Can members of the Vermont State Teachers' Retirement Board be personally sued and held financially liable for ordinary mistakes in their investment or benefit decisions?

Plain-English summary

The State Teachers' Retirement Board asked Chief Assistant AG William Griffin whether its members had personal protection against liability for board decisions. Griffin answered that they had the same protection as any other state official.

Three statutory layers define the protection.

First, 3 V.S.A. § 1101 obligates the state to defend any "elective or appointive officer or employee" sued for acts or omissions "in the performance of the employee's official duties." Section 1102 says that defense is ordinarily provided by the Office of Attorney General. Board members fall inside the broad statutory definition because they are appointed officers in the executive branch.

Second, 12 V.S.A. § 5602 provides that for ordinary negligence within the scope of employment, "the exclusive right of action shall lie against the state of Vermont; and no such action may be maintained against the employee or the estate of the employee." So an injured plaintiff who claims a pension or investment misstep cost the state money cannot sue the board member personally; the only available remedy is against the state itself.

Third, the carve-outs. Gross negligence and willful misconduct are not protected by § 5602. The Vermont Supreme Court has defined gross negligence in Hardingham v. United Counseling Service of Bennington County, 164 Vt. 478 (1995), as more than an error of judgment, momentary inattention, or loss of presence of mind, requiring "a failure to exercise even a slight degree of care" and "indifference to the duty owed." Federal civil rights claims under 42 U.S.C. § 1983 can proceed against board members in their personal capacities, but 12 V.S.A. § 5606 obligates the state to indemnify them up to $250,000 per person and $1 million per occurrence as long as the conduct was not gross negligence or willful misconduct.

The opinion then offered a practical observation. The AG's office had not seen any money claim against a Retirement Board member. Theoretically a beneficiary unhappy with investment decisions might sue, but the injured party in such a case would be the state, and the state cannot maintain an ordinary-negligence suit against its own board members. Griffin closed by noting that boards had consistently avoided the suggestion of negligence by retaining experienced advisors and money managers and ensuring that benefits decisions are made by competent staff under lawful procedures.

Currency note

This opinion was issued in 2008. 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.

The state-employee immunity framework in 3 V.S.A. ch. 25 and 12 V.S.A. ch. 189 has been amended multiple times since 2008, and federal civil rights litigation against state officials has continued to evolve. Indemnification caps in 12 V.S.A. § 5606 may have been adjusted. Any board member assessing current personal exposure should consult the present statutory text and current AG defense practices.

Historical summary

For state board members (at the time): Members served with broad personal protection: state-funded defense, statutory shield from ordinary-negligence liability, and indemnification up to substantial caps for federal civil rights claims. The carve-outs were narrow: gross negligence, willful misconduct, and conduct outside the scope of duties.

For retirement-system trustees (at the time): The opinion frames investment-decision risk as principally state risk, not personal risk. The injured party for an investment loss would be the state (which owns the trust), and the state cannot sue itself.

For sovereign immunity researchers: The opinion is a clean statement of how Vermont packages defense, indemnification, and exclusive-action-against-the-state into a coherent immunity regime.

Common questions

Are members protected if they act outside the scope of their duties?
No. § 1101 and § 5602 both require the conduct to fall within "official duties" or "scope of employment." Conduct outside that scope (for example, side dealings or conflicts of interest) is not protected.

Are members protected against criminal prosecution?
No. State employee immunity is civil, not criminal. Members can be charged criminally if they commit crimes in office.

What if a member personally benefits from a decision (a kickback or self-dealing)?
That is gross negligence or willful misconduct at minimum, and probably criminal. The state would not defend such conduct.

Citations and references

Statutes:
- 3 V.S.A. § 1101 (state's duty to defend state employees in civil actions)
- 3 V.S.A. § 1102 (legal representation by AG's office)
- 12 V.S.A. § 5602 (exclusive right of action against the state for state-employee negligence)
- 12 V.S.A. § 5606 (state indemnification of state employees up to $250,000/$1,000,000)
- 42 U.S.C. § 1983 (federal civil rights claims)

Cases:
- Hardingham v. United Counseling Service of Bennington County, 164 Vt. 478 (1995) (defining gross negligence)

Source

• Landing page: https://ago.vermont.gov/about-attorney-generals-office/attorney-general-opinions
• Original PDF: https://ago.vermont.gov/sites/ago/files/2025-11/IO%207-30-08.pdf

