Protecting Public Officials

Public officials in today’s economic environment face ever-increasing, costly litigation threats that can severely hinder the operations and financial stability of the public entity and themselves. The degree to which public officials may be liable for their actions is an important issue at every level of government service. These threats can harm the public entity’s financial performance and the communities directly served by it, not to mention the threat to the public officials’ personal assets.

Public Officials Liability (POL) policies are designed to shield the personal assets of a public entity’s elected and appointed officials, and protect them against breaches of duty, neglect, error, misstatement or omission while in the performance of their duties for the public entity. These policies can be tailored specifically to address the insurance needs of municipalities, governmental bodies or any department or unit therein.

PUBLIC OFFICIALS’ VULNERABILITY

Safeguards are in place to protect public officials from litigation provided they acted fairly and without malice towards others. However, such safeguard measures are not always readily available or applicable in the most-needed instances. Historically, the courts have created remedies in damages against public authorities for wrongful acts that give rise to personal injury or economic harm. For example, courts routinely grant an injured party damages for wrongful governmental action. These public authorities have also been held liable in damages if they act negligently in relation to a person to whom the official owes a duty of care. A re-occurring issue facing public officials is their need to consider the “complex problem of how a true balance is to be struck between the necessary requirements of a public service and the just rights of the citizens.” 1

From time to time, a public official may be held liable for misfeasance in a public office or for a violation of an individual’s constitutional right. The view is that public officials and the public entities that serve the public interest must shoulder the responsibility towards the community at large under the threat of litigation should they fail to do so. In the province of Alberta, a recent case examined the personal legal liability of politicians for the decisions they make while governing. In this case, claims were made for damages based on personal injury claims that the public officials were negligent in their decision-making on funding for health care, and as a result of their negligence the plaintiffs suffered harm.

In a separate matter, the Supreme Court of Canada has created certain remedies to permit monetary relief to be awarded for bad faith decision-making. Even in cases in which a public official is immune from suit for negligent acts, such immunity may not be absolute. Liability is found when it has been determined that the public official acted in bad faith or when the exercise of power is unreasonable.

POL COVERAGE

When considering POL coverage, one must reason that if executive officers of a profit-making corporation can be sued for the decisions they make that can result in economic loss to their stakeholders, so too can the case be made against elected and appointed officials of provincial agencies, authorities, commissions or special boards. Persons who were, are or shall be lawfully appointed or elected officials of a provincial or municipal agency, members of commissions, boards or other units operating by or under the jurisdiction of such entity are usually covered. Generally speaking, the public interest is to shield officials from litigation and personal financial liability. However, this is certainly easier said than done.

Public bodies carrying a POL policy include local government, port authority, housing authority, transit authority, school districts, utility, water/sewer authority, development/finance authority, sports/convention centre/parks department, power authorities, water authorities, etc. It should be noted, however, that a number of differences exist between a standard D&O policy and a POL policy. For example, a POL policy will likely include automatic entity coverage; for a standard D&O policy, this might not always be the case. The POL policy can also provide coverage for employees as insureds as well as volunteers. Coverages usually provided under such policies include breaches of duty, neglect, error, misstatement or omission while in the performance of their duties for the public entity. Under certain circumstances, coverage for some POL policies can also be amended to add coverage for employment practices liability for the insured entity’s law enforcement agency or fire fighting agency.

CONCLUSION

Public official exposures are very apparent. However, the availability of coverage in a Canadian context is still rare and often difficult to secure. There are many reasons to seek public officials coverage: the simplest is that constant government intervention, frequently rationalized on the basis of ever-changing economic conditions, exposes more and more public officials to the very issues raised. The exposures are real and the stakeholders numerous.

1 Hamson, C.J. “Escaping Borstal Boys,” [1969] Camb. L.J. 273, 283).

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When considering Public Officials Liability (POL) coverage, one must reason that if executive officers of a profit-making corporation can be sued for the decisions they make that can result in economic loss to their stakeholders, so too can the case be made against elected and appointed officials of provincial agencies, authorities, commissions or special boards.

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A number of differences exist between a standard D&O policy and a POL policy. For example, a POL policy will likely include automatic entity coverage; for a standard D&O policy, this might not always be the case. The POL policy can also provide coverage for employees as insureds as well as volunteers.