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Indemnification: Chief Freitag & Attorney Cornelius
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30 July 2018  

Wondering what is in the indemnification clauses for Chief Freitag and Attorney Cornelius? We’ve got the scoop here.

When Attorney Cornelius was informed of a Bar Complaint being filed against him he sought indemnification from the three fire boards he represents: Central Arizona Fire and Medical Authority (CAFMA), Central Yavapai Fire District and Chino Valley Fire District.

Attorney Cornelius wrote his own indemnification policy, which was not reviewed by any outside attorney, despite his assurances during the June 25, 2018 Board meetings that, "I would never suggest to the Board that they should indemnify me and that I would advise them to do that... The whole point is to advise them as to what their rights and responsibilities are and that they must retain outside third-party counsel to advise them in that regard."

Cornelius Statements

June 25, 2018:

"I would never suggest to the Board that they
should indemnify me…"

July 23, 2018

"I took indemnification language from
existing contracts... I made one change,
I put specific language in it that said,
'reimbursement for attorney’s fees and
costs incurred.'"

June 25, 2018:

 "They [the Boards] must retain outside 
third-party counsel to advise them…"

July 23, 2018

 "What I propose to do is provide the 
Board, if it so desires, the names of 
individuals it can call, that is, attorneys…"


You can read about that and watch the video of Cornelius’ statements here: Fire Board Attorney Cornelius Writes Language to Indemnify Himself


 

Within a month, in the July 23, 2018 meeting, Cornelius presented an indemnification clause to his contract that he himself had written. He did not advise them that they "must retain outside third-party counsel," instead, he offered to provide them with names of 3rd party attorneys, if the Board "deems it necessary."

The justification for writing his own indemnification clause was that, "I took indemnification language from existing contracts that are currently in effect between this agency and the CYFD and other third parties which were then approved by this Board previously. Having said that," Cornelius explained, "I made one change, I put specific language in it that said, 'reimbursement for attorney’s fees and costs incurred.' That’s kind of a subset of the general indemnification clause which always includes any damages and all the rest of these things that might be. So, it’s the only language that I actually appended to this."

During the CAFMA meeting, Cornelius characterized it as, "A near clone of existing indemnification provisious used in multiple documents executed by this agency previously, either with other governmental agencies or with outside 3rd parties providing services to either CAFMA, the CYFD or the CVFD."

"What I propose to do," Cornelius continued. "Is provide the Board, if it so desires, the names of individuals that it can call, that is attorneys, and I will make the representation on the record that I will have had no prior contact with these attorneys…"

Legal Ethics

So, what does the Arizona State Bar have to say about this? In Ethics Rules (ER) 1.8 (h) it states:

There is an associated comment further down from ER 1.8 (h) that reads: 

"[14] Agreements prospectively limiting a lawyer's liability for malpractice, whether made at the outset of the representation or at any time when the client is unaware of a claim or potential claim, are prohibited unless the client is independently represented in making the agreement because they are likely to undermine competent and diligent representation.  Also, many clients are unable to evaluate the desirability of making such an agreement before a dispute has arisen, particularly if they are then represented by the lawyer seeking the agreement."

This appears to be a pretty standard Ethics rule across the United States. 

In New York, their State Bar explains,

"3. Rule 1.8(h)(1) of the New York Rules of Professional Conduct provides that a lawyer shall not “make an agreement prospectively limiting the lawyer’s liability to a client for malpractice.” Comment [14] to this Rule notes: “Agreements prospectively limiting a lawyer’s liability for malpractice are prohibited because they are likely to undermine competent and diligent representation.” Thus, it is clear that the attorney could not prospectively enter into an agreement with the client that would require the client to indemnify the lawyer against a judgment in favor of the client, or otherwise hold the lawyer harmless for any liability to the client, arising from legal malpractice."

The American Bar Association states,

"(h) A lawyer shall not:

(1) make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless the client is independently represented in making the agreement; or

(2) settle a claim or potential claim for such liability with an unrepresented client or former client unless that person is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel in connection therewith."

CAFMA Chair Julie Pettit

The problem is, CAFMA Chair and CVFD Clerk Julie Pettit is not an experienced attorney, well trained in attorney ethics. In explaining why she was satisfied with the language, Pettit stated, "I have reviewed the contract information and I’m satisfied… I’m satisfied that it is standard language, we do have it in our other contracts and I don’t see anything unusual that would warrant the expense of an additional attorney…"

Pettit, when she is not serving on the Fire Board, is the owner of Arizona FTZ Services.  In her bio, she is described as a Licensed Customs House Broker. She is not an attorney licensed to practice law in Arizona. 

During the discussion, Pettit said, "It’s the same language that we put into the Chief’s contract that we also already reviewed and discussed."

Of course, Attorney Cornelius wrote the indemnification for Chief Freitag, also. 

The Indemnifications

So, what exactly is in the new indemnification policy for Attorney Cornelius? Is it really the same as Chief Freitag’s indemnification policy as Pettit stated? 

In a word, no.

Here is the indemnification for Attorney Cornelius which we received from a Public Records request. This is the language written by Attorney Cornelius himself, in his own interests. 

"The written retainer agreement for legal services between the Parties is hereby amended to add the  following language: 

"INDEMNIFICATION. 

