Denying Employee Defense, Indemnification Requires Strategic Steps

By Margaret A. Skelton and Frank E. Langan, Ratwik, Roszak & Maloney, P.A.

A municipality’s consideration of a request for defense and indemnification from an officer (including an elected or appointed official) or employee can be challenging. These requests are generally made by the individual at or near the beginning of a lawsuit when he or she is looking for a speedy (and favorable) decision by the municipality to represent him or her in the lawsuit.

Minnesota Statutes, Section 466.07 requires a municipality, including counties, to defend and indemnify officers and employees in a lawsuit seeking damages from that person individually when he or she was acting in the performance of his or her job duties, and he or she was not guilty of malfeasance, willful neglect of duty or bad faith. Occasionally, municipalities determine they have no duty to defend and indemnify the individual, a decision that may result in litigation.

The Minnesota Supreme Court’s decision in Reetz v. City of Saint Paul provides guidance regarding the process municipalities should follow when considering whether to defend and indemnify an officer or employee named in a lawsuit.

Reetz v. City of St. Paul

Saint Paul police officer Eric Reetz worked part time as a private security guard at a homeless shelter. The Saint Paul Police Department approved Reetz’s off-duty work but was not a party to his agreement with the shelter and did not compensate him for this work. Reetz was required to wear his uniform while working at the shelter and could request to use his patrol car.

One evening when Reetz was in uniform and using his patrol car, he allegedly failed to detect a knife in a shelter client’s bag, which resulted in a stabbing after the officer’s shift ended. Both the shelter and the stabbing victim sued Reetz for negligence.

Reetz asked the City of Saint Paul to defend and indemnify him against the lawsuit under Minnesota Statutes Section 466.07. The city asked Reetz to explain why he qualified under that statute and invited him to submit further documentation to support his request. The city attorney also met with Reetz and his attorney to discuss his explanation.

St. Paul ultimately denied Reetz’s request on the grounds that he was not acting in the performance of his duties as a police officer, because he was not performing any law enforcement duties at the shelter and was not present at the time of the stabbing. Reetz petitioned the Minnesota Court of Appeals seeking review of the city’s decision.

The Court of Appeals held in favor of Reetz, finding he was acting in a dual capacity as a police officer and private security guard on the date in question. The city appealed to the Minnesota Supreme Court.

Minnesota Supreme Court Decision

The Minnesota Supreme Court concluded that the city’s decision was quasi-judicial:

• • The city had gathered and weighed evidence to resolve a genuine dispute as to whether Reetz was entitled to defense and indemnification in a process that resembled judicial proceedings.

• • The city had applied the statutory standard in Section 466.07 to the evidence it had gathered to make its decision. Specifically, the city weighed and received evidence as to whether Reetz was acting in the performance of his duties as a St. Paul police officer prior to the stabbing.

• • The city made a binding decision because there was no opportunity to appeal the city attorney’s decision under Saint Paul’s policies.

Quasi-judicial decisions of municipalities are reviewed under a limited standard. Such decisions are only overturned if they are arbitrary; oppressive; unreasonable; fraudulent; or made under an erroneous theory of law or without any evidence to support the decision. Courts uphold a municipality’s quasi-judicial decision if it has explained how it derived its conclusion and if that conclusion is reasonable on the basis of the record.

The Minnesota Supreme Court further held that the city’s factual findings on the issue of whether its employee was acting in the performance of his duties as a police officer were entitled to deference.

Based on these holdings, the Supreme Court reversed the Court of Appeals’ decision because the facts found by the city showed that Reetz was not acting in the performance of the duties of his position, and therefore, the city had no obligation to defend or indemnify him.

Best Practices in Light of Reetz

It is in a municipality’s best interest to ensure that any decision to deny defense and indemnification is quasi-judicial. Under the Reetz case, a municipality’s quasi-judicial decision will be upheld if the organization explains how it derived its conclusion and that the conclusion is reasonable based on the record.

Boards should take the following steps so that their decision on an employee’s request for defense and indemnification will be considered a quasi-judicial decision.

1. 1. In any disputed claim for defense and indemnification, a municipality should conduct its own investigation. As part of that investigation, the officer or employee should be allowed to present evidence in support of his or her request. The employer’s investigation can be done by its legal counsel, but the results of the investigation and any facts to be weighed should be presented at a board meeting for review.

1. 1. The board should make clear that it is applying the standard set forth in Section 466.07, which lists the criteria for defense and indemnification. This language should be referenced both during the meeting where the facts are presented and in the board’s resolution regarding its decision on the individual’s request for defense and indemnification.

1. 1. The board should enact a final binding resolution that states its decision, the information that it considered in reaching this decision and the facts on which the board has relied to support that decision. Including this level of detail in the resolution both explains the board’s decision to a reviewing court and demonstrates that its decision was reasonable.

Taking these steps puts the municipality in the best position in the event of a legal challenge to its decision regarding a request for defense and indemnification. As with all matters that could result in litigation, MCIT members should seek assistance from legal counsel during the process of considering such requests.