Public Housing - Public Officials, Directors and Officers, Errors and Omissions Liability Coverage

Frequently Asked Questions Public Officials Liability Directors & Officers Liability (D&O) Errors & Omissions Liability (E&O) What is directors and officers liability coverage? Why do I need directors and officers liability coverage? What is the difference between public officials and general liability coverage? What types of things does Public Officials cover? What is a wrongful act? Who might sue the board? What are some examples of claims? What are the responsibilities of the Board of Directors? What are the responsibilities of housing authority executives and employees? What about immunity? What is the greatest risk to public housing authorities? About your public officials coverage with HARRG Who insures our commissioners? Who is covered? Does our policy cover activities of our related nonprofit entities? Does policy cover employment practices? Is coverage provided for breach of contract? Is coverage claims-made or occurrence? Are defense costs in addition to the limits? What is a retroactive date? What is directors and officers liability coverage? Directors and officers liability coverage protects directors and officers against claims alleging negligence, errors and omissions, misstatements, misleading statements and misrepresentations, or breach of duty on the part of the board of directors. Top of Page Why do I need directors and officers liability coverage? Most organizations have a general liability policy that provides protection for its directors and officers against negligent acts that result in bodily injury or property damage. A general liability does not provide protection against alleged wrongful acts or omissions, including breach of duty, which do not result in bodily injury. Directors and officers coverage protects your executives from potential lawsuits resulting from key decisions or management practices-lawsuits that may target their personal assets. Purchasing directors and officers coverage allows your officers to make needed decisions with less worry because they have been affordable valuable insurance protection. Top of Page What is the difference between public officials and general liability coverage? Public Officials coverage is significantly different from Commercial Liability coverage. Public Officials covers policy and administrative errors, while. Commercial Liability insures a housing authority’s negligent acts arising from occurrences on their premises or from their operations. Errors or mistakes in administrative policy will result in economic loss to the injured party. Any negligence resulting from activities on their premises and operations generally causes bodily injury, personal injury, advertising injury or property damage. Each of these policies excludes coverage provided by the other, eliminating any duplication of coverage or pyramiding of limits. However, it is always best to have both policies insured with the same carrier to minimize any possible issues in borderline cases where there could be uncertainty as to which coverage may apply. Top of Page What types of things does Public Officials cover? Public Officials Errors and Omissions coverage provides protection for administrative acts and decisions administered by housing authority officials and employees. This coverage protects board members, officers and employees from mistakes or consequences of their actions in managing housing authority operations and making business decisions on its behalf. Housing Authority personnel are required and expected to: act with due diligence and in good faith, representing the best interest of the housing authority maintain loyalty to those they represent or act on behalf of, including the municipality, county and state act within and comply with the by-laws established for the authority and all federal, state and municipal laws When any of these functions are not carried out with due diligence and individuals or entities feel they have been injured, the Housing Authority and its members may be held liable for these alleged improper actions. Any negligence in performing these functions generally leads to a claim for an economic loss. Top of Page What is a wrongful act? Public Officials Errors and Omission policies provide coverage for liability arising out of Wrongful Acts. A wrongful act is any actual or alleged error, misstatement, act omission, neglect or breach of duty. Sometimes this is referred to as an improper act. This includes both: Misfeasance (something done incorrectly) and Nonfeasance (something that wasn’t done and should have been). Improper acts could include alleged: deceitful acquisition of additional properties wrongful termination of an employee acts that lead to an impairment of quality of life acts that diminish the value of non-owned property unfair tenant selection Top of Page Who might sue the board? Third parties, residents, current or former staff or even a current commission may sue the board. Government agencies may even bring actions against PHA Commissioners alleging violation of state or federal laws. Top of Page What are some examples of claims? Current and former staff may bring actions alleging a host of wrongful acts, including wrongful termination, discrimination, sexual harassment, and Americans with Disabilities Act violations. Third parties that have a relationship with the PHA may allege harm caused by the PHA and/or its directors, officers or employees. Outside sources can be