With law enforcement conduct in the news once again (my firm's statement on recent events in Minneapolis is available here: Support for Minnesota), I was reminded of the academic work of one of my former colleagues from a prior job. John Rappaport, a law professor at the University of Chicago, published a thorough study in the Harvard Law Review almost a decade ago discussing the ways in which police departments' reliance on liability insurance may actually reduce instances of law enforcement misconduct.

His analysis goes against conventional wisdom about the impact of law enforcement agencies' purchase of liability insurance. One of the supposed "problems" (from a policymaking standpoint) of liability insurance is the idea of “moral hazard"—the notion that liability insurance reduces the tort system's deterrent effect on bad behavior. If someone doesn't bear the full impact of tort liability, they won't be sufficiently deterred from engaging in bad acts.

But as I see every day in my insurance recovery practice, no one engages in risky or improper behavior simply because they have insurance that will cover their future legal liability. Indeed, we actually see the opposite—innocent policyholders who are unjustly accused by their insurers of engaging in the type of intentional misconduct that is not covered under their liability insurance policies. So, rather than seeing bad actors engaging in more misconduct because they have insurance, we more often see good actors being accused of misconduct by insurers who are trying to avoid performing their end of the insurance bargain.

By studying law enforcement liability insurance specifically, Prof. Rappaport provides a more detailed and systematic framework for understanding the limited moral hazard effect that liability insurance actually has in the real world. When law enforcement agencies take out liability insurance, they do not treat the insurance as a “blank check” that gives them impunity to engage in improper behavior. Rather, liability insurers operate in the background as regulators of police conduct. Insurers set premiums that reflect a police department's relative level of risk. Insurers provide training and share “best practices” that departments can use to turn high-minded and fuzzy Constitutional law concepts (like the Fourth Amendment's prohibition on “unreasonable searches and seizures”) into actionable policies and procedures. Insurers can pressure police departments to make personnel decisions that reduce liability risk. And in extreme cases, insurers can elect not to insure specific police departments that are particularly risky and are unable to improve.

Those concepts apply more broadly to liability insurance in other industries and contexts as well, and for that reason, now is as good a time as any to revisit my old friend's important work.

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A string of deadly police-citizen encounters, made public on an unprecedented scale, has thrust American policing into the crucible of political conflict. New social movements have taken to the streets, while legislators have introduced a wide array of reform proposals. Optimism is elusive, however, as the police are notoriously resistant to change. Yet one powerful policy lever has been overlooked: police liability insurance. Based on primary sources new to legal literature and interviews with over thirty insurance industry representatives, civil rights litigators, municipal attorneys, police chiefs, and consultants, this Article shows how liability insurers are capable of effecting meaningful change within the agencies they insure — a majority of police agencies nationwide.

harvardlawreview.org/...