Request By:
[NO REQUESTBY IN ORIGINAL]
Opinion
Opinion By: Albert B. Chandler III, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the City of Shepherdsville violated the Open Records Act in its disposition of Courier-Journal reporter Jason Riley's requests for various records relating to the settlement of a lawsuit filed by the Reverend Abraham Lincoln Washington and Lisa Washington against the city. For the reasons that follow, we find that although the city complied with the Act in promptly responding to Mr. Riley's requests and furnishing him with responsive records then in its possession, it erred in denying him access to the settlement agreement itself, disclosing the amount of money paid by the city's liability insurer in settlement of the lawsuit, on the basis that records of the insurance carrier, and the defense attorney hired by the carrier, cannot "be opened by a demand upon the city."
On August 17, 2000, city attorney Norman R. Lemme furnished Mr. Riley with copies of an agreed order dismissing signed by Judge Heyburn, Attorney Smith and Attorney Stopher and entered on August 14, 2000, the entry dated June 13, 2000, from the U.S. Magistrate, a letter of June 23, 2000, with enclosures from Mr. Stopher relating to a meeting before the city council, a letter of June 27, 2000, from the Mayor and approved by Chief Haycraft and Detective Rogers directed to the insurance carrier, and the confidential release signed by the Washingtons and Attorney Smith prohibiting them from discussing the case. With reference to the latter document, Mr. Lemme commented, "We would naturally assume that you and your employer would not attempt to interfere with this contract." With reference to the remainder of Mr. Riley's request, Mr. Lemme stated:
There were no tax dollars expended in the settling of the lawsuit. The City is in possession of no further documentation as to the amount or breakdown as between Mr. Smith and his clients.
In closing, he reiterated that the city possessed no other responsive records.
On August 18, 2000, Mr. Lemme responded to a new request submitted by Mr. Riley by releasing to him thirty-two additional pages relating to the settlement. He explained:
Upon review of KRS 61.878(1)(i) and (j) I must conclude that the only information we can properly provide is that following the City Council's letter of June 27, 2000, consenting to settlement. Thus, after reviewing your request and the cited portions of the statute, I believe anything prior to that date would be exempt under the sections cited.
With respect to your attorney's position that it is the responsibility of the City to create documents which it does not have in its possession, I am unable to find any authority for that and certainly none in the Attorney General Opinions cited. Therefore, I supply herewith all documents that we are aware of in the possession of the City since June 27, 2000.
This appeal followed.
On appeal, The Courier-Journal contests the city's denial of access to documentation evidencing the terms of the settlement, and in particular, the amount of money paid to the plaintiffs. On behalf of the newspaper and Mr. Riley, Attorney Kimberly K. Green observes:
It is our contention that the insurance company defended and settled this lawsuit against the City of Shepherdsville as an agent for the city. Thus, all documents evidencing the terms of the settlement are owned by the City of Shepherdsville, whether in its possession or in the possession of its insurer.
Ms. Greene rejects the city's argument that no tax dollars were expended in settling the lawsuit, noting that in OAG 92-17 this office held:
It does not follow that if no city funds are expended in an out-of-court settlement involving the city because of the availability of insurance or otherwise, that the public has no legitimate interest in the settlement. City funds were expended in paying the insurance premiums, and the public has a legitimate interest in how a lawsuit involving a public agency is settled, at least insofar as the settlement concerns the public agency.
Because City of Shepherdsville "tax dollars were spent on insurance premiums and settlement was made using the City's insurance policy," Ms. Greene asserts, "the public is entitled to full access to both the terms and amount of the settlement. "
In a supplemental response directed to this office following commencement of this appeal, Shepherdsville city clerk, Tammy Owen, elaborated on the city's position. Acknowledging that the public's interest in the case and the settlement is of great importance to Shepherdsville officials, she nevertheless maintained:
The August 17 letter expressly states that, "The City is in possession of no further documentation as to the amount or break down as between Mr. Smith and his clients."
The August 17 letter expressly states that, "There were no tax dollars expended in the settling of the law suit."
The Hon. Kimberly K. Greene's reliance on the fact that public funds are expended for insurance premiums is misplaced as is her statement that the city "presumably signed the settlement agreement. " The city simply responded to the question if any city funds were expended in the settlement. The answer was and is NO. The only "agreement" (or anything like an agreement) signed by the city is the letter dated June 27, 2000 which the city supplied to Mr. Riley. The payment of premiums resulted in insurance coverage. The insurer provided a defense as well as the documents provided to the city and from the city to Mr. Riley.
With reference to the newspaper's demand for access to the settlement agreement itself, Ms. Owen observed:
Ms. Greene's statement alleging, "The City's denial of Riley's request . . ." is simply not true. The city did not deny Mr. Riley's request. The city answered Mr. Riley's request with all of the documents it had. The city not having what Mr. Riley wants when Mr. Riley wants it is