This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.
COUNTY SHERIFF -- Liability (loss of funds)
INSURANCE -- Liability Insurance (authority of county to purchase on behalf of sheriff)
COUNTY LAW, §650: A county sheriff is subject to the rule of strict or absolute liability for the loss of public funds. Hence, liability exists whether or not the sheriff is personally at fault, and even if loss is caused entirely by misconduct of deputy sheriff or other employee of sheriff's department. Deputy sheriff or other employee also may be personally liable for loss of public funds caused by misconduct, whether intentional or negligent.
COUNTY LAW, §§403, 650; PUBLIC OFFICERS LAW, §§11, 12: A county sheriff is required to file an official undertaking before entering upon the duties of the office. The county board of supervisors or the sheriff may demand the giving of an undertaking by subordinates or employees in the sheriff's department.
NEW YORK CONSTITUTION, ARTICLE XIII, §13; COUNTY LAW, §650: The constitutional provision which prohibits the county from ever being made responsible for the acts of the sheriff bars local legislation by which the county would assume liability for loss of public funds caused by acts of sheriff. However, county, by local law, may assume liability for non-intentional acts or omissions of deputy sheriffs and other employees of sheriff's department.
NEW YORK CONSTITUTION, ARTICLE XIII, §13; COUNTY LAW, §650; GENERAL MUNICIPAL LAW, §52: The constitutional provision which bars a county from ever being made responsible for the acts of a sheriff does not preclude a county from providing a defense or from purchasing liability insurance to protect a sheriff against claims arising from the performance of official duties. Prior opinions to the extent inconsistent, including 20 Opns St Comp, 1964, p 502, are superseded.
You ask if a sheriff is personally responsible for cash shortages occurring in his department. You also ask if employees of a sheriff's department can be held liable for cash shortages in department funds caused by their wrongful acts. Finally, you ask if it is proper for a county to appropriate moneys to replace sheriff department funds lost through embezzlement or as a result of negligence.
A sheriff, like other public officials who are responsible for the handling of public funds, is held to a duty even higher than that of a fiduciary handling private funds; that is, with respect to public funds, he is absolutely liable as an insurer and is liable for losses even if they occur without his fault (see, Bird v McGoldrick, 277 NY 492, 14 NE2d 805; Tillinghast v Merrill, 151 NY 135, 45 NE 375). This rule of strict liability for public funds is well established and uniformly applied, notwithstanding that adherence to this rule produces seemingly unjust or harsh results.
In Bird v McGoldrick, supra, the court commented:
"The judicial rule of liability, without fault, for the loss of public funds received by an officer, even if unduly harsh, is too well established to be changed by the courts. It is for the Legislature, not the courts, to change or limit the rule if such change seems wise."
Thus, a sheriff was held to be personally liable for department funds embezzled by his deputy, although the sheriff in no manner participated in the deputy's wrongdoing (see McCollom v Aetna Casualty & Surety Co., 260 App Div 1, 20 NYS2d 287). Under the same rule, a town tax collector was held personally liable for public tax moneys lost when the bank in which the moneys were deposited failed (Mercer v Floyd, 24 Misc 164, 55 NYS 433), although a statutory enactment would now prevent this result (see Town Law, §64). The only possible exception to the strict liability rule acknowledged by the courts is when the loss is caused solely by an act of God or the public enemy (see Tillinghast v Merrill, supra).
In applying the rule of strict or absolute liability for the loss of money to the office of sheriff, it must be kept in mind that the cases discussed above concerned only public funds. It may be appropriate, therefore, to distinguish between moneys collected or handled on behalf of the public and moneys collected or handled on behalf of private persons or entities. Fees or poundages earned by a sheriff would be included among the public moneys he handles, and under the authorities cited, the rule of strict liability discussed above would be applied if any of those funds were lost. In contrast, moneys collected by a sheriff on behalf of a private judgment creditor through execution issued on behalf of such creditor would be classified as private funds, as would moneys taken from a prisoner and held by the sheriff as bailee for the prisoner's benefit. Although there is little case law on the subject, it is doubtful that the rule of strict liability would apply with respect to these private moneys. Accordingly, while a sheriff may be liable to a private party for his wrongful acts and those of his subordinates when committed with respect to civil matters in the course of employment (see Foyster v Tutuska, 25 AD2d 940, 270 NYS2d 535), it would appear that a sheriff's liability in such private matters would be based upon more general principles of substantive law (see Teddy's Drive Inn, Inc. v Cohen, 47 NY2d 79, 416 NYS2d 782, 390 NE2d 290; Fiorini v Fiorini, 122 Misc 325, 203 NYS 785).
