Are the directors of New York's Independent Livery Driver Benefit Fund entitled to state defense, indemnification, and qualified immunity as public officers?
Plain-English summary
The Independent Livery Driver Benefit Fund was created in 2008 to plug a gap in workers' compensation coverage for independent-contractor livery drivers. The drivers were not employees of the livery base, so they weren't otherwise covered. The Fund collects assessments from independent livery bases, buys an insurance policy with the proceeds, and pays out workers' compensation benefits to injured drivers. By statute it is a not-for-profit corporation. Its nine directors are appointed by the Governor.
The Fund's secretary asked: are these directors public officers for purposes of state defense and indemnification, and are they entitled to qualified immunity for actions taken in their roles? The AG worked through three statutes and one common-law doctrine, and the answer was no on each.
Public Officers Law § 18 applies to "public entities," a category that lists counties, cities, schools, public authorities, agencies, public benefit corporations, and a catch-all "any other separate corporate instrumentality or unit of government." The Fund was statutorily separate, but the AG read the catch-all as requiring an instrumentality of government, not just a separate not-for-profit. The Fund's role, buying workers' compensation insurance for private workers, fit a private employer's role rather than a governmental function. The opinion compared the Fund to two earlier statutes the Legislature had used as templates: the Black Car Operators' Injury Compensation Fund and the Jockey Injury Compensation Fund. Both were not-for-profits. Both required their directors to buy liability insurance from the fund's resources, on the assumption that the directors were not state officers. The Legislature was clearly not treating those funds as public entities, and there was no reason to read the same architecture differently for the Livery Fund.
Public Officers Law § 17 applies to State employees: people holding a position by election, appointment, or employment in the service of the state, plus authorized state-program volunteers. The AG concluded that the Fund's directors held appointed positions but were not "in the service of the State," because the Fund was statutorily separate from the State and entirely self-funded. Past § 17 determinations had refused coverage where the entity in question was structured as separate from the State (Hunter College Foundation, Safe Affordable Housing) and granted it where the entity was created without that separation (Deferred Compensation Board, local emergency planning committees).
Common-law qualified immunity (the kind that protects governmental actors exercising discretion or expert judgment, Tango v. Tulevech) was off the table for the same reason. As to Not-For-Profit Corporation Law § 720-a, the opinion left a door cracked open: § 720-a confers qualified immunity on uncompensated directors of certain not-for-profit corporations. Whether the Fund's directors qualified depended on (a) whether the board had actually authorized the up-to-$200-per-meeting compensation that Executive Law § 160-bbb(4) permitted, and (b) whether the Fund counted as a § 501(c)(3) organization. Those were factual questions the AG didn't answer.
Currency note
This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Q: Why did the AG read the § 18 catch-all narrowly?
A: The phrase "any other separate corporate instrumentality or unit of government" was the only one of the five § 18 categories that arguably reached the Fund. The opinion read "instrumentality of government" as requiring something the State uses to perform a governmental function. The Fund, by contrast, performed a function ordinarily done by employers (buying workers' compensation insurance) and the workers it covered were private contractors, not public ones.
Q: How did the comparison to the Jockey Fund and Black Car Operators' Fund matter?
A: The opinion noted that both predecessor funds were structured as not-for-profits and required their directors to obtain liability insurance from fund resources. If the Legislature thought of those funds as public entities under § 18, that requirement would have been redundant: public-entity directors can already be defended and indemnified by their entities. The drafters' reliance on a private-insurance fix told the AG the Legislature was not treating the funds as public.
Q: What about the Livery Fund? Did it have its own insurance requirement?
A: The Livery Fund's enabling statute did not include an explicit insurance-purchase requirement, but the directors had authority under Not-For-Profit Corporation Law §§ 722 and 726 to indemnify officers and directors and to buy indemnification insurance on their own. The AG saw no reason to read the absence of an explicit insurance clause as legislative intent to treat the Fund as a public entity.
Q: What's the practical effect of falling outside § 17 and § 18?
A: The State will not pay for outside counsel or any judgment if a director is sued for actions taken in their Fund role. The directors had to look to the Fund's own indemnification provisions and to insurance the Fund could buy under the Not-For-Profit Corporation Law.
Q: Is § 720-a a useful backstop?
A: It can be, in narrow circumstances. Section 720-a immunizes uncompensated directors of certain types of not-for-profit corporations from suit (with exceptions for gross negligence and intentional misconduct). If the Fund had not authorized the discretionary $200-per-meeting fee, and if the Fund met the § 501(c)(3) criteria, directors could have invoked that immunity. The AG didn't take a position on either prerequisite.
