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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST -- Insurance Transactions (village board members selling to village employees)

GENERAL MUNICIPAL LAW, §§800(2), 806: The sale of an individual insurance policy by a village trustee to a village employee in the employee's private capacity is not a "contract" with the municipality for purposes of the conflict of interest provisions of article 18 of the General Municipal Law, but may be subject to restrictions under a local code of ethics.

You ask whether a village trustee who is also an insurance salesman would have a conflict of interest if he or she were to sell individual insurance policies to village employees and service these policies.

General Municipal Law, Article 18 (§800 et seq.) governs conflicts of interest of municipal officers and employees (see General Municipal Law, §800[4], [5]). Pursuant to General Municipal Law, §800(3), a municipal officer or employee has an "interest" in any contract with his or her municipality if he or she receives a direct or indirect pecuniary or material benefit as the result of the contract (General Municipal Law, §800[3]). An officer or employee is also deemed to have an interest in the contract of a firm, partnership or association of which he or she is a member or an employee (General Municipal Law, §803[3][b]). That interest is prohibited if the officer or employee, individually or as a member of a board, has the power or duty to (a) negotiate, prepare, authorize or approve the contract or approve payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such duties (General Municipal Law, §801), and none of the exceptions contained in article 18 are applicable (see General Municipal Law, §804). Any contract willfully entered into in which there is a prohibited interest is null, void and unenforceable, and any officer or employee who willfully and knowingly violates these provisions may be guilty of a misdemeanor (General Municipal Law, §805).

A "contract" for purposes of article 18 includes only any express or implied claim, account or demand against or agreement with the municipality (see General Municipal Law, §800[2]). Therefore, the conflict of interest provisions of article 18 would not apply to private insurance contracts between the trustee's insurance company and village employees in their private capacities since the village has no involvement in such contracts (cf. 1988 Opns St Comp No. 88-15, p 25, concerning a village trustee who was the comptroller of an insurance company from which the village intended to purchase insurance).

Although article 18 would not apply, the village's code of ethics should be consulted to determine whether it contains any pertinent restrictions. We note that General Municipal Law, §806 requires all villages to adopt codes of ethics providing the standards of conduct reasonably expected of their officers and employees. Such codes must provide standards with respect to, among other things, private employment in conflict with official duties. In this regard, it might be appropriate for the code to address the circumstances, if any, under which a municipal official may solicit business in his or her private capacity from municipal employees who are hired or confirmed by the official or a board of which the official is a member.

May 1, 1990
Gary J. Grayson, Esq., Village Attorney
Village of Walton