PURPOSE

To consider the current arrangements for Members indemnity and insurance arrangements and to specifically consider if there is sufficient protection for Members who face libel or slander allegations as a consequence of them undertaking their official duties in a responsible manner.

BACKGROUND

The Committee will recall that at its last meeting the following issues were raised in connection with a wide ranging discussion on Members indemnity:

Members needed to receive training on roles, liabilities and responsibilities that accrue when they represent the Council on outside bodies.

Officers needed to know a lot more detail about the workings of the various outside bodies.

The Ethical Audit needed to consider these issues.

The current insurance arrangements for libel and slander for Members being restricted to 90% needed to be re-considered.

Insurance cover for Members and Officers should be the same.

There needed to be a balance struck between increased cost of any insurance/indemnity and ensuring Members can operate effectively.

Current guidance on Members being on outside bodies needs to be revised in the light of the current Codes of Conduct – particularly with regard to conflicts of interest.

If a complaint was submitted against a Member and it was subsequently established that there had been no infringement of the Code of Conduct the Member concerned should not be unreasonably “out of pocket”.

Since the meeting officers have looked into the various matters and the Council’s Resources Select Committee has also looked at the issues with outside bodies.

There are three specific issues covered in the above bullet points:

1. Outside Bodies

2. Current insurance and indemnity arrangements for libel and slander; and

3. Financial assistance to Members where an unfounded complaint against them has been submitted.

Taking each in turn:

1. Outside Bodies

The Resources Select Committee looked at this and have commissioned some more work designed to identify which outside bodies it would be appropriate for the Council to appoint representatives to and what conditions (in terms of financial information and insurance arrangements) should be attached to any such representations. Once this work has been completed (and it is likely to take some months) a further report will be submitted to this Committee to explain the outcome and to consider any ethical issues that remain unresolved.

The Standards Committee, and others undertaking this work will organise their activity so that issues relating to individual bodies/appointments will not be held up whilst the entire exercise is completed.

2. Current insurance arrangements particularly for libel and slander

Appendix 1 is a paper that has been prepared with the assistance of the Council’s Insurance manager setting out the current position. This also deals with some of the issues raised at the last meeting – including any differences between the cover for Members and officers.

An issue that needs consideration by the Committee is that 10% of libel and slander claims that are not covered by the Council’s insurers. Essentially the Council’s insurers will not extend the cover to include this 10% - however as can be seen from the attached there are a number of options that the Council could be recommended to agree whereby this amount is covered by the Council’s own resources:

1. The Council could decide to set aside the 10% uninsured losses and pay them from the Council’s funds should the case be lost; or

2. The Council could reserve the right to charge back to the Member either a smaller percentage or a set sum (for example £250); or

3. The Council could agree to meet these costs wherever it is legally allowed to (test of legality depending on the facts of the particular case and the decision to be taken in each case to be informed by advice from Counsel).

It must be emphasised that each of these options leaves the crucial issue as to whether an indemnity is available in a particular case, to be determined by whether or not insurance cover applies in that case. As set out in the Appendix, this will be a decision taken by the council’s insurers in the light of the reasonableness of the members’ actions, whether they took and followed advice and acted in good faith.

It would be possible for the council to adopt a policy which provided for an indemnity in circumstances where insurance was not available. This would require the council (perhaps on a recommendation from the Standards Committee) to form a judgement about the reasonableness of the member’s actions. This would be a difficult and inherently risky process.

Each option has its merits but the third option would seem to strike a balance between ensuring a Member is not out of pocket at all when it is legal for the Council to provide an indemnity. Additionally the determination of whether the Council should meet the marginal uninsured costs will be informed by advice from Counsel as to what approach the reasonable council would take in each circumstance. This will minimise the risk that the council’s external auditors will question any such expenditure.

In circumstances where a member considers they have been defamed, it is suggested there need to be safeguards against commitment of public funds on trivial or speculative cases. The council will wish to satisfy itself that the member has a genuine and sustainable belief that a substantial defamation has occurred and that there are good prospects of successful proceedings being brought.

One mechanism by which this could be achieved is to require that a member who wishes to claim an indemnity be required to seek and pay for their own initial advice (from a suitably qualified advisor) as to whether there has been a defamation and what the prospects of a successful action are.