Q: Why is the Fund self-funded relevant?
A: Past § 17 determinations had treated the presence of state appropriations as a factor pointing toward "in the service of the State." The Fund's funding came entirely from assessments on independent livery bases. No state money flowed in. That cut against treating the directors as state-service appointees.
Background and statutory framework
Workers' compensation in New York has long depended on an employer-employee relationship. Independent contractors fall outside the system unless something specific brings them in. By 2008, livery drivers driving for independent livery bases were a recognized gap, working in a way that exposed them to job-related injury without the benefit of mandatory coverage. The Legislature filled the gap with Executive Law article 6-F, which created the Fund as a self-funded not-for-profit corporation that collects assessments from livery bases and buys insurance on the drivers' behalf. Workers' Compensation Law § 18-c(7) treats the Fund as the drivers' employer for workers' compensation purposes.
Public Officers Law § 18 was enacted to extend to local-government and public-authority employees the kind of defense and indemnification that the State already provided to its own employees under § 17. Section 18 lets a public-entity governing body opt in by local enactment. Section 17 covers State employees and authorized State volunteers. The two sections are mutually exclusive: § 18 by its terms excludes any entity covered by § 17.
The Fund, as an entity sitting outside both classifications, had to look elsewhere for liability protection. Not-For-Profit Corporation Law §§ 722 and 726 gave the directors authority to indemnify officers and directors and to purchase indemnification insurance. Section 720-a offered a partial common-law shield, but only for uncompensated directors of qualifying types of not-for-profit corporations.
Citations and references
Statutes:
- Public Officers Law § 17
- Public Officers Law § 18
- Executive Law article 6-F (Independent Livery Driver Benefit Fund)
- Not-For-Profit Corporation Law § 720-a
- Not-For-Profit Corporation Law §§ 722, 726
Cases:
- Tango v. Tulevech, 61 N.Y.2d 34 (1983) (governmental qualified immunity for discretionary acts)
Source
- Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
- Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_2011-9_pw_0.pdf
Original opinion text
Public Officers Law §§ 17, 17(1)(a), 18, 18(1)(a); Executive Law §§ 160-bbb(1), 160-bbb(2), 160-bbb(4), 160-bbb(5) , 160-bbb(6)(c)(ii), 160-bbb(6)(c)(iv), 160-ccc, 160-dd,
160-ddd, 160-eee, 160-hhh, 160-hhh(8), 160-mmm, Article 6-F; Workers'
Compensation Law § 18-C(7); Racing, Pari-Mutuel Wagering & Breeding Law §§
221, 221(1), 221(11); Not-For-Profit Corporation Law §§ 720-a, 722, 726; Internal
Revenue Code § 501(c)(3)
The directors of the Independent Livery Driver Benefit Fund are not eligible for the
defense, indemnification, and immunity that may be accorded to public officers.
November 30, 2011
Paul Celentano
Associate Attorney
Workers' Compensation Board
20 Park Street
Albany, NY 12207
Informal Opinion
No. 2011-9
Dear Mr. Celentano:
You have requested an opinion on behalf of the Independent Livery Driver
Benefit Fund ("Fund") board of directors as its secretary, relating to the status of
the Fund under state law. First, you have asked whether the Fund is a "public
entity" as defined in the Public Officers Law. Second, you have asked whether the
State will defend, indemnify, and save harmless members of the board of directors
of the Fund in the performance of their official duties under Public Officers Law
§ 18. Finally, you have asked whether members of the Fund's board of directors are
entitled to the protection of qualified immunity in the performance of their official
duties. As we explain below, we conclude that the Fund is not a public entity, and
its directors are not eligible for the defense, indemnification, and immunity that
may be accorded to public officers.
- Public Officers Law § 18 authorizes the governing body of a public entity
to confer the benefits of defense and indemnification in civil actions or proceedings
on its employees for acts or omissions alleged to have occurred while the employee
was acting within the scope of his or her public employment. For purposes of
section 18, a "public entity" is (1) a county, city, town village or any other political
subdivision or civil division of the State; (2) a school district, board of cooperative
educational services, or any other governmental entity or combination or
association of governmental entities operating a public school, college, community
college, or university; (3) a public improvement or special district; (4) a public
authority, commission, agency, or public benefit corporation; or (5) any other
separate corporate instrumentality or unit of government. Public Officers Law § 18(1)(a).
