State v. Heinze
196 Ariz. 126, 993 P.2d 1090 (1999)
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Rule of Law:
A statutory exclusion barring state indemnification for an employee's felonious acts does not require a formal criminal conviction; a civil court can determine if the acts constituted a felony. This exclusion is inapplicable, however, if the state knew of the employee's propensity for such actions, which is a question of fact for a jury.
Facts:
- Allen Heinze was the executive director of the Arizona Prosecuting Attorneys Advisory Council (APAAC), a state agency.
- While serving as director, Heinze committed multiple acts of sexual misconduct and harassment against employees Schallock and Saunders.
- Heinze's conduct included making offensive comments, engaging in unwanted physical contact, making quid pro quo sexual demands, and, in Schallock's case, committing rape.
- Members of APAAC's leadership were aware of Heinze’s aggressive sexual behavior toward female employees under his supervision.
- Instead of reprimanding, firing, or otherwise curtailing Heinze's behavior, APAAC leadership 'looked the other way'.
Procedural Posture:
- Schallock and Saunders sued Allen Heinze and the State of Arizona in state trial court, alleging personal misconduct by Heinze and both direct and vicarious liability against the State.
- In a separate declaratory judgment action, the trial court was asked to determine if the State must indemnify Heinze for his personal liability.
- The trial court granted summary judgment in favor of Schallock and Saunders (Appellees), ruling that the State must indemnify Heinze.
- The State of Arizona (Appellant) appealed this summary judgment.
- The case was heard by the Arizona Supreme Court, which resolved certain issues and remanded the case to the intermediate court of appeals to decide the remaining questions.
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Issue:
Does a state statute that excludes indemnification for losses arising from an act 'determined by a court to be a felony' require a formal criminal conviction to be invoked?
Opinions:
Majority - Fidel, Presiding Judge
No. A statutory provision excluding state indemnification for an employee's felonious acts does not require a formal criminal conviction. The statute's plain language does not use the word 'conviction' nor specify a 'criminal court,' indicating that a civil court in an indemnification proceeding is empowered to determine if the employee's acts were felonious. The court reasoned that the legislature frequently uses the term 'conviction' in other statutes, and its absence here was intentional. However, the felony exclusion contains a critical exception: it is inapplicable if 'the state knew of the person’s propensity for [such] action.' Because there was evidence that APAAC knew of Heinze's propensities, whether this exception applies is a question of fact for a jury and cannot be resolved on summary judgment.
Analysis:
This decision clarifies a significant provision in Arizona's state employee indemnification law, establishing that a civil court can make a finding of felonious conduct for insurance coverage purposes without a corresponding criminal prosecution. This prevents state employees from receiving indemnification for serious crimes simply because they were never formally charged or convicted. Crucially, the court's emphasis on the 'known propensity' exception creates a strong incentive for state agencies to address employee misconduct, as ignoring known dangerous behavior can negate the state's ability to later deny indemnification for the resulting harm.
