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October 16, 1997 Spring Meeting May 19-21, 1999 Randolph W. Hall Assistant City Attorney City of Oakland WHEN CAN A CITY REFUSE TO DEFEND AND INDEMNIFY AN EMPLOYEE? TABLE OF CONTENTS I. INTRODUCTION II. LEGAL FRAMEWORK A. The California Tort Claims Act B. The Duty To Defend C. Grounds For Refusing To Provide A Defense To The Public Employee D. The Duty To Provide Indemnification E. An Employee’s Private Automobile Insurance Policy May Satisfy The Public Entity’s Duty To Indemnify The Employee From Damages And Costs Arising From A Motor Vehicle Accident That Occurred During The Course And Scope Of Duty F. What Constitutes “Scope of Employment” And How Do We Analyze Whether An Act Or Omission Is Within The Scope of Employment? G. A Risk Is Inherit In, Or Created By, A Public Entity’s Operations If The Occurrence Was A Generally Foreseeable Consequence Of The Entity’s Operations H. Scope Of Employment Is Broadly Interpreted Under The Respondent Superior Doctrine I. An Employer Is Not Strictly Liable For All Actions Of Its Employees During Working Hours J. Vicarious Liability Arising Out Of Scope Of Employment K. Imposition Of Vicarious Liability Is Not Appropriate Where The Misconduct Does Not Arise From The Conduct Of The Employer’s Enterprise L. The Standard For Determining Whether A Risk Is “Unusual Or Startling” For Respondent Superior Analysis M. A Municipality’s Decision To Defend Some Employees In A Given Matter Does Not Create A Duty To Defend All Employees Named As Defendants In That Or Other Matters III. CONCLUSION [I wish to thank my colleagues Karen Rodrigue and Sophia Li who contributed to the preparation of this paper. I. INTRODUCTION Under what circumstances may a California public entity refuse to defend and indemnify an employee named as a defendant in a lawsuit arising out of acts or omissions that allegedly occurred within the course and scope of her or his official duties? This question is frequently asked of city attorneys and is an issue of particular importance where the employee is alleged to have committed an intentional tort that could result in a significant award against the city or against the employee as an individual. This paper presents an outline of factors that city attorneys may find useful when analyzing whether a public employer has a duty to accept an employee’s request that the public agency employer provide a defense and indemnification in a civil lawsuit arising out of alleged acts committed in the course and scope of employment. Unless specifically otherwise identified, all references to statutes in this paper will be to the California Government Code. II. LEGAL FRAMEWORK A. The California Tort Claims Act Any analysis of a public entity’s duty to defend and indemnify its employees must include a working understanding of the California Tort Claims Act (“the Act”). The Act, which was enacted in 1963, provides a comprehensive codification of the law of governmental liability and immunity in California. (Los Angeles Police Protective League v. City of Los Angeles (1994) 27 Cal.App.4th 168, 174. The Act requires public entity employers to defend and indemnify their employees in civil lawsuits arising out of acts performed by the employees in the course of scope of their official duties. (§§ 995, et seq.) and to pay any claim or judgment against an employee in favor of the third party plaintiff (§§ 825, et seq.). B. The Duty To Defend Sections 995 and 996 set forth the requirements pertaining to a public entity’s duty to defend an employee in a lawsuit arising from acts or omissions allegedly taken within the course and scope of her or his official duties. Section 995 provides in pertinent part that, upon request of an employee, “a public entity shall provide for the defense of any civil action or proceeding brought against him, in his official or individual capacity or both, on account of an act or omission in the scope of his employment as an employee of the public entity.” Pursuant to section 996.4, if the public entity refuses to provide the requested defense and the employee retains separate counsel to defend the action, the employee “is entitled to recover from the public entity such reasonable attorney’s fees, costs and expenses as are necessarily incurred … if the action … arose out of an act or omission in the scope of his employment as an employee of the public entity, but he is not entitled to such reimbursement if the public entity establishes (a) that he acted or failed to act because of actual fraud, corruption or actual malice or that the action is one described in § 995.4.” C. Grounds For Refusing To Provide A Defense To The Public Employee Section 995.2(a) provides the standard under which a public entity may refuse to provide a defense to a public employee in a civil action. “A