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Sahli v. Woodbine Board of Education

January 30, 2008

RONALD W. SAHLI, ESQ., PLAINTIFF-APPELLANT,
v.
WOODBINE BOARD OF EDUCATION, ATLANTIC AND CAPE MAY COUNTIES ASSOCIATION OF SCHOOL BUSINESS OFFICIALS JOINT INSURANCE FUND AND SPECIALTY NATIONAL INSURANCE COMPANY, DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 386 N.J. Super. 533 (2006).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

WALLACE, J., writing for a majority of the Court.

The Court considers whether a school board attorney is entitled to indemnification under N.J.S.A. 18A:16-6, which provides for indemnification in defense of a civil action for "any person holding any office, position or employment" with a board of education. The Court considers also whether the board of education's insurance policy required the insurer to reimburse the board's attorney for counsel fees incurred in defense of a civil action.

Plaintiff Ronald W. Sahli was appointed solicitor of the Woodbine Board of Education (Board). As Board solicitor, Sahli attended meetings, met with Board members, provided advice, and carried out the Board's instructions relating to legal matters. He received no health or pension benefits from the Board and no income tax withholdings were deducted from his fees.

In August 2000, an employee of the Board who held the title of Administrative Assistant for Special Education sent a letter to District Superintendent Bruce Kinter accusing him of both intentionally violating federal and state laws governing the Special Education program and threatening to terminate her if she failed to comply with his instructions. In September 2000, the employee appeared before the Board and publicly expressed her concerns. Several days later, the employee reported additional complaints about Kinter to the Board's personnel committee. She then requested an opportunity to discuss her grievances with Kinter before the entire Board.

On October 12, 2000, the Board convened an executive session and met with the employee. Board members requested that the Board's regular secretary be excluded from the meeting and appointed Sahli as secretary pro tem for the session. The meeting with the employee was contentious. After the employee was excused, Board members discussed their concerns regarding the employee's medical and psychiatric conditions given her conduct during the meeting. Sahli advised that if an employee displayed evidence of mental health issues, the Board could request a psychiatric evaluation. The Board instructed Kinter to review the employee's personnel file and make a recommendation concerning her ability to perform her duties. Sahli prepared minutes of the executive session that described the employee's behavior in detail. The minutes were approved but were kept confidential.

At a November 16, 2000 Board meeting with the employee, Sahli was again appointed secretary pro tem. After the employee was excused, Kinter recommended that she be placed on paid administrative leave pending the results of physical and psychiatric evaluations. Several weeks after being informed of this decision, the employee resigned.

In March 2001, the employee filed a civil complaint against the Board and Kinter, alleging that they retaliated against her in violation of the Conscientious Employee Protection Act. During discovery, the confidential minutes of the Board's executive sessions were provided. An amended complaint was filed alleging that Sahli, while engaged in the course and scope of his duties as solicitor and while serving as secretary pro tem, committed wrongful acts, including failing to faithfully reflect in the minutes what actually occurred and drafting the minutes to make the employee appear mentally unstable.

In March 2003, Sahli demanded insurance coverage under the Atlantic and Cape May Counties Association of School Business Officials Joint Insurance Policy Fund (Joint Fund) and also requested that the Board indemnify and defend him. The Joint Fund denied coverage on grounds that he was an independent contractor hired by the Board, rather than an insured under the policy. The Board also denied indemnification and defense on grounds that N.J.S.A. 18A:16-6 applies to officers and employees, not independent contractors such as a school board solicitor.

Sahli filed this action to compel the Board and the Joint Fund to reimburse him for the amounts spent in defense of the claim. The trial court concluded that N.J.S.A. 18A:16-6 provided indemnification for the attorney of the Board, but the Joint Fund policy excluded coverage. In a published opinion, the Appellate Division held that the Board's attorney is not entitled to indemnification under N.J.S.A. 18A:16-6, and rejected Sahli's argument that the claims arose out of his service as secretary pro tem. The Appellate Division also concluded that the Joint Fund was not required to provide representation because Sahli was acting as Board solicitor rather than Board secretary. 386 N.J. Super. 533 (2006).

HELD: N.J.S.A. 18A:16-6, which provides for indemnification in defense of a civil action for "any person holding any office, position or employment" with a board of education, does not mandate that the Board of Education indemnify its attorney for actions taken in his capacity as Board solicitor but does entitle him to indemnification for his conduct as secretary pro tem to the Board. Similarly, the insurance policy at issue in this case provides coverage to the attorney volunteering to act as secretary, but does not provide coverage for the Board solicitor.

1. The Court adopts the Appellate Division's extensive analysis of the legislative and decisional history of N.J.S.A. 18A:16-6, which affords indemnity in a civil action to any "person holding any office, position or employment under the jurisdiction of any board of education," and affirms the panel's opinion that the statute's focus is solely upon school board members and school employees and does not include an independent contractor operating as board solicitor. (Pp. 10-11).

