Memorandum 1) bare December 1,2016 10 The Honorable Mayor and Councilmembers CITY OF DALLAS suugect ‘The scope of coveroge provided by Chapter 31 of the Dallas City Code for the Board of Trustees Board") of the Dallas Police & Fite Pension System ("System") Several of you have recently asked me to describe in writing the scape of coverage provided for the Board by Chapter 314 of the Dallas City Code ‘Chapter 314 is the City’s officer and employee lability plan. Cours have held that Chapter 31, Constitutes an insurance poicy. See Curlin v. Maples, No. Civ. 302CV1997H, 2003 WL 22124076 at *4 (ND. Tex. March 7, 2003); City of Dallas v. Csaszar, No, 05-99-00208-CV, 1999 WL 1268076 at *3 (Tex. App. Dallas Dec. 30, 1999, pet. denied) (not designated for publication); see also Whatley v. City of Dallas, 738 S.W.2d 301, 308 (Tex. App-—Dallas 1988, ‘writ denied) (construing predecessor city council resolution asa liability insurance policy). When the City provides liability coverage, itis “subject to the same rules and liabilities as any other insurance provide.” See Curlin, 2003 WL 22124076 at *4; Csaszar, 1999 WL 1268076 at *3 ‘The City’s liability plan covers every member ofthe System's Board because a Board member is explicitly defined as a “plan member” as that term is used in Chapter 31A (not to be confused with the term “plan member" as the term is used to denote participants in the System). See Dallas City Code § 31A-4(5)E). Chapter 31 contains two important protections for Board ‘members who are sued due 10 their official actions or omissions: (1) the appointment of an atiomey who will provide a defense, and (2) payment of damages, attorneys” fees, expenses, court costs, and interest if the Board member were determined to be liable. Both of these important protections (including a few narrow exceptions to those protections) are more particulary described below and in Chapter 31 First, Chapter 314 requires the City to defend the Board members fror lability for their acts or ‘omissions during the discharge of their duties and within the scope of their offices from any lawsuit (unless the City is the one suing the Board member). See Dallas City Code §§ 31A-5(a), 31-6(a), 31A-10(a)(1). The City’s obligation to defend even extends to suits that are “groundless or fraudulent See Dallas City Code § 31-6(3). ‘The City's duty to defend a Board member is determined by the “eight corners rule.” See City of Dallas v. Csascar, 1999 WL 1268076 at *3. This rule equires examination ofthe language in {two documents: 1) the allegations in the pleadings, and (2) the language ofthe insurance policy. 1. (citing National Union Fire Ins. Co. x. Merchant's Fast Motor Lines, nc., 939 S.W.24 139, 141 (Tex.1997)). The duty to defend is not affected by facts ascertained before the lawsuit developed in the process of Itigation, or by the ultimate outcome of the lawsuit. See Csaszar, 1999 WL 1268076 at *3 (citing Trinity Universal Ins. v. Cowan, 945 S.W.2d 819, 829 (Tex. 1997) and American Alliance Ins. Co. v. Frito-Lay, Ine., 788 S.W.2d 152, 154 (Tex. App— Dal The Cy Tha Wosks: Dives, Vibra and Prope”Dallas 1990, writ dismd). The duty also is determined without reference to wht the parties know the tue fiets to be. See Csascar, 1999 WL 1268076 at *3 (citing Argonaut Soushwest Ins Co, v. Maupin, S00 S.W.2d 633, 635 (Tex. 1973); Tri-Coastal Contractors In. v. Hartford, 981 'S.W.2d 861, 863 (Tex. App.-Houston [Ist Dist] 1998, writ denied). When applying the “eight ‘comers rule” acourt gives the allegations in the complaint liberal interpretation. See Csassar, 1999 WL 1268076 at *4 (cing National Union, 939 S.W.2d at 141). Any uncertainty about ‘whether allegations in a complaint state a covered cause of action is resolved in the insureds favor. See Csarzar, 1999 WL 1268076 at *4 (citing Heyden Newport Chem. Corp. v, Southern Gen, ns. Co. 387 S.W.24 22, 26 (Tex. 1965). However, the City may settle any suit “as it determines necessary." See Dallas City Code § 31: 6(b). As'a part of this defense, the City will provide legal representation for Board members in such lawsuits. See Dallas City Code § 314-12(a), If a conflict of interests prevenis the City ‘Auorney from representing a Board member in such a lawsuit, the City will pay the reasonable fee of a private attorney to represent the member, and the atorney will be selected by muttal agreement ofthe member and the City Aorney. Sce Dallas City Code § 314-12(b) Second, Chapter 31 provides that the City will pay losses that a Board member is legally obligated to pay, except that in cases arising from incidents or occurrences where the City’s Tiablity exists ty virwe of the Texas Tort Claims Act, the City will pay those losses that the member is legally obligated (0 pay up to, but not exceeding, the limits of liability provided by that Act for a municipality. See Dallas City Code § 31A-"(a). In addition, Chapter 31 provides thatthe City will pay: (1) the City’s expenses in investigating and defending the claim or lawsuit: (2) costs taxed against the Board member in a suit and interest that accrues after entry of judgment before the City has deposited payment with the court on that part of the judgment ‘which does not exceed the limits of coverage; (3) reasonable expenses of the the City’s request; and (4) atiomey’s fees ordered by the court to be paid by Dallas Cty Code § 314-7 ‘There