Increased Liability for Municipal Utilities?
February 6, 2014
The Pennsylvania Supreme Court will review a state law setting a $500,000 cap on damages that can be levied on public agencies.
The appeal to the Supreme Court could pose a threat to the continued viability of municipal utilities. Municipalities often furnish public services that are traditionally or principally supplied by private corporations. These functions can include providing water and wastewater services, operating landfills, or selling electricity or natural gas to the public. In Pennsylvania, municipal entities are protected (to some degree) in providing these “proprietary” functions by the statutory cap on damages, which is contained in the Political Subdivision Tort Claims Act.
Tragic circumstances often lead to changes in the law. The current appeal to the Pennsylvania Supreme Court comes after a split Commonwealth Court refused to declare unconstitutional the Tort Claim Act’s statutory cap on damages leveled against governmental entities. The Commonwealth Court decision affirmed a trial court decision that dropped a $14 million jury verdict – awarded to a girl who lost her leg following a school bus accident – to $500,000.
Notably, the dissenting opinion at the Commonwealth Court argues that municipalities that furnish a service often provided by a private entity should be required to insure itself in the same manner as a private entity and be equally liable for the full amount of an award. Such logic – if accepted and applied to municipal utilities, could give new life to the common-law distinction between “governmental” and “proprietary” functions[1] and could expose municipal utilities and their taxpayers/ratepayers to larger liabilities.
The case is Ashley Zauflik v. Pennsbury School District, Pennsylvania Supreme Court Docket No. 1 MAP 2014. The Commonwealth Court Opinion was reported at 72 A.3d 773 (July 3, 2013).
This Eckert Seamans’ Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions about the content of this post, please contact Dan Clearfield at (717) 237-7173 / dclearfield@eckertseamans.com or Deanne O’Dell at 717.255.3744 / dodell@eckertseamans.com
[1] In determining whether a specific action of a local government constitutes a governmental or proprietary function, courts will consider: (1) whether the activity is one that the governmental unit is not statutorily required to perform; (2) whether the activity may also be carried on by private enterprise; or (3) whether the activity is used as a means of raising revenue. See, e.g., Boyle v. Mun. Auth., 796 A.2d 389 (Pa. Commw. Ct. 2002). If the answer to any of these inquiries is yes, the function is proprietary. Id. Municipal authorities, by their very definition, engage in proprietary functions only. Id.