Birmingham City Council has earmarked £150,000 to meet possible legal costs against its chief executive, Lin Homer.
The war chest, approved by council leader Mike Whitby, means that Mrs Homer will not have to pay the cost of any potential action against her arising from the General Election.
Council lawyers are concerned that Mrs Homer, the acting returning officer for Birmingham at the election on May 5, could be taken to court in her role as the person responsible for overseeing the organisation of the election and the count.
The prospect of legal action might arise if, as happened at last year's council elections, allegations were levelled about the distribution and counting of postal votes.
An election court in Birmingham heard how the council was unprepared to cope with a record 70,000 postal votes and ran out of ballot boxes.
Ballot papers were taken to the count in plastic bags, in contravention of electoral law.
The council's insurance cover for the returning officer has an excess of £150,000.
Although Mrs Homer's £180,000-a-year job carries an indemnity against claims, she does not act as a council employee when assuming her duties as returning officer.
Council chief legal officer Mirza Ahmad explained: "The chief executive's employment contract includes an indemnity against claims but, as the postholder is not acting directly on behalf of the council in the special role of organising elections, it is essential that the chief executive has a separate indemnity in the event that the excess becomes payable.
"The city council is legally entitled to give this indemnity."
The decision was announced on the day that independent observers from abroad came to Birmingham to investigate the organisation of the General Election.
Elections experts invited to Britain by the Foreign Office expressed an interest in visiting Birmingham in order to understand more about postal voting.
Two observers, one from Norway and one from the United States, spent yesterday talking to the West Midlands Police economic crime unit, Coun Whitby and The Birmingham Post.
MPs from Burma, East Timor and the Philippines were due in Birmingham today and will be taking a close interest in the counting of votes on May 5.