are some narrow exceptions to the coverage provided by Chapter 31. Specifically, the plan does not cover a claim oF lawsuit that is brought against a Board member: (1) by the City: (2) arising out of the intentional, knowing, or criminally negligent violation of a penal law ‘committed by or with the knowledge or consent of the member; (3) arising out of acts of fraud committed by ot atthe direction ofthe member with intent to deceive or defraed; (4) arising out of the gross negligence of the member (although the City Couneil may waive this exclusion if it determines that circumstances justify the waiver); (5) arising out of affirmatve dishonesty oF actual intent to injure by the member; (6) arising while the member is operatng a city vehicle ‘with no authority to operate the vehicle; (7) arising while the member is operating a city vehicle in the course of personal or private business, unless the operation is porsuant to the general orders or the applicable standard operating procedure of the police department; (8) for ibility assumed by the member under a contract, unless the contact is entered into at the request of the City; (9) ifthe Board member joins or aterpts to join withthe suit against the member a claim against the City for benefits under Chapter 31A; or (10) if the member fails t comply with Section 314-8 ofthe plan. See Dallas City Cade § 31-10, In turn, Section 314-8 requires Board member (0: (1) noufy the city avioney 38 soon as practicable upor receipt of written notice of a claim or lawsuit, but no later than three working Page 20f 3days after receipt; (2) cooperate with te ety atorney and, upon the city attorney’ request, assist in making settements, in the conduct of suits, and in enforcing any right of contribution or indemnity against a person or organization who may be liable to the City; (3) attend hearings and. Uwals and assist in securing and giving evidence and obtaining the attendance of witnesses; (2) not give any oil or writen statement or enter into aay stipulation oF agreement conceming a claim or lawsuit (except upon advice of the city attorney); and (5) not, except at his own cost, voluntarily mak» any payment, assume any obligation, oF incur any expense with respect (0 a claim or lawsuit without the consent of the City. See Dallas City Code § 3148. To obtain coverage, « person must nolify the City Attorney of a claim or lawsuit within three working days of receipt und sooner if practicable. See Dallas City Code § 31A-3(1). However, “an insured’s falure to timely nouty its insurer ofa claim or suit does not defeat coverage ifthe insurer was not prejudiced by the delay.” PAJ, Inc. v. Hanover Ins. Co.,243 S.W.3d 630, 636-37 (Tex. 2008). IF the City denies coverage, the Board member can sue ina court of proper jurisdiction in Dallas County or a determination of coverage. See Dallas City Code § 314-13. Since the City Council established the City’s officer and employee lability plan in 1985, the plan has successfully protected hundreds of city officials and employees from libility. ‘Based on the information known to us at this time, we believe Board members would be entitled to coverage under Chapter 31A if they: (1) were to decide to prohibit System members from withdrawing mest oral of their funds inthe System's deferred retirement option plan (DROP) to protect System funds so that the Board could meet its obligation to pay pension benefits to ‘members until the Systems financial health had improved to the point where such prohibition as no longer needed: and (2) complied with Chapker 31, For your review, I have attached a copy of Chapter 31. Please let me know if you have any ‘questions or conzerns about these matters, = Es Auschment ‘€: A.C. Gonzalez, Cty Manager Chris Bowers, First Assistant City Attorney Page 3 of 3Page | of > [Pine ‘The Dallas City Code CHAPTER 314 OFFICERS AND EMPLOYEES ARTICLE I. RESERVED. Sees. 31A+Ithru31A-3. Reserved. ARTICLE N. CITY OF DALLAS OFFICER AND EMPLOYEE LIABILITY PLAN. Sec. 31A4. Definitions Sec.31A-5. Coverage See.31A-6. Defense. Sec. 31A-7. Limits of coverage See.31A-8, Notice of occurence elaim, or sul; cooperation Sec. 314-9. Plan period See. 31A-10. Exclusions. See. 1-11. Subrogation, See. 314-12, Lega representation. See. 314-13, Determination of coverage Sec. 31A-14. No creation of cause of ation, ARTICLE |. RESERVED. SECS. 314-1 THRU 31-3. (Repeated by Ord. 24316) ARTICLE Il. CITY OF DALLAS OFFICER AND EMPLOYEE LIABILITY PLAN. ‘SEC. 314-4. DEFINITIONS. 112016Page 2 of 5 (1) CITY means the city of Dallas, Texas (2) CITY VEHICLE means. vehicle or mobile equipment either leased or owned by the ety (@)_ LOSS means an amount which a plan member is legally obligated to pay resulting from an act or omission of the plan member which is covered under this plan (4) PLAN means the City of Dallas Officer and Employee Liebility Plan (5) PLAN MEMBER means a person who is (A) an employee ofthe city; (B)_a member of a city board, commission, or commitee created by charter, ordinance. oF resolution ofthe city; (©) amember ofthe city council; (D) a volunteer who has been approved as a volunteer by a departmental volunteer coordinator and who is working under the direction of an employee ofthe city; oF (E)__amember ofthe board of trustees of the police and fie pension fund of the city. (Ord ‘Nos. 18575; 20811) SEC. 310-5. COVERAGE. (a) The