A county may require an applicant for a coastal development permit to agree to indemnify, defend, and hold the county harmless in any action brought by a third party to void the permit, according to a recent opinion by California’s Attorney General [Op. No. 01-701.]
Indemnification agreements require one party to pay for loss or damage incurred by another party. The question posed to the Attorney General was whether a county was authorized by law to require, as a condition to receiving a coastal development permit, that applicants agree to defend, indemnify, and hold the county harmless in litigation initiated by third parties to void the permit. The Attorney General answered “yes,” finding the source of such authority in the California Constitution’s broad grant of police powers to city and county governments.
Regulation of land development has long been recognized as a subject for local government’s exercise of police powers, the Attorney General noted. Many times, local regulation takes the form of a condition imposed on the issuance of a permit, such as a development, regulatory, or license fee. Such fees are imposed based on the rationale that they mitigate the impact of a permitted activity on affected land, or that they reimburse the costs of processing and administering permit applications. The California Supreme Court has routinely upheld such fees, finding it “proper and reasonable” for an agency to consider the “incidental consequences” that may “subject the public to cost" as the result of a permit or license.
The Attorney General viewed the county’s indemnity requirement as the county’s way of covering litigation expenses that might result from its issuance of a coastal development permit. A county’s decision that the risk of potential litigation costs should be borne by the permit holder, as opposed to the general taxpaying public, is a public policy determination, and is the type of legislative decision with which a court would be reluctant to interfere. The Attorney General concluded that a county’s decision to require permit applicants to indemnify and hold the county harmless from such costs is authorized and legal.