"Counsel's firm has agreed to provide legal services to the Fire Board as whole and serves the Fire Board at its pleasure. Counsel has previously advised the Fire Board, and hereby confirms, that Counsel maintains legal malpractice insurance which applies to the services provided by Counsel to the Fire Board. However, the provision of such services has recently required the retention of outside counsel to advise Counsel regarding matters raised by a member or members of the Fire Board in the context of civil and/or licensing matters. As a result thereof, the Fire Board agrees and accepts that the Fire Board should offer an indemnification to Counsel in connection with the provision of such services. 

"The Fire Board therefore agrees that it shall indemnify and hold harmless Counsel and its employees and agents from any and all claims, liabilities, and expenses, including legal fees and costs, resulting from the indemnifying Party's negligence, or the negligence, acts or omissions of its directors, employees, and agents. The Fire Board further agrees to reimburse Counsel for any legal and/or associated expenses incurred by Counsel thirty days in arrears following presentment of invoices for same, after approval of same by the Fire Board. Nothing herein shall be construed as a waiver by either Party of the right to bring an action for contribution against the other or as against any third person or entity."

Here is the indemnification policy written by Attorney Cornelius on behalf of Chief Scott Freitag: 

"Indemnification. The Agency shall defend, hold harmless, and indemnify the Chief against any tort, professional liability claim or demand or other legal action, including attorneys' fees incurred for the defense of same, whether groundless or otherwise, arising out of an alleged act or omission occurring in the performance of his duties as Chief. The Agency's duty to indemnify hereunder shall be in effect only to the extent it does not conflict with the Agency's liability policy. Further, nothing herein shall serve to limit the Agency insurance carrier's right of subordination or defense, if any. Said indemnification shall continue for three (3) years after termination of employment.

"Legal review. The Chief shall be eligible to be reimbursed for reasonable attorney's fees and associated legal expenses up to $8,500.00 (Eight thousand five hundred dollars and zero cents) annually (based upon the Agency's fiscal year) for consultation with an independent counsel of his choosing when, in his discretion, Freitag determines it would be beneficial to have independent legal consultation regarding potential personal liability arising from Agency-related matters and/or circumstances."

Recap

Attorney Nicolas Cornelius’ Indemnification in 7 Bullet Points

1. He agrees to provide legal services to the Fire Board
2. He admits he serves the Fire Board at its pleasure.
3. He confirms that he does maintain legal malpractice insurance which applies to the services provided by Counsel to the Fire Board.
4. He states that the services he has provided has caused members of the Fire Board to raise matters in the context of civil and/or licensing matters. 
5. He believes that the fire board should offer an indemnification on his behalf in connection with the provision of his services. 
6. The Fire Board agrees to indemnify and hold harmless Cornelius, his firm's employees and agents from "any and all claims, liabilities, and expenses, including legal fees and costs" that are a result of:
 • The Fire Board’s negligence
 • Or, the Directors, employees or agents negligence, acts or omissions
7. The Fire Board agrees to reimburse Counsel for any legal and or associated expenses incurred by Counsel within 30 days of receiving an invoice.

Fire Chief Scott Freitag’s Indemnification in 5 Bullet Points

1. The Fire Board shall defend, hold harmless and indemnify the Chief against any tort, professional liability claim or demand or other legal action, including attorneys’ fees incurred for the defense of the same.
2. This indemnification shall be in place whether the liability is "groundless or otherwise arising out of an alleged act or omission occurring in the performance of his duties as Chief."
3. This indemnification is in effect only to the extent that it does not conflict with the Agency’s liability policy.
4. The indemnification for Chief Freitag continues for 3 years after termination of employment. 
5. The Chief is eligible to be reimbursed for up to $8,500 annually for "reasonable attorney’s fees and associated legal expenses" whenever he wants to consult with an independent counsel of his own choosing, regarding any potential personal liability arising from Agency-related matters or even circumstances.

What the two indemnifications have in common:

1. They both appear to be practically blank checks - indemnification against "any and all claims" or "against any tort, professional liability claim or demand"
2. Neither indemnification appears to protect the Fire Board in the event of improper actions by either the Attorney or the Chief, despite the fact that Attorney Cornelius is supposed to be representing the Boards’ interests, not his own or the Chief’s.
3. Attorney Cornelius wrote both indemnification clauses.

How the two indemnifications are different:

1. Fire Chief Scott Freitag is an employee, whereas Attorney Nicolas Cornelius is an independent contractor.
2. Attorney Cornelius admits he maintains malpractice insurance, but appears to be reluctant to use it. 
3. Attorney Cornelius' indemnification extends to his employees and agents. Chief Freitag’s indemnification applies only to himself.
4. Attorney Cornelius asks that his legal fees and expenses be reimbursed within 30 days. There is no time limit for reimbursement for Chief Freitag.
5. Attorney Cornelius admits that it is the services he has provided which have caused members of the Fire Board to raise civil and licensing issues. 
6. Fire Chief Freitag’s indemnification continues for 3 years after termination of employment. There is no time frame mentioned for Attorney Cornelius. 
7. Fire Chief Freitag is eligible to be reimbursed up to $8500 annually for legal consultation regarding his potential liability. There is no limit provided for Attorney Cornelius to consult with legal counsel on an annual basis or otherwise. 
8. Fire Chief Freitag’s indemnification is limited by the Agency’s liability policy. Attorney Cornelius’ indemnification policy is not. 

 

Lynne LaMaster

Lynne LaMaster is the Founder and Editor of the eNewsAZ Network of websites. She asks a lot of questions! In her spare time, she loves photography, cooking and hanging out with her family.

Website: https://www.facebook.com/eNewsAZ/