A Joint Powers Entity Needs Its Own Coverage

As a separate and distinct (from its creating members) legal entity, a joint powers entity (JPE) needs its own liability coverage to protect the entity, the JPE’s board and when appropriate, the employees of the new entity.

When public entities consolidate and transfer duties to a joint powers entity (JPE) pursuant to Minnesota Statutes, Section 471.59, the new entity becomes a separate and distinct legal entity with all the privileges, obligations and risks of its creating members. Therefore, the operations of the JPE and actions of the JPE’s board and employees expose the entity to its own potential liability for claims and lawsuits.

Forming Entities’ Coverage Does Not Extend to New Joint Powers Entity

Forming member elected officials or employees on the JPE’s board are covered by their entity’s liability coverage, but only for their individual actions. The entity’s coverage does not extend to the elected officials when a claim is made against the JPE’s board as a whole or against the JPE.

Like all entities requesting MCIT membership, the JPE must complete a risk assessment and provide MCIT copies of governing documents, such as the joint powers agreement and bylaws. Using this information, MCIT evaluates eligibility for membership.

Cost of MCIT Coverage for JPE Depends on Risk Exposures

The cost of MCIT coverage for the new JPE depends on its size and operations. The cost of coverage/contribution is based on factors such as number of employees and board members, amount of property owned and the entity’s published budget.

As a member of MCIT, the JPE is provided the same coverage as all other public entities that participate in the trust. MCIT’s coverage is designed to address exposures unique to public entities. This includes coverage for open meeting and data practices violations, employment claims and excessive force claims.

Ensure Independent Operation of JPE

When creating a JPE, it is imperative that the JPE operate independently of its forming members. The public entities that formed the JPE should safeguard from influencing or controlling the JPE. This autonomy further demonstrates the need that the new JPE have its own liability coverage.

Learn More

For additional information about the need for coverage when engaged in the joint exercise of powers, members should contact their MCIT risk management consultant toll-free at 1.866.547.6516.