The Committee are asked to consider what (if any options) they would like to recommend to the Council.

3. Financial assistance to Members where an unfounded complaint against them has been submitted

The legal position on the ability of the Council to cover such costs is unclear –the Office of the Deputy Prime Minister, and it’s predecessor the DTLR, have variously promised guidance or legislation, for sometime.

Clearly there needs to be a balance here between ensuring a Member is not unfairly out of pocket whilst being able to defend themselves against any allegation – but also ensuring that public funds are not used to protect Members inappropriately, or that the purpose of the statutory regime in Part 3 Local Government Act 2000 is neutralised.

It is suggested that the Committee consider a scheme similar to that as set out above – in that the Council agrees to re-imburse a Member for costs of defending him or herself where:

a. The Member has been cleared of the allegation; and

b. Where the Council is legally able to do so (this to be determined in the light of advice from Counsel, on a case by case basis).

Such a system would have the additional benefit of ensuring a certain level of prudence by a Member seeking professional assistance in defending him or herself as the outcome of who will fund such costs cannot be guaranteed until after the case has been concluded.

FINANCIAL IMPLICATIONS

Will depend on level of any successful action or processes above – if any money is paid following the adoption of the above two changes this will be unbudgeted expenditure and will need to found from reserves.

LEGAL IMPLICATIONS

Whilst S101 Local Government Act 2000 is a specific statutory reference to indemnity of officers and members, it is simply an enabling provision, empowering the Secretary of State to make regulations.

In introducing debate on the clause of the then Local Government Bill, the Minister stated that the purpose was to “enable the removal of the unhelpful ambiguity in the current powers of local authorities”. The failure to enact regulations has ensured that unhelpful ambiguity remains as such cases which have been determined by the courts have been concerned with very specific circumstances and have established few general principles.

In the absence of regulations the key statutory provisions remain Part 1 Local Government Act 2000 (the well-being powers) and S111 Local Government Act 1972 (ancillary powers).

EVALUATION AND RISK MANAGEMENT

It is suggested that, in the absence of clarity at law, the policy issue is essentially an ethical one, with the council having to take a judgement where the right balance lies between the following factors:

1. Encouraging members, and potential members, to offer themselves for public service without fear that they will be exposed financially as a result.

2. How much individuals in public life, rather than the public purse, should bear the cost of defending the reputation of those who offer themselves for public office.

3. Where the right balance lies between the need for the ethical framework to encourage members to act at all time responsibly and with high ethical standards (by ensuring there are personal consequences for members who do, or who are alleged to have, acted improperly) and the need to ensure that members do not feel inhibited from acting fearlessly in a complex and inherently risky environment.

4. The extent to which the potential costs involved in such cases (which may be significant), and the opportunity costs to scarce council budgets, should affect decisions which are taken in relation to indemnity.

This paper recommends seeking Counsel’s advice in several circumstances. This will involve a cost (such advice would typically cost between £700-£2,000) and care must be taken, if the need to take advice arises, that this cost is not disproportionate to the cost of the indemnity being contemplated.

The risks are both legal/financial in that a policy allowing the council to commit funds in circumstances where there is no power to do so may lead to unlawful expenditure.

If the wrong balance is struck by the policies under discussion, then there is a risk, either that current or potential members will be deterred from standing for election; that members will unfairly bear the burden of correct but controversial acts in undertaking their public duties, and/or that the reputation of the council will suffer as members of the public see too much or too little protection being given to members.

RECOMMENDATIONS

1. That the position with regards to the outside bodies be noted, and the Standards Committee receive such future reports as are necessary.

2. That the Standards Committee recommend to the Council that it adopt the following policy:

(i) That the Council meet, in cases where the insurance cover for defending defamation cases applies, the percentage of uninsured costs or damages where it is advised it is legally able to do so, on a case by case basis.

(ii) That no indemnity is offered to members defending defamation cases where insurance cover does not apply.

(iii) That indemnity for the costs of defamation proceedings brought by a member only be considered by the council following receipt of legal advice sought and paid for by the member concerned which advises there is a substantial defamation and good prospects of successful proceedings.

(iv) That the Standards Committee make a recommendation in any case where funds are likely to be committed by the council to indemnify a member in any of the above circumstances.

