On November 5, 2007, three Los Angeles County Sheriff’s Deputies assaulted an inmate by spraying pepper spray in his genital region. The inmate later sued the deputies for battery and civil rights violations under 42 U.S.C. § 1983.
The County entered into a written reservation of rights agreement with the deputies, setting forth the conditions under which the County would defend them. The agreements reserved the County’s right to obtain indemnity from the deputies if the County paid any judgment against them, unless the County failed to establish that the deputies acted or failed to act because of actual fraud, corruption, or actual malice.
At trial, the deputies were found liable. The jury found each of the deputies acted with malice, oppression, or reckless disregard in violating the inmate’s civil rights, and found each of the deputies acted with malice, oppression, or fraud in committing battery on the inmate. The jury awarded damages.
The deputies claimed they were entitled to indemnification from the County for all economic, non-punitive damages awarded against them, pursuant to Government Code section 825. The trial court granted summary judgment in favor of the deputies on the claim for indemnification. The County appealed. The question then became: Is the County obligated to indemnify the deputies?
The Court of Appeal held no and reversed the order granting summary judgment in favor of the deputies. Pursuant to Government Code section 825.2, the County is not obligated to indemnify the deputies if they acted with actual malice, corruption, or actual fraud. Government Code section 825.2 states that, except as provided in subdivision (b), if an employee pays a judgment against him, he is entitled to indemnification from the public entity employer. But, subdivision (b) states that if the public entity conducted the employee’s defense pursuant to a reservation of rights, the employee can obtain indemnification only if the public entity fails to establish the employee acted or failed to act because of actual fraud, corruption, or actual malice.
The word “pay” as used in section 825.2 has been interpreted broadly and does not require literal payment, so section 825.2 applies whenever a judgment is entered against an employee.
Although it is unclear from the statute itself which rights the public entity must reserve in order to trigger the protections of section 825.2, the Court of Appeal looked to legislative history to determine the most sensible interpretation. The Court found that the protections of section 825.2 apply when a public entity defends an employee under a reservation of rights, which includes reserving the right not to indemnify the employee for acts or omissions of the employee because of actual malice, corruption, or actual fraud.
In this case, the agreement reserved the County’s right to indemnity from the deputies for acts committed with actual malice, corruption, or actual fraud. By necessary implication, this is a reservation of the right not to indemnify the deputies for such acts. As such, the protections of section 825.2 apply, and the County is not obligated to indemnify the deputies if they acted with actual malice, corruption, or actual fraud.
Accordingly, a public entity employer that defends an employee under a reservation of rights, which includes reserving the right not to indemnify the employee for acts committed with actual malice, corruption, or actual fraud, is not obligated to indemnify the employee for such acts, pursuant to Government Code section 825.2.
An explicit reservation of the employer’s right to seek indemnification from the employee for acts committed with actual fraud, corruption, or actual malice is an implied reservation of the right not to indemnify the employee for such acts, which is sufficient to trigger the protections of section 825.2.