Request By:
Ilse Dickerson, Executive Director
Board of Claims
115 Myrtle Avenue
Frankfort, Kentucky 40601
Opinion
Opinion By: David D. Armstrong, Attorney General; Martin Glazer, Assistant Attorney General
The Board of Claims has requested an official opinion of this office in order to guide it in handling in a uniform fashion many of the claims arising under the comprehensive amendments to the Board of Claims Act enacted by the 1986 General Assembly.
The basic question is whether subrogation claims by insurance carriers are now barred under the amendments to the Act.
Before giving our advice, we have requested one of your hearing officers, Ronald W. May, to furnish his memorandum in writing as to why he believes such claims have not been extinguished.
At the risk of our oversimplifying that contention, we paraphrase his memorandum thusly:
1. A subrogation claim is not a collateral or dependent claim, because the company is subrogated to the rights of the insured and it [the company] stands in the same position as the insured. The insurance company can ask for contribution before the Board, if it has already paid the claim.
2. The General Assembly never intended to prohibit subrogation. To determine so violates Section 14 of the Kentucky Constitution. Prior to the 1986 amendment, an insurance carrier could seek recovery on its subrogation claim either by suing the state employees individually in the circuit court or by filing a claim against the state before the Board of Claims. If the Board now holds that a subrogation claim is barred by the 1986 amendments, the result is the state will have taken away the right of the injured subrogation party to bring action in the courts while at the same time holding it cannot bring the claim before the Board of Claims.
We should point out at the outset that there is presently pending in the Kentucky Court of Appeals cases which challenge the constitutionality of requiring claims against individual employees to be brought first only in the Board of Claims. Therefore, based on 40 KAR 1:020, Section 4, we will not deal with that specific issue pending the resolution of that litigation.
We first need to reiterate some basic principles. The first is that the state has sovereign immunity from suit and that immunity can only be lifted when the state waives its immunity.
In many states, this principle is a judicial doctrine created to protect the state from a flood of claims that might bleed the government from using its tax revenues to provide legitimate governmental services. A doctrine created by judicial fiat can be removed by the same process.
But, in Kentucky, the "doctrine" is embedded in Kentucky's Constitution, itself. Section 231 of that document provides:
The General Assembly may, by law, direct in what manner and in what courts suits may be brought against the Commonwealth.
And, until the Kentucky General Assembly elects to subject the Commonwealth to claims, such claims are barred by that immunity. Cabinet for Human Resources, Commonwealth v. Poore, Ky.App., 711 S.W.2d 498 (1986; Commonwealth Department of Banking and Securities v. Brown, Ky., 605 S.W.2d 497 (1980).
The General Assembly can waive that immunity in whole 2318 it can rescind its or in part. In fact, under Section 231, it can rescind its prior waiver.
The second consideration is the fact that the state is paying out its money to settle claims. This money comes from the taxpaying public.
With those principles in mind, we need to address the question raised, to wit: "Are subrogation claims now barred under the Board of Claims Act? "
KRS 44.070(1), as amended in 1986, provides in part:
. . . provided, however, regardless of any provision of law to the contrary, the Commonwealth or any of its cabinets, departments, bureaus and agencies, and its officers, agents and employes, while acting within the scope of their employment by the Commonwealth or any of its cabinets, departments, bureaus or agencies, shall not be liable for collateral claims which are dependent on loss to another and not the claimant. . . . (Emphasis supplied. )
It is argued that a subrogation claim by an insurance carrier is not a collateral claim, but is an original claim, because the insurer stands in the same position as its insured, the latter having assigned his claim to the insurer by the contractual terms of the insurance policy.
If that be so, why are the following also excluded?
. . . . Furthermore, any damage claim awarded shall be reduced by the amount of payments received or right to receive payment from workers' compensation insurance, social security programs, unemployment insurance programs, medical disability or life insurance programs or other federal or state or private programs designed to supplement income or pay claimant's expenses or damages incurred. (KRS 44.070(1) as amended in 1986). (Emphasis supplied. )
As we interpret those provisions, if a claimant has filed an automobile accident claim in the Board of Claims, the Board is required to deduct from any damages claimed the amount that has been paid or could be paid by an insurance carrier to that claimant.
