Insurance to defend and indemnify offices and employees of a political subdivision of the State

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.

Limiting the use of personal leave accruals

Limiting the use of personal leave accruals

Johnston v ITT Aerospace/Communications, CA7, 272 F.3d 498

Sometimes an employee will challenge his or her employer's placing restrictions on the use of an employee's personal leave accruals. In the Johnston case, the Circuit Court of Appeals considered whether an employer's leave policy that distinguished between granting paid leave in connection with an individual's responding to a court order and the employee's filing a lawsuit on his or her own behalf, was lawful.

Kevin M. Johnston, an employee of ITT Aerospace/Communications Division of ITT Industries, Inc., challenged the company's attendance policy, which contains an exception for absences that are due to the employee's being ordered by a court “to appear as a witness (not a party).” The issue was raised as part of Johnston's Title VII law suit against ITT after he was assessed two unexcused absences for days on which he attended a preliminary pretrial conference, and gave his deposition, in the Title VII action that he filed against ITT.

The Circuit Court concluded that “[t]here is nothing unlawful about a leave policy that distinguishes between leave that is due to a court order and leave to enable an employee to engage in private business, including the filing of lawsuits.”

Mental stress and workers' compensation

Mental stress and workers' compensation

Vaupell v Buffalo City School District, 288 A.D.2d 510

The provisions set out in Section 2(7) of the Workers' Compensation Law [WCL] was a critical factor in resolving the appeal filed by Naomi Vaupell challenging the Workers' Compensation Board's denying her additional benefits following her termination by the Buffalo City School District.

WCL Section 2(7) specifically excludes from compensation “an injury which is solely mental and is based on work related stress if such mental injury is a direct consequence of a lawful personnel decision involving a disciplinary action, work evaluation, job transfer, demotion, or termination taken in good faith by the employer.”

Naomi Vaupell had suffered a head laceration and concussion in September 1993 while working as a special education teacher for the Buffalo City School District. She filed for and received workers' compensation benefits for a consequential psychiatric condition. In September 1994, Vaupell returned to work with no restrictions imposed by her treating psychiatrist and her Workers' Compensation case was closed.

In September 1995, Vaupell was denied tenure and terminated from her position based upon her poor job performance. She then filed for additional workers' compensation benefits alleging that her ineffectiveness as a teacher and termination were causally related to her previously compensable psychiatric condition.

A Workers' Compensation Administrative Law Judge denied Vaupell's claim upon finding that any recurrence of her stress-related symptoms was due to her poor performance evaluations. The Workers' Compensation Board affirmed this decision and Vaupell appealed its ruling.

The Appellate Division dismissed Vaupell's appeal, noting that “[s]ince the Board decided only the question of whether claimant's inability to perform her job and her resulting termination were causally related to her 1993 injury, this Court's review is limited to determining whether substantial evidence supports the Board's conclusion that claimant's loss of employment was solely related to the employer's denial of tenure and her poor work performance,” thus triggering the provisions of WCL Section 2(7).

The decision notes that Vaupell testified that she was emotionally devastated when she received negative evaluations and the letter of dismissal. Accordingly, said the court, “the Board's conclusion that Vaupell's symptoms of stress were related to poor work evaluations rather than her original compensable injury is supported by the record.”

As the evidence presented at the Workers' Compensation hearing established that Vaupell had been evaluated as unsatisfactory in the performance of her teaching duties prior to, as well as after, her injury and the lack of any evidence in the record suggesting that the employer acted in bad faith in making the negative evaluations or denying Vaupell tenure, the Appellate Division declined to disturb the Board's decision.

PERB rules employer’s conducting a survey of unit members to determine if a recognized or certified collective bargaining agent should continue to represent the unit an improper employer practice

PERB rules employer’s conducting a survey of unit members to determine if a recognized or certified collective bargaining agent should continue to represent the unit an improper employer practice
Matter of Monroe County v New York State Pub. Empl. Relations Bd., 2011 NY Slip Op 05170

The Public Employment Relations Board found ruled that Monroe County had committed an improper employer practice in violation of the Taylor Law when it conducted a survey “to assess whether to hold a secret ballot election” to determine if CSEA should continue as the union representing certain of the County’s part-time employees.

