Request By:
Mr. John R. S. Brooking
Adams, Brooking & Stepner
P.O. Box 861
421 Garrard Street
Covington, Kentucky 41012
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Carl Miller, Assistant Attorney General
You have requested that the Attorney General reconsider OAG 75-81 in which we opined that there is no statutory authority for the purchase of errors and omissions insurance by the Northern Kentucky State University for the protection of its board of regents, administration, officers and faculty and pay for it from its general operating budget. You state as follows:
"Since that opinion, a recent audit has brought to our attention that the bond documents in connection with the construction of the Northern Kentucky University buildings require the carrying of such liability insurance. We wish to inquire as to whether this contractual obligation supercedes the prohibition or the prohibition voids the contractual obligation. "
It is still our opinion that a public agency is not authorized to spend public funds for indemnification insurance for the benefit of its officers unless authorized expressly by statute. Until the Legislature declares otherwise, such an expenditure for the protection of private individuals is against public policy. Individual accountability is the foundation of morality.
The 1976 General Assembly did, however, provide for the defense of state employees charged with discretionary administration by enacting House Bill 761, now codified as KRS 12.211 to 12.215. While government officials usually enjoy official immunity for their discretionary decisions, they are sometimes sued by aggrieved citizens. Even if the suit is defensible or covered by immunity it must be defended and the defense is often costly. Under this new act the Attorney General or his designate may defend such suits at state expense. The Legislature has thus provided a means by which executive officials may be defended without an outlay of their own money.
You ask that we consider the effect of the decision of the United States Supreme Court in Wood v. Strickland, 420 U.S. 308 (1975) as it relates to the exposure of legal liability of state officials. That case dealt with suits for damages under the Civil Rights Act, 42 U.S.C. § 1983, and held that public officials could be held personally liable for violating the constitutional rights of citizens even though they acted in good faith, if they knew or should have known that their actions were unconstitutional. No new personal liability was imposed by the court, only a higher standard of good faith was imposed. We do not believe that Wood v. Strickland changes the legal principle in regard to the purchase of indemnification insurance with public funds.
As to the requirement found in the bond documents that such insurance should be carried, it is our opinion that such a contractual obligation cannot change the law. All contracts made with a state agency are subject to the provisions of existing law. Armory Commission v. Palmer, Ky., 69 S.W.2d 681 (1934). A state agency cannot contract away its rights or immunities under the law. Board of Education of Louisville v. Society of Alumni of Louisville Male High School, Ky., 239 S.W.2d 931 (1951); Floyd County Board of Education v. Layne, Ky., 474 S.W.2d 397. The contractual obligation, therefore, cannot supersede or nullify a legal prohibition.
Without seeing the indenture agreement you mention we cannot express an opinion as to whether any contractual obligation could be nullified by the legal inability to purchase indemnity insurance for University officials. We can only point out that the bond trustees are charged with knowledge of the law.