Any federal employee can be the target of a lawsuit filed by a private party for alleged violations of their
legal rights. Most at risk are managers and employees who have frequent dealings with the public.
In addition to private lawsuits, a federal employee could become the subject of internal conduct
investigations; be named as the responsible manager in a discrimination complaint; or become the
subject of proposed disciplinary action for alleged wrongdoing. The decision to purchase professional
liability insurance against such claims is one that should be made on an individual basis. Your specific
circumstances, including the type of job you have and it’s effect on the risk you face, should be
The first step in evaluating the need for professional liability insurance is to estimate the potential cost of
losing a suit or claim brought against you. While the potential cost of the professional liability can be quite
high, insurance benefits are usually limited to $1 million for damages and $100,000 for legal defense
costs. In the current legal environment, liability damage awards are virtually unlimited, depending on the
circumstances of the case. For the potential costs used in your insurance analysis, damage award
estimates should be no higher than the limits offered by the policy, since you’d be responsible for any
excess beyond those amounts in any case.
The second step is to estimate the probability of your being found liable for damages in a suit or claim.
According to an Office of Personnel Management report published in 1998, only 150 out of 7,000
requests by federal workers for Justice Department representation in defending liability claims against
them were denied during the preceding five years. This means that the government took up the cause,
and assumed the potential liability for damages on behalf of the employee in more than 98 percent of the
cases reported. And then in only one of the remaining cases did an employee pay substantial damages
out of pocket. So, it appears that while the risk of being the defendant in a liability claim might be
significant, the probability of actually paying substantial financial damages may be much lower. These
statistics do not include the legal costs of defending a claim that the government does not assume, or the
cost of defending certain administrative actions. But, these costs are considerably lower than damage
awards, typically ranging between $1,000 and $10,000.
So, on a strictly economic basis, it is difficult to make a compelling argument in favor of buying
professional liability insurance. But, there’s another way to look at it. A liability claim could mean financial
ruin. And, by many workers’ standards, a $200 or $300 premium per year is quite affordable, maybe even
incidental. The money to fund this additional cost could be generated by setting the deductible on your
auto or health insurance plan a little higher, for example.
Written by Mike Miles
For the Federal Times
Publication February 28, 2005