A public authority [Employer] filed disciplinary charges filed against an officer of the Employer [Plaintiff] pursuant to Civil Service Law §75 alleging that Plaintiff had made a number of unauthorized purchases using "agency-issued" credit cards. Plaintiff was terminated and subsequently plead guilty to disorderly conduct in satisfaction of the criminal charges brought against him pursuant to §240.20 of the Penal Law.*
Plaintiff then demanded that the Employer indemnify him for, among other things, counsel fees incurred in defending himself in the criminal action by filing a claim pursuant to the Employer's Employees and Directors Liability Policy.** The Employer filed the claim and the insurance carrier declined coverage. The Employer rejected Plaintiff 's request for indemnification, contending it had no duty to indemnify employees outside the scope of its insurance coverage.
Plaintiff next commenced initiated a combined CPLRA 78 proceeding and action for declaratory judgment seeking, among other things, a declaration that he was entitled to indemnification by the Employer for his expenses, costs and counsel fees incurred in defending himself in the criminal action.
Although Supreme Court granted Plaintiff petition to the extent of declaring that Plaintiff was entitled to indemnification under the Employer's internal resolution providing for "indemnification", the Appellate Division reversed that ruling, explaining:
1. It agreed with Supreme Court that Plaintiff had "no statutory right of indemnification" under the otherwise pertinent provisions Public Officers Law §§17[3][a]; 18[4][a]; 19 [1] nor Public Authorities Law §2623 [2] any duty to indemnify Plaintiff would derive solely from a contractual obligation;
2. In the event a party is under no legal duty to indemnify an employee, "a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed" and a promise to indemnify "should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding facts and circumstances"; and
3. The Employer's resolution pursuant to which Plaintiff claims a right of indemnification states, in pertinent part, that the Employer "agrees at its sole cost and expense to indemnify and hold harmless the members, officers and employees of [the Employer] from all costs and liabilities of every kind and nature as provided in the by-laws" with respect to the individual's "acting [o]n behalf of [the Employer]."
Noting that the language of the internal resolution is ambiguous, the Appellate Division opined that "This ambiguity itself precludes a finding of entitlement to contractual indemnification", citing Hooper Assoc. v AGS Computers, 74 N.Y.2d 487 as the resolution does not convey a clear right to indemnification and Plaintiff was ordered to pay restitution in connection with a guilty plea to disorderly conduct in satisfaction of an accusatory instrument charging intentional criminal conduct.
Thus, said the court, "Supreme Court erred" in concluding that Plaintiff had an enforceable right to "contractual indemnification."
* Plaintiff was sentenced to 150 hours of community service and ordered to pay $8,026.53 in restitution.
** Employee did not apply for indemnification pursuant to Public Officers Law or the Public Authorities Law.
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