2. In respect of Sahli's argument that he was acting as secretary pro tem and therefore is entitled to indemnification, a review of the record reveals that the employee sued him in his capacity as both secretary pro tem and as solicitor. Sahli was not sued by the employee until she obtained the minutes that he prepared for the two meetings, which she alleged were calculated to denigrate her. If the regular secretary of the Board had been sued because of the manner in which the minutes were drafted, it is clear that the secretary would be covered by the statute as a person holding a "position" of the Board. Plaintiff was appointed to take the place of and perform the role of secretary. Although a temporary position, it was nevertheless a position of the Board. To the extent that Sahli was sued in that capacity, he is entitled to indemnification under the statute. (Pp. 11-16).

3. With regard to insurance coverage, the duty to defend is generally determined by the language of the insurance policy. Here, the Joint Policy provides than an insured includes all persons who were, now are, or shall be elected during the coverage period or appointed or employed members of the board of education and all employees and volunteers while acting within the scope of their duties for a member. Sahli functioned as a volunteer when he was appointed to serve as secretary pro tem and is entitled to coverage under the policy for the defense of the claims against him in that capacity. The policy expressly excludes, however, any independent contractor, persons who are on retainer, are a consultant or under contract for services for an insured. As such, the Court agrees that the plain language of the policy excludes coverage for Sahli in his capacity as solicitor for the Board. (Pp. 16-17).

4. Sahli was sued in part for the performance of his duties while serving as secretary pro tem and in part for his performance as solicitor for the Board. To the extent that he incurred legal fees in his capacity as secretary pro tem, both the statute and the Joint Fund afford him protection. The Court remands to the trial court to determine the proper allocation of fees that the Board and the Joint Fund should reimburse Sahli for his expenses arising out of the defense of claims made against him as secretary pro tem. (Pp. 17-18).

The judgment of the Appellate Division is AFFIRMED in part and REVERSED in part, and the matter is REMANDED to the trial court for further proceedings consistent with this opinion.

The opinion of the court was delivered by: Justice Wallace, Jr.

Argued September 25, 2007

JUSTICE ALBIN, CONCURRING in part and DISSENTING in part, in which JUSTICE LONG joins, agrees with the majority of the Court that Sahli's actions as secretary pro tem qualified him for indemnification under the statute and under the terms of the Board's insurance policy, and agrees also that Sahli is not covered under the Board's insurance policy in his position as solicitor. Justice Albin dissents from the majority's opinion that N.J.S.A. 18A:16-6 does not contemplate indemnification for a school board attorney.

JUSTICE RIVERA-SOTO, CONCURRING in part and DISSENTING in part, agrees with the majority of the Court that the statute and the Board's insurance policy do not apply to Sahli as Board Solicitor. Justice RiveraSoto dissents from the majority's opinion that Sahli is entitled to indemnification and insurance coverage for his conduct as secretary pro tem to the Board.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA and HOENS join in JUSTICE WALLACE's opinion. JUSTICE ALBIN filed a separate opinion concurring in part and dissenting in part in which JUSTICE LONG joins. JUSTICE RIVERA-SOTO filed a separate opinion concurring in part and dissenting in part.

This case requires us to determine whether a school board attorney is entitled to indemnification under N.J.S.A. 18A:16-6, which provides for indemnification in defense of a civil action for "any person holding any office, position or employment" with a board of education. A secondary issue is whether the Woodbine Board of Education's (Board) insurance policy requires the insurer to reimburse the Board's attorney for counsel fees incurred in defense of the civil action.

The trial court concluded that the statute provided indemnification for the attorney of the Board, but that the insurance policy excluded coverage for the attorney. Both sides appealed. In a published opinion, the Appellate Division held that the Board's attorney is not entitled to indemnification under the statute, and the insurance policy does not require the insurer to defend or reimburse the attorney for his litigation expenses. We granted the Board's attorney's petition for certification.

We hold that N.J.S.A. 18A:16-6 does not mandate that the Board indemnify its attorney for the defense of a civil action against him in his capacity as Board solicitor. However, because the Board's attorney in this case was also sued in his capacity as secretary pro tem to the Board, he is entitled to indemnification for his conduct in that position. Similarly, he is not entitled to insurance coverage as the attorney to the Board, but he is entitled to insurance coverage as a volunteer in acting as secretary.

I.

Plaintiff Ronald W. Sahli, a partner in the law firm of Sahli and Padovani, was appointed solicitor of the Board and served in that capacity for several years before his current appointment. He also represented several other school boards in New Jersey. As Board solicitor, plaintiff attended meetings, met with Board members on a regular basis, provided counsel and advice to the Board whenever requested, and carried out the Board's specific instructions as related to legal matters involving the school ...


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