Insurance Coverage of Claims Alleging Constitutional Torts: It's a Right

Article excerpt

Local governments can find a bright spot in high court decisions that may otherwise greatly increase their exposure to potential liability. In recent years, several states for the first time have allowed suits for money damages to redress alleged violations of rights granted by a state's constitution - or "constitutional torts." Localities' existing insurance policies should provide coverage against suits alleging these violations - even if constitutional tort liability itself did not exist when the policies were purchased.

Insurance companies sometimes are reluctant to admit it, but when they agree to indemnify a policyholder for "loss by reason of liability imposed on him by law" (to quote familiar policy language), they also take the risk that the law will impose a greater liability than was contemplated at the time of contracting. A judicial enlargement of liabilities is one of the risks that insurance companies bargain for when they sell policies.

The Decision in Brown

On November 19, 1996, in a case entitled Brown v. State, New York became the latest state to allow an action for money damages that claimed a violation of rights afforded by its constitution. The facts of the Brown case were compelling, and the decision of the Court of Appeals was widely heralded, meriting, for example, a front-page news story and subsequent editorial in The New York Times. An elderly woman in Oneonta reported that she had been assaulted at knifepoint by a black man. State police first interrogated all black male students at the campus of the nearby state university and later conducted a sweep of dark-complexioned men from Oneonta's streets. "This was, in effect, an official - and offensive - racial dragnet," the Times editorialized.

A resulting suit brought against the state by a group of students and town residents was dismissed by the New York Court of Claims, which held that its jurisdiction applied only to suits against the state government alleging claims based in the common law of torts. It could not hear suits for violations of protections afforded under the state constitution.

The New York Court of Appeals reversed this opinion in a six-to-one decision. Judge Richard Simons's majority opinion concluded that "duties spelled out in the State Constitution" - specifically, the search-and-seizure and equal protection provisions - should be subject to a damage remedy to deter future misconduct. "[N]o government can sustain itself, much less flourish, unless it affirms and reinforces the fundamental values that define it by placing the moral and coercive power of the State behind those values."

The Brown majority addressed the economic consequences of its own decision for public institutions by quoting the United States Supreme Court decision in Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics: "Current limitations . . . arising from budgetary inadequacies should not be permitted to stand in the way of the recognition of otherwise sound constitutional principles." This admirable justification, however, was directed to scarce judicial resources, not cash-strapped New York local governments, which now may face "innumerable [cases] certain to be improvised within [Brown's] precedential repertoire," according to Judge Joseph Bellacosa's dissent.

Relief for Local Governments

Real help in meeting this new exposure lies in the liability insurance policies sold to municipalities. Typically, a locality's general liability insurance policy obligates its insurance company to "defend any claim or suit or portion of any suit against the Insured seeking compensatory money damages" (emphasis supplied) and to "pay on behalf to the Insured all sums which the Insured shall be legally obligated to pay or assumed by the Named Insured under contract or agreement, for damages direct or consequential, and expenses" (emphasis supplied). …