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Sky-high liability costs have wide impact. For towns, doctors, day-care centers lawsuit protection is hard to find

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Gale Marceau, an official in the western Massachusetts town of Montague, was threatening to quit her job. The town was having trouble renewing its liability insurance, and she wasn't about to risk losing ``everything I've worked for all my life if someone sues me over a decision I made.'' Towns and cities in the United States are caught in an insurance crunch. ``It's a national problem,'' says Natalie Wasserman of Public Risk Insurance Management Association in Washington. ``It's a hard market. . . . It's more severe than the last [downturn] in the mid-'70s.''

The insurance industry, coming off its worst year ever (See story right), is trying to recover by raising its rates, canceling policies, and refusing to cover certain professions or businesses. While the crunch has hit municipalities before, this time it is squeezing a host of others who want liability insurance -- lawyers, commercial fishermen, bar owners, obstetricians, and day-care providers.

People who work in these fields report that their premiums have at least doubled in the past year. For some, premiums have increased tenfold.

Worse, many of those who want liability insurance cannot obtain it at any price. The town of Montague, for instance, looked in vain for a company to take over its policy, which expired in July. Ms. Marceau decided to keep her position as a selectman after learning Montague had a separate policy to protect town officials, but she says she's not sure if that policy will be renewed when it expires in a year or so.

``Town officials are essentially volunteers,'' she says. ``Not many are going to be willing to put everything on the line. There just won't be town officials anymore [if the liability-insurance problem is not resolved].''

Groups caught in the crunch -- including the insurance industry itself -- agree permanent solutions to the problem are complex. Some experts, citing an increasing readiness of Americans to sue, say reform of the tort system is needed to discourage frivolous lawsuits and control the size of awards. Others want the federal government to become more involved in the reinsurance market to help stabilize the highly cyclical insurance industry. All agree such solutions will take time to implement.

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