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Tuesday, January 26, 2010

Doctrine of estoppel against governmental entities may be invoked where its "misleading nonfeasance would otherwise result in a manifest injustice"

Doctrine of estoppel against governmental entities may be invoked where its "misleading nonfeasance would otherwise result in a manifest injustice"
Agress v Clarkstown Cent. School Dist., 2010 NY Slip Op 00455, Decided on January 19, 2010, Appellate Division, Second Department

Jo Ann Agress, served as a school psychologist with the Clarkstown Central School District. In 2000 Agress resigned from her position after allegedly being told by one of the District's employees working in its benefits office that since she was a "vested" employee at the time of her resignation, she was entitled to a continuation of her health benefits as long as she paid the full premiums until she attained 55 years of age.” Agress also alleged that this employee told her that once she attained age 55, the District would become responsible for payment of 50% of the health insurance premiums.

In June 2006, Agress told the District that she would be turning 55 in July and that, as a result, it should start to pay 50% of her health insurance premiums. The District, however, told Agress that “an error had occurred and that [she] had not been entitled to the continuation of her health benefits after she resigned.” The District then terminated Agress’ health insurance coverage with the District, compelling her to secure alternate coverage for herself and her family at a much higher cost.

In response to Agress’ initiated a lawsuit in April 2007 to recover damages for “negligent misrepresentation,” the District asked Supreme Court to dismiss her petition. Supreme Court granted those branches of the District’s motion seeking summary judgment dismissing the negligent misrepresentation and implied contract causes of action but retained her third cause of action based on her claim of promissory estoppel.*

The Appellate Division agreed with the lower court’s finding that triable issues of fact existed with respect to the issue of “detrimental reliance.”

The Appellate Division said that "The elements of a cause of action based upon promissory estoppel are a clear and unambiguous promise, reasonable and foreseeable reliance by the party to whom the promise is made, and an injury sustained in reliance on that promise."

Although as a general rule estoppel may not be invoked against a governmental body to prevent it from performing its statutory duty or from rectifying an administrative error there is an exception to this general rule "where a governmental subdivision acts or comports itself wrongfully or negligently, inducing reliance by a party who is entitled to rely and who changes his position to his detriment or prejudice."

Pointing to its ruling in Landmark Colony at Oyster Bay v Board of Supervisors of County of Nassau, 113 AD2d 741, the Appellate Division noted that it had invoked the doctrine of estoppel against governmental entities where its "misleading nonfeasance would otherwise result in a manifest injustice" such as where the aggrieved party has been the victim of bureaucratic confusion and deficiencies.

In this instance, said the court, although the District’s employee did not induce Agress to resign, once Agress did resign, she made certain employment and insurance decisions based upon the earlier representations that she was entitled to receive continuing health insurance coverage from the District.

In view of this, the Appellate Division ruled that there was a “triable issues of fact” as to

1. whether those representations were made;

2. whether it was reasonable for Agress to rely upon them if they were made;

3. whether the District explicitly or implicitly authorized them; and

4. whether the District, by affording health insurance coverage to Agress for several years after she resigned, ratified the alleged earlier representations, even if they had been made in error.

* The doctrine of promissory estoppel states that if a party changes his or her position substantially either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise even if the essential elements of a contract are not present.

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