Pay and Benefits Watch: A look at liability

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Since passage of IRS reform legislation last year, managers at the much-maligned tax agency have become more interested in professional liability insurance.

Section 1203 of the legislation lists ten violations for which IRS employees must be fired. Managers are particularly worried about the section because allegations of Section 1203 violations can be made by both taxpayers and IRS employees (for a list of what IRS employees are calling "the ten deadly sins," see www.irs.ustreas.gov/plain/tax_regs/rra-1203.html).

Because the section provides a new avenue for IRS employees to file complaints against their supervisors, the Professional Managers Association, which includes many IRS managers, is recommending to its members that they strongly consider purchasing professional liability insurance.

Such insurance covers legal costs incurred in the line of duty. It becomes necessary only when the Justice Department, which usually represents federal managers in court, chooses not to do so. Liability insurance also covers legal costs during administrative proceedings, such as when a manager is faced with a discrimination complaint.

Wright & Company of Washington, D.C., is the primary provider of professional liability insurance to federal employees. About 18,000 civil servants are covered under Wright & Company policies.

The firm offers two levels of insurance: $1,000,000 liability and $500,000 liability. The million-dollar plan costs $266 a year. The $500,000 plan costs $203 a year.

In 1996, Congress authorized agencies to reimburse managers and law enforcement officers for up to 50 percent of the cost of the annual premium for professional liability insurance. Each agency is allowed to decide whether to offer the benefit to its employees.

The following agencies have decided to offer the reimbursement: The departments of Agriculture, Education, Interior, Labor, and the General Services Administration, NASA, National Science Foundation, Nuclear Regulatory Commission, Securities and Exchange Commission, Small Business Administration, Social Security Administration, Substance Abuse and Mental Health Services Administration, HHS Office of Public Health and Science, HHS Inspector General Office and HUD Inspector General Office.

The following agencies have decided not to offer the reimbursement: The departments of Commerce, Defense, Housing and Urban Development, Justice, Transportation and Veterans Affairs, and the Equal Employment Opportunity Commission, Health Care Financing Administration, Office of Personnel Management and the General Counsel's office at the Health and Human Services Department.

Other agencies are still deciding whether to offer the reimbursement, including Treasury (IRS managers are crossing their fingers).

Some important figures to note:

  • According to a May 1998 report by the Office of Personnel Management, the Justice Department approves requests for personal representation in 98 percent of cases.
  • Agencies told OPM that a total of 14 federal employees over five years were found personally liable in cases against them. In 11 of the cases, agencies indemnified the employees.
  • In 1998, 159 feds covered by professional liability insurance filed claims with Wright & Company for help during administrative proceedings. About 170 filed claims for involvement in court cases. Most claims were awarded, but a handful were denied. Denials were usually made because an employee was accused of wrongdoing before he or she signed up for the insurance.

The Senior Executives Association has been pushing for Congress to make reimbursement for liability insurance mandatory. But Ned Lynch, senior research director at the House Government Reform Civil Service Subcommittee, said the subcommittee believes the choice of reimbursements should be left up to agency heads.

More information about the insurance is available at: www.wrightandco.com/cseba/csebapage34.htm.

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