Request By:
Hon. Patrick Watts
Department of Insurance
P.O. Box 517
Frankfort, Kentucky 40602
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On behalf of the Department of Insurance, you request our opinion as to whether or not the Department of Insurance is required to approve the use of state funds to purchase liability insurance for officers or employees of state agencies.
Under KRS 56.070(1), the Department of Insurance must determine which state property shall be insured against loss by fire and other hazards. Your question centers around KRS 56.070(2), which reads:
"(2) Any officer or agent of the state having control or custody of any property belonging to or controlled or used by the state or any agency of the state may, with the approval of the secretary of the finance and administration cabinet and the department of insurance, from the funds allotted to such agency, purchase insurance of an additional kind or kinds which cannot properly be covered in the state fire and tornado insurance fund."
KRS 56.090, in treating state property insurance, contains the phrase "insurance against damage by fire and other hazards upon property of like kind . . ." (Emphasis added.) KRS 56.100, which creates the "State Fire and Tornado Insurance Fund," suggests only property hazards or property damage insurance. See also KRS 56.120, relating to state property damage.
When all of KRS 56.070 is read in its entirety, and when all of the above statutes relating to state property damage are read together, it is our opinion that KRS 56.070(2) relates only to property damage insurance, and does not embrace liability insurance. Statutes in pari materia should be construed together and harmonized. Economy Optical Co. v. Kentucky Bd. of Optometric Examiners, Ky., 310 S.W.2d 783 (1958). KRS 304.5-050 defines "property insurance" as insurance on real or personal property of every kind and of every interest therein against loss or damage from any and all hazard or cause. KRS 304.5-070(1)(b) defines "casualty insurance" as including liability insurance, i.e., insurance against legal liability for damage to property.
In addition, as relates to the personal liability of state officers and employees, the Court, in Hennessy v. Stewart, Ky., 283 S.W.2d 719 (1955), ruled that the officer or employee must pay for such liability insurance, in the absence of any statute expressly providing for payment by the state. We believe the Court in Hennessy v. Stewart was merely distinguishing between state property damage insurance and liability insurance covering the Circuit Court Clerk. In any event, the Court made it clear that the payment of state money for liability insurance covering a state officer requires a positive and express statute. Although the Court in that case used KRS 56.070(3) [now (2)], in support of its analysis, the Court ruled that the clerk's charging to the state the premium on the liability policy was questionable. The Court seems to suggest that the Commissioners of Finance and Revenue could have authorized the state's payment of the premium on the insurance. However, property insurance does not include liability insurance. See KRS 304.5-050 and 304.5-070, originally enacted in 1970, some fifteen years after Hennessy v. Stewart was decided. Since the 1982 amendment of KRS 56.070 left what is now subsection (2) with its prior wording, the two sections in the Insurance Code are the latest and more specific and govern over any ambiguity of KRS 56.070(2). Shannon v. Burke, 276 Ky. 773, 125 S.W.2d 238 (1939) 239.
Thus we agree with you that KRS 56.070(2) was never intended to embrace or include the purchase of liability insurance covering officers or employees having control or custody of state property.
Again we believe it is the rule that no state agency may use state funds to purchase liability insurance for its officers or employees unless specifically authorized to do so by statute. See Hennessy v. Stewart, above.