Court Opinion

ID: 9790355
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:52:06.224428+00
Date Added: 2024-06-11T07:37:29.095125
License: Public Domain

*901Worswick, J.
(dissenting) — I cannot believe that any appellate court would decide this case as the majority has if insurance did not lurk in the background. Notwithstanding its statement of the issue, the majority treats this as an insurance case. It is not, for the policy here extends coverage only to those whom the hospital district has the legal authority to indemnify. The lure of an insurance company treasury should not becloud the real issue: whether a public entity, accountable for its stewardship of public money, has authority to forgive its own claim against a negligent employee and thereby suffer a loss. I would hold that the hospital district has no such authority.
The majority relies heavily on Washington Pub. Util. Dists.' Utils. Sys. v. PUD 1, 112 Wn.2d 1, 771 P.2d 701 (1989). That case was decided under a different statute, however, and is distinguishable. Public utility districts have statutory authority to indemnify their officers and directors (RCW 54.16.097); hospital districts do not. See RCW 70.44.060. Had the Legislature intended the districts to have this power, it would have said so. It is not the place of this court to fill in legislative gaps by reading into statutes what is not there. Jenkins v. Bellingham Mun. Court, 95 Wn.2d 574, 579, 627 P.2d 1316 (1981); Christie v. Maxwell, 40 Wn. App. 40, 48, 696 P.2d 1256, review denied, 104 Wn.2d 1002 (1985).
Even if hospital districts have a common law right to indemnify officers and directors, it does not follow that the insurance policy in this case, purchased pursuant to RCW 36.16.138, benefits the hospital district's treasurer in a suit against him by the district. This insurance is similar to directors' and officers' liability insurance purchased by *902business corporations as authorized by RCW 23B.08.580.2 Such insurance was created to fill gaps left by statutes that prohibited corporations from indemnifying directors and officers for judgments against them. See generally Johnston, Corporate Indemnification and Liability Insurance for Directors and Officers, 33 Bus. Law. 1993 (1978). The purpose of such insurance is "to protect aggressive managers who are willing to take good-faith risks in the search of profits" for the corporations they represent. Johnston, at 1993-94. By extending coverage to include a hospital district's own claims against its officers, and not just third party claims, the majority is protecting not just aggressive managers, but negligent or even reckless ones as well.
Further, even when statutory authority permits an entity to indemnify officers or directors, necessarily such indemnity does not extend to direct claims between the two. Norwich v. Silverberg, 200 Conn. 367, 511 A.2d 336 (1986). In Silverberg, the City of Norwich sued their city attorneys for malpractice, and those attorneys counterclaimed under the indemnification statute for reimbursement of any amount the court might order them to pay. Construing the statute and upholding the dismissal of these counterclaims, the court stated that, in enacting the statute, the Legislature had "created a statutory analogue for the common law *903doctrine of respondeat superior." Silverberg, at 375. The court continued:
It is true that the legislature might have determined that the need to attract citizens to public service required it to go beyond respondeat superior and to provide for municipal officers and employees total immunity from liability for actions in negligence brought by their municipal employers. In our view, however, if that had been the legislature's intention, it would have been manifested by a straight-forward immunity statute rather than by the round-about system of indemnification that the defendants ask us to read into [the statute].
Silverberg, at 375. Similarly here, had it intended to cover claims of this kind, the Legislature could have permitted this sort of indemnification. Also, had the parties to the insurance contract intended this coverage, the insurance policy would have been drafted to include it. In effect, the majority here creates an equivalent of uninsured motorist coverage for hospital districts. That sort of innovation is the province of the Legislature, not this court.
Also, by so expanding the traditional authority of an entity to indemnify its officers, this court effectively confers immunity upon both the hospital district and its treasurer. By doing so, it allows the risk of the treasurer's defalcations to be shifted to an insurance company that had no idea, when it issued the policy, that it was writing a fidelity bond instead of an insurance contract. This is bad policy; if an entity that elects an officer can be made immune from the risk of any negligence on his part, it has little incentive to select good officers. If the officer himself is immune from the consequences of his negligence, he has little incentive to be careful.
Most important of all, the majority is announcing a principle that will apply even when the entity has no recourse, to insurance or any other source, to cover such losses. In *904such circumstances, the entity would be empowered without limitation to jeopardize the public purse. This is intolerable to contemplate. I dissent.
Review denied at 116 Wn.2d 1006 (1991).

RCW 23B.08.580 states:
"A corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the corporation, or who, while a director, officer, employee, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, against liability asserted against or incurred by the individual in that capacity or arising from the individual's status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify the individual against the same liability under RCW 23B.08.510 or 23B.08.520."