Does employee's statutory right to indemnity for attorney fees in defending action obligate employer to pay for attorney who duplicates work of employer-provided attorney?

September 16, 2013
By Justice Steven Vartabedian (Ret.) on September 16, 2013 6:00 AM |

employee.jpgLabor Code section 2802, subdivision (a), requires an employer to indemnify its employee for "necessary" expenditures or losses incurred as a direct consequence of the employee carrying out his employment duties.

In Carter v. Entercom Sacramento, LLC (filed 9/3/13) 2013 DJDAR 11886, Carter, as an employee of defendant's radio station, helped conduct an ill-conceived water-drinking contest that resulted in the death of a woman. The woman's family sued the station and employee Carter, among others. Carter tendered defense of the action to defendant station's insurer. The insurer accepted the tender and appointed conflict-free counsel to represent Carter rather than the attorney of Carter's choice. Carter declined the appointed attorney and insisted on utilizing the services of separate counsel. When the insurer refused to pay for that separate attorney, Carter brought this action seeking indemnity under section 2802. The trial court found that none of the fees and costs Carter incurred after the insurer appointed the attorney to represent him were necessary expenditures, thus found in favor of Entercom.

On appeal, Carter claims he had an absolute right to choose his own attorney at the employer's expense. This, he stated, was especially so because he faced potential liability for punitive damages and potential criminal charges. The Court of Appeal, Third Appellate District, disagreed, finding the question of whether the fees and costs claimed were necessary, and thereby subject to the duty of indemnity under section 2802, is a factual one; Carter failed to show the trial court's determination lacked substantial evidence to support it.

The appellate court initially points out that, although section 2802 does not impose a duty to defend, when an employer offers to defend the employee, that fact can have a bearing on the right to indemnity. Such a tender, if made with competent, conflict-free counsel, renders the employee's engaging separate counsel unnecessary. (See Grissom v. Vons Companies, Inc. (1991) 1 Cal.App.4th 52, 58.)

On the question of the employee's right to choose counsel, the court notes that the 2802 right to indemnity, as a statutory right differs, from a contractual right to indemnity. This dispels Carter's claim that Civil Code section 2778, in saying that "in interpretation of a contract of indemnity," one of the rules is: "the person indemnified has the right to conduct his own defenses, if he chooses to do so," applies here. Moreover, even if section 2778 did apply, "an indemnitee ordinarily may not refuse to join in or cooperate with the indemnitor's proferred defense and still recover his separate and redundant attorneys' fees and costs." (Buchalter v. Levin (1967) 252 Cal.App.2d 367, 371.)

Nor did the appellate court see the personal risks faced by Carter (allegation of punitive damages and potential criminal charges) as causing the necessity of hiring his own counsel. The case turned on its own facts. The mere possibility of separate criminal charges and the mere allegation of punitive damages are not facts here that create a conflict, especially in light of the insurer's interest to vigorously defend the suit to avoid compensatory damages.

From this opinion, it is apparent to me that an employee in Carter's situation actually is not deprived of the right to an attorney of that person's own choice. But, if that person does so choose, instead of relying on cost-free, conflict-free, competent counsel, that person will foot the bill.

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