(a)

(1) The board of claims is authorized to pay final judgments for state employees, as defined in § 8-42-101, for any damages, including interest thereon, which are awarded in a final judgment in a civil lawsuit against the employee in a court of competent jurisdiction where it is determined by the board that the incident on which such damages were awarded occurred when the employee was acting in good faith within the scope of such employee's official duty and under apparent lawful authority or orders.

(2) No final judgment or interest thereon shall be paid where the employee's conduct amounted to gross negligence or willful, intentional or malicious conduct.

(3) Any portion of the judgment covered by liability insurance will not be paid.

(4) Settlements or compromises of litigation reached out of court by mutual agreement between the parties may be disallowed by the board if the board determines that the terms of the proposed settlement have no relationship to the employee's liability and the injury or damage caused.

(b) In order for any payment to be made as authorized herein, the employee must have exercised such employee's right to retain counsel in accordance with title 8, chapter 42, to defend such employee in the action filed or must be represented by the attorney general and reporter. No payment shall be made unless the employee shall notify, in writing, the attorney general and reporter of the existence of such action within ten (10) days after process is served personally on the employee. This requirement shall be met by an employee's timely filing of a request for the employment of counsel with the defense counsel commission, and shall not be required where process has been served on the attorney general and reporter.

(c) Any final judgment against an employee whose act or omission gave rise to the claim shall constitute a complete bar to any action, by reason of the same subject matter, against the state of Tennessee. Likewise, any judgment, if permitted or awarded by the state, shall constitute a complete bar to any action, by reason of the same subject matter, against a state employee as defined in § 8-42-101.

(d) This section shall not be construed as a waiver of official or sovereign immunity where the injury arises from the act, or failure to act, of an employee where the act is the type of act for which the employee would be or heretofore has been personally immune from liability nor as a waiver of any other defense or jurisdictional bar available to the employee. Furthermore, this section shall not be construed under any circumstances as making the state an insurer of the aforementioned state employees nor as constituting a waiver of the sovereign immunity of the state.

(e) In order for payments to be made as authorized herein, an employee must submit a written request to the board, together with a certified copy of the judgment against the employee, within fifteen (15) days following the entry of the judgment. The board shall act on a request promptly and shall give the employee written notice of its action. The board's decision shall be judicially reviewable by the employee as a final decision in a contested case pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3.

(f) This section applies to final judgments rendered on or after July 1, 1979.

(g) This section shall apply to causes of action arising on or after January 1, 1985, only as set forth in subsection (h).

(h)

(1) The board of claims, upon determining that the officer or employee was acting within the scope of the officer's or employee's official duties, shall reimburse the affected officer or employee for actual damages and costs, including attorneys fees, awarded by judgment or settlement up to the limits found in § 9-8-307(e), against state officers and employees for any cause of action arising on or after January 1, 1985, where the state officers' or employees' immunity set forth in § 9-8-307(h) is not sustained. Notwithstanding the foregoing, the board of claims may, in its sole discretion, reduce the reimbursement provided in this subsection (h) if the board finds a circumstance to exist which makes such a reduction proper and just. Such a circumstance may include, but is not limited to, the failure of the officer or employee to fully cooperate in the investigation and defense of the litigation. In cases where the judgment or settlement is in excess of the limits found in § 9-8-307(e), the board of claims may pay any of the amounts in excess of those limits where such reimbursement is found to bear a reasonable relationship to the officer's or employee's liability or the injury or damage caused.

(2) For purposes of this subsection (h), actions deemed to be within the scope of official duties include, but are not limited to, actions taken pursuant to the statutes, policies or procedures of the state of Tennessee, or when the officer or employee had reason to believe that the officer or employee acted pursuant to the statutes, policies or procedures of the state.

(3) Payments may be denied pursuant to this subsection (h) if the officer or employee or the officer's or employee's counsel have not made reasonable efforts to defend or if the officer's or employee's actions were grossly negligent, willful, malicious, criminal or done for personal gain. All other applicable provisions of this section shall apply to this subsection (h). The board may promulgate rules and regulations implementing this subsection (h).