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July 21, 2024

Local Government – “Insurance” – Our Lawyer said we don’t have to bid for insurance because…..

By Kirk Allen & John Kraft

On December 23, 2019

Illinois (ECWd) –

For the purpose of this article, we are addressing non-home rule public bodies, specifically County and Township government.

More times than we can count, we hear County and Township officials claim they don’t have to bid out their insurance because their lawyer told them so.  And to that, we say we have proven lawyers wrong more times than we can count so please start reading the law for yourself as the buck stops with the public officials, not the attorneys advising them.

For starters, any public body that resists putting things out for bid should read the court’s view on bidding.

“The purposes for requiring public bodies to engage in competitive bidding are to invite competition, to guard against favoritism, improvidence, extravagance, fraud and corruption and to secure the best work or supplies at the lowest price practicable. ( O’Hare Express, Inc. v. City of Chicago (1992), 235 Ill. App.3d 202, 208; Smith v. F.W.D. Corp. (1982), 106 Ill. App.3d 429, 436 N.E.2d 35; 10 E. McQuillin, Municipal Corporations § 29.29, at 302 (3d ed. 1981).)”

So for those public bodies that go out of their way to find an excuse to not bid things out, know that is the first red flag that may lead to the discovery of favoritism, improvidence, extravagance, fraud, and corruption, much like we are finding in Joliet Township as exposed in articles here and here.

When we call out a unit of government for not bidding out their insurance we hear a laundry list of excuses, but the two most common are that professional services do not require bidding, and their lawyer told them they don’t have to. That is where the conversation should begin, not end.

They are correct, professional services do not require bidding, however, they never define what is or is not a professional service and never mind that there is an actual professional services selection act for local governments and we note, Insurance is not listed in that act.

Local officials are not trained or educated to ask the right questions when they get information from their attorney and often blindly follow their attorney’s advice.   As many of our readers know, I continue to preach the importance of asking two questions when we hear excuses for not following the law, Says Who and With What Proof?

Insurance brokerage and Insurance providers are not a professional service, contrary to many attorney’s belief that it is.  Yes, we said, as has the courts and the Attorney General.  The proof to support that position is provided below.

As it relates to insurance, the Attorney General, and the Illinois Bar Association lists it on their website (click here or here), that insurance services are not “professional services” and must be let to the lowest responsible bidder.

In the Attorney Generals analysis, the following language is used to make the determination as to what is or is not a professional service.

“Whether the professional services exception to section 5-1022 applies is determined on the basis of whether the services require a high degree of professional skill or judgment or there is a need for confidence, trust, and belief in the person rendering the services. Neither contracts for insurance coverage nor contracts for insurance broker or agent services involve the provision of services requiring a high degree of professional skill or judgment, nor is there a need for confidence, trust, or belief in the person rendering the services.”

The section 5-1022 they speak of in that opinion is found in the County Code and that is where so many Township lawyers get confused and say it does not apply to a Township because it points to the Counties Code.   That is where they are wrong.  The analysis is on what it takes to be a professional service and that analysis applies to any of the local government statutes that exempt bidding for professional services.

The language in the Township Code is almost identical as it relates to the professional service exemption from bidding, yet we have Township attorneys making claims that bidding is not needed because a broker is being used or that its a specialized service so no bidding is required.

We challenge those attorneys to provide such language in the law, and more importantly, any case law to support such a claim.

As it relates to the actual insurance provider, a minimal search of case law confirms, the actual provider of the insurance is not a professional service and that is spelled out quite well in the Compass Health Care Plans v. Board of Education.

“Thus, we concur in the trial court’s findings that the HMO industry is highly competitive; that HMO contracts do not involve the type of professional skills which would render them not adapted to competitive bidding; and that the contracts at issue were not awarded on the basis of the professional skills, program offerings or cost-effectiveness of each HMO, but, rather on the number of enrollees in each of the HMO plans offered to CPS employees as of June 1990. Consequently, we find no error in the trial court’s ruling that HMO contracts are not exempt from the competitive bidding provision of the Code

The American Health Care Providers v. Cook County case provided a differing opinion however that was because of Home Rule and language in a bidding ordinance and the court indicated as much in their ruling.

“The circuit court here disagreed with the Compass decision and found it distinguishable. In Compass home rule authority was not at issue.”

Additionally, the AHCP v. Cook County case cited language placed in their actual bidding ordinance that is not found in the County or Township code, thus would not apply to non-home rule public bodies.

“Contracts which by their nature are not adapted to award by competitive biddings, such as contracts for the services of individuals possessing a high degree of professional skill where the ability or fitness of the individual plays an important part * * * shall not be subject to the competitive bidding requirements of this ordinance.” (Bidding Ordinance § 10-19.)

So our suggestion to units of governments that have attorneys that make excuses for not bidding, such as no RFP is not needed for insurance services because they use a broker, or that it’s a specialized service and not required to be bid out, find a new attorney.

At a minimum, public officials should demand these opinions from their attorneys be in writing and only then will we see many of the bad advice problems go away.  It’s one thing to make a blanket statement to a board and everyone believes it because he or she is the attorney, it’s a whole different matter to put it in writing having actual case law language to support their verbal opinion.

When public bodies fabricate reasons to not bid out insurance, as well as other services, let it be a wake-up call that you should probably start paying more attention to what is going on with those officials.

While the laws do outline certain professions and situations do not require bidding, why on earth would they not do it anyway since they are not forbidden from bidding?  Yes, we understand there is some work involved and cost of publications but in most cases, we find the offset to be substantial.  Two cases that come to mind are my own local school district and a city insurance contract.  Once our school district was informed of bidding obligations and bid out their insurance, the result was a $50,000.00 savings. In the case of the City Insurance, improper bidding exposure (favoritism) resulted in a $90,000.00 reduction in the price.

We urge local officials to become more pro-active in their duties and stop blindly accepting verbal opinions from their attorneys and demand written opinions to support the advice being given.  And even when that happens, read all the case law they point to in those opinions to see if it actually is a proper comparison because many times we see lawyers point to statutes or court opinions that do not apply to the actual situation at hand. Evidence of that fact is found in the very case we cited above, American Health Care Providers v. Cook County.

Contrary to many people’s beliefs, you don’t have to be an attorney to comprehend a judge’s rulings found in case law.  If a couple of hay-seeds from East Central Illinois can figure it out, so too can most public officials.

Bid out your Insurance!


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