Department of Administrative Services

Transcription

1 State of Utah GARY R. HERBERT Governor GREG BELL Lieutenant Governor August 12, 2014 Department of Administrative Services KIMBERLY K. HOOD Executive Director Division of Risk Management TANI PACK DOWNING Director (./';: :c:.. r_,~, -; o t--.3 rc c=>..r:- ~~,_.,_ >.-.~ ~... c: ('ft--~ G) :~~~ -IC:5 <r.,.,... tn~~ " ~"") :::c.n :::&: g~ 1--,-1 ca.:.._() a-... (./)ftl -; 0 Kristina L. Kindl Director, Policy & Legal Services Salt Lake City School District 440 East 100 South Salt Lake City, Utah Dear Ms. Kindl: Thank you for your inquiry to the Utah Division of Risk Management regarding liability coverage for the Salt Lake City School District. As I understand it, your questions centered on the availability of coverage for employees and board members. I will address each question as follows: 1) Under what circumstances can employees and board members expect liability coverage from Risk Management. As you correctly note, Risk liability coverage is typically triggered when employees and board members are sued for actions taken in "the performance of their duties, in the course and scope of employment, or uncier color of auil- 0-rity. '' Tn each cast' where an employee requests defense and indemnity!rom Risk, the initial coverage question will focw, on whether the underlying actions were taken in "course and scope.'' There are over sixty Utah cases that deal with the issue of course and scope. The most significant case is Birkner v. Salt Lake County, 771 P.2d 1053 (Utah 1989). In Birkner, a county employee hired to counsel with health patients engaged in inappropriate physical activity with a client. When the cli~nt sued the counselor, he requested the county to defend and indemnify him, claiming that he qualified for liability coverage because his conduct was in the course and scope of his employment. The County declined to extend coverage and its denial was upheld by the Utah Supreme Court. The Court emphasized three factors for making course and scope decisions. Addition to the Official Minutes Agenda Item: 1 Board Meeting: 01/20/ State Office Building, Salt Lake City, Utah telephone (801) fac:.imile (801)

2 1) Is the conduct which lead to the complaint the "general kind" of conduct which the employee is employed to perform? Or is the conduct more "personal" in nature? The "employee must be about the employer's business and the duties assigned by the employer, as opposed to being wholly involved in a personal endeavor." Birkner, at ) Does the conduct occur within the hours of work and in the ordinary spatial boundaries of employment? Did the activity occur when and where the employee generally works? 3) Is the conduct motivated by the purpose of serving the employer's interests? Is the conduct intended "for purposes other than the master's business." I d. Moreover, if an employee acts from "purely personal motives... or if the conduct is unprovoked, highly unusual, or outrageous" it does not fall within course and scope activities. Id. The Restatement (Second) of Agency 228 also addresses course and scope issues. It provides that "conduct is not within scope if it is different in kind from that authorized, far beyond authorized time/space limits, or too little actuated by a purpose to serve the employer." These principles guide Risk Management when it makes coverage decisions after an employee is sued. As one might expect, coverage is not available where, after investigation, there is a fair determination that the employee was acting for personal reasons, that the actions were not aligned with the employer's interests, or where actions are clearly beyond employer authorizations. 2) Does Senate Bill 56 impact Risk Management coverage? Senate Bill 56, as you properly note, extends governmental immunity to school districts from third claims resulting from use of school facilities under the civic center statutes. Senate Bill 56 does impact Risk coverage, in the sense that employees designated to make determinations to issue, deny or suspend a permit can fully expect liability coverage from Risk Management. In addition, Senate Bill 56 makes it more likely that the litigation will be quickly concluded in the employee's favor. 3) In addition to regular employees, does Risk Management have coverage guidelines for school district board members? The Governmental Immunity Act explicitly provides that "board members" are employees for purposes of liability coverage. UCA 63G-7-102(2)(a). As a result, all the normal immunity protections extended to employees, e. g. a limited statute of limitations, notice requirements, liability caps, apply to board members. Moreover, the Immunity Act's exclusive remedy provisions also apply, making it probable that individual board members would be dismissed early in any state lawsuit. UCA (3). At the same time, Risk coverage for board members is no broader than for regular employees. Board members and employees can be sued individually (and should not expect Risk

