Think your government employer will protect you?  Think again.

by Randall K. Edwards

There are a lot of people who work for the government at some level or another, from the President of the United States, at the federal level, to the guy who fixes potholes in front of your house, on the local level.  In addition to full-time government employees, there exists a host of volunteers and part-timers who also contribute to our government, from volunteer firemen to part-time school board members.  Every one of these folks can be sued in connection with their government job.  Unfortunately, most of them have no idea of the possibility that they may have some personal liability for carrying out their duties, and that their own personal fortune, such as it is on a government salary, may be at risk.

Let’s start off with a real-life example – one I’ve actually seen during my years working in and out of government (I’ve alternatively been a Deputy City Attorney and then Chief Deputy City Attorney in Reno, Nevada, an Assistant City Attorney in Salt Lake City, Utah, and outside [private] counsel to various governmental entities and employees).

Let’s suppose that you are a part-time school board member in a school district where a teacher is accused of sexually abusing one of his students. Let’s further suppose that this is the third such instance of claimed sexual abuse by a teacher in your district in the past two years. Parents are outraged, the newspaper is editorializing and the political heat is on to do something. Among the things that are done is a lawsuit brought by the family of the latest victim against not only the teacher (who, of course, has been fired from his job and has no money), but also against the school district administration and the school board members individually. The claims against you, as a board member, are that you knew or should have known that your district's hiring, retention and review policies were inadequate, and that your failure to have done anything meaningful about them constituted not only negligence but malice and/or reckless disregard for the rights of the students in your district. There’s a claim brought against you for punitive damages, among other claims.

You go to your school district’s attorney and demand defense and indemnity as a school board member, coupled with a few choice words about the incompetent administration of your school district. (Defense is where the government provides a governmental attorney to represent the official; indemnity is where the government pays any damages assessed against the official). The school board’s attorney informs you that the plaintiff’s lawyer can’t get any punitive damages against the district itself, because under the governmental immunity statute of your state, no such damages are allowed (and that the same is generally true even if a claim is brought in federal court). He also tells you that the district will cover you in the unlikely event that there is an award against you for negligence.  He explains to you that this is due to a concept known as “sovereign immunity,” a holdover from English common law that says that the “sovereign” (in England, the king, and in modern America, the government) can do no wrong and thus can’t be sued.  He also explains that while most governments have waived their sovereign immunity by statute, there are also exceptions to that waiver, which include some types of claims for negligence of public officials acting within the scope of their duties.  Your agency’s lawyer explains that under the statutes of your state, the government is duty-bound to defend and indemnify any negligence claims against you.

“Great,” you say, “so I’ve got nothing to worry about.”

“Uh … not so fast,” says your school district attorney, “there have been allegations against you personally for punitive damages, and it’s our policy that the district may not indemnify you for those.”

“Huh?” you say.  “Why not?”

“Well, it’s certainly arguable that any action on your part that might lead to punitive damages, such as malice or reckless conduct, are by definition outside the course and scope of your duties … after all, it’s not in your job description to be reckless or malicious,” he explains.

“But … but I wasn’t malicious or reckless,” you protest.  “I was just doing my job.”

“Well, we won’t really know that until the jury comes back, will we?” replies the school district’s lawyer.

Suddenly that little knot that’s been forming in the pit of your stomach turns into full-fledged nausea.

“Are you saying that I’m not protected?” you ask.

At this point, the school board’s attorney starts to hem and haw, because he’s caught in a quandary – in fact, a conflict of interest.

If, on the one hand, he tells you that you should consider hiring your own lawyer to defend yourself against any punitive damage claim, there’s a question as to whether you’ll have to pay that lawyer out of your own pocket. After all, if there’s a determination that your actions weren’t within the course and scope of your duties (and thus you’re not covered under the governmental immunity statute), why should the school district foot the bill for your lawyer to defend you personally?

If, on the other hand, he tells you not to worry about punitive damages since, after all, he just doesn’t see that a jury is going to hit you with them, he may be leading you down a primrose path of relying on legal advice that may not be in your best interest, but is only in the district’s best interest (since the district doesn’t want to pay for a separate lawyer for you).

If he tells you that he’ll defend the claims, but that the district can’t guarantee that it will pay for any punitive damages, he’s put you in the worst of all situations, since the district has no real monetary incentive to put up a vigorous defense of the punitive damage claims, inasmuch as the district won’t have to pay for them anyway.  In fact, it may actually be in the district’s advantage to place any blame on you individually so that the district can get off the hook from an institutional standpoint.