Section 18 authorizes the governing board of a public entity to extend to employees
of these entities certain benefits that are accorded by Public Officers Law § 17 to
employees of the State.
The Fund was created by statute in 2008 to provide workers' compensation
benefits to livery drivers who are independent contractors rather than employees of
a livery provider or "livery base." Independent contractors are ordinarily not
eligible for such benefits, and the Fund was established by the Legislature as the
mechanism through which a livery base provides workers' compensation benefits for
such drivers. The Fund was established as a not-for-profit corporation, and the
provisions of the Not-for-Profit Corporation Law apply to the Fund to the extent
they do not conflict with the Fund's enabling statute. Executive Law § 160-bbb(1).
The Fund is comprised exclusively of moneys assessed from independent livery
bases and is used to purchase an insurance policy to provide workers' compensation
benefits to injured independent livery drivers. Executive Law §§ 160-ccc, 160-ddd.
For purposes of the Workers' Compensation Law, the Fund is the employer of
independent livery drivers. Workers' Compensation Law § 18-c(7).
The Fund's powers are exercised by a nine-member board of directors
appointed by the Governor. Executive Law § 160-bbb(1),(2). The directors establish
a plan of operation for the administration of the Fund, which must include the
procedure for collecting and managing the Fund's assets and for determining and
collecting the appropriate amount of annual assessments from independent livery
bases to pay for the insurance policy from which such benefits are paid. Executive
Law §§ 160-bbb(6)(c)(ii),(iv); 160-ccc; 160-ddd. For their attendance at meetings, the
directors are entitled to compensation, as authorized by the board of directors, in an
amount up to $200 per meeting, and to reimbursement of their actual and necessary
expenses. Id. § 160-bbb(4). They may engage in any other public or private
employment unless prohibited by other law. Id. § 160-bbb(5).
The Workers' Compensation Board exercises regulatory oversight over the
independent livery bases. Executive Law §§ 160-eee, 160-hhh. If the Fund has
reason to believe that an independent livery base has violated the statute's
provisions, it refers the matter to the Workers' Compensation Board. Executive
Law § 160-hhh(8).
We are of the opinion that the Fund is not a public entity for purposes of
Public Officers Law § 18. That statute lists five covered categories, and the only one
that is even arguably applicable is the last: "any other separate corporate
instrumentality of government." But while the Fund is, by statute, a separate
corporate entity, we do not believe that it is an instrumentality of government. Its
function is to provide a service ordinarily provided by employers, namely obtaining
insurance to provide workers' compensation benefits, and the individuals for whom
it provides this service are private rather than public workers.
Further support that the Fund is not a "public entity" for purposes of section
18 is found in analogous statutes establishing other not-for-profit corporations to
provide workers' compensation benefits to individuals who otherwise would not be
eligible for them. The statute creating the Fund appears to have been modeled on
the law establishing the Black Car Operators' Injury Compensation Fund ("Black
Car Operators' Fund"), which was modeled on the law establishing the Jockey
Injury Compensation Fund ("Jockey Fund"). Executive Law article 6-F; Racing,
Pari-Mutuel Wagering & Breeding Law § 221; see also Sponsor's Memorandum in
Support of 1999 N.Y. Assembly Bill A. 3517 (relating to Black Car Operators'
Fund); Letter from Matthew W. Tebo, Esq., Department of State Legislative
Counsel, to Terryl Brown Clemons, Esq., Acting Counsel to the Governor (July 28,
2008), reprinted in Bill Jacket for ch. 392 (2008), at 12 (relating to Fund). Like the
Fund, the Jockey Fund and the Black Car Operators' Fund were established as not-for-profit corporations, and the provisions of the Not-for-Profit Corporation Law
apply to them insofar as those provisions do not conflict with their enabling
statutes. Executive Law § 160-dd; Racing, Pari-Mutuel Wagering & Breeding
Law § 221(1). Their powers are exercised through boards of directors. Executive
Law § 60-dd; Racing, Pari-Mutuel Wagering & Breeding Law § 221(1).