Thus, it may be summarized that in all but the most unusual circumstances involving an act of God or the public enemy, under the rule of strict or absolute liability, a sheriff will be held personally liable for the loss of any public funds entrusted to his care. It is of no consequence whether or not the sheriff himself participated in or had any knowledge of the act that brought about the loss. With respect to private funds, however, the rule of strict or absolute liability apparently is not applied.
Irrespective of the basis of a sheriff's personal liability, and whether or not it relates to the loss of funds, under existing interpretations of a constitutional mandate, such liability cannot be assumed by or imposed upon the county. New York Constitution, Article XIII, §13 provides that the county shall never be made responsible for the acts of the sheriff (see Barr v County of Albany, 50 NY2d 247, 428 NYS2d 665, 406 NE2d 481; Commisso v Meeker, 8 NY2d 109, 202 NYS2d 287, 168 NE2d 365; 1980 Opns St Comp No. 80-688, p 183). Thus, it has been held that the constitutional prohibition against the county being responsible for the acts of the sheriff bars a county from indemnifying a sheriff for damages sustained in a court action (Barr v County of Albany, supra). A separate question is presented, however, with regard to whether this constitutional prohibition also bars a county from defending a sheriff in a civil action.
In Opn No. 80-688, supra, because we were unable to locate a controlling court decision, we stated that it was unclear whether section 13(a) of Article XIII of the State Constitution barred a county from defending the sheriff in a civil action. Recently, however, the Supreme Court in Suffolk County held that a local law enacted by that County requiring the county attorney to defend county officers in civil litigation was applicable to the sheriff (Dooley v Boyle, _____ Misc 2d _____, NYLJ, June 24, 1988, p 28). After noting the constitutional prohibition of Article XIII, section 13 and the express exclusion of sheriffs from Public Officers Law, §18, which generally authorizes the defense and indemnification of public officials, the Court wrote:
"However, recognizing the difficulties of employing a highly qualified Sheriff who must be both a self-insurer and liable for possibly onerous legal fees in defense of job related litigation prompted the Suffolk Legislature to enact a local law permitting defense by the County Attorney ... Such enactment is not in conflict with the aforestated constitutional proscription against indemnity. Rather, it is analogous to the defense versus indemnification provisions of private insurance contracts making the duty to defend broader than obligation to indemnify or not to indemnify (citations omitted). In other words, defense and indemnity are not co-extensive."
Accordingly, at least one court has now held that a county by a local law may provide a defense for a sheriff in civil litigation arising out of acts done in the performance of his duties. We are informed, however, that an appeal is now pending in this case.
Relative to a sheriff's liability, it should be noted that a sheriff is among the county officials who are required to execute and file an official undertaking before entering upon the duties of the office (County Law, §403). County Law, §403, read in conjunction with Public Officers Law, §11(1), provides that the undertaking shall be to the effect that the sheriff will faithfully discharge the duties of his office and promptly account for and pay over all moneys or property received by him as sheriff, or that in default thereof the parties executing the undertaking will pay all damages, costs and expenses resulting from the sheriff's default not exceeding the sum, if any, specified in the undertaking. The amount of the undertaking is fixed by the board of supervisors and approved by the board if in session. If the board is not in session, then the undertaking is approved by the county clerk. County Law, §403 further provides that if the board of supervisors is of the opinion that the sureties are insufficient and that the money and property of the county may be unsafe, the board may direct that a sheriff furnish a further undertaking upon ten days written notification and that the sheriff "shall not perform any duties nor be entitled to compensation until such further undertaking is furnished." County Law, §403 further authorizes the board of supervisors or the sheriff to demand that subordinates or employees give separate undertakings. Any default or misfeasance in office on the part of any such subordinate or employee shall be deemed a breach of the undertaking of the county officer appointing him as well as a breach of the undertaking furnished by such subordinate or employee.
