As a financial adviser to federal managers and executives, I am often asked about the need for and
benefits of professional liability insurance. Given the relatively low cost of this insurance and the relatively
high potential cost of defending against a suit or claim, I generally recommend that all federal employees
at least consider it as part of their financial planning.

One of the most important parts of any sound financial plan is the elimination or reduction of catastrophic
financial risk. Liability — the responsibility for damages caused to others — is one of the primary sources of
catastrophic risk. It is not unusual for legal expenses in defending a lawsuit or administrative action to run
into the tens of thousands or even hundreds of thousands of dollars. And, in a worst-case scenario,
damages could run into the millions of dollars. Keep in mind that you must defend yourself against any
claim made against you, whether you are guilty or not. Innocent conduct provides no assurance that you
will not be the target of a lawsuit or administrative action.

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, such
as those at the Homeland Security Department’s Customs and Border Protection, Immigration and
Customs Enforcement, and Transportation Security Administration; and the Agriculture Department’s
Animal and Plant Health Inspection Service. In addition, many federal managers and executives make
decisions that make them vulnerable to being sued by a citizen.

In most civil suits, the government will assume responsibility for handling the claim and the Justice
Department will represent the employee being sued. Because of this, judgments ordering individual
employees to pay damages are rare. On occasion, however, Justice will refuse to represent the
individual, who must then hire an attorney to defend the claim in court. With rates running $300 to $500
per hour or more for experienced lawyers, a defendant forced to retain private counsel can easily wind up
paying many thousands of dollars in fees, even if the allegation is ultimately found to be without merit.

While federal employees are immune from these suits if they are acting within the scope of their
employment, this does not mean a federal employee cannot be sued. If Justice determines that the
federal employee is acting within the scope of his or her employment and that providing representation
would be in the interest of the United States, then Justice will take over and seek to have the United
States substituted as the defendant or file a motion to dismiss the claim. Under these circumstances it is
most likely that the suit will be dismissed.

However, Justice may take the position that certain conduct is either not within the scope of employment
or not in the interest of the United States to defend. In these cases, an employee is forced to retain
private counsel at his own expense, and may become liable to pay a judgment if the defense is
unsuccessful. Even if Justice represents you in a civil suit, Justice is not authorized to pay a judgment
against an individual federal employee from its judgment fund.

In addition to private lawsuits, federal employees may become the subject of a variety of internal conduct
investigations; may be named as the responsible management official in a discrimination complaint; or
may become the subject of proposed disciplinary action for some alleged wrongdoing. In these cases, an
agency lawyer may be assigned in defense, but this attorney will represent the government’s interests,
not yours, and may advance a position adverse to yours. If you are accused of wrongdoing, you will most
likely be on your own. Like the cost of defending a claim in court, the cost of defending an administrative
or internal investigation can be a few or many tens of thousands of dollars, depending on the

So, there are clearly circumstances when federal employees are at risk for large expenses because of
legal or administrative claims filed against them in connection with their work. Personal liability insurance,
like that provided with your homeowner’s insurance or under an umbrella liability policy, is not likely to
cover these expenses. And since our legal system allows claims to be filed without consequence to the
plaintiff, caution and preventive practice can only go so far in mitigating risk. It is always possible that a
baseless claim will force you to bear the expense of defending yourself.

Fortunately, there is insurance designed to cover this risk. Professional liability insurance for federal employees covers the cost, within limits, of defense in an administrative disciplinary action, investigation or judicial sanction proceeding. It will also pay a personal judgment in a civil suit.

Federal agencies are required by law to reimburse managers, supervisors and law enforcement officials
for up to half the cost of the annual premium. Wright & Co. of Washington offers a policy covering claims
of up to $1 million for as little as $300 per year. So, for about $150 per year, after reimbursement, you can
buy up to $1 million worth of protection. Unless you’re wealthy enough not to have to worry about million-dollar judgments, or too cash-strapped to afford $150 per year, a personal liability insurance policy will likely add valuable protection to your financial plan.

Because of the unique aspects of federal employment, you should only consider policies written for the
federal market. One of the most recognized sources of personal liability insurance for feds is Wright &
Co., on the Web at

Written by Mike Miles
For the Federal Times
Publication August 23, 2004