Leased Employees of Municipality

[Guest Ralph Amadio]

A California city client's city attorney has asked the following:

Will the City's financial capability be impaired in any way in the event that "leased employees" who lack sovereign immunity are utilized in job functions ranging from jail guards to parks and recreation employees?

His concern lies in the possibility of a California deep pockets suit in which the City is found liable over the amount of insurance carried by leasing contractor. How would revenue and/or bond counsel view this?