You’re in a mess, especially since you know that the public mood is to find some poor schmuck to blame for this disaster and you fear that it may well be you and the other members of the elected body. And while you may actually have a pretty good case on the merits, you fear that in this politically charged atmosphere, a jury may well find someone to hang with punitive damages in order to send a message – damages your school district has already made clear they won’t pay. When you were running for office, you didn’t really see this kind of a train wreck on the horizon. You were more interested in looking over budgets and teacher salaries.

So, what can you do?  Or is it too late to do anything?

Here are a few suggestions:

First, find out now whether you’re covered.

As a governmental employee or volunteer, the quickest thing you can do is to find out long before trouble arises whether your governmental entity covers you – both with respect to defense and indemnity – for any lawsuit related to your job, including allegations of punitive damages.  If you are on the government payroll right now, a quick letter or email to your government lawyer should start the ball rolling to get an answer to this question – or perhaps provide a surprise that you may not be as secure as you thought.  I believe that you should insist on a written response from your entity’s lawyer – something you can rely on and, if necessary, produce later in the event of a dispute over whether you are covered by the entity or not.

Of course, it goes without saying that most government workers – including volunteers – never think of this until they find their name on the defendant line of a lawsuit, and by then it may be too late to do much but worry about what’s going to hit you next.  After all, no one goes to their government job ever thinking that they’re going to get sued as a result.  After years of defending police officers, firemen, janitors, truck drivers, city councilmen and others, the only thing I can tell you is that it can and does happen, every day.  And it can be devastating – to your credit, your career and your peace of mind.  So, a little checking on your part will serve you well.  It’s good to know now what you can – and can’t – count on.

Second, if you’ve been sued, make sure you know where you stand.

The next course of action, in the event that you do find yourself in a lawsuit in which you’ve been named personally for punitive damages, is to either get a commitment in writing from your governmental entity that you will be covered in all instances for all matters arising from your governmental duties … including any claims of punitive damages or, if your employer won’t give you this, to get your own lawyer to try to convince the governmental entity that it would be in its best interest to cover you (and send the bills for that lawyer to your governmental entity).

Third, consider litigation.

Another option after litigation against you arises – and, unfortunately, not a very pleasant option – is for you to sue your governmental entity for a declaratory judgment that you are covered by the governmental entity’s statutory requirements of defense and indemnity. This is a mess for a couple of reasons. First, it puts you in an adversarial position at the time that you most need to be in the governmental entity’s good graces, and second, there is no guarantee that you’ll win … thus not only leaving you “bare” with regard to punitive damage coverage (and now having angered everybody in the government administration), but also leaving you with a huge attorney’s fees bill that the administration isn’t going to pay.

Most importantly, have an asset protection plan in place – now! 

A savvy plaintiff’s attorney is well aware of the potential conflicts I’ve listed above, even if the average civil servant isn’t.  Thus, the claimant’s lawyer will try as hard as he can to find a basis upon which punitive damages can be alleged against the government employee in order to drive a potential wedge between the employee and his employer, since such a rift may well lead the governmental entity to a quick settlement of the plaintiff’s claim rather than put that entity, its lawyers and its administrators in the conflict of interest situation I’ve just laid out.  Of course, a quick settlement may save the government time, hassle and money in not having to deal with the hard decisions of either extending coverage or, even worse, denying coverage, for a punitive damage claim.

But what if the government doesn’t want to settle – and also doesn’t want to defend or indemnify you for the punitive damage claims against you?  It’s during those times that you’ll either a) lay awake at night wishing you had put some kind of personal asset protection plan in place or b) rest easy at night, knowing that long before the storms arose, you did.

You need to have an asset protection plan in place today.  You need to make sure that in the event that it’s your name on the defendant line of that lawsuit, you can rest easy knowing that no matter what, you’re not going to lose everything you own.  You need to make sure that your home, your retirement, your bank account and your future earnings aren’t all going to be jeopardized by a claim against your government employer and – by extension – you.

This is something that you’ll need to take up with an independent asset protection professional.  Your entity’s attorney has no interest – in fact, can’t ethically advise you – on making sure that your personal estate is protected in the event that the entity and you are sued.  You’ll need to sit down with somebody who represents your interests – and only your interests – to figure out where you stand and what your options are.  The sooner you can do this, the better.  By the time the case hits the newspapers, it may be a bit too late to try to salvage what you can of your fortune and your reputation.

There are a couple of morals to this story. 

First, you need to be aware that taking a job with the government – or even simply volunteering for a government board as a patriotic act of civic duty may be a bit more complicated and involved than you may think, and that you need to go into public service with both eyes open about whether you’ll be covered in the event that your public agency has a liability meltdown.

Most importantly, you need to be aware that government employees and volunteers – just like everyone else – need to have an asset protection plan in place before trouble arises, just in case the public entity they serve goes sideways on them.

Randall K. Edwards practices law in Nevada, Utah, California and Arizona, with his primary office located in Salt Lake City.