If the State of North Carolina decides not to provide for a state employee's defense in a civil or criminal case under G.S. § 143-300.3 or § 143-300.4, can the State still pay the final judgment against the employee under G.S. § 143-300.6 when the case is over?

Plain-English summary

The University of North Carolina's Assistant to the President asked a structural question about Article 31A of Chapter 143, the statute that governs the State's defense and indemnification of its employees. The framework has three working parts:

• G.S. § 143-300.3 authorizes the State to provide for the defense of a current or former employee in any civil or criminal action brought against him for acts done in the scope and course of employment. The authority is discretionary, not mandatory. Three preconditions must be met: the employee must request defense; the action must arise from in-scope conduct; and the Attorney General must not have determined under § 143-300.4(a) that defense would not be in the State's best interests (or that other disqualifying conditions are met).

• G.S. § 143-300.5 prescribes how the State provides defense once it decides to: assigning an Attorney General staff lawyer, hiring outside counsel under § 147-17, buying insurance with a defense obligation, or using attorneys already assigned to the employing agency. The State has discretion to pick among the four methods as appropriate.

• G.S. § 143-300.6 authorizes the State to pay final judgments against state employees "in actions or suits to which this Article applies," up to the Tort Claims Act cap (§ 143-291 et seq.).

The question presented was whether the State has discretion to walk away from defending an employee under § 143-300.3 or § 143-300.4 but then still pay the resulting judgment under § 143-300.6. In other words: are the defense decision and the indemnity decision severable?

The 1989 AG said no.

The phrase that decides it. G.S. § 143-300.6(a) limits state payment to "actions or suits to which this Article applies." The AG read that phrase to mean actions where the State agreed to provide the defense under § 143-300.3 (using one of the four methods in § 143-300.5). It does not mean every civil or criminal action against a state employee.

Why the linkage matters. The defense-and-indemnity tie is intentional. If the State were obligated to pay judgments in cases where it chose not to defend, the financial exposure would be unbounded and unmanaged. The State would be paying for losses in lawsuits it never controlled, never assessed, and never decided were worth defending. That would also undermine the State's discretion under § 143-300.4(a) to decline defense on best-interests grounds. An employee who lost a case the State had passed on for sound reasons could nonetheless collect from the State Treasury at the end.

By linking indemnity to the State's defense decision, the General Assembly kept the program coherent. When the State steps forward to defend, it accepts the corresponding obligation to pay. When the State steps back, it does so cleanly: no defense, no indemnity.

Three ways defense is denied. The AG implicitly catalogued the situations in which § 143-300.6 would not apply:

• The employee never asked the State to defend (no triggering request).
• The act was outside the scope and course of state employment (no qualifying conduct).
• The Attorney General determined under § 143-300.4(a) that defense would not be in the State's best interests, or one of the other § 143-300.4(a) disqualifying conditions was met.

In any of those three situations, the State has no authority under § 143-300.6 to pay the resulting judgment, even if the employee loses at trial and faces a substantial personal exposure.

The Tort Claims Act cap. § 143-300.6(a) also caps any payment at the amount payable for a single claim under the Tort Claims Act. Even where the State did provide defense and is otherwise authorized to pay, the cap controls.

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Article 31A has been amended multiple times since 1989, including changes to the Tort Claims Act limits and revisions to the defense and indemnity procedures. Anyone facing a state-employee defense or indemnity question today should consult current Article 31A, current Tort Claims Act provisions, and current Department of Justice litigation policies.

Historical context: what the AG concluded

The opinion reflects an ongoing question for state agencies in the 1980s as litigation against public employees became more common. State employees facing § 1983 suits, defamation claims, contract disputes, and a variety of tort actions wanted to know whether the State would stand behind them. The General Assembly had built Article 31A as a controlled, discretionary program: the State could choose case by case whether to provide defense, and that choice was bounded by the scope-and-course requirement and the AG's best-interests review.

The University was asking a sensible question. Could an employee who was denied defense at the front end still recover from the State at the back end if he lost? The 1989 AG's no answer locked the program shut. Defense and indemnity move together. The State retains real discretion to say no at the front end without leaving itself exposed at the back end.

The reasoning rests on the phrase "actions or suits to which this Article applies." Read narrowly, that phrase encompasses only actions in which the State had taken on a defense obligation under § 143-300.3. Read broadly, it could encompass every action against a state employee for in-scope conduct. The AG took the narrow reading, both as a matter of textual fit (the Article is constructed around the defense decision) and as a matter of program design (the State should not be liable for losses in lawsuits it consciously declined to engage).

For state agencies and state employees in 1989 the practical implication was a clear two-step. Step one: the employee requests defense; the State (through the AG) decides under § 143-300.3 and § 143-300.4. Step two: if the State agreed to defend (using one of the four § 143-300.5 methods), it is on the hook for the judgment up to the Tort Claims Act cap; if it did not agree to defend, the employee faces the judgment personally.

Common questions

Does this mean a state employee is never indemnified unless the State takes the case?

Under the 1989 opinion's reading of Article 31A, yes. State indemnity under § 143-300.6 follows the State's defense decision. An employee who is denied defense has no Article 31A claim on the State Treasury for the resulting judgment.

What if the employee did not know to request defense?

The opinion does not address that scenario. The State's authority under § 143-300.3 is keyed to a request. An employee who never asked is not in the indemnity track. Whether other equitable or statutory protections might apply is outside the scope of the 1989 opinion.

Can the State change its mind after declining defense?

