Insurance to defend and indemnify offices and employees of a political subdivision of the State
Watkins Glen Central School District v. National Union Fire Ins. Co. of Pittsburgh, 286 A.D.2d 48
Sections 17 and 18 of the Public Officers Law provide for the defense and indemnification of public employees in connection with their official acts or their failure to perform an official act. Sometimes a public employer decides to purchase an insurance policy to protect itself in the event it is sued for its employees' alleged acts or omissions, official or otherwise.
The Watkins Glen Central School District purchased an “errors and omission” insurance policy from National Union Fire. When the District asked to Company to defend and indemnify it in connection with another law suit, Dean v Watkins Glen Central School District, [Western District of New York, Civil Action No. 98-CV-0362C], National Union said it was not obligated to defend and indemnify the District under the terms of the policy.* The District sued National, seeking a court order declaring that the insurance company was obligated to defend and indemnify it in connection with the Dean action.
In Dean, the plaintiff alleged that the District was negligent in its hiring and supervision of a teacher with a history of sexual misconduct with students. Did this mean that National Union could disclaim coverage under the exclusion for intentional acts set out in the policy it issued to the District?
The Appellate Division said that National Union could not disclaim coverage, finding that “to permit the insurer to do so would wholly vitiate coverage and frustrate the reasonable expectations of the insured, contrary to the parties' unambiguous intentions.”
Accordingly, ruled the court, under the circumstances of this case, Watkins Glen is entitled to be defended and, if need be, indemnified by National Union Fire as a matter of law.
Significantly, National Union claimed that coverage for damages arising from the teacher’s alleged sexual misconduct was expressly foreclosed pursuant to the unambiguous language of the assault and battery and bodily injury/emotional distress exclusions set out in the District's policy. The District, on the other hand, offered parole evidence that the parties had purposely negotiated for the elimination of a provision within the policy that would have expressly excluded coverage for sexual molestation.
The Appellate Division said that an understanding of the type of insurance policy involved was critical to correctly deciding the appeal. An errors and omissions policy is not a standard general liability policy but rather “is intended to insure a member of a designated calling against liability arising out of the mistakes inherent in the practice of that particular profession or business” other than those engaged in the legal and medical fields.
The Appellate Division ruled that National Union's errors and omissions policy was intended to cover the District's negligence in its rendering of professional services. Such coverage, said the court, undeniably includes negligence in the hiring and supervision of employees. Finding “no direct controlling authority to the contrary from any New York court precluding such errors and omissions coverage in a case such as this,” the Appellate Division said that it was persuaded that “National Union is indeed obligated to provide the School District with defense and indemnification for its potential liability for its alleged professional malpractice.”
* In the Dean case it was alleged that the District was negligent in connection with its hiring, supervision, and retention of a teacher. The teacher was reportedly convicted in Pennsylvania in 1974 of sex crimes he committed in the course of his employment as an elementary school teacher and Dean alleged that the teacher committed criminal acts of sexual abuse as against the Dean infant plaintiffs while in the employ of the District.