Public Employees Liability Coverage

Minnesota Counties Intergovernmental Trust has designed its Coverage Document to respond to the unique business of local government. It recognizes the risks faced by elected officials. MCIT’s liability coverage applies to all MCIT members and includes public employees liability (PEL).

Covered Parties

Each of the following is a covered party for MCIT coverage, but the person is only covered for acts within the scope of his or her employment or for duties performed on behalf of the member in his or her official capacity:

• Any elected or appointed official of the member
• Any person officially appointed by the member to a board or commission
• Any law enforcement personnel of the member
• Any employee or authorized volunteer of the member

The MCIT Coverage Document defines “member” as the entity named in the Declarations section of the document, including any department, subdivision, committee, commission or board under its jurisdiction, control and direction.

Coverage is always subject to the terms, conditions and exclusions of the Coverage Document. For example, claims of fraud, dishonesty, malicious or criminal acts, and intentional wrongdoing are generally excluded from coverage.

In the event that MCIT does not cover a claim, the public entity is obligated under Minnesota Statutes, Section 466.02 to defend its employee when it is determined that the employee acted within the scope of his or her employment or duties.

Distinct Coverage

Public employees liability coverage responds to claims arising from wrongful acts or omission and breach of duty, such as decision making and how either members of the public or member employees are treated. Claims under PEL include allegations of civil rights violations and harassment, and usually fall outside Minnesota Statutes, Chapter 466 liability caps. In these cases, MCIT provides up to $2 million in coverage for covered claims.

Members may have heard about class action cases involving multimillion dollar settlements or verdicts arising from jail strip search policies, claims arising from jail suicides, or employee claims of wrongful termination or discrimination. These, and claims arising from alleged board action or inaction, decisions on zoning and ditch issues, and defamation are all examples of PEL claims.

Best to Avoid Lawsuits

American society is increasingly litigious; land use cases are more contentious; lake shore and feedlot issues are harder fought; and employment cases, as supported by the Minnesota Department of Human Rights, have increased. This involves claims of discrimination on the basis of disability, race, sex, age, national origin, marital status, religion, sexual orientation, reprisal and more.

If an entity has not been sued yet, it is just a matter of time. Here are several reasons members should be concerned if they are sued and work to prevent suits:

Damages: Unlike general liability claims that are protected by the tort caps, public employees liability claims filed in federal court have no such limitation. They typically involve intangible damages arising from an alleged violation of rights or harassment that can be difficult for a jury to evaluate. These claims can also be subject to an award of the plaintiff’s attorney fees if they prevail and that can drive up the cost of a claim. It is possible that a verdict or settlement could exceed a member’s coverage limit through MCIT and fall to the member’s funds.

High profile: These claims can receive a great deal of attention in the press. Even if the allegations are untrue, the story is out there and can be difficult on the employee, his or her family and other employees. It can be a major distraction personally, in the workplace and possibly erode public confidence in the named employee and the entity.

Lost productivity: Defending a PEL claim can require the assistance of many employees during interviews with defense counsel; gathering and copying documents; and attending hearings, depositions and meetings. It can have a real negative effect on employee morale and productivity, especially in employment-related cases when the aggrieved employee continues to work for the entity.

Financial impact: As noted previously, responsibility for an excess verdict falls to the member. In addition, all claim payments made by MCIT affect a member’s future coverage contribution and can affect the dividend calculation. When compared to all property/liability claims received by MCIT, public employees liability enjoys a relatively low frequency (number of claims), but the corresponding severity (how much is paid in claims) is much higher.

Exclusions: MCIT provides broad coverage tailored to its public entity membership; however, there are exclusions. Damages arising from covered claims that are not covered, including awards of employee back pay or benefits in employment actions, would be the member’s responsibility.

There is good news. MCIT has worked hard to refine its ability to defend against PEL cases by developing a top-notch panel of attorneys to represent its members. They work to minimize the number of defendants named in a suit and aggressively assert immunity defenses.

In each case, MCIT has the goal of minimizing the disruption and financial impact to an organization and hopes to create stronger case law along the way.

Workers’ Compensation

Elected officials face the potential of sustaining a work-related injury or illness as they perform their official duties. Although workers’ compensation coverage is required for all employees, except in some limited circumstances, such as self-employment, this is not the case for elected officials.

Minnesota Statutes, Section 176.011, Subdivision 9a(6) requires that an elected board take the affirmative action of passing a resolution to provide workers’ compensation coverage to its members and other elected officials in its organization. Presently, all MCIT member counties and soil and water conservation districts have taken this action.