HomeMy WebLinkAbout87-576 MarlesBlake C. Marles, Esquire
The Traylor
15th and Hamilton Streets
Allentown, PA 18102
Dear Mr. Marles:
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PA 17120
TELEPHONE: (717) 783 -1610
May 20, 1987
ADVICE OF COUNSEL
$7 -576
Re: Township Supervisors, Indemnification For Actions Arising Out Of Official
Conduct
This responds to your letter of May 12, 1987, wherein you requested the
advice of the State Ethics Commission.
Issue: Whether the State Ethics Act presents any prohibition upon township
supervisors securing insurance or legal services to defend against actions
arising out of their official conduct.
Facts: As solicitor for Lower Macungie Township, you have requested the
advice of the State Ethics Commission regarding the above issue. You have
indicated that the township supervisors are considering the enactment of an
ordinance that would permit the township to provide legal representation to
township employees including the elected officials for any legal actions or
liabilities that may be brought against them as a result of their conduct as
public officials and employees. You have indicated that it has generally been
the case in municipalities that liability insurance coverage provided to
employees also would include coverage for the elected officials. You have
indicated that this would be deemed appropriate in light of the fact that the
most likely target of litigation in this respect would be the elected
officials who have transacted the township's business. You have requested the
advice of the State Ethics Commission regarding whether the State Ethics Act
would present any prohibitions upon the supervisors from providing such
coverage for the officials and employees of the township. You have provided a
copy of the ordinance which would be considered by the supervisors. Pursuant
to that document, the township would secure a defense either by the township
solicitor or through the employment of other counsel or through the purchase
of insurance which would provide such a defense. This coverage would be
implemented as a result of the need for a defense that may be reasonably
necessary to answer any claim, civil action or proceeding filed against such
employee or official on account of an act or omission committed in the scope
of the official's /employee's employment. The ordinance would allow the
Mr. Blake C. Marles, Esquire
May 20, 1987
Page 2
township to refuse the provision of such defense for actions that were not
within the scope of the official's employment or in the event that a lawsuit
had been initiated by the township or the action of the employee was the
result of fraud or malice.
Discussion: As township supervisors, the individuals here in question, would
clearly be public officials as that term is defined in the State Ethics Act.
65 P.S. §402 et. seq. As such, their conduct must conform to the requirements
of that law. See Sowers, 80 -050; Welz, 86 -001. The Ethics Act provides, in
relation to the instant situation, as follows:
Section 3. Restricted activities.
(a) No public official or public employee shall use his
public office or any confidential information received
through his holding public office to obtain financial gain
other than compensation provided by law for himself, a
member of his immediate family, or a business with which
he is associated. 65 P.S. 403(a).
Generally, in analyzing any situation, under the above provision of law, it
must be determined initially whether the public official has used or will use
his official position in relation to a given matter. It must further be
determined if the use of that position has resulted in the receipt of a
financial gain and whether that financial gain is part of the compensation
provided for by law. In the instant situation, it is clear that a public
official who authorizes the expenditure of township funds or who otherwise
casts a vote in relation to an ordinance providing benefits to himself, would
be using his public office as set forth in section 3(a). Additionally, there
is no doubt that the provision of such legal benefits would be a financial
gain. The analysis of the instant situation, therefore, must turn upon the
question of whether the financial gain is part of the compensation that is
allowed by law.
This Commission has reviewed an issue similar to that presented in the
instant matter. In Pugliese, 85 -018, the Commission reviewed the issue of
whether the Ethics Act presented any restrictions on township supervisors
securing legal services to defend against a surcharge action that was
initiated against the supervisors as a result of actions taken in their
official capacity. The Commission concluded in that situation, that the costs
of such a legal defense, even if constituting compensation, appeared to be
provided for by law. In this respect, a review of the Commission's analysis
in that situation is in order. In this respect, the Commission stated as
follows:
We have searched for some definitive rule or
precedent to assist us in reviewing this question. We
have found none directly on point. One recent case,
however, is instructive. In Employers Mutual Casualty
Mr. Blake C. Marles, Esquire
May 20, 1987
Page 3
Company v. Supervisors of Lewis Township, Pa. Cmwlth.
, 477 A.2d 607 (1984), the Court decided that an
errors and omissions insurance carrier was required to
provide insurance coverage to a township where the
supervisors were surcharged. The Court condluded that the
policy which provided for coverage and payment of any loss
where l i a b i l i t y arose from the employer's performance of
duties within the scope of his employment was not contraty
to public policy and the insurer was, therefore, obligated
to pay losses under the policy. The Court concluded that
Section 701 of the Political Subdivision Tort Claims Act,
42 P.S. 8564(a), provided authority for a political
subdivision to purchase and insure any liability arising
from the performance of official duties. The errors and
omissions insurance was found to be authorized and the
carrier liable to pay even in the face of a loss which
resulted from a surcharge judgment.
In the present case, it is clear that the surcharge
and the need for a legal defense arose out of actions
related to your official duties. The Employers Mutual
case, above, would seem to teach that any loss resulting
from this action would itself be payable from the
Townships errors and omission policy. It would be
anomalous that if the loss itself might be payable from
this policy that you would be precluded from securing a
defense to same from a similarly purchased public source
or substitute (private counsel) thereof. Thus, even
assuming the costs of this defense would be deemed
"compensation," it would appear that the costs of this
policy and, therefore, the costs of defending same, if
same is denied by the insurer, can be said to be "provided
by law."
Additionally, it is interesting to note that the Second Class Township
Code appears to contemplate the provision of this type of insurance or
indemnification as one of the benefits of public office. In this respect, the
code provides as follows:
To make contracts with any insurance company, so
authorized, insuring any public liability of the township,
including insurance on every township officer, official
and employe for liability arising from errors and
omissions in the performance of their duties in the course
of their employment, except that liability of elected or
appointed officials or officers for surcharge in
accordance with law shall not be affected hereby. 53 P.S.
§65713.
Mr. Blake C. Marles, Esquire
May 20, 1987
Page 4
Based upon the foregoing, it would appear as though in accordance with prior
Commission opinions and applicable law, the provision of this type of
indemnification for actions that are brought against township supervisors as a
result of their official conduct would not be contrary to the provisions of
the State Ethics Act. This would be so, in that the officials are obtaining
benefits and a gain that are specifically provided for in law. As such, the
provisions of the State Ethics Act would appear not to prohibit the passage of
such an ordinance or the supervisors activities in doing so.
It should be noted that the instant advice is specifically limited to the
situation which you have presented before the Commission and does not address
the provisions of other types of legal services on behalf of township
supervisors.
Conclusion: The State Ethics Act would not prohibit township supervisors from
securing appropriate liability insurance, indemnification or legal
representation in order to defend against actions brought against them as a
result of their official conduct. This decision is in accordance with prior
Commission opinions and applicable law.
Pursuant to Section 7(9)(ii), this Advice is a complete defense in any
enforcement proceeding initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, providing the requestor has
disclosed truthfully all the material facts and committed the acts complained
of in reliance on the Advice given.
This letter is a public record and will be made available as such.
Finally, if you disagree with this Advice or if you have any reason to
challenge same, you may request that the full Commission review this Advice. A
personal appearance before the Commission will be scheduled and a formal
Opinion from the Commission will be issued. Any such appeal must be made, in
writing, to the Commission within 15 days of service of this Advice pursuant
to 51 Pa. Code 2.12.
n
Acti General Counsel