Both the Jockey Fund directors and the Black Car Operators' Fund directors
are required by law to purchase an insurance policy to protect these funds and their
directors, officers, agents, and other representatives from liability; the Black Car
Operators' Fund statute also specifically provides for indemnification. Executive
Law § 160-mm; Racing, Pari-Mutuel Wagering & Breeding Law § 221(11). This
demonstrates that the Legislature did not think of these funds as "public entities"
authorized by section 18 to provide defense and indemnification for their officers
and employees. Because the statute creating the Fund was modeled after these
statutes, it would seem by analogy that the Fund also is not a public entity under
section 18. To be sure, unlike the Jockey Fund and the Black Car Operators' Fund,
the Livery Drivers' Fund is not required by statute to purchase insurance, but the
directors are authorized by the Not-for-Profit Corporation Law to indemnify its
officers and directors and to purchase indemnification insurance. Not-for-Profit
Corporation Law §§ 722, 726. There is no evidence in the legislative history of the
statute creating the Fund to indicate that the Legislature omitted the insurance
provision in the Fund's enabling statute because it thought of the Fund as a "public
entity" under Public Officers Law § 18; it may simply reflect the fact that the Fund
has authority to purchase insurance under the Not-for-Profit Corporation Law and
needs no special authority here. It seems implausible to read into the Legislature's
silence on this subject an intent to make the Livery Drivers' Fund a public entity
under Public Officers Law § 18 when other similar funds are not.
- You also have asked whether the State will defend and indemnify the
Fund's directors in the performance of their official duties under Public Officers
Law § 18 or other provision of state law. We conclude that the State will not.
Defense and indemnification for State employees are governed by Public
Officers Law § 17. Defense and indemnification for employees of other public
entities are governed by Public Officers Law § 18. These two sections are mutually
exclusive, because Public Officers Law § 18(1)(a) provides that the definition of
"public entity" in section 18 does not include the State or any other public entity the
officers or employees of which are covered by section 17. As discussed above, we are
of the opinion that the Fund is not a "public entity" under section 18, and therefore
defense and indemnification cannot be authorized by that section.
Nor are defense and indemnification of Fund directors authorized by section
17. That section covers only employees of the State, defined as "any person holding
a position by election, appointment or employment in the service of the state" or a
volunteer expressly authorized to participate in a state-sponsored volunteer
program. Public Officers Law § 17(1)(a). Section 17 does not cover independent
contractors. Id. Here, while the Fund's directors are holding their positions by
appointment, we believe they are not "in the service of the State" when exercising
their powers, because the Legislature has established the Fund as a not-for-profit
corporation, separate and distinct from the State.
Whether boards, commissions, and other such entities were established as
entities separate from the State has been a significant factor in past section 17
determinations. Thus, for example, we concluded that the officers and employees of
the Hunter College Foundation and the officers and directors of Safe Affordable
Housing, Inc., both established by state law as not-for-profit corporations, were not
eligible for section 17 coverage. Op. Att'y Gen. No. 97-F8 (Hunter College
Foundation); Op. Att'y Gen. (Inf.) No. 82-F8 (Safe Affordable Housing, Inc.). In
contrast, we have opined that members of the Deferred Compensation Board and
members of local emergency planning committees, entities created by state law that
did not establish them "separate and apart from the State", were eligible for state-provided defense and indemnification. Op. Att'y Gen. No. 99-F4 (Deferred
Compensation Board); Op. Att'y Gen. No. 89-F2 (local emergency planning
committees). Additionally, the Fund is entirely self-funding, and we have found
legislative provision of state funds relevant to a determination that members of an
entity are "in the service of the State." Op. Att'y Gen. No. 99-F4; Op. Att'y Gen. No.
89-F13 (New York members of Interstate Sanitation Commission).
We therefore conclude that the directors of the Fund are not in the service of
the State and thus that they are not eligible for defense and indemnification
pursuant to section 17.
- Finally, you have asked whether members of the Board of Directors are
entitled to the protection of qualified immunity in the performance of their official
duties for the Fund under state laws. Because they serve a not-for-profit corporation
instead of a governmental entity and are not governmental officers or employees,
we are of the opinion that they are not eligible for qualified immunity under the
common law doctrine available to governmental actors whose official action involves
the exercise of discretion or expert judgment in policy matters. See Tango v.
Tulevech, 61 N.Y.2d 34, 40 (1983). They may be eligible for qualified immunity
pursuant to Not-for-Profit Corporation Law § 720-a, which confers this protection on
uncompensated directors of certain not-for-profit corporations. Whether they are
eligible for qualified immunity pursuant to section 720-a depends on whether the
board of directors has authorized compensation for attending meetings pursuant to
Executive Law § 160-bbb(4) and whether the Fund is considered a not-for-profit
corporation of the type described in section 501(c)(3) of the Internal Revenue Code.
We are not aware of other state law pursuant to which the Fund's directors may be
eligible for qualified immunity.
Very truly yours,
KATHRYN SHEINGOLD
Assistant Solicitor General
in Charge of Opinions