That the Council be recommended to adopt the following policy:

That the Council agrees to indemnify Members for reasonable costs of defending themselves against a complaint to the Standards Board where:

(i) The Member has been cleared of all or part of the allegation; and

(ii) The Council is advised it is legally able to do so, on a case by case basis, and

(iii) That the Standards Committee make a recommendation in any case where funds are likely to be committed by the council to indemnify a member under this policy.

BACKGROUND PAPERS

None

Contact Point : Chris Mathews, F 3280

JOHN LAWSON

Monitoring Officer

MEMBERS INSURANCE POSITION

Current Position

a. Libel and Slander claims against Members

i. Current insurance policy indemnifies the council for up to 90% of a claim for libel or slander against a member or officer. Have to be established that the Member acted with good faith and without malice. Member will have to show acted on advice.

ii. Currently the remaining 10% would have to be picked up by the Member.

iii. If a Member receives notice that they are being sued they need to hand all papers etc to the Insurance Office. The claim will then be handled by the Council’s insurer, who will engage professionals as required.

iv. Council could agree a policy whereby it would cover the remaining 10% (or portion thereof) in particular cases where Member had acted on good advice, in good faith and without malice. There are three particular ways that this could be achieved:

1. The Council could decide to set aside the 10% uninsured losses and pay them from the Council’s funds should the case be lost; or

2. The Council could reserve the right to charge back to the Member either a smaller percentage or a set sum (for example £250); or

3. The Council could agree to meet these costs wherever it is legally allowed to (test of legality depending on the facts of the particular case and determined by Counsel).

v. Realistically no officer is in the Council is aware of any Member being sued for libel and slander.

vi. Financial risk is greatly dependant on successful action showing person was libelled or slandered and also payment of significant funds.

vii. Whilst this might be a small risk it is still a risk.

b. Outside Bodies

i. Council covers for any insurance liability while Member is on the official business of the Council or when the Member is specifically authorised to represent the Council. However, the outside body should have the appropriate insurance in place to protect their members including members appointed by the Council.

ii. Council does not cover for Members undertaking work for outside bodies where they have not been appointed by the Council.

iii. Role of Members on outside body can vary – Directors and Trustees have responsibilities to the outside body and not the Council when acting in that capacity.

iv. Information on outside bodies (role of members, insurance cover etc) is not complete – some is available.

v. Members see membership of outside bodies as an important part of their community work and this should be supported by understanding their role. The Council should do all we can to ensure that Members/officers are fully aware of the issues relating to an outside body before they join it.

c. Libel and Slander actions taken by Members against 3^rd parties.

i. No cover for this for Members – down to individual.

ii. Legal position as to whether we can provide cover for this is unclear.

Insurance differences between Members and Officers.

Personal Accident Cover:

1. Age range is 0 to 80 for Members and 0 - 70 for Officers

2. There is a set capital sum for Members of £150,000 and 5 times annual earnings for Officers, min of £35,000.

3. Temp total disablement is £300 for Members and 50% of weekly earnings for Officers

4. Temp partial disablement is £150 for Members but NIL for Officers

5. The Activities covered for Members is wider to include official duties including travel connecting business but not covering home to place of duty. Attending meetings for the Local Gov Assoc or Convention of Scottish Authorities. Service on behalf of or by appointment to by the Insured on Committees of other authorities or outside bodies providing that they have no PA cover of their own which would cover the Member. Attendance at Surgeries and any other complementary activities.

Officers cover is Official duties including connected journeys. And direct travel between home and place of duty.

Most of the differences are because of a contract of employment between the Council and the employee whereas Members are not strictly employees. There are sliding scales for severity of disablement.

Liability Insurances :

Members cover the same as employees.

Libel and Slander :

Essentially the same but for employees it is described as “in the discharge of official duties on behalf of the insured (IWC)” for Members as “Official business at meetings of the insured or of its committees or sub committees or any occasion when then the Member is specifically authorised to represent the insured.”

Motor :

Key point is that Members claiming mileage on Council business MUST have business use by the driver (not just the policyholder which may be different) of a privately owned and insured vehicle as part of the requirement for claiming mileage and for their protection. The Council is not responsible for any loss.