Arizona Court of Appeals Division Two holds that A.R.S. § 12-820.05(B) immunizes a public entity for losses caused by an employee’s criminal acts so long as the public entity lacks actual knowledge of the employee’s propensity for such conduct, even when the plaintiff claims that the public entity itself was negligent for hiring an employee with past misconduct.

The Gallagher family sued the Tucson Unified School District after police discovered that a TUSD employee had secretly recorded images of the Gallaghers’ daughter, a student at the school where the TUSD employee worked.  It turns out that this was not the employee’s first time:  he had been fired from a previous job for sexual misconduct.  A TUSD principal testified that she had contacted the previous employer but there was not any documentation of the call.

The Gallaghers claimed TUSD was vicariously liable for the employee’s acts and also directly liable for negligent hiring and supervision.  TUSD successfully moved for summary judgment on the theory that it was immune under A.R.S. § 12-820.05(B), which provides immunity to public entities for the criminal conduct of employees. 

The Court of Appeals affirmed, holding that TUSD is immune.  Section 12-820.05(B) states, “A public entity is not liable for losses that arise out of . . . an act or omission determined . . . to be a criminal felony by a public employee unless the public entity knew of the public employee’s propensity for that action.”  The Gallaghers’ case was made more difficult because the Court of Appeals had already held (in a special action in this matter) that the exception to the immunity applied only when the public entity had actual knowledge of the employee’s propensity, not merely “constructive” knowledge.

First, the Gallaghers argued that the statute should not immunize TUSD’s “own negligence” in hiring the employee.  Rejecting that argument, the Court explained that the fact that one claim was for vicarious liability and one for direct liability did not alter that they were seeking to make TUSD liable for a “loss[] that arise[s] out of” the employee’s criminal act and thus a loss the statute covers.

Second, the Gallaghers argued that there was at least a triable fact as to whether the principal really called the previous employer and whether she tried to learn the “necessary information” about the employee.  None of that mattered because the only relevant issue was whether TUSD acquired “actual knowledge” of the employee’s propensity, not whether it should have found out about the prior bad conduct.  Because there was no evidence in the record suggesting that TUSD possessed actual knowledge of the employee’s propensity for this conduct, the statutory immunity applied and there was nothing left for a jury to decide.

Judge Vásquez authored the unanimous opinion; Judges Kelly and Howard concurred.