Public Officers Law, §12 similarly provides that a public officer of whom an official undertaking is required may not receive any money or property as such officer or do any act affecting the disposition of money or property before the filing of his undertaking. Section 12 further provides that if a public officer does enter upon the duties of his office before giving his undertaking, the sureties upon an undertaking subsequently given shall be liable for acts and defaults which occurred prior to the execution of the undertaking.
The official undertaking to the effect that the sheriff will faithfully discharge the duties of his office and promptly account for and pay over moneys received by him as sheriff protects the county from losses caused by both intentional and unintentional acts committed by the sheriff or committed by others for whom the sheriff is liable. Accordingly, if a sum of money received and held by the county sheriff is lost under circumstances which constitute a breach of the official undertaking, then the surety upon the undertaking becomes liable for the money lost (see McCollum v Aetna Casualty & Surety Co., supra). The surety in turn generally may proceed then against the sheriff or other individual who was responsible for the loss under the surety's right of subrogation; that is the surety will succeed to whatever rights the county may have against the individual responsible for the loss, such as a sheriff. The right of subrogation is usually set forth as a term of the surety contract.
The sheriff's official undertaking or bond, as noted, protects the county and its taxpayers, but does not protect the sheriff personally. Therefore, in view of the rule of strict liability for the loss of public funds and the constitutional directive that the county may not assume the liability of the sheriff, consideration should be given to obtaining "money and securities" insurance coverage. This type of coverage normally protects an individual against the loss of moneys by theft, robbery or burglary and may afford some personal protection to the sheriff. It should be cautioned, however, that insurance coverage of this nature is somewhat limited in scope and policies now issued generally contain extensive exclusions. Any such policies, accordingly, should be carefully examined to determine precisely the risks that are covered.
This Office has previously expressed the opinion that since section 13 of Article XIII of the New York State Constitution provides that, "the county shall never be made responsible for the acts of the sheriff", the county may not purchase insurance indemnifying the sheriff against civil liability, thereby protecting the sheriff's personal assets from loss (20 Opns St Comp, 1964, p 502). We have now reconsidered this opinion, primarily in light of the holding of the Court of Appeals in Barr v County of Albany, (50 NY2d 247, 428 NYS2d 665, 406 NE2d 481 ), where the court strictly construed the language of the constitutional prohibition immunizing a county from liability for acts of the sheriff and permitted the county to assume the liability of deputy sheriffs and others in the sheriff's employ. In our opinion, a similar literal reading of this constitutional language also permits a county to purchase insurance on behalf of the sheriff (see also, Dooley v Boyle, NYLJ, June 24, 1988, p 28, quoted supra).
We believe there is a meaningful distinction between the prohibited act of a county assuming the sheriff's liabilities or indemnifying the sheriff (as discussed in Barr v County of Albany and Commisso v Meeker, supra) and the act of purchasing insurance for the sheriff's benefit. Indemnification occurs when a loss is shifted from one who has been compelled to pay for that loss to another (Ott v Barush, 109 AD2d, 254, 260; 491 NYS2d 661, 666). When a county voluntarily accepts responsibility for the cost of the sheriff's civil liability insurance, there is no shifting of the sheriff's loss to the county. Rather, the loss is shifted to the insurer and it is the insurer not the county that becomes liable for the sheriff's tortious acts.
The distinction between the assumption of liability and indemnification has been recognized for tax purposes. For example, in Stearns-Roger Corporation v United States (774 F2d 414), the court upheld an Internal Revenue Service disallowance of a deduction of "insurance premiums" when the amounts deducted were used to create a reserve fund for self-insurance purposes. The court found that self-insurance plans failed to qualify as insurance since there was no "shifting of the risk to others" (774 F2d 414-415). Similarly, in view of the recent judicial decisions which have narrowly construed New York Constitution, Art XIII, §13(a), we believe that the distinction should also be recognized for purposes of that constitutional provision. Therefore, it is now our opinion that a county may purchase liability insurance to indemnify a sheriff against civil liability without violating Article XIII, section 13 of the Constitution. Moreover, we conclude that the purchase of such insurance coverage would be authorized by General Municipal Law, §52, which generally authorizes a county to purchase liability insurance to protect its officers and employees "against liability for claims arising from their acts while exercising or performing or in good faith purporting to exercise or perform their powers and duties". In view of the foregoing, 20 Opns St Comp, 1964, p 502 and other prior opinions, to the extent inconsistent, are superseded.
