Opinion ID: 794639
Heading Depth: 2
Heading Rank: 3

Heading: Insurance and Indemnification Provisions

Text: 128 As to the insurance and indemnification provisions, for reasons that appear in the separate opinions of Judge Kleinfeld and Judge Wardlaw, the majority of the panel is of the view that the provisions are valid. I, however, do not agree. This portion of this opinion therefore represents only my own views, not those of the panel majority. 129 Appellants argue that the Event Ordinance's insurance provision, SMMC § 4.68.120, does not sufficiently cabin official discretion. They also protest that the indemnification provision is invalid because it encompasses all suits against the City, without regard to the merit or outcome of the claims. Santa Monica, for its part, maintains that (1) the insurance provision presents no constitutional problem because permittees engaged in protected expression may elect to agree to indemnify the City instead; and (2) the indemnification agreement requires that the permittee indemnify the City against [only those] claims attributable to the acts or omissions of the permittee. I respectfully disagree with my colleagues' conclusion that the Event Ordinance's insurance and indemnity provisions withstand constitutional scrutiny. 130 With a valid indemnification alternative, the insurance provision would present no constitutional problem. The particular indemnification alternative Santa Monica has adopted, however, is not a valid one because, as implemented, it impermissibly burdens speech in public places. 131 Employing a variety of standards, courts have commonly acknowledged that insurance requirements can indirectly restrict speech on the basis of its content. See, e.g., E. Conn. Citizens Action Group v. Powers, 723 F.2d 1050, 1056 n. 2 (2d Cir. 1983) (noting that an insurance requirement may allow for content-based considerations by the third-party insurance providers); Collin v. Smith, 578 F.2d 1197, 1209 (7th Cir.1978) (noting that the [insurance] requirement does not turn on the content of a proposed demonstration except in the sense that controversial groups will likely be unable to obtain insurance, as here. (emphasis added)); Invisible Empire of the Knights of the Ku Klux Klan v. Mayor of Thurmont, 700 F.Supp. 281, 285 (D.Md.1988) (noting that the Ku Klux Klan could not obtain the required special event insurance because of the controversial nature of the group's message); Long Beach Lesbian & Gay Pride, Inc. v. City of Long Beach, 14 Cal.App.4th 312, 17 Cal.Rptr.2d 861, 876-77 (1993) (striking down insurance provision in part because [the provision's] delegation of the amount of insurance charges to the market . . . appears inescapably to create a system of charges subject to impact and adjustment based on `content,' including the element of hostility anticipation); Mardi Gras of San Luis Obispo v. City of San Luis Obispo, 189 F.Supp.2d 1018, 1030 (C.D.Cal.2002) (following Long Beach ). But see Thomas v. Chicago Park Dist., 227 F.3d 921, 925 (7th Cir.2000) (upholding an insurance requirement where [t]he required amount and the cost of the insurance depend only on the size of the event and the nature of the facilities involved in it (a bandstand, stage, tents, and so forth)), aff'd on other grounds, 534 U.S. 316, 122 S.Ct. 775, 151 L.Ed.2d 783 (2002). 132 The Instruction, pursuant to SMMC § 4.68.120(a), excludes Category 2 and 3 events—the categories that include expressive activity—from the insurance requirement imposed by SMMC § 4.68.120, if the applicants agree to indemnify the City. Instruction at 35 (Section VII(14)(g)). 24 The Instruction spells out the indemnification agreement as one in which the permittees 133 agree[ ] to defend, protect, indemnify and hold the City, its officers, employees, agents, and volunteers free and harmless from and against any and all claims, damages, expenses, loss of liability of any kind or nature whatsoever resulting from the alleged willful or negligent acts or omissions of permittee, its officers, agents, or employees in connection with the permitted event or activity; and the permit shall expressly provide that the permittee shall, at permittee's own cost, risk and expense, defend any and all claims and all legal actions that my [sic] be commenced or filed against the City its officers, agents, employees, or volunteers, and that the permittee shall pay any settlement entered into and shall satisfy any judgment that may be rendered . . . as a result of the alleged willful or negligent acts or omissions of permittee . . . in connection with the uses, events, or activities under the permit. 