On behalf of the Georgia Interlocal Risk Management Agency (“GIRMA”), this letter is directed to you as City Attorney for the City of Peachtree City in response to your letter to me dated May 25, 2012 on behalf of City Council Member Eric Imker and the letter from Council Member Vanessa Fleisch to me dated May 23, 2012. In response to these letters, I will attempt to explain GIRMA’s decisions regarding defense and coverage of the above-styled case.
To understand GIRMA’s decision process, some background regarding GIRMA’s legal framework is necessary. By statute, GIRMA is not an insurance carrier but instead a self-insurance fund created by the General Assembly to allow municipal governments to pool risks. GIRMA enters into a Member Coverage Agreement (“MCA”) with each of its member cities that delineates the relationship between GIRMA, the Named Member, and additional Members who are afforded coverage, to include elected officials, employees, and others. An elected official is treated as a Member while “acting for and on behalf of the Named Member.” Members other than the Named Member are not a party to the GIRMA MCA, but are intended third party beneficiaries of the MCA and have rights under it.
While GIRMA is not insurance, the Georgia courts generally employ insurance principles to interpret the GIRMA MCA. Under the GIRMA MCA, Members are owed a duty of defense and indemnity. A liability insurer’s duty to defend and its duty to pay (i.e., indemnify) are separate and independent obligations. A liability insurer has a duty to defend its insured against all claims covered under a policy, even those that are groundless, false, or fraudulent. If there is even potential, or arguable, coverage, the insurer has a duty to defend.
With this backdrop, this claim was originally tendered for coverage when the complaint was filed against Mayor Don Haddix on May 19, 2011. As City Attorney, you tendered the claim for coverage via email to Kenneth Swanson of Gallagher Bassett Services, Inc., GIRMA’s third party administrator, on May 27, 2011. The complaint named the Mayor individually and not in his official capacity. The complaint stated that an email was sent to Joseph Grisham containing negative information about former mayor Harold Logsdon. While the complaint stated that a copy of the email was attached, the complaint forwarded to GIRMA did not have a copy of the email. On or about June 1, 2011, Mr. Swanson declined coverage after conferring with coverage counsel on the basis that the complaint did not contain allegations that the Mayor was acting in his official capacity or using city computer equipment.
On September 6, 2011, Mayor Haddix’s attorney, John Mrosek, again tendered the claim for defense and coverage stating that the Mayor’s comments were made “in connection with his discharge of official duties.” Aside from this statement, no additional facts were made available. A copy of the complaint without the offending email was again presented. On February 29, 2012, you transmitted a letter to me containing additional facts that Mayor Haddix had requested you to present. By this point, the Mayor had expended $9,969.40 in defense and settlement of the case. Your letter stated, “The email which initiated this matter was sent by the Mayor from his city email address, and was directed to a city employee concerning a matter that was going to be addressed at a future council meeting.” Also, attached to your letter were additional documents, including a letter from Harold Logsdon giving additional context. Mr. Logsdon states that the email includes discussion of ”possible changes to the ordinance governing operational hours of local bars.” Based upon these facts, you conveyed on behalf of the Mayor that he was seeking reimbursement on the basis that he was acting in his role as Mayor when he sent the email.
On the basis of your February 29, 2012 letter, GIRMA reconsidered its position and reimbursed the Mayor. The reason for GIRMA’s change of position was the additional factual information contained in, or attached to, your letter. Given the fact that the Mayor was communicating with a City employee regarding a matter of official business (i.e., changing a city ordinance), it was at least arguable that the Mayor was acting “for and on behalf of” the City at the time he sent the offending email communication.
Had all of the information been presented to GIRMA at the outset, GIRMA’s initial determination would have been to provide a defense under reservation of rights as to coverage, an approach GIRMA normally employs.
GIRMA owes a duty to the City of Peachtree City as well as all other Named Members to resolve claims in an economical and efficient manner. The question of whether the claim was actually one for which indemnity was available never ripened because the case was settled for a very nominal amount. The cost of a declaratory judgment action to have this question decided would have exceeded the amount reimbursed for defense and settlement of the claim. This claim was actually handled in the manner least costly to the City.
GIRMA’s actions and decisions are determined entirely based upon its contractual obligations. GIRMA protects the interests of all covered and potentially covered Members in defense of liability claims. As a matter of policy, GIRMA does not involve itself in political disagreements involving Named Member cities, and political considerations play no role in coverage determinations. A contrary approach would be unfair to elected officials and city employees who depend on GIRMA coverage for their protection and could lead to accusations of bad faith in claim handling.
Whether Mayor Haddix would have been entitled to indemnity from the City — and whether the City is entitled to indemnity from Mayor Haddix for the deductible expense — present issues of local government law distinct from any issues involving GIRMA. GIRMA’s decisions in this matter have been based entirely upon the contractual relationship between itself and the City of Peachtree City and GIRMA’s obligations to Mayor Haddix as an additional Member based upon that contractual relationship. I trust that this information will be useful to the Mayor and Council.
George R. VanLeuven, Jr.
Manager of Risk Management Services
Georgia Interlocal Risk Management Agency
Georgia Municipal Association
Atlanta, Ga.
