Request By:
Brent Yonts
Yonts & Pax
114 Mill Street
P.O. Box 195
Greenville, Kentucky 42345
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
You have asked the Office of the Attorney General to consider whether a school board must take competitive bids for its general liability insurance on buildings, vehicles, etc. You stated it appeared to you a conflict possibly existed between KRS 424.260 and the Model Procurement Code, KRS Chapter 45A. It is our belief that a conflict does not actually exist between these statutes even though we do acknowledge a different conclusion on whether general liability insurance must be bid is required depending upon which statutes are used.
The reason we conclude there is not actually a conflict between these statutes is that local school districts, as a local public agency, have the prerogative or not of operating under the Model Procurement Code. KRS 45A.343 states: "Any local public agency may adopt the provisions of KRS 45A.345 through 45A.460. No other statutes governing purchasing shall apply to a local public agency upon adoption of these provisions." Also, see OAG 80-279, copy attached, construing this provision. Thus, we believe it is clear that a school district has a choice as to whether to operate with respect to its procurement needs under either the local Model Rocurement Code or KRS 424.260.
With respect to KRS 424.260, we do not believe this section requires insurance to be competitively bid. The Court of Appeals has interpreted this provision to not include insurance. See
McCloud v. City of Cadiz, Ky.App., 548 S.W.2d 158, 162 (1977). However, we believe competitive bidding should be seriously considered if the school district will benefit by such procurement procedure being exercised.
In contrast, if the school district has chosen to operate under the Model Procurement Code, we believe competitive bidding for general liability insurance on buildings and vehicles, etc., is required absent a legitimate, written determination by the local public agency to the contrary. One basis for this position is found in the fact that in KRS 45A.345(23) the term, "supplies," is defined to mean: "all property, including but not limited to leases on real property, printing and insurance, except land or a permanent interest in land." (Emphasis ours.) Additionally, KRS 45A.380(10), with respect to noncompetitive negotiation, authorizes, in essence, an exemption from competitive bidding by written determination if the "contract is for group life insurance, group health and accident insurance, group professional liability insurance, workers' compensation insurance, and unemployment insurance." We do not believe general liability insurance of the nature you have inquired about is included within this "exemption" for certain types of insurance contracts. This being the case, we must conclude the intent of the General Assembly was that under the Model Procurement Code such insurance contracts are to be subject to competitive sealed bidding.