CSEA had told Monroe that the CSEA unit for part-time employees was in administratorship, i.e., the CSEA local had taken over control of the part-time unit, because the unit no longer had any officers “to run it.”  Although Monroe had agreed to negotiate with CSEA concerning the part-time workers in the unit, it mailed all of its part-time employees represented by CSEA a letter and survey form underlying CSEA’s improper practice charge.

PERB affirmed its hearing officer’s determination that Monroe had "interfered with, restrained and coerced employees in the exercise of protected rights." Monroe appealed, seeking to annul PERB's determination while PERB counterclaimed seeking enforcement of its remedial order.

The Appellate Division concluded that substantial evidence supported PERB's determination that Monroe had violated Civil Service Law §209-a (1) (a) by conducting the survey. The court rejected Monroe’s claim that it was acting appropriately and was justified in sending out the survey based on a provision in the prior collective bargaining agreement.

The provision relied on by Monroe stated that CSEA's "representative status shall continue as long as it represents a majority of the bargaining unit employees, provided that if [Monroe County] receives evidence that thirty percent or more of the unit employees are questioning this status, the parties will conduct a secret ballot election conducted by PERB to determine representative status."

The Appellate Division ruled that PERB’s finding that this language did not provide Monroe with the authority to actively solicit employees' opinions regarding their potential dissatisfaction with CSEA's union representation nor did Monroe have authority under the regulations to seek decertification of CSEA was “rational.” It commented that courts give deference to PERB's interpretation of a collective bargaining agreement, which is within PERB's area of expertise, as long as that interpretation is reasonable, rational and supported by the language of the agreement.

Notwithstanding Monroe’s concerns regarding CSEA's ability to effectively represent its employees in the part-time unit, the Appellate Division decided that PERB “reasonably determined that this concern did not permit [Monroe County] to conduct a survey. Accordingly, said the court, PERB was entitled to a judgment of enforcement of its remedial order.

The decision is posted on the Internet at:

http://www.courts.state.ny.us/reporter/3dseries/2011/2011_05170.htm

Pension benefits and marital property

Pension benefits and marital property

DeLuca v DeLuca, 97 N.Y.2d 139

Retirement benefits frequently are an important factor in a divorce. In the DeLuca case the Court of Appeals ruled that retirement benefits from the New York City Police Superior Officers Variable Supplements Fund [VSF] are marital property subject to equitable distribution in a divorce proceeding.

New York City Detective Crescenzo DeLuca divorced his wife, Maria, after 30 years of marriage. Before the divorce became final, DeLuca retired and began receiving VSF benefits in addition to his regular pension benefits.

A New York Supreme Court justice subsequently granted Crescenzo the divorce. As part of the equitable distribution of Crescenzo's assets, the court awarded Marie half of his past and future VSF payments. The Appellate Division, however, modified the award (276 AD2 143), holding that VSF benefits were not marital property on the theory that VSF benefits were not pension benefits under the City's Administrative Code Section 13-279[b].

The Court of Appeals disagreed, holding that the VSF was subject to equitable distribution in a divorce proceeding. The court said the VSF, along with its counterpart for police officers below the rank of sergeant ... were the result of contract negotiations between the City of New York and the unions representing police officers. In 1968, both sides jointly proposed legislation allowing the Police Pension Fund, whose pension investments were limited to fixed-income obligations, to invest some of its assets in equities, such as common stock, with the hope of creating higher earnings. The additional earnings could then be used as extra post-retirement compensation to attract qualified individuals and induce long-term service.

The Court of Appeals decided that whether VSF benefits constitute marital property cannot be determined by the Administrative Code provisions relied on by the Appellate Division but rather are to be determined pursuant to the relevant provisions of the Domestic Relations Law.

The general rule in such cases is that if the benefit is something of value and was earned in whole or in part during the marriage, it may be considered marital property subject to equitable distribution. Referring to Majauskas v Majauskas, 61 NY2d 481, the court pointed out that “rights in a vested but non-matured pension were marital property.”

Thus, said the court, formalized concepts such as “vesting” and “maturity” are not determinative in such situations, noting that in Olivo v Olivo, 82 NY2d 202, it ruled that compensation received after dissolution of the marriage for services rendered during the marriage is marital property.

In the words of the court, “VSF benefits are a supplement to pension fund payments and, as such, a form of compensation for past services related to the first 20 years of police employment, notwithstanding the date they mature.”

Also noted was the fact that although issues such as “vesting” and “maturity” do not raise serious obstacles to the determination that VSF benefits are marital property, they do affect valuation and distribution.