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HB 120: "An Act relating to public employers defending and indemnifying public employees and former public employees with respect to claims arising out of conduct that is within the scope of employment."

00 HOUSE BILL NO. 120                                                                                                      
01 "An Act relating to public employers defending and indemnifying public employees                                        
02 and former public employees with respect to claims arising out of conduct that                                          
03 is within the scope of employment."                                                                                     
04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
05    * Section 1.  AS 39 is amended by adding a new chapter to read:                                                      
06 CHAPTER 55.  DEFENSE AND INDEMNIFICATION OF                                                                             
07 PUBLIC EMPLOYEES.                                                                                                       
08  Sec. 39.55.010.  PUBLIC EMPLOYER'S DUTY TO PROVIDE DEFENSE.                                                           
09 (a)  Except as otherwise provided in this chapter, a public employer shall provide legal                                
10 defense of civil claims against, and pay settlements and judgments including attorney                                   
11 fees and costs entered against, a public employee when the claims, settlements, or                                      
12 judgments are based on acts or omissions that occurred during the course and within                                     
13 the scope of the employee's employment with the public employer.                                                        
14  (b)  A public employer does not have an obligation to defend or indemnify if                                          
01 the                                                                                                                     
02   (1)  acts or omissions at issue were a result of gross negligence or                                                 
03 intentional or wilful misconduct on the part of the employee; however, a public                                         
04 employer may not, based solely on an allegation of gross negligence or intentional or                                   
05 wilful misconduct made by a party other than the public employer, withhold legal                                        
06 defense in a civil action;                                                                                              
07   (2)  claim or action involves a disciplinary, administrative, or criminal                                            
08 matter brought against the employee or is an appeal from a disciplinary, administrative,                                
09 or criminal action;                                                                                                     
10   (3)  civil claim or action is based on conduct for which the employee                                                
11 has been convicted of a criminal offense or terminated from employment by the public                                    
12 employer; or                                                                                                            
13   (4)  public employee settled or compromised the claim or action before                                               
14 requesting the public employer to provide legal defense or indemnification or while                                     
15 a request for defense was pending.                                                                                      
16  (c)  This chapter does not apply if a collective bargaining agreement that covers                                     
17 the employee includes a provision for defense and indemnification, in which case the                                    
18 terms of the collective bargaining agreement apply.                                                                     
19  (d)  A public employer does not have an obligation to pay an award for                                                
20 punitive damages against an employee.                                                                                   
21  (e)  A public employer may adopt an internal policy or enter into an agreement                                        
22 with an employee that requires the employer to defend or indemnify the employee or                                      
23 pay punitive damages in circumstances in which the employer would not otherwise                                         
24 have an obligation to do so.                                                                                            
25  (f)  Defense or indemnification provided to a public employee under this                                              
26 chapter does not constitute a waiver, limitation, or expansion of sovereign immunity                                    
27 or of other immunity.                                                                                                   
28  (g)  A public employer that is obligated to provide legal defense under this                                          
29 chapter shall, through its designated legal counsel, provide legal services to the                                      
30 employee.  The public employer has the right to determine which attorney shall                                          
31 represent the employee.                                                                                                 
01  (h)  This chapter applies to a former employee to the same extent as a current                                        
02 employee.                                                                                                               
03  Sec. 39.55.020. EMPLOYEE'S DUTIES WHEN REQUESTING DEFENSE                                                             
04 AND INDEMNIFICATION.  (a)  A public employer's obligation to defend and                                                 
05 indemnify an employee under this chapter arises only if the employee                                                    
06   (1)  notifies the public employer in writing, in the manner required by                                              
07 the employer, within 10 days after receipt of a claim, demand, or suit, unless there is                                 
08 good cause for the employee's failure to provide timely or proper notice and the                                        
09 employer has not been materially prejudiced; and                                                                        
10   (2)  makes a good faith effort to cooperate in the defense and resolution                                            
11 of the claim or action.                                                                                                 
12  (b)  An employee for whom a public employer has provided legal defense                                                
13 under this chapter or who has a request for the provision of legal defense pending may                                  
14 not settle the claim brought against the employee unless the public employer approves                                   
15 the settlement.                                                                                                         