134 Id. at 35-36 (Section VII(15)) (emphases added). The actual indemnification agreement, submitted as part of Santa Monica's request for judicial notice, contains significantly broader language, requiring that: 135 [a permittee] defend, indemnify, and hold harmless the City of Santa Monica. . . from and against any and all loss, damages, liability, claims, suits, costs and expenses, whatsoever, including reasonable attorney's fees, regardless of the merit or outcome of any such claim or suit, resulting from the alleged acts or omissions of permittee . . . in connection with the permitted event or activity. 136 Request for Judicial Notice at 49 (emphasis added). 25 137 Listeners' reaction to speech is not a content-neutral basis for regulation. Forsyth County v. Nationalist Movement, 505 U.S. 123, 134, 112 S.Ct. 2395, 120 L.Ed.2d 101 (1992). Because of the broad language in the Instruction and indemnification agreement, the agreement runs afoul of this basic principle. 138 In Forsyth County, the Court struck down a provision allowing a city administrator to assess a fee against permit applicants based on the cost of protecting persons participating in and observing covered events. See id. at 134, 112 S.Ct. 2395. The provision was held infirm because the assessed fee would necessarily depend on the administrator's estimation of the hostility likely to be created by the speech based on its content.  Id. (emphasis added) (Those wishing to express views unpopular with bottle throwers, for example, may have to pay more for their permit.). 26 139 Here, the indemnification provision is limited to the costs of suit and liability premised on a permittee's own alleged willful or negligent acts or omissions. This limitation might appear to avoid the problems that made the fees challenged in Forsyth County unconstitutional. On closer examination, however, that is not the case. 140 Under the indemnification provision, permittees are responsible for costs created after the event by litigants seeking to establish that the permittees owe them damages for something that allegedly happened during the event. If this indemnification provision were limited to meritorious suits concerning permittees' actual activities, I would have no problem approving it. But it is not. Instead, the provision requires permittees to promise to pay for Santa Monica's legal defense in cases brought by third parties, based on alleged, rather than actual, acts or omissions. So the indemnification requirement is not limited to permittees' actual behavior. 141 Also, the indemnification provision does not exclude lawsuits against the City triggered by or focused on injuries caused by the content of purely expressive activity allowed for by a permit. For example, a retail clothing business located on one of Santa Monica's streets could file a lawsuit against the City alleging economic harm from loss of business caused by a permitted event protesting the use of sweatshop labor. The indemnification provision would require that an event organizer, although constitutionally entitled to conduct his event and to seek to persuade observers to boycott the retailer, reimburse the City for costs of defending the lawsuit. 142 The result is that permittees' speech is contingent on an agreement to cover costs in an unknown amount, generated by third parties over whom the speakers have no control and who may be hostile to them, and who may be seeking damages for injuries caused solely by the content of constitutionally protected activity. In other words, as in Forsyth County, those costs may be premised not on any tort or other wrongdoing by the permittees, but on the reactions of third parties to the permittees' communication. Because the costs generated need not reflect the permittees' actual behavior and could be the result of the content of the permittees' speech, the indemnification provision, like the fee provision in Forsyth County, exposes event organizers to costs based not on their own acts or omissions but on costs associated with the public's reaction to the speech. 505 U.S. at 134, 112 S.Ct. 2395. 143 For these reasons, the indemnification provision is not content neutral. Also for these reasons, the indemnification provision, despite its limitation to allegations concerning permittees' own behavior, is not narrowly tailored to the governmental interest in protecting the City from bearing costs arising from injuries or other liabilities due to the permittees' wrongful conduct of the event or conditions at the site. 144 To require that event organizers engaged in constitutionally protected speech contractually bind themselves to indemnify the City for the costs associated with wholly meritless suits brought by third parties is thus constitutionally unsound. Because I would therefore hold the insurance and indemnification provisions invalid, I respectfully dissent on this single point.