3 coverage) for acts that are beyond course and scope and for other statutory exclusions, e.g., fraud, willful misconduct, false testimony. In instances where board members are named in a lawsuit, Risk coverage will depend upon the criteria established in Birkner, along with the coverage exclusions identified in the Immunity Act. With that understanding, some general coverage guidelines can be helpful. These include: 1) Formal activities such as voting, discussions, and expressions during a regularly scheduled board meeting are well within coverage. In this setting, all the time and place criteria are met and such actions are the type of activities board members are expected to perform. 2) Board members who act on specific directions/authorizations from the board can expect coverage. Board members, for example, may be authorized by the board to take actions on behalf of the board including attendance at outside meetings, events, working with the legislature, speaking on behalf of the board, and other endeavors. When those actions fall within the scope of authorization, the board member can expect coverage from Risk Management. 3) At the same time, attendance or involvement in unauthorized private meetings, events, or functions not sanctioned or directly authorized by the board would not likely meet course and scope criteria. While any board member is free to meet, discuss, and opine on any occasion -just as any other citizen - lawsuits resulting from such unauthorized activities would probably not warrant coverage. 4) Personal letters, blogs, s, Facebook, use of social media or other communications not authorized by the board would probably not meet the coverage criteria established by Birkner and the Immunity Act. This might be the case even where the board member uses board stationary, or introduces him/her self as a board member in the communication. These activities may be more "personal" than official, and board members should anticipate that their liability coverage would not extend so far. Where actions are beyond authorization, the member could be acting as a citizen( who happens to be a board member) rather than as a board member fulfilling his/her board functions. Board members are typically sued for actions taken by the Board, and in these types of suits the member can rely upon Risk coverage. For other types of claims, Risk would conduct a fair inquiry regarding coverage prior to reaching any decision that would adversely impact a board member. Risk Management appreciates the opportunity of working with the Salt Lake School District on these important matters. Sincerely,

4 Department of Administrative Services KJl\.tBERLY K. HOOD Execulive /Jirecfor State of Utah GARY R, HERBERT Governor Division of Risk Management TANI PACK DOWNING Director GREG BELL /)eulelltllll Govenwr September 12,2014 Kristina L. Kindl Director, Policy and Legal Services Salt Lake City School District 440 East 100 South Salt Lake City, Utah Dear Ms. Kind I: Thank you for communicating with Risk Management regarding coverage. We appreciate the opporhmity to provide information to Salt Lake School District. My August 12, 2014 letter to you considered the issue of course and scope in regards to your insurance coverage and liability exposure to the district, school board, individual board members and district officers and employees. I understand the district seeks additional information explaining what it might expect once a lawsuit is actually filed. In my judgment, the following perspectives are critical to tmderstanding how coverage and liability can play out in actual litigation. 1) First and foremost, the district or board can expect to face liability claims whenever a board member or district employee injures someone while performing her duties. The concept of course and scope, as discussed in my August 12,2014 letter, is the substantive controlling principle for determining whether the entity is held legally responsible for injury claims, or whether the board member or employee is personally responsible. It is fundamental that an individual who acts within course and scope, cannot "be held personally liable for acts or omissions" that damage others. UCA 63G (4). Conversely, one who injures another while acting beyond scope can be personally responsible to satisfy an adverse judgment. 2) In addition to liability issues, the availability of Risk Management insurance for individuals also depends upon course and scope principles. When a lawsuit names individual board members or employees as defendants, the primary coverage question is whether the individuals are being sued for actions/omissions within scope. If there is no clear answer, Risk is authorized to defend the individual under a reservation of rights. 63G-7-902(6). Risk provides 5120 Slate Office Building. Salll.akc City, Utah telephone (801) 5Jg-9560 facsimile (801) 53& I!OV