16  (c)  An employer who has provided legal defense and indemnification may                                               
17 settle a claim or action without the consent of the employee so long as the settlement                                  
18 resolves all the outstanding claims against the employee.                                                               
19  Sec. 39.55.030.  EMPLOYEE'S RIGHTS WHEN EMPLOYER REFUSES TO                                                           
20 PROVIDE LEGAL DEFENSE.  (a)  If a public employer refuses to provide legal                                              
21 defense for an employee, the employer shall provide the employee with written notice                                    
22 of this decision within 60 days after receiving a request for legal defense from the                                    
23 employee or service of the summons and complaint on the employee, whichever is                                          
24 later.  The notice must include a copy of this chapter.                                                                 
25  (b)  An employee whose employer refuses to provide legal defense under this                                           
26 chapter may file an action for declaratory relief in superior court if the employee wants                               
27 the employer to provide legal defense.  The employee must file the action for                                           
28 declaratory relief within 30 days after the employee received a written notice of refusal                               
29 to defend from the employer.                                                                                            
30  (c)  If an employee who has been denied legal defense settles the claim or                                            
31 action without filing a declaratory relief action under (b) of this section, the employee                               
01 waives any right to defense or indemnification.  If the employee files a declaratory                                    
02 relief action under (b) of this section, the employee may settle the claim for a                                        
03 reasonable amount without the employer's consent.                                                                       
04  (d)  If an employee prevails in a declaratory relief action against the employer,                                     
05 the employee may bring an action for indemnification no later than one year after the                                   
06 final judgment in the declaratory relief action or final judgment or dismissal of the                                   
07 underlying action, whichever is later.                                                                                  
08  Sec. 39.55.040.  DEFENSE WITH RESERVATION OF RIGHTS; DENIAL OF                                                        
09 INDEMNIFICATION; EMPLOYEE LIABILITY FOR EXPENSES.  (a)  A public                                                        
10 employer may undertake the defense of an employee under this chapter while                                              
11 contesting the obligation to indemnify the employee, either partially or fully.  A public                               
12 employer that offers a defense with a reservation of rights to an employee, may                                         
13 provide legal defense and place limitations on its agreement to indemnify an employee                                   
14 pending the outcome of the case.                                                                                        
15  (b)  If an employer denies indemnification or offers a defense with a                                                 
16 reservation of rights to an employee, the employer shall provide written notice to the                                  
17 employee.  The notice must include the reason for the denial or reservation of rights                                   
18 and a copy of this chapter.                                                                                             
19  (c)  If a final judgment is entered against an employee in a claim or action in                                       
20 which the employer provided a legal defense and the employer agrees to only partially                                   
21 indemnify the employee or denies indemnification entirely, the employee may bring                                       
22 an action for indemnification against the employer not later than one year after the                                    
23 entry of the final judgment against the employee.                                                                       
24  (d)  A public employer who has defended an employee may bring an action                                               
25 against the employee for expenses incurred in the defense if the trier of fact found that                               
26 the employee's conduct was not within the course or scope of employment.  The action                                    
27 for expenses under this subsection must be brought not later than one year after the                                    
28 execution of a written agreement settling the underlying claim or action or entry of                                    
29 final judgment in the action.                                                                                           
30  Sec. 39.55.100.  DEFINITIONS.  In this chapter,                                                                       
31   (1)  "employee" or "public employee" means a person who performs a                                                   
01 service for wages or other remuneration under a direct contract of hire, written and                                    
02 expressed, for a public employer and includes a member of a board or commission                                         
03 established by the employer; "employee" or "public employee" does not include an                                        
04 independent contractor;                                                                                                 
05   (2)  "employer" or "public employer" means the state, a public or                                                    
06 quasi-public corporation or authority established by state law, and a political                                         
07 subdivision of the state including a municipality and a public or quasi-public                                          
08 corporation established by a municipality; however, "employer" or "public employer"                                     
09 does not include the University of Alaska, a municipal school district, or a rural                                      
10 educational attendance area;                                                                                            
11   (3)  "settlement" means the execution of a written agreement settling the                                            
12 claim or action that gave rise to the employer's obligation to defend or indemnify the                                  
13 public employee.                                                                                                        
14    * Sec. 2.  Nothing in this Act terminates or modifies a collective bargaining agreement in                           
15 effect on the effective date of this Act.                                                                               
16    * Sec. 3.  This Act applies only to claims and actions that arise on or after the effective                          
17 date of this Act.