Risk Management Services (RMS)
POLICY 4
Effective Date: 07/01/2003
Last Modified Date: 10/20/2003
The Defense of State Employees Act
The Defense of State Employees Act (N.C.G.S. §143-291) provides coverage up to $500,000 for injury or property damage to others caused by the negligent acts of State employees acting in the scope of their employment. This first $500,000 of all final judgments shall be paid by the department, agency, board, commission, institution, bureau, or authority that employed the individual.
The policy is subject to certain exclusions and conditions that may preclude coverage. These include, but are not limited to, criminal acts, intentional acts, medical malpractice, sexual abuse claims, or claims arising out of the operation of motor vehicles. Contact Risk Management Services (RMS) for additional information.
This law also recognizes that State employees may be named as defendants in their individual capacities as well as their official capacities, based on the performance of their jobs. It authorizes the State to provide legal defense of employees who are sued in their individual capacities, and allows the State to pay damages on their behalf, at the discretion of the Attorney General.
Excess Liability Insurance Policy
In addition to the statutory coverage provided by The Defense of State Employees Act, the University provides, at no cost to its employees, excess liability insurance coverage. This coverage is part of a master policy provided on behalf of all State employees and was purchased through the Public Officers' and Employees' Liability Insurance Commission (POELIC).
The excess liability insurance policy pays judgments in excess of those covered by The Defense of State Employees Act, subject to policy terms, conditions, exclusions, and policy limits. These policy limits are $5,000,000 for each employee, with a $500,000 retention per loss, and $5,000,000 each occurrence/$10,000,000 annual aggregate. The policy does not pay defense or investigative costs. It is written on an occurrence basis and coverage is extended worldwide.
The policy is designed to provide coverage for errors and omissions of State employees for losses in the performance of the job and for losses resulting in bodily injury and property damage. It is not designed to replace insurable coverage that is better provided by other types of insurance policies (e.g., workers compensation, auto liability, medical malpractice).
RMS shall serve as the University's point of contact for procuring professional liability insurance through the North Carolina Department of Insurance.
Exclusions to the Excess Liability Insurance Policy
As with any insurance policy, certain policy conditions and exclusions may limit or eliminate coverage. Exclusions to this policy include, but are not limited to, criminal acts, claims arising out of the operation of vehicles, claims arising out of consulting activities, medical malpractice, sexual abuse claims, and intentional acts.
To identify all policy exclusions and conditions, obtain a complete copy of the policy from RMS. If there are any concerns that a particular class of employees or their employment activities may not be covered by this policy, contact RMS for a ruling. If a class of employees or their activities is excluded, other professional liability coverage can be secured if necessary. See Purchasing Other Professional Liability Insurance, below.
Notification of Excess Liability Claims
The Vice Chancellor and General Counsel is the institutional official responsible for the administration of the policy. The policy requires that the insuring company be notified of a potential claim within a reasonable length of time after the University learns of it. Failure to provide timely notice may result in forfeiture of the insurance protection.
Any employee learning of a potential claim should immediately notify the office of the Vice Chancellor and General Counsel, either in person or by telephone. That office will immediately provide written notice to the insurance company via the State's designated insurer, RMS, and the appropriate person in the Office of the President.
Potential Excess Liability Claims
The following are representative categories of charges that should be treated as potential claims for insurance purposes. Institutional employees should notify the responsible institutional official immediately, who in turn should notify the office of the Vice Chancellor and General Counsel, whenever such a charge is brought by the taking of formal action, as indicated in the table.
Allegation Formal Action Violation of State constitution or statutory law, including provisions relating to open meetings, public records, personnel records, and political activities Filing suit in State court Violation of Federal constitution or statutory law protecting personal rights (e.g., due process, freedom of speech) Filing suit in Federal court Violation of Federal equal employment and nondiscrimination laws or regulations Complaint to or from HEW, EEOC, Labor, or Justice; or suit in Federal court Violation of State rules concerning employees subject to State Personnel Act Final appeal within institutional SPA grievance process, or appeal bypassing that process directly to the Office of State Personnel Violation of Federal law or regulation regarding privacy of student records, the Buckley Amendment Complaint to or from HEW Violation of Federal or State law or regulation regarding occupational safety Complaint to or from Federal or State OSHA Violation of University Code or institutional tenure documents in matters addressed therein, including, e.g., non-reappointment of faculty members for listed impermissible reasons (Code Section 604B), other faculty grievances (Code Section 607), and general grievance provisions (Code Section 501C(4)) Initiation of grievance procedures established by those documents, or initiation by an institution of faculty discipline or retrenchment procedures (Code Sections 603 and 605, respectively). Notice is not required of matters before student judiciary or honor systems until appeal is taken to the Chancellor. Contract disputes Filing suit in State or Federal court Purchasing Other Professional Liability Insurance
The excess liability policy does not cover all categories of University employees or their activities. For example, most medical-related occupations and activities are excluded, as are non-State employees. If a department's employees or activities are excluded from this coverage, a separate professional liability or medical malpractice policy can be purchased on an as-needed basis.
Additionally, some departments—such as the Dental School, the School of Pharmacy, and the School of Social Work—may have students who conduct professional activities as part of their educational requirements and who would not be covered under the excess liability policy.
Departments are encouraged to contact RMS to confirm that their employees or activities are not excluded by this policy. Separate liability coverage may be purchased through POELIC if necessary, with RMS as the liaison.
Structure and Functions of POELIC
POELIC, a division of the Office of the State Fire Marshall in the North Carolina Department of Insurance, makes available a plan of professional liability insurance coverage for all public officials, employees of any political subdivision of the State, and all law enforcement officers. POELIC negotiates with insurance companies for the most favorable rates and coverage. The Commission also serves as liaison between the companies and the insured to resolve any issues that may arise. The Commission consists of 11 members representing City, County, and State governments, sheriffs' and police departments, and the insurance industry.
POELIC is responsible for acquiring professional liability insurance covering officers and employees in the scope of their State employment. Insurance coverage for these State officials can be provided only for claims in excess of the protection provided by The Defense of State Employees Act.
Sovereign Immunity
For actions of general or professional liability, the State of North Carolina claims sovereign immunity and cannot be sued without its permission. The purchase of professional liability insurance for State officials shall not be construed as a waiver of any defense of sovereign immunity. However, in accordance with The Defense of State Employees Act, the State waives its sovereign immunity up to a limit of $500,000 per claim for claims of negligence of its employees or agents resulting in bodily injury or property damage. The North Carolina Industrial Commission is constituted a court for the purpose of hearing and passing upon tort claims against State agencies.
Return to Risk Management Services Section Contents
Return to Business Manual Table of Contents