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No Indemnification under N.J.S.A. 18A:16-6 for Defense Costs Incurred by Attorneys in Malpractice Actions

Sahli v. Woodbine Board of Education, 386 N.J.Super. 533, 902 A.2d 296 (App. Div. 2006)
NJ Underlying Subrogation Action

Student Contributor:  Jason Klein

Facts: The Woodbine Board of Education entered into a contractual agreement with Ronald Sahli, an attorney licensed to practice in the State of New Jersey, to hire him as its attorney. Pursuant to the agreement, Sahli’s duties included attending Board meetings, providing counsel and advice to board members and carrying out the Board’s specific instructions as related to legal matters involving the district.

Toy, an Administrative Assistant in the Special Education Department of the Woodbine School District, appeared at a meeting of the Board to discuss her complaints regarding the district’s failure to comply with federal and state laws governing special education programs. Because of confidentiality concerns at the meeting, the Board designated Sahli, rather than the Board’s usual secretary, as secretary pro tem, responsible for providing minutes of the session, as well as performing his usual duties as attorney.

Following Toy’s presentation, Sahli recommended to the Board that Toy be removed from her position and explained that if the Board felt it was necessary, they could subject Toy to a physical and/or psychiatric examination. Toy declined to undergo the requested examination and left the employment of the Woodbine School District. Toy sought damages from Sahli for violating her civil free speech rights, Law Against Discrimination rights, and due process and equal protection rights. Sahli sought indemnification under New Jersey Statute 18A:16-6 which provides that "the board shall defray from all costs of defending [a civil action]…any person holding office, position or employment under the jurisdiction of any board of education".

Issue: Whether an attorney has a right to indemnification for legal fees incurred in the defense of a suit against him under the indemnification provisions of N.J.S.A. 18A:16-6.

Ruling: The Court, in reversing a motion for summary judgment, found that a third party independent contractor operating as a board attorney is not entitled to indemnification under N.J.S.A. 18A:16-6.

Lesson: The intent of the legislature in passing N.J.S.A. 18A:16-6 was “to confine indemnification to Board members, employees, and students preparing for teaching careers.” None of the statute’s various amendments since its enactment in 1937 have referenced school board attorneys, or otherwise suggested coverage for legal fees incurred in the defense of malpractice actions.

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Posted in: Administrative Law, New Jersey