public entity may refuse to provide for the defense of a civil action … brought against the employee … if the public entity determines that … the employee’s act or omission was not within the scope of employment, or that the employee acted or failed to act because of actual fraud, corruption or actual malice, or that the public entity’s defense of the action would create a specific conflict of interest.” Note: Section 995.2(b) requires that if an employee requests in writing that the public entity provide a defense, the public entity shall inform the employee within 20 days whether it will or will not provide a defense and the reason for a refusal to provide a defense. D. The Duty To Provide Indemnification The provisions pertaining to a public entity’s duty to provide indemnification are found in §§ 825 through 825.6. Section 825(a) provides that, except as otherwise stated, if the public entity is requested by an employee to defend a civil action against her or him “for an injury arising out of an act or omission occurring within the scope of his or her employment as an employee of the pubic entity,” and “the request is made in writing not less than 10 days before the day of trial, and the employee reasonably cooperates in good faith in the defense, … the public entity shall pay any judgment based thereon or any compromise or settlement of the claim or action to which the public entity has agreed.” “The primary purpose of the indemnification statute is to avoid dampening the ardor of employees who might otherwise be preoccupied with the possibility of having to personally finance and pay large judgments in tort suits arising from the performance of their duties”. California Municipal Law Handbook, p. VIII-45; Johnson v. State of California (1968) 69 Cal.2d 782, 792. If the public entity does not conduct the defense as requested and the employee pays the claim or judgment awarded against her or him, the employee may be entitled to recover such payment from the public entity. This “entitlement” may be conferred only if: (1) the requesting employee establishes that the act or omission upon which the claim or judgment is based occurred within the scope of her or his employment as an employee of the public entity and (2) the public entity fails to establish that the requesting employee acted or failed to act because of actual fraud, corruption or actual malice or (3) that the requesting employee willfully failed or (4) refused to conduct the defense of the claim or action in good faith or (5) refused to reasonably cooperate in good faith in the defense conducted by the public entity. § 825.2 (b). Note: It is the requesting employee’s burden to prove by a preponderance of the evidence that the act or omission was within the scope of employment. Los Angeles Police Protective League v. City of Los Angeles, supra, 27 Cal.App.4th at p.176; Rivas v. City of Kerman (1992) 10 Cal.App.4th 1110, 1118-1119. (Italics added). E. An Employee’s Private Automobile Insurance Policy May Satisfy The Public Entity’s Duty To Indemnify The Employee From Damages And Costs Arising From A Motor Vehicle Accident That Occurred During The Course And Scope Of Duty An interesting twist to the indemnification obligation occurs where a public employee, operating her or his private vehicle, in the scope of employment, is involved in an accident. When this situation occurs, the employee’s automobile policy may satisfy the public entity’s duty to indemnify. Younker v. County of San Diego (1991) 233 Cal.App.3d 1324. Government Employees Insurance Company v. Gibraltar Casualty Company (1986) 184 Cal.App.3d 163. However, if the employee is involved in an accident and is underinsured, the city may not be able to rely on the employee’s insurance company to make up any shortfall between the amount of a damages award or settlement and the policy limit. Practice Tip: To more effectively defend against “negligent entrustment” claims, cities that allow their employees to use the employees’ private vehicles in the course and scope of city business would be wise to require their employees to list the City as an additional insured on their automobile insurance policies. Such cities should require stringent safety standards for private vehicles used for city business, require their employees to maintain coverage in an amount reasonably sufficient to cover foreseeable damages and demand annual DMV proof of each employee’s driving record. F. What Constitutes “Scope Of Employment” And How Do We Analyze Whether An Act Or Omission Is Within The Scope Of Employment? The Act makes clear that the critical issue in determining whether a public entity has a duty to defend and indemnify a public employee is whether the alleged act or omission occurred within the “scope” of the employee’s duties.
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