5 a defense for the individual, but with the written understanding that it is not obligated to pay any judgement against an individual not acting within scope. 1 In other words, Risks' duty to defend can be broader than its duty to indemnify.. 3) When a board member or employee is defended under a reservation of rights, a separate attorney may be appointed for the individual if the board or district is also named in the lawsuit. This is important in circmnstances where a dispute exists about course and scope. The resolution of this dispute between the individual and the entity directly impacts ultimate responsibility for an adverse verdict, i.e., whether it falls upon the individual or the entity. As noted, an individual not acting in course and scope can expect to be personally and financially responsible for an adverse verdict against him. 4) While board members and employees must act within scope to legitimately claim insurance, the board itself and the district will always be defended and indemnified by Risk for all covered claims. That coverage remains intact where individual board members or employees trigger a lawsuit by acts that are beyond scope. This is significant because, in addition to claims against the individual, independent claims can be asserted against the entity, e.g., negligent hiring, negligent training, or negligent supervision, that may lead to a separate verdict against the entity. Moreover, even where the "out of scope" activities of a lone board member or employee are the only reason the board or district is dragged into a lawsuit, your coverage remains intact. This is true regardless of whether the individual is denied coverage. In other words, the board and district can expect to be defended and indemnified in every instance where covered claims are asserted against it regardless of the coverage provided to individual board members or district employees. Covered entities do not get reservation of rights letters. 5) In lawsuits where it is clear that the board member or employee acted within scope, the exclusive remedy provision of the Utah Governmental Immunity Act provides a basis for early dismissal of a named individual, leaving the entity as the only defendant. In this circumstance, only one attorney will be appointed by Risk to defend both the individual and the entity. Once the individual is dismissed, a plaintiff may continue his suit against the entity, but is thereafter forbidden from pursuing any legal action against the individual. 63G-7-202(3)(a). Where individual actions were within scope, any judgment against the entity "is a complete bar to any action" subsequently asserted against the individual based upon the same event. 63G-7-202(3)(b). 6) Regardless of the circumstances, the board or district should never feel pressured or obligated to make difficult coverage decisions that impact individuals. Risk Management will conduct a review, investigate when necessary, and make coverage determinations. The board or district never needs to wear a black hat. It just needs to cooperate in any investigation and respond honestly to Risk questions. At the same time, Risk welcomes district input regarding coverage decisions including situations that can significantly impact individuals. 1 Other factors may also lead to personal liability, i.e., fraud, willful misconduct, actions taken under the influence of drugs or alcohol, false testimony under oath, fabricating evidence, and failure to disclose evidence. UCA 63G-7-202(3)(c). While these factors are occasionally relevant, in the great majority of cases the fundamental coverage and liability issues center on course and scope analysis.

6 7. Typically, Risk makes coverage determinations fairly quickly. In instances where coverage is denied to an individual, that person is afforded the opportunity to procure an attorney for his own defense. When Risk defends an individual under a reservation of rights, there may be a subsequent determination to withdraw coverage where new information emerges. In that circumstance, Risk would pay for an orderly transition from the assistant attorney general who is defending to the individual's new defense attorney. The stakes are significant for any district employee or board member who triggers a lawsuit by conduct beyond course and scope. Without insurance, the individual would face financial responsibility for an adverse judgment. Any settlement would be funded by personal resources. Even where a defense proved successful, attorney fees and costs charged to the individual can be enormously expensive, easily in excess of six figures through trial. Appeals impose additional expenses, again borne by the individual. On the other hand, employees or board members sued for actions committed within scope can expect to be fully defended and indemnified. An assistant attorney general will be appointed to defend them. All attorney fees and litigation costs are paid by Risk Management. If a settlement is warranted, it is funded by Risk. An adverse verdict or judgment is satisfied by Risk, or it will pay for an appeal to reverse the judgement. An appeal taken by the other side would be defended by the attorney general's appeal practice group, all without cost to the individual. This letter explores your insurance coverage and outlines practical defense issues that can arise when lawsuits are flied. We hope this has been helpful, and would be pleased to come to your offices anytime if further discussion is warranted. ~ ~~!~-~ Counsel~t~k Management