In 2010, the police department in Rutledge, Tenn., was riven by scandal. The police chief, a 12-year department veteran, had been charged with assault and was under investigation by state authorities. But that wasn’t what Mayor Danny Turley cited when he fired the top cop that year. Turley “had no choice,” he said — his “hands were tied” — because the city could have lost its liability insurance if the chief kept his job. That would have left Rutledge responsible for paying out on future lawsuits, potentially crippling its small budget. So the insurance company got its way, and a police officer got early retirement.

My research on municipal liability insurance turned up this and other examples of police chiefs — including some reform-minded administrators — who owe their jobs to pushy insurance adjusters. The insurance companies (with names like National Casualty, JWF Specialty and Genesis) offer policies that reimburse cities held liable for harm their law enforcement officers inflict. The coverage is broad: It often includes intentional acts such as discrimination or assault and battery, as well as punitive damages, which are meant to punish egregious misbehavior. (There is no national data about the size of this insurance market, but it’s big. Lawsuits stemming from recent shootings by officers, such as those of Laquan McDonald in Illinois and Walter Scott in South Carolina, have settled in the ballpark of $6 million per case.)

The arrangement creates a potential moral-hazard problem — a risk that insured municipalities will be less vigilant against police misconduct than they’d be in the absence of insurance. But it also empowers insurers, which are committed to strategies of “loss prevention.” In an age when police departments, backed by politicians and powerful unions, are said to resist complaints about brutality and abuse, some insurance companies are playing an unheralded role: as private regulators of police activity.

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