We note in this regard that General Municipal Law, §6-n empowers municipal corporations, including counties, to establish an insurance reserve fund and make expenditures from the fund for any loss, claim, action or judgment for which the municipal corporation is authorized or required to purchase or maintain insurance, except for certain risks not here relevant. Notwithstanding the clear language of this section, and the conclusion we have here reached that it is proper for a county to purchase civil liability insurance on behalf of the sheriff, we conclude that a county may not make expenditures from its insurance reserve fund for any loss or claim of the sheriff or for any action or judgment against him. In our opinion, any such payment would be prohibited in light of the present judicial interpretations of Article XIII, section 13 of the Constitution barring the county from indemnifying the sheriff (Commisso v Meeker, supra; Barr v County of Albany, supra).
As was noted above, there is a clear distinction between the county itself indemnifying the sheriff and the county paying a casualty insurer to provide indemnification. This distinction is found not only in the nature of the acts themselves, one of which is prohibited while the other is not; but it is observed also in the nature of the burden accepted by the county. In undertaking to pay insurance premiums for coverage relating to the civil liability of the sheriff, the county is accepting a limited and foreseeable burden. The acceptance of this burden does not expose the county to the open-ended, unlimited liability which the constitution seeks to prohibit (see Commisso v Meeker, 8 NY2d 109, 120, 202 NYS2d 287, 290). Therefore, our conclusion that a county may purchase insurance to indemnify a sheriff from liability will not permit a county, under the guise of self-insurance, to directly assume the sheriff's liability in contravention of article XIII, §13 of the State Constitution.
Turning to the liability of an employee of the sheriff's department, it may be stated that, like the sheriff himself, such employee is clearly personally liable for the loss of department funds caused by his own misconduct, whether intentional or negligent (see McCollom v Aetna Casualty & Surety Co., supra). A distinction, however, is to be observed in the ability of a county to assume the liability of a sheriff's subordinates. This distinction again involves the directive of New York Constitution, Art XIII, §13 that the county shall never be made responsible for the acts of the sheriff. The constitutional provision has been extended to acts of deputy sheriffs and subordinates when they are acting in their civil capacities (Barr v County of Albany, supra). It is now settled, however, that while the county may never assume responsibility for the acts of the sheriff or otherwise become liable for the sheriff's acts, the county may by local law assume responsibility for the acts of deputy sheriffs and other employees of the sheriff's office. In Barr v County of Albany, supra, the court specifically upheld a local law which provided that any act or omission of a county employee in the office of the sheriff would be the act or omission of the county and that the county would be liable for damages resulting from such acts (50 NY2d 247 at 255, 256; see also Hex Building Corp. v Lipeck Constr., 104 AD2d 231, 482 NYS2d 510).
In Hex Building Corp. v Lipeck Constr., supra, the court further held that when a county, by local law, has adopted a broad provision assuming liability for "any act or omission" of employees in the sheriff's office, but expressly excluding responsibility for the sheriff himself, the sheriff no longer remains vicariously liable for the acts and omissions of his civil employees, including deputy sheriffs. It should be noted, however, that this case did not involve the loss of public funds. Whether a local law cast in such terms would relieve a sheriff from absolute liability for public funds lost as the result of an employee's wrongful act is presently undetermined.
With respect to whether it is proper for a county to appropriate moneys to replace public funds lost through embezzlement or negligence, we have concluded that in this connection the sheriff's department is to be treated no differently than any other department of county government; that is, when a shortage in department funds is discovered, it is incumbent upon a county to diligently seek recovery from the sheriff's bonding company or, if appropriate, directly from the sheriff or other persons responsible for the loss. If, however, the missing public moneys are necessary for the department's operation and cannot be recovered from a bonding company, insurance carrier or others, then the county will, of course, be required to provide necessary additional funds to the department. In our opinion, the appropriation of additional moneys in these circumstances would be proper. Such supplemental appropriation would direct the transfer of necessary moneys to a proper account from unappropriated cash surplus, contingency funds or from other legally available funds, including if necessary, the proceeds of budget notes (County Law, §363). We note, however, that the appropriation of supplemental moneys by the county required to permit the department's operation would not in any way relieve a sheriff or other persons from liability for the funds lost and these individuals would remain liable in accordance with the principles noted above.
July 20, 1988
Cornelius F. Healy
Deputy State Comptroller