The opinion does not address timing. As a practical matter, defense decisions are usually made early; reversing them after trial would be unusual.

Does the Tort Claims Act cap apply to all § 143-300.6 payments?

Yes. G.S. § 143-300.6(a) ties the maximum payment to "the amount payable for any claim under the Tort Claims Act." The cap is independent of the defense decision and applies even in cases the State fully defended.

What happens to the employee if the State declines defense?

The employee must arrange and pay for his own defense and bear any judgment personally (subject to insurance the employee may have arranged). The State's no-defense decision under Article 31A leaves the employee on his own.

Who decides whether defense is in the State's best interests?

The Attorney General, under § 143-300.4(a). That determination is a meaningful gatekeeping function.

Background and statutory framework

The discretionary defense statute. G.S. § 143-300.3 (State may provide defense upon employee request, for in-scope conduct, unless § 143-300.4 disqualifies).

The disqualifications. G.S. § 143-300.4(a) (four conditions, including a determination by the Attorney General that defense would not be in the State's best interests).

The methods of providing defense. G.S. § 143-300.5 (assign AG staff; hire outside counsel under § 147-17; buy insurance with a defense duty; use agency-employed attorneys).

The indemnity statute. G.S. § 143-300.6(a) (State may pay final judgments in actions or suits to which this Article applies, up to the Tort Claims Act cap).

The Tort Claims Act. G.S. § 143-291 et seq. (claim cap controlling the maximum state payment).

Citations

• G.S. § 143-300.3
• G.S. § 143-300.4, G.S. § 143-300.4(a)
• G.S. § 143-300.5
• G.S. § 143-300.6, G.S. § 143-300.6(a)
• G.S. § 143-291 et seq. (Tort Claims Act)
• G.S. § 147-17

Source

• Landing page: https://ncdoj.gov/opinions/defense-of-state-employees-medical-contractors-and-sanitarians/

Original opinion text

Requested By: Mr. Richard H. Robinson, Jr., Assistant to the President, The University of North Carolina

Question: Does G.S. § 143-300.6 permit the State to pay a final judgment awarded against a State employee in a civil or criminal proceeding brought against him on account of an act done or omission made in the scope and course of his employment, despite the State's decision not to provide for the employee's defense under G.S. § 143-300.3 or G.S. § 143-300.4?

Conclusion: No.

The basic provisions of Article 31A appear in G.S. § 143-300.3. That statute reads:

Except as otherwise provided in G.S. § 143-300.4, upon request of an employee or former employee, the State may provide for the defense of any civil or criminal action or proceeding brought against him in his official or individual capacity, or both, on account of an act done or omission made in the scope and course of his employment as a State employee.

G.S. § 143-300.3 simply authorizes the State to provide for the defense of State employees under certain circumstances. This statute does not obligate the State to provide for the defense of any employee under any circumstances; the decision to exercise the authority granted in G.S. § 143-300.3 lies entirely within the State's discretion.

Under G.S. § 143-300.3 the authority to provide for the defense of a State employee is dependent on three distinct factors. First, the State may exercise its authority to represent an employee only upon the request of the employee. If an employee does not want the State to provide for his defense, G.S. § 143-300.3 does not authorize the State to assume responsibility for or control over the lawsuit. Second, the State may provide for the defense of an employee only when the action or proceeding in question is brought against him on account of an act done or omission made in the scope and course of his State employment. Third and finally, the State is prohibited from providing for the defense of any employee if the Attorney General determines that any of the four conditions described in G.S. § 143-300.4(a) obtains. In particular G.S. § 143-300.4(a) prohibits the State from providing for an employee's defense whenever the Attorney General determines that the "[d]efense of the action or proceeding would not be in the best interests of the State."

Once the State has decided to "provide for the defense" of a State employee, G.S. § 143-300.5 specifies the means by which that defense may be provided. Under G.S. § 143-300.5 the State may "provide for the defense" of a State employee by assigning a member of the Attorney General's staff to represent the employee, by employing outside counsel in accordance with the provisions of G.S. § 147-17 to represent the employee, by authorizing the purchase of insurance which requires the insurer to defend actions against State employees, or by authorizing an attorney assigned to or employed by the agency which employed the defendant State employee to represent the employee. G.S. § 143-300.5 does not obligate the State to utilize any one of those four methods in any particular case. Rather, the State has the discretion under G.S. § 143-300.5 to provide for an employee's defense through any one of the four methods "as may be appropriate to the employee or class of employees in question."

G.S. § 143-300.6(a) authorizes the State to pay "[a]ll final judgments awarded in courts of competent jurisdiction against State employees in actions or suits to which this Article applies," provided that the payment does not exceed the amount payable for any claim under the Tort Claims Act, G.S. § 143-291 et seq. Whether the State's decision not to provide for the defense of an employee under G.S. § 143-300.3 or 300.4 relieves the State of its authority to pay a judgment against a state employee under G.S. § 143-300.6 depends on the meaning of the phrase "actions or suits to which this Article applies" as used in G.S. § 143-300.6(a).

It is the opinion of this office that the General Assembly intended the phrase "actions or suits to which this Article applies" to describe those actions or suits against a State employee for which the State has agreed to provide the defense under G.S. § 143-300.3. Therefore, it is the opinion of this office that G.S. § 143-300.6(a) does not authorize the State to pay any judgment rendered in any case where the State does not provide the defense for the employee under one of the methods specified in G.S. § 143-300.5.

Lacy H. Thornburg, Attorney General

Thomas J. Ziko, Assistant Attorney General