Do You Need Liability Insurance


new law has many federal employees wondering whether they need professional liability insurance coverage. The law, which took effect Oct. 1, requires federal agencies to reimburse their managers, supervisors and law enforcement officials for up to half the cost of professional liability insurance. Employees should take a closer look at the potential liabilities they may face during their careers in order to make an informed decision about whether or not they need such coverage.

Government employees at all levels can be sued by citizens alleging violations of their constitutional rights. Such lawsuits arise most often for law enforcement officials, but anyone who deals with the public can become a defendant. Even managers who have no direct contact with the public can face lawsuits by citizens who are irate over management decisions. Similarly, supervisors can be sued by their subordinates. However, rarely are federal employees found personally liable or ordered to pay damages in such cases.

Who's at Risk?

In general, managers are immune from lawsuits while performing their official government duties. When a federal employee is named a defendant in a lawsuit, the Justice Department analyzes whether the employee was acting within the scope of his or her job. If that is the case, Justice takes over and moves to substitute the U.S. government as the defendant. In these cases, suits against individual employees are dismissed. So, exposure to civil liability from suits brought by citizens or subordinate employees is minimal.

However, in some cases, such as that of an employee accused of using a racial slur while dealing with a customer, the Justice Department has determined it is not in the government's interest to represent the employee. Therefore, the employee would be responsible for mounting his or her own, often expensive, defense. Justice may also decline to represent an employee whose action was supposedly committed willfully. An employee can challenge such a decision in court, but that costs money.

Employees who deal with the public, particularly law enforcement officers, can also be sued personally for constitutional torts. This means they can be found personally liable if they violate the constitutional rights of a member of the public.

Innocence Elusive

Supervisors and managers who would never consider making racial comments or discriminating against citizens or their subordinates often discount the need for professional liability insurance. There is a world of difference, though, between being accused of discrimination or other wrongdoing and actually being guilty.

Unfortunately, good conduct does not prevent managers from being accused of misconduct, whether the accuser is an agency inspector general, the Office of Special Counsel, internal affairs or another federal employee. While the accused may ultimately be vindicated, the process of achieving such vindication can easily cost tens of thousands of dollars.

The Senior Executives Association and other professional, management and law enforcement associations recommend professional liability insurance because these policies include an "administrative defense" provision. This provision pays up to $100,000 of an employee's legal fees if he or she is:

  • The subject of an IG investigation;
  • Accused of engaging in whistleblower reprisal by OSC;
  • Named as the responsible management official in an EEO complaint;
  • The subject of a disciplinary action, such as a suspension, demotion or removal for alleged misconduct.

Rare is the supervisor or law enforcement official who is not accused of some wrongdoing at some point in his or her career. For the law enforcement official, it could be a private citizen who accuses him or her of using excessive force, taking bribes, engaging in discriminatory treatment or other offenses that could trigger an IG or internal affairs investigation.

For a supervisor, it could be a disgruntled subordinate who was denied a promotion or received a low performance rating. In some instances, the agency will provide a lawyer to the accused employee, but only if it's in the agency's-not necessarily the employee's-best interests. Additionally, as the President learned recently, what a federal employee tells an agency attorney is generally not covered by attorney-client privilege.

Federal employee associations often recommend professional liability insurance because many of their members have ended up paying $30,000 or more to defend themselves. While bargaining unit employees have free union representation, even if they are not union members, most managers, supervisors, executives and many law enforcement officials are not eligible to join a bargaining unit.

What Is Covered

Professional liability insurance covers allegations that a federal employee violated the rights of another employee or a private citizen while carrying out his or her official duties. If the allegation results in a criminal or administrative investigation, the insurance policy would provide a private lawyer to represent the accused employee during the investigation. If a disciplinary action, such as a suspension or a removal, is proposed or taken, the policy would cover representation of the employee until the Merit Systems Protection Board makes a final decision. In cases where an employee is accused of a constitutional tort, the policy would cover attorney representation and the payment of any personal judgment against the covered employee. The policy does not cover representation during arbitration under a collective bargaining agreement.

If an employee is investigated or prosecuted for an allegedly criminal act arising out of his or her official duties, these policies usually provide legal representation during the investigation and the prosecution, until an initial finding of guilt. An allegation that concerns a matter outside the scope of the employee's duties (e.g., an employee shoots a fellow employee in a domestic dispute) would not be covered by the insurance.

The Justice Department cannot provide criminal defense representation at the federal level, as the policy does, because the United States would be both prosecuting and defending the case, which is a conflict of interest. However, on occasion, Justice will arrange for private counsel when a state or foreign court prosecutes an employee acting within the scope of employment. For example, when the state of Idaho prosecuted a federal agent for his acts during the Ruby Ridge incident, the Justice Department arranged for private counsel to represent the federal agent.

Personal Choices

Employees who have a personal liability insurance umbrella policy might wonder whether their policy provides coverage for issues related to their official duties.

Most of these personal policies exclude employment-related cases. When an incident occurs at work, the employer is supposed to be the liable party. However, as a federal employer, the government is not always liable because of sovereign immunity, leaving employees on their own.

Professional liability insurance can be confusing, and the decision to buy it is a personal one. If you are a federal manager, supervisor or a law enforcement official, and you decide to purchase the insurance, inform your agency and find out how to get reimbursed for up to half the cost of the premiums.

G. Jerry Shaw is a Washington attorney with the law firm of Shaw, Bransford, Veilleux & Roth, which specializes in federal employment law. He is general counsel for the Senior Executives Association.