city shall indemnify and defend a plan member. in accordance withthe tems ofthis plan, against a loss arising out of any claim, suit, or judgment resulting from an act or omission ofthe plan member during the discharge of his duties and within the scope of hs office, employment, or assigned volunieer work with the city (®) A plan member whose position withthe city terminates is entitled to coverage in sceordance with this plan for any event that occurred while the person was.a plan member. (Ord. 18575) SEC. 31A-6, DEFENSE. (2) ‘The cty will defend any suit against a plan member who is covered under this plan even if ‘the suit is groundless or fraudulent, (b) The city may investigate, negotiate, and setle any claim or suit a it determines necessary. (Ord, 18578) SEC. 318-7. LIMITS OF COVERAGE. (a) The city will pay losses covered by this plan that a plan member is legally obligated to pay. except, that in cases arising from incidents or occurrences where the city’s liability exists by Virtue ofthe Texas Tort Claims Act (Chapter 101. Texas Civil Practices and Remedies Code). ‘whether or not the ety isa party defendant. the city will pay those losses covered by this lan that a plan member is legally obligated to pay up (0, but not exceeding the limits of liability provided by that Act, as amended, for a municipality Ian016Page 3 of (©) In addition to the coverage provided in paragraph (a) the city wil pay (1) the cip’s expenses in investigating and defending the claim or lawsui: (2) costs txed against a plan member in a suit covered by this plan and interest that accrues afer entry of judgment before the city has deposited payment with the court on that part ofthe Judgment which does not exceed the limits of coverage: (2) reasonsble expenses of the plan member incurred atthe city’s request. and (4) attorneys fees ordered by the court to be paid by the plan member. (Ord. Nos. 18575; 18905; 19884) SEC. 31A-8, NOTICE OF OCCURRENCE, CLAIM, OR SUIT; COOPERATION. To be eniled to coverage under the plan a plan member mus: (1)_ notify the city atomey as soon as practicable upon receipt of writen raice ofa claim or lawsuit, but no later than theee working days after receipt; (2) cooperate with the city attorney and, upon the city atorney’s request, assist in making settlements, in te conduct of suits, and in enforcing any right of coneibution oF indemnity against a persor or organization who may be liable tothe city because of injury oF damage covered under te plan; (G) attend bearings and trials and assist in securing and giving evidence and obtaining the attendance of witnessess; and (4) not, except upon advice of the city altomey or when questioned by’a police officer atthe seene of an accident, give any oral or written statement or enter into any stipulation or agreement concerning a clsim or lawsuit, (5) not, except at his own cost, voluntarily make any payment, assume ary obligation, or incur any experse with respect to a claim or lawsuit without the consent of the city. (Ord, 18575) SEC. 31A-9, PLAN PERIOD. This plan covers only acts or omissions occuring or alleged to have occurred: (1) while the plan i in effect; (2) before the plan was in effect and which are not barred by any statue of imitations; and (3) ifthe plan is cancelled, while the plan i in effect and which are not bared by any statute of limitations. (Ord. 18575) ‘SEC. 314-10. EXCLUSIONS. (2)_ Coverage under this plan does not apply to a claim or lawsuit that is brought against a plan member: 112016vage 4 01> (1) by the citys (2) arising out ofthe intentional, knowing, or criminally negligent violation ofa penal statute or ordinance commited by or withthe knowledge or consent ofthe plan member. or any claim arising out of acts of fraud committed by ora the direction ofthe plan member with intent to deceive or defraul (3) arising out of te gross negligence ofthe plan member. except that the city will defend the plan member in accordance with Section 31A-6(a) of this chapter: (4) arising out of affirmative dishonesty or actual intent o injure by the plan member, (3) asi vehicle: (6) arising while the plan member is operating a city vehicle inthe course of personal or private business, unless the operation of the vehicle is pursuant o the general orders oF the applicable standard operating procedure of the police department; whit the plan member is operating a city vehicle with no authority to operate the (7) or labiity assumed by the plan member under a contract, unless the contract is entered imo atthe request of the city: (8) ifthe plan member joins o atempts o join with the suit against the plan member a of > I the city denies coverag> toa plan member, the plan member may seek a determination of ‘overage by a court of proper jurisdiction in Dallas County, Texas. Ifthe eourt resin favor of | the plan member. de city sall provide the plan member al benefits under the plan and shall ‘reimburse the plan member for reasonable atiomey fees, expenses and costs incurred in obtaining the determination of coverage, (Ord. 18575) ‘SEC. 314-14. NO CREATION OF CAUSE OF ACTION. Nothing contained in this plan shall be construed as creating a right or eause of action against a plan member noras giving right (oa third party to institute or maintain a suit which would not otherwise exist under law as a legal claim against a plan member. (Ord. 18575) 1202016