Pay and Benefits Watch: Liability insurance Q&A

Section 642 of the fiscal 2000 Treasury-Postal appropriations act (H.R. 2490), which President Clinton signed last month, changed only one word of federal law, from "may" to "shall." That tiny change could mean a savings of up to $146 a year for federal managers.

By changing that one word, Congress ordered federal agencies to provide reimbursement for half the cost of professional liability insurance for supervisors, managers and law enforcement officers. Previously, under section 636 of the fiscal 1997 Treasury-Postal appropriations act, agencies could provide the reimbursement, but did not have to.

The annual cost of professional liability insurance can be close to $300, depending on the type of coverage.

Agencies now have to budget for the additional expense, and managers and law enforcement officers need to consider whether they should purchase the insurance. Here's a question-and-answer review of some of the factors to consider:

What does professional liability insurance cover?

Professional liability insurance covers federal managers' or law enforcement officers' legal costs when defending themselves against allegations of wrongdoing while carrying out official duties. The coverage pays for lawyers' fees during criminal or administrative investigations up to $100,000 a year and covers payment of civil fines or penalties as long as the cost of the lawyers' fees plus the fines or penalties is below $100,000.

Do federal managers and law enforcement officers need the insurance?

The Justice Department provides legal representation for federal managers and law enforcement officers when the official is being sued for actions performed within the scope of his or her employment and the Justice Department determines it is in the interest of the government to represent the employee.

In a 1998 report, the Office of Personnel Management found that of the 7,000 requests for legal representation federal officials submitted to the Justice Department over the preceding five years, only 150 were rejected. Over the same period, only 14 federal employees were found personally liable for illegal actions performed on the job. In 11 of the cases, agencies indemnified the employees.

In 1998, 159 feds covered by professional liability insurance filed claims with Wright & Co., a Washington-based firm that provides such insurance, 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.

Professional liability insurance can also help officials get additional legal help even if the Justice Department decides to represent them.

Who is eligible for reimbursement?

Federal supervisors, management officials and law enforcement officers are eligible for reimbursement of half the cost of liability insurance (If you need a legal definition of those positions, "law enforcement officer" is defined under sections 8331(20) or 8401(17) of Title 5 of the U.S. Code, or under section 4823 of Title 22. "Supervisor" and "management official" are defined in section 7103(a) of Title 5).

How much does the insurance cost?

Wright and Co. offers the only professional liability insurance program specifically designed for federal officials. The company offers two policies. For $1,000,000 worth of liability coverage and a $100,000 legal defense provision, the premium is $292 a year. For $500,000 worth of liability coverage and a $100,000 legal defense provision, the premium is $229 a year.

How do you sign up for professional liability insurance?

Contact Wright & Co. at 1-888-412-7322 or at the the company's Web site, To receive reimbursement for half the cost of the insurance, you'll need to contact your agency's human resources office. For example, here is a link to the reimbursement policy at the National Institutes of Health.

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