3 Rapidly Evolving Risks Facing Public Entities

Public sector leaders are navigating more than budget pressures and cost constraints. A growing set of emerging risks is adding new complexity to their decision-making and reshaping how exposures must be understood and managed.

“Emerging risks for public entities are exposing gaps not just in operations, but in governance,” said Susan Thomson, Public Entity Underwriting Director at Safety National. “Risks, particularly related to AI, may expose the dangers of a lack of oversight and accountability. It is essential that these exposures are considered as critical as controls, with an understanding of how much more complex and connected they are when looking at the big picture.”

Here are some current trends that can heavily impact a public entity liability program.

1. AI-Driven Risk

The technology that drives many AI platforms can be incredibly useful for public entities, especially those with limited resources. Where enterprise models are not enforced, a public entity may adopt AI informally and on a per-department basis. However, without centralized or human oversight, usage can become inconsistent with no clear accountability.

AI can also amplify the risk of bias, potentially leading to inadequate decisions in hiring, policing, and permitting that may become civil rights exposures and even class action litigation. One bad hiring system set up by AI could possibly lead to thousands of affected individuals before an error is detected.

2. Social Inflation and Liability Expansion

Higher jury awards and litigation costs remain among the most significant factors driving rising loss severity for public entities. Shifting jury sentiment and hostility toward public entities continues to lead to larger compensatory plaintiff awards.

However, as these influences remain a constant force, the definition of liability affecting them continues to evolve. Public entity liability used to have narrower interpretations, but has since expanded beyond direct actions to include broader definitions of duty and negligence. Claims may now be framed as violations of civil rights as opposed to negligence, which has the potential to put law enforcement, correctional facilities, education, and social services most at risk.

Additionally, as liability increasingly includes multiple parties, the question of “who is responsible” becomes an issue, which could include frequently used resources, like third-party vendors or contracted services.

3. Critical Infrastructure Risk

Where large corporations may hire cyber security teams to take preventative measures, build firewalls and buy all the necessary security applications, local governments may not have the budget to afford this. This creates vulnerabilities in networks now tied to operational technology that can control water treatment systems, traffic controls, power distribution, and even building automation.

These operational technologies are typically aged and were not designed with cybersecurity in mind. As systems have been integrated to allow for remote monitoring access, there is more opportunity for cyberattacks that exploit an infrastructure’s vulnerabilities.