Most local governments (city and county) are self insured.
The money for payouts come directly from taxpayer dollars.
Since you said "most", I'm not disagreeing with you by noting that when the Archer County Sheriff screwed a female prisoner in his care, The County paid its 100k deductible and the Ins. Co paid 900k to settle it for the max. under the policy.
I suspect that the policy is written out of a pool administered by the State, but it is structured like any other ins. policy with a max limit and a deductible.
