Request By:
Mr. William D. Probus
City Attorney
P.O. Box 227
Cynthiana, Kentucky 41031
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of November 23 in which you relate that for many years the City of Cynthiana has leased a parking lot from the L & N Railroad adjacent to its main tracks running through the city. The lot provides free parking for downtown employees so that there is more parking near the stores available to the general public. The lease in question was allowed to expire in January of 1978, and has not been renewed though the city continued to utilize the lot by paying the rental provided for in the lease. The reason the lease has not been renewed is the fact that the railroad company wishes to incorporate in any new lease the following provision:
"(10) It is understood that the leased area is in close proximity to the Railroad's tracks, and so involves the possibility of hazard to persons and property on the leased area resulting from accidents arising in connection with railroad operations. In recognition of this, the Lessee hereby agrees to furnish to the Railroad a policy of insurance satisfactory to the Railroad, with an effective date of October 15, 1981, naming the Railroad as the insured, and covering the liability of the Railroad arising from or growing out of any claim for personal injury, death or property damage involving persons and property upon the leased area and reslting from or growing out of accidents to, or derailments of, trains, engines or cars of the Railroad upon its tracks, or resulting from objects falling from trains, regardless of the cause of such accidents, derailments or falling objects; such policy to have limits of $250,000/$500,000 for property damage and $500,000/$1,000,000 for bodily injury, and to be kept in force at the expense of the Lessee during the term of this lease and any extension thereof."
Under the circumstances you raise the following questions:
"1. May the City legally expend funds for insurance coverage listing a private corporation as the named insured?
2. If not, would it be legal for the City to purchase such coverage with the City as the named insured and a private corporation as an additional insured?
3. Finally, could the City legally increase its lease payments to the Railroad by the amount needed for it to purchase its own insurance perhaps naming the City as additional insured? "
The quoted provision that the railroad desires to be incorporated in the new lease requires the city to furnish to the railroad company a policy of insurance naming the company as the insured to cover any liability that the company may incur growing out of claims against it for personal injury, death or property damage involving persons and property located on the leased property as a result of railroad accidents.
As you know, the railroad company is responsible for any damages inflicted by virtue of its own acts which, of course, can be covered by its purchase of sufficient liability insurance. Cities are equally liable for damages in tort actions for its own negligent acts and there is a long line of cases so holding which we will not recite. Thus, though there is no specific statute authorizing cities to purchase liability insurance, the rule is well established that they may do so for their own protection. Such basic authority is now given in the new home rule statute enacted in 1980, coded as KRS 82.082. See also McQuillin, Municipal Corporations, Volume 10, Section 28.23.
On the other hand, a city's authority to contract for liability insurance applies solely to the protection of itself, its officers and employees and city-owned property. As a matter of fact, it is pointed out in 56 Am.Jur.2d, Municipal Corporations, Section 548, that a city has no power to contract for insurance on property belonging to a school covering the same territory.
Aside from the above, any attempt by the city to appropriate money to, for example, insure a private corporation such as the L & N Railroad Company, would, we believe, be unconstitutional under the terms of Section 179 of the Constitution and the case law cited therein which prohibits a city from appropriating public money for the benefit of a private corporation.
Under the circumstances, the proposed provision to insure the railroad from liability would, we believe, be invalid and unconstitutional. This being the case, our answer to questions one and two would be in the negative, though the city could obtain liability insurance for its own protection to cover tort actions arising in connection with accidents occurring on the leased property. It could not, however, include the railroad company as an additional insured as this would also be in violation of Section 179 of the Constitution.
The answer to your third question would also be in the negative, in our opinion, if the increase in the lease payments was made solely to permit the insurance company to purchase its own liability insurance.