vendors, funders, or nonprofits. A commissioner may sue another board member alleging violation of a duty owed to the PHA. Under certain circumstances such an action may be compelled. Residents may even bring claims against directors and officers alleging wrongdoing. Antitrust A housing authority could be held liable, for undue influence, if their actions prevented another party from concurrently bidding on a parcel of land that the housing authority was interested in purchasing. Wrongful Discharge Employee termination must be processed properly, in accordance with procedures outlined in the authority’s employee handbook, in order to avoid any violation of their rights. For example, employees are entitled to proper notice and have the opportunity to refute the charges within the due process of law. These are serious charges, as it may very well affect future employment. Retaliatory Discharge While employees cannot be discharged for “matters of public concern” (expressing ones own opinion on public matters) or “political reasons” (choice of candidate), they may be terminated if their comments obstruct the efficient operation of the unit or break the trust or confidence of management. Such cases become more likely and more severe in higher-ranking positions, where the law begins to allow termination for political reasons. Constructive Discharge Employees can bring an action for constructive discharge when employers obviously change working conditions and make them unpleasant for the employee. We would not expect housing authorities to alter working conditions for a selected employee. Wrongful Termination Firing an employee for supporting an opposing political party is a violation of the first amendment because the employee was deprived of the right to associate with party of choice. This is a concern with appointed housing authority personnel and must be addressed in the housing authority’s personnel handbook. Sexual Harassment Employees have equal protection under the fourteenth amendment. This section of the law applies equally to both commercial and public workplace environments. This issue should also be addressed in the housing authority’s personnel handbook. Right of Privacy Employees subject to testing and searching, have the right to expect it to be done equally among all employees, unless there is just cause (suspected offender) or specific operations. Specific operations would include areas where safety precautions are essential or activities involved with classified or sensitive materials. Discrimination Discrimination; the violation of a constitutional right based on race, sex, color, religion or national origin. Intentional discrimination must be proven. Discrimination is excluded from the Public Officials coverage. However, claims for discrimination are covered under the HARRG Personal Injury coverage section. Top of Page What are the responsibilities of the Board of Directors? The responsibilities and duties of the Board and operating officials are varied and broad, including: select, evaluate and advise the authority’s officials review and approve the authorities financial objectives, strategies and plans provide advice to operating officials recommend candidates for board positions review systems and procedures that help the authority to comply with laws & regulations establish a Governance Committee that makes recommendations to the board concerning the size function and needs of that board monitor board functions consider matters of corporate governance review functions of senior officers periodically review primary company policies, particularly regarding human resources act ethically and adhere to the code of business conduct and ethics act diligently and with due care. avoid conflicts of interest and activities that benefit them personally at the expense of the housing authority comply, both personally and corporately with the numerous federal and state statutes regulating management and conduct Top of Page What are the responsibilities of housing authority executives and employees? administer the policies established by the Board of Directors manage the operations of the housing units comply with all laws maintain a fair, equitable & nondiscriminatory employment policy Top of Page What about immunity? Municipal units are subdivisions created by state governments to carry out assigned policies and duties of the state within their designated jurisdictions. Municipal powers are granted by the state legislature. While these governmental units initially had a great deal of immunity, it has eroded over time, to the point where it is confusing as to when their limited immunity applies. Thus, municipalities have the power of the legislature to perform their assigned functions, but are left on their own to defend their actions. As sub-units of municipalities, this same degree of immunity applies to housing authorities. Like municipalities, immunity is now questionable, often leaving housing authorities fully responsible for their actions. However, some states still grant some immunity as respects the amount of liability that may be imposed. Top of Page What is the greatest risk to public housing authorities? While authority members are subject to anti-trust laws and compliance with laws relating to fair and equitable policy administration, their primary legal concern lies with employment laws, both state and federal. Considering the numerous laws and constant interaction, the exposure to employment practices is considerably greater than