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Mitigating joint and several liability risk for municipalities

Mitigating the risks associated with joint and several liability is crucial for municipalities to protect their financial stability and public trust. Learn and implement risk management strategies to transfer risk and reduce costly liabilities.

04/29/2025 · 5 minute read

Joint and several liability is a legal doctrine that allows a plaintiff to hold multiple parties accountable for the full amount of a debt or judgment, regardless of each party's individual degree of fault. This principle frequently emerges in scenarios involving multiple stakeholders, such as partnerships or joint ventures. 

Under this framework, even a party found to be minimally at fault can be liable for all damages if other responsible parties are insolvent or inadequately insured. This situation can disproportionately affect municipalities, who engage in partnerships for public projects and may encounter increased liability exposure due to limited financial resources, insufficient insurance coverage, and the complex nature of joint ventures. 

The following guidance highlights key considerations for public entities to understand the financial risks and implications of joint and several liability, as well as adopt proactive risk mitigation strategies. It should not be seen as an exhaustive list and should be used in conjunction with internal policies and procedures, as well as in compliance with local laws and regulations. 

A hypothetical joint and several liability case 

Imagine a township called Evergreen, a small community with a population ranging from 5,000 to 15,000, known for its rural roads and harsh winters. In February 2019, a severe car accident occurred on one of the local roads during a snowstorm. 

A driver lost control on an icy curve, which had not been adequately plowed and was marked by faded signage, resulting in a collision with another vehicle. Both drivers sustained serious injuries, with one requiring lifelong care. 

The fault in this incident was distributed among the parties involved. Driver one was found to be 60% at fault due to speeding and distraction, the contractor responsible for road maintenance was deemed 30% at fault for failing to plow or salt the road despite weather forecasts, and the township of Evergreen was assigned 10% fault for not enforcing Minimum Maintenance Standards (MMS) or updating signage according to the Ontario Traffic Manual.

The court awarded damages totaling $US5 million, covering medical costs, lost income, and pain and suffering. However, the driver had minimal insurance coverage of only US$200,000, and the contractor was insolvent. Consequently, under the principle of joint and several liability, the township of Evergreen was compelled to pay US$4.8 million, despite being only 10% at fault, as it was considered the deep pocket defendant.

This scenario highlights the financial vulnerabilities faced by municipalities, particularly those with limited budgets. Additionally, rural townships like Evergreen manage extensive networks of low-traffic roads, often prioritizing main routes over backroads, which can increase their liability risks. 

Many municipalities rely on insurance, but rising premiums following lawsuits can further strain their financial resources. The risks associated with joint and several liability for municipalities are significant, including unpredictable costs that can drain budgets and force cuts to essential services or necessitate tax increases. 

Furthermore, shared fault amplification means that even minimal negligence, such as delayed pothole repairs, can lead to full liability if co-defendants are unable to pay – something called vicarious liability. These cases can also lead to significant reputational damage, eroding public trust in municipal governance and complicating the already challenging landscape of public service management.

Developing a proactive risk management strategy

The fallout of joint and several liability issues can be significant.  However, municipalities can reduce their liability risk through operational diligence and strategic planning. Recommended actions to mitigate these risks and build greater resilience include:

Standard liability policies may not suffice for multi-million-dollar claims. Municipalities should explore excess liability coverage with limits tailored to the municipality’s exposure, (for example, US$10M+). 

Historical claims data — like the hypothetical case above — may justify higher limits to those wary of premium costs.

Review contracts with third-party vendors, including road maintenance firms and construction companies, to ensure robust indemnification clauses. These should shift liability back to contractors for their negligence. 

Additionally, require contractors to carry adequate insurance and name the municipality as an insured on their policies.

Ontario’s MMS for municipal highways provides a legal benchmark for road upkeep. Compliance — such as timely pothole repairs and regular inspections — can serve as a defense against negligence claims. 

It is also important to document all maintenance activities meticulously to demonstrate due diligence if an incident arises.

Partner with legal experts to audit bylaws, policies, and maintenance protocols annually. Identify gaps that could expose the municipality to lawsuits, such as outdated signage standards.

Leverage resources which offer risk management assessments and training tailored to municipalities.

Proactive infrastructure investment — like upgrading drainage systems or repairing roads before defects worsen — can reduce the likelihood of incidents that trigger lawsuits. 

Investment in data-driven tools, such as pavement condition indexes, can also help organizations gain better oversight into high-risk areas.

Train public works teams on MMS compliance and documentation protocols. Brief council members on joint and several liability risks to secure buy-in for insurance and reform initiatives.

Effectively mitigating the risks associated with joint and several liability is crucial for municipalities to protect their financial stability and public trust. 

By implementing proactive risk management strategies, such as advocating for higher insurance limits, strengthening contractual protections, and prioritizing regular maintenance and other preventative measures, public entities can significantly reduce their exposure to costly liabilities. Ultimately, these measures not only safeguard municipal resources but also enhance the overall safety and wellbeing of the communities they serve.

To learn more about mitigating the financial and reputational risks associated with joint and several liability, speak to your Marsh representative.

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