Court of Appeal Holds Public Employer Can Refuse to Indemnify Officers Where Malice Found

In David Chang et al., v. County of Los Angeles, --- Cal.App.2d --- (July 1, 2016) 2016 WL 3574063, Sheriff's deputies brought action against the County seeking indemnification of a judgement against them under Government Code section 825.  The County had provided a defense for three employees under a reservation of rights, then refused to pay the resulting judgment for battery and civil rights violations on the ground that the employees acted with actual malice.

The deputies were sued by an inmate for battery and violation of civil rights. On September 9, 2010, following a jury trial, the jury found the deputies violated Franco's federal civil rights, causing injury or harm to him. The jury also found each of the deputies acted with malice, oppression or reckless disregard in violating the inmate's civil rights, and that they acted with malice, oppression, or fraud in committing battery on Franco.

Against each deputy, the jury awarded compensatory damages of $85,000 and punitive damages of $50,000. The total compensatory damage award was $255,000. The deputies were jointly and severally liable for an award of costs of $6,754.80 and attorney fees of $189,331.67. The employees sought indemnification from their employer under Government Code section 825. The trial court granted summary judgment in favor of the employees.  The appellate court reversed.

The deputies signed agreements with the County of Los Angeles setting forth the terms and conditions under which the County would defend them. The first paragraph of each agreement listed circumstances under which the County might withdraw from defending a deputy, including if the deputy did not act within the scope of his employment or he acted or failed to act because of actual fraud, corruption, or actual malice.

On appeal, the public entity contended that because the defense was conducted under a reservation of rights, the deputies had to satisfy the requirements of section 825.2 for indemnification.  The court agreed, holding by implication the County had reserved the right not to indemnify the deputies for acts within the course and scope of their employment that were taken with actual malice. The court pointed out the County showed the jury had acted with malice or at the very least, a triable issue of fact existed as to whether the deputies acted with malice.

By implication, the court found the County reserved the right not to indemnify the deputies for acts within the course and scope of their employment that were taken with actual malice. Having reserved that right, the County could invoke section 825.2 in seeking to deny indemnification.