The issue
California's liability
system is out of balance.
Public services pay the price.
California can protect injured people’s right to fair compensation while protecting the services our communities depend on.
Explore the solutions01 / System Imbalance
Limited fault.
Disproportionate cost.
California’s liability laws can leave a public agency paying far more than its share of responsibility when another party cannot pay.
At fault
Of economic damages
Joint and several liability
Under California law, a public agency found 16% at fault can be forced to pay 100% of the economic damages. Those damages include medical expenses, lost wages, and estimated future care.
Non-economic damages, such as pain and suffering, are treated differently: defendants generally pay according to their share of fault.
Public entities are often added to lawsuits even when they have little or no involvement in the incident. Attorneys inflate the economic damages and then leverage this 16% standard for generous settlements.
Legal Loopholes Magnify the Cost for Public Agencies
Pure Comparative Negligence
Allows plaintiffs to recover damages from a public entity even when they are primarily responsible for their own injuries.
No Statutory Cap on Damages
No set limit on economic and non-economic damages, allowing for unlimited multi-million dollar payouts.
Broad Dangerous-Condition Standards
Exposes agencies to liability when public property is alleged to have contributed to an injury caused primarily by someone else.
02 / Taxpayer Impact
Lawsuit payouts come from taxpayer dollars.
The challenge isn’t simply the number of claims. It’s the growing cost of the largest claims—and public dollars needed to cover them.
public payouts
in the last decade
by fiscal year 2027–28
“thermonuclear” claims
The largest claims are driving the increase.
Claims exceeding $1 million account for the majority of total liability costs. By 2024–25, claims exceeding $5 million represented the largest and fastest-growing share of exposure.
Claims above $25 million, described as “thermonuclear” claims, were virtually nonexistent before 2021–22. Public agencies now face multiple claims of this size each year.
03 / Cost Drivers
More than
ordinary inflation.
Public liability claim costs are rising, driven by litigation practices, financial incentives for larger payouts, and shrinking insurance options.
This growth beyond general inflation is often called “social inflation.”
Deep pocket targeting
Public agencies have identifiable assets and taxpayer-funded resources. That makes cities, counties, schools, and special districts attractive targets when the person primarily responsible has insufficient insurance or assets.
Inflated medical costs
Artificially inflated medical bills, treatment liens, long-term care estimates, and projections of future medical expenses can substantially increase a claim’s economic damages. In some cases, plaintiffs intentionally pursue treatment outside their insurance networks and submit bills far exceeding the rates insurers would ordinarily pay for the same services.
These inflated costs are used to justify larger settlement demands, distort juries’ understanding of a plaintiff’s actual losses, and drive up settlements and judgments.
Attorneys profit from bigger payouts
California generally places no statutory cap on contingency fees in lawsuits against public agencies. Attorneys commonly collect 30-40% of a recovery. After additional litigation expenses are deducted, the combination of attorney fees and litigation expenses may consume over 50% of a payout before the plaintiff receives compensation.
The larger the award, the larger the attorney payday.
Hedge funds profit from litigation
Third-party litigation funding allows hedge funds and other outside investors to finance lawsuits in exchange for a portion of any settlement or judgment. When litigation becomes an investment opportunity, outside financial interests may prolong cases and discourage reasonable settlements, increasing costs for public agencies and taxpayers.
Fewer insurance options
California’s worsening liability environment is driving insurers out of the public-entity market. Fewer options mean less competition, reduced coverage capacity, and substantially higher costs for taxpayers.
04 / Solutions
Fair compensation.
Strong public services.
Californians for Protecting Local Services supports balanced liability reform that preserves injured Californians’ right to fair compensation while protecting public agencies from financially devastating liability that threatens essential services.
Reasonable Limits on Damages
Establish defined limits that ensure fair compensation while preserving public agencies’ ability to deliver essential services. Thirty-nine other states limit public-entity liability through defined limits on compensation. California already imposes limits in medical malpractice cases under MICRA, recognizing the public interest in reasonable safeguards. Similar protections should apply when awards are paid with taxpayer dollars.
Proportional Liability
Align financial responsibility with actual fault so public agencies are not forced to absorb damages caused primarily by others.
Stronger Evidence Standards
Strengthen standards for claims involving older incidents, when records, witnesses, and other critical evidence may no longer be available, to help guard against fraud and abuse while preserving access to justice for legitimate claims.
Regulate Hedge Fund Profiteering
Hedge funds and other outside investors should not be allowed to secretly profit from lawsuits paid with taxpayer dollars or control cases to maximize their returns. California should require litigation funders to disclose their involvement, register with the state, limit their recoveries, and prohibit them from influencing legal or settlement decisions.
Eliminate Litigation Gamesmanship
Plaintiffs’ attorneys and those who enable them use litigation tactics to maximize their profits at taxpayers’ expense. California should establish anti-anchoring rules that prevent either party in a lawsuit from assigning a dollar amount to noneconomic damages during trial.
Take a closer look
Understand the impact.
Help restore balance.
Read the full factsheets or explore the cases behind the call for reform.