bankruptcy-signIf you find yourself in one of the almost-bankrupt California cities and happen to drive through a busy intersection, beware. Any number of things could happen. The lights could go out because the municipality didn't pay its electric bill. Then you could be struck by a city vehicle careening through the intersection.

If this happens don't sit there waiting for the police to show up; there are fewer of them than there used to be. Don't waste your time trying to find the nearby fire and rescue station since it's probably closed. And if by chance you need the Jaws of Life, don't expect prompt service.

But your legal nightmare hasn't even started yet. You could have a valid claim against the city for negligence and want it to pay your hospital bills, time lost from work and, obviously, pain and suffering. But what's the point of filing that claim if the city is bankrupt and hasn't paid its insurance?

Nobody's fool

Thus far most of the ink spent on the California cities that have already filed for Chapter 9 bankruptcy -- Stockton, San Bernardino and the much smaller Mammoth Lakes -- has been about the bonds they took out. And there's no doubt about it: they spent like drunken sailors. Working-class Stockton has $700 million in outstanding bonds; once-wealthy San Bernardino about $18.5 billion. And other towns across the state are likely to follow them into bankruptcy, predicts the Los Angeles Times.

But remember that wealthy individuals, funds, and, yes, insurers hold these bonds, and they are nobody's fool. The bonds are backed by water and sewer revenues. And no one in San Bernardino is going to stop flushing his or her toilet, so the 1 percent who invested in them are relatively safe.

Sorry, Scranton

But what about the rest of us? Will these cities and ones like Scranton, Pa., which is also sliding into bankruptcy, be able to pay for basic insurance policies for commercial auto, workers comp, and environmental hazards, to name just a few examples?

It's a murky question with no clear answer -- except to wait and see just how bad things get. When I looked at the city websites for both Stockton and San Bernardino I couldn't even tell that anything was wrong. Stockton is still holding an advanced fencing camp. And in San Bernardino, where city officials are facing a criminal probe, the library is hosting a magician and fine arts grants are still available.

So I dug deeper. Stockton's bankruptcy filing says that it will "continue to pay its vendors and service providers," presumably including insurance companies. More ominously, San Bernardino's plan calls for a "freezing of expenditures if necessary."

What does happen if a city can't pay for insurance? The policies lapse at renewal and the city will be -- effectively -- self-insured. Not good news for the town since it will have to depend on its city attorneys to defend against suits rather than professionals who handle insurance cases. And, like the police, fire and sanitation, city attorneys are facing cutbacks.

Brother can you spare a dime

But for those with legitimate claims against a city, things could be even worse.

While it might be easier to win a case of negligence against a crippled city, it could be a lot harder to collect. A bankruptcy pits the creditors of a municipality or a company against each other to get whatever is left in terms of assets. So you could end up standing in the bread line along with thousands of angry employees who have already lost most of their salaries and are about to lose their pensions.

You might be wise to take 10 cents on the dollar instead of waiting around for more.