Original opinion text

MEMORANDUM

OFFICE OF THE ATTORNEY GENERAL

TO:

State Teachers' Retirement Board

FROM:

William Griffin
Chief Assistant Attorney General

RE:

Liability of Board Members

DATE:

July 30, 2008

This is in reply to your question whether members of the State Teachers'
Retirement Board have any protection against liability for their actions as Board
members. The short answer is that they have the same protection as any State
official or employee (for example, the Governor, the State Treasurer, Retirement
Office employees). They are entitled to a legal defense if they are sued as a
result of their official acts and they are protected against financial liability for
ordinary negligence in the course of their duties.
Title 3, section 1101 of the Vermont Statutes provides that:

(a) In any civil action against a state employee for
alleged damage, injury, loss or deprivation of rights
arising from an act or omission to act in the
performance of the employee's official duties it shall
be the obligation of the state to defend the action on
behalf of the employee and to provide legal
representation for that purpose at state expense,
except to the extent that such representation is
provided by an insurance carrier, or except in an
action resulting from the service of civil process.
Subsection (b) of section 1101 defines "state employee" broadly to include "any
elective or appointive officer or employee within the legislative, executive or
judicial branches of state government." Members of the State Teachers'
Retirement Board are elective or appointive officers within the executive branch
of state government. Therefore they are entitled to a legal defense at state
expense in the event that they are sued as a result of acts or omissions in the
performance of their duties as Board members. Legal representation in such
cases is ordinarily provided by the Office of Attorney General. See 3 V.S.A.
§ 1102.

Title 12, section 5602 of the Vermont Statutes provides that:

(a) When the act or omission of an employee of the
state acting within the scope of employment is
believed to have caused damage to property, injury to
persons, or death, the exclusive right of action shall
lie against the state of Vermont; and no such action
may be maintained against the employee or the
estate of the employee.
(b) This section does not apply to gross negligence or
willful misconduct.

(c) As used in this chapter "employee" means any
person defined as a state employee by section 1101
of Title 3.
This means that lawsuits can not be maintained against Board members for
ordinary negligence, errors or omissions. The legal remedy available to the
injured party in such cases, the "exclusive right of action," is a lawsuit against
the State itself. Board members are protected against liability for ordinary
negligence, errors or omissions.

Board members can be sued and held liable for gross negligence or willful
misconduct. "Gross negligence," as defined by the Vermont Supreme Court,
means:

"'more than an error of judgment, momentary
inattention, or loss of presence of mind'"; rather, "'it
amounts to a failure to exercise even a slight degree
of care'" and an "'indifference to the duty owed [to
another].'" ("Gross negligence is substantially and
appreciably higher in magnitude and more culpable
than ordinary negligence. It is a heedless and
palpable violation of legal duty respecting the rights of
others.")
Hardingham v. United Counseling Service of Bennington County, Inc., et al., 164
Vt. 478, 481 (1995) (citations omitted).

Board members can also be held liable in cases arising under federal law, for
example, cases arising under the federal civil rights statute (42 U.S.C. § 1983). In
such cases, however, absent gross negligence or misconduct, state law provides
that "the state shall indemnify" the employee or official up to $250,000 per person
and $1,000,000 per occurrence. 12 V.S.A. § 5606.

As a practical matter, lawsuits against state officers and employees are
commonplace, but I am not aware of any money claim ever being made against
any member of the Retirement Boards. It is conceivable, I suppose, that someone
might be unhappy about the Board's investment decisions, and might want to
voice that sentiment by way of a lawsuit against individual Board members.
However, to the extent that the Board's investment decisions result in financial
injury, the injured party would be the State. Applying the legal principles
discussed above, the State could not maintain a lawsuit against Board members
to recover investment losses resulting from the ordinary negligence of Board
members.

If a Board member was grossly negligent, for example, by failing to exercise
even a slight degree of care in his or her duties and if this gross negligence
caused injury to the State or to a third party, the member could be held liable.
Board members have consistently avoided even a suggestion of negligence by
taking care to choose and retain experienced advisors and money managers to
guide them in their investment decisions. Board members have avoided claims
of intentional misconduct, for example, claims that benefits are withheld for
improper motives, by taking care to assure that benefits decisions are made by
competent staff in accordance with lawful procedures.

I will attend the June 3 Board Meeting and will be happy to answer any related
questions at that time.

cc: James Douglas, State Treasurer.