Opinion ID: 768122
Heading Depth: 3
Heading Rank: 1

Heading: The City's Conditional Offer to Provide a Defense

Text: 12 DeGrassi contends that the district court erred in ruling that the City had complied with its obligation to provide her with a defense. She acknowledges that there is no California authority defining the limits of the ability of the City to control her defense but she argues that as a professional she should be entitled to approve or reject any settlement entered on her behalf. 2 DeGrassi cites a footnote in Robertson v. Chen, 52 Cal. Rptr. 2d 264 (Cal. Ct. App. 1996), stating that [a]n exception to the general rule affording insurers the unconditional right to settle most third party claims without the insured's consent are the provisions in professional liability policies which `often give the insured the right to approve or reject any settlement negotiated by the insurer.'  Id. at 267 n.3 (citation omitted). Her reliance on this language is misplaced. DeGrassi's claim does not arise under the terms of a liability policy. Rather, it is controlled by the California Government Code, which defines the City's indemnity obligation. 13 Government Code section 995, which creates the obligation to defend a public employee, provides: 14 [U]pon request of an employee or former 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. 15 Cal. Gov't Code Ann. S 995 (West 1995 & Supp. 2000). This obligation is limited by the public entity's right to refuse to provide a defense if it determines the employee did not act in the scope of employment, acted with actual fraud, corruption, or actual malice, or that defense of the action would create a conflict of interest between the public entity and the employee. See Cal. Gov't Code Ann. S 995.2(a) (West 1995 & Supp. 2000). The obligation to indemnify a public employee is found in section 825(a), which provides: 16 [I]f an employee or former employee of a public entity requests the public entity to defend him or her against any claim or action against him or her for an injury arising out of an act or omission occurring within the scope of his or her employment as an employee of the publicentity and such request is made in writing not less than 10 days before the day of trial, and the employee or former employee reasonably cooperates in good faith in the defense of the claim or action, 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. 17 Cal. Gov't Code Ann. S 825(a) (West 1995 & Supp. 2000) (emphasis added). Under this section, given a proper request by the employee and her good faith cooperation in the defense of a claim based on conduct occurring within the scope of employment, the City must indemnify the employee against any judgment or the cost of a settlement to which it has agreed. See id. This language leaves no room to argue that the employee must also agree to the settlement. 18 These provisions were adopted as a part of the California Tort Claims Act (Cal. Gov't Code SS 810-996) in response to the California Supreme Court's decision in Muskopf v. Corning Hosp. Dist., 359 P.2d 457 (Cal. 1961). That decision eliminated the defense of sovereign immunity in tort actions against the State and other public entities. See id. at 213-214, 11 Cal.Rptr. at 90, 359 P.2d at 458. In response, the Legislature adopted legislation to limit tort liability of public entities and of public employees.[A] principal purpose of the [California Tort Claims Act] centered on assuring the zealous execution of official duties by public employees. Johnson v. State, 447 P.2d 352, 359 (Cal. 1968). To that end, the Legislature provided a qualified right to indemnity. 19 The Legislature did not grant public employees the right to control a defense provided by a public entity. The statute by its terms grants the public entity authority to select an attorney by giving it the option to use its own attorney, hire outside counsel, or purchase insurance requiring the insurer to defend the employee. See Cal. Gov't Code Ann. S 996 (West 1995). It lodges control over settlement in the public entity by limiting the obligation to indemnify a public employee against settlements to those to which the public entity has agreed. S 825(a). The statute also conditions the employee's rights on her reasonabl[e] cooperat[ion] in good faith in the defense of the claim or action. Id. Failure to cooperate in good faith with the City's defense of the claim relieves the public entity of its obligation to indemnify the employee. See Stewart v. City of Pismo Beach, 42 Cal. Rptr. 2d 382 (Cal. Ct. App. 1995) (finding police officer, who made statements that incriminated City to plaintiffs in underlying tort liability action, was not entitled to defense because he had willfully failed to cooperate in good faith with the City's defense). Because a public entity providing an employee's defense under section 825(a) assumes the liability for any resulting settlement or judgment, these qualifications do not undermine its strong incentive to provide an effective defense. See Laws v. County of San Diego, 267 Cal. Rptr. 921, 926 (Cal. Ct. App. 1990) (finding a public entity has more incentive than an insurance company to carry out another's defense because its liability is theoretically limitless). 20 We conclude that giving a public employee a right to control settlement of an action defended by the public entity is supported neither by the statute's text nor by its purpose. 21