The California Tort Claims Act requires public employers to defend and indemnify their employees for third party claims arising out of acts within the scope of employment. Where the public employer refuses to defend the employee, the employee can seek a writ of mandate. Alternatively, he can fund his own defense and then sue for reasonable attorneys' fees, costs, and expenses incurred pursuant to Government Code section 996.4. However, recovery is barred if the agency establishes that the employee acted or failed to act because of "actual fraud, corruption or actual malice."

A student at the Los Angeles Community College District sued the District and Igor Daza, a guidance counselor employed by the District, alleging that Daza sexually assaulted her when she visited his office for counseling services. The District refused to defend him, so he paid for his own defense and filed a cross-complaint denying the allegations and seeking reimbursement for his defense. Daza also sought indemnity but later conceded that his indemnity claim was moot because the main lawsuit settled and was dismissed. The District filed a motion challenging Daza's claim for reimbursement on the basis that the student's allegations of sexual assault fell outside the scope of Daza's employment as a matter of law. The trial court agreed.

The appellate court concluded that consistent with the vast weight of authority, the student's allegations of sexual assault against Daza fell outside his scope of employment as a guidance counselor for the District. However, the appellate court found that Daza was not limited to the student's allegations in showing that the action arose from acts within the scope of his employment. Instead, by alleging in his cross-complaint that no sexual assault occurred, Daza sufficiently stated a claim for reimbursement.

The Court reasoned that nothing in the language of Government section 996.4, which provides for reimbursement, limited Daza's ability to present evidence he was acting within the scope of employment, including by disproving the student's allegations. In fact, the statute provides for reimbursement if the action "arose out of an act or omission" in the scope of employment, not out of an alleged act or omission in the scope of employment. Moreover, the statute allows an employer to rebut the employee's showing that the claims arose out of acts within the scope of employment by establishing that the employee acted with actual fraud, corruption, or actual malice. The Court found that this contemplates an evidentiary showing by the employee, and that it would create an unfairly lopsided procedure to limit the employee's ability to present evidence but to allow an employer to present evidence to defeat the employee's claim for reimbursement.

Finally, the Court cited prior case law, which held that the focus under section 996.4 must be on "actual occurrences in the scope of public employment, not mere allegations of such occurrences." The Court also noted that the opposite result would encourage employers to settle with third parties without admitting liability, depriving employees of a factual determination of the claims against them, in order to insulate themselves from later claims of reimbursement. Thus, the Court held that the determination of whether an employee acted within the scope of employment is not limited to the third party's allegations when the employee denies those allegations and the employee's version of events would demonstrate acts within the scope of employment.

Daza v. Los Angeles Community College District (2016) 247 Cal.App.4th 260.