Therefore, if the original claimant, himself, cannot recover from the state the amount an insurance carrier has paid or would pay to him, how can the insurance carrier, by paying him, file its claim for recovery of the money it expended? To do so, we would be allowing to be done indirectly what could not be done directly.
We have been cited to two cases to support the contention that subrogation claims are still valid. They are: Automobile Club Insurance Company v. Commonwealth, Department of Highways, Ky., 414 S.W.2d 578 (1967) and Commonwealth, Department of Transportation v. All Points Construction Company, Ky.App., App., 566 S.W.2d 171 (1977). However, those cases were decided on the law as it existed prior to 1986. What the General Assembly can give, it can take away.
The argument is also made that if the insurer-subrogator cannot sue for recovery of its subrogation claim in the Board of Claims and the only place the state employee can be sued is in the Board of Claims, the General Assembly has unconstitutionally removed redress in the courts against the employee, himself, and violated Kentucky Constitution Section 14 which provides:
All courts shall be open, and every person for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law, and right and justice administered without sale, denial or delay.
The argument that Section 14 and other Constitutional sections preclude denying a valid claim was answered in Rooks v. University of Louisville, Ky.App., 574 S.W.2d 923 (1978), citing language in Wood v. Board of Education of Danville, Ky., 412 S.W.2d 877 (1967), to wit:
The doctrine of sovereign immunity had acceptance in our system of jurisprudence before the adoption of our first Constitution. It was then embodied therein, and it must be recognized that whatever may have been intended by Sections 2, 14 and 26 of the Kentucky Constitution . . . it was not intended that those sections should in any way impinge on the right of the Commonwealth by its General Assembly under Section 231 to direct in what manner and in what court suit may be brought against it. Id. at 879. (Emphasis supplied. )
The Rooks Court then stated:
It is a basic rule of construction that the Constitution be interpreted whenever possible so as to harmonize various provisions. The present case offers just such a construction opportunity, and so it would seem that sovereign immunity does not contradict other parts of the state Constitution. Rooks, ibid. at 925.
Besides, the argument of total claim preclusion is not exactly accurate. KRS 44.073(5) provides:
No action for negligence against the Commonwealth, any of its cabinets, departments, bureaus or agencies, or any officers, agents or employes thereof may be brought initially in any other court or forum in the Commonwealth except the board of claims until the board of claims makes a determination, that has become final, that the board of claims has or does not have primary and exclusive jurisdiction over the claim. (Emphasis supplied. )
If the Board of Claims were to determine that a state employee was not acting within the scope of his employment and that determination became final, a court suit could be brought against the employee, himself, to recover damages.
Likewise, when the Board has deducted the amount paid or to be paid to a claimant by an insurance carrier, the carrier can subsequently bring suit to attempt to recover that subrogation from the individual employee by filing its claim in court. There is no statute of limitations problem because KRS 44.073(7) provides:
Any applicable statute of limitations for bringing negligence actions in any court or forum other than the board of claims shall be tolled pending the final determination that the board of claims does not have primary and exclusive jurisdiction of the negligence claim.
The General Assembly in amending the Board of Claims Act sought to bring all initial claims in the Board itself. Prior to 1986, claims were filed simultaneously in the Board of Claims against the Commonwealth and in the courts by claimants against the state employee.
The 1986 amendments seek to require all such claims to be filed first in the Board. If a claim is denied on the ground that the Board has no jurisdiction thereof, the state, itself, will not pay it. The claimant then can seek redress elsewhere in the courts against the individuals involved.
CONCLUSION
No one has an inherent or constitutional right to file a claim for negligence against the state. The state has immunity under Section 231 of the Kentucky Constitution. Only to the extent that the General Assembly waives that immunity can an individual recover from the state.
The General Assembly has determined that Kentucky will not pay so much of claims which are recoverable from other sources, nor for collateral claims.
A subrogation claim is such another source or a collateral claim. The subrogator can only look to the state employee who caused the damage to the subrogator's assignor, after the Board has determined the state's and the employees' liability.