administrative acts. This is the primary reason for maintaining current Personnel Policy Employee Handbooks. About your public officials coverage with HARRG Who insures our commissioners? Housing Authority Insurance sponsors its Public Officials Errors and Emissions Liability Insurance Program through Housing Authority Risk Retention Group (HARRG). This coverage is often referred to as Directors and Officers Coverage. Public Officials liability provides coverage for your Board members, Commissioners, officers and certain employees arising from claims or suits resulting from negligent acts in the course of their duties. The policy is written on a claims-made basis and is offered in conjunction with the HARRG General Liability policy. Top of Page Who is covered? Coverage provides protection for the Housing Authority and its directors, officers, officials and commissioners for their professional acts in directing and managing the authority. Employees and volunteers are also covered for any indirect allegations as associates of the authority. Independent contractors are not included. Top of Page Does our policy cover activities of our related nonprofit entities? No. As separate and distinct entities, each nonprofit board must obtain its own coverage or be specifically added to an existing policy. Contact your underwriter to discuss any nonprofit activities your board is involved to determine what coverage is required. Top of Page Does our policy cover employment practices? Based on statues, common law and torts, employees have certain rights as employees regarding hiring, benefits and termination. Employees can bring suit for discrimination or the deprivation of their civil rights. This basic policy does not cover employment practice claims. Employment practice liability is offered as an optional coverage for an additional premium. You need to refer to your policy, or contact your underwriter or marketing representative to find out if your authority has purchased the employment practices liability coverage. Coverage is added by endorsement 138. It provides special employment practice coverage for the housing authority’s administration of their human resources program, as outlined in the housing authority’s Personnel Policy Employee Handbook. However, this coverage only applies when the housing authority is in compliance with their personnel policies and procedures that have been approved by legal counsel. If a claim is brought for an employment practice (hiring, termination, promotion, etc.) that is not in conformity with your housing authority’s approved guidelines, then there is no coverage. Since the Public Officials coverage excludes cross liability suits, one insured suing another, this endorsement, Public Officials with Employment Practice, also specifically deletes the Employee Cross Liability exclusion and provide cross liability when an employee, (who is also an insured), brings suit against the employer (the housing authority). This cross liability provision only applies to the employee practices coverage granted by this endorsement. While the Public Officials limit applies, this coverage is usually subject to a separate deductible ($10,000 Minimum). Top of Page Is coverage provided for Breach of Contract? Yes, there is no charge for this coverage and coverage is generally added to all HARRG Commercial Liability Policies when Public Officials Coverage is purchased to provide coverage for alleged breach of contracts entered into by the officials and employees of the authority. Coverage is afforded through this endorsement by deleting the Breach of Contract exclusion 2.a. (19). However, this extension only applies to the cost to defend a claim. It does not provide any coverage for damages. Top of Page Is coverage claims-made or occurrence? Coverage is provided on a Claims-Made basis. Most public officials policies are written on a claims-made basis. Under this coverage trigger, a claim must first be made against the insured during the period in which the policy is in force and the wrongful act must have taken place between the retroactive date (generally the date that the coverage was first written with the insurer) and the expiration date of the policy. Further, the claim must be reported within a specified number of days after the expiration date of the policy. This is considerably different from an occurrence based policy where an occurrence that takes place within a specific policy period is always covered by that policy, regardless of when the claim is made or reported. Top of Page Are defense costs in addition to the limits? No. Defense costs are included within the Limit of Liability. Liability under this coverage section ends when the sum of expected or actual payments for damages and defense costs exceeds the limit of liability. Under Section A & B (Bodily Injury, Property Damage, Personal and Advertising Injury) of the Commercial Liability Policy, Liability coverage does not end until the sum of expected or actual payments for damages exceeds the limit of liability, regardless of the amounts paid for defense costs. Top of Page What is a retroactive date? This coverage contains a retroactive date, which provides coverage for acts that took place prior to the effective date of the current policy, but were first reported during the current policy period. Retroactive dates are generally equal to the effective date of the first policy issued by the company. Top of Page Download applications here or call 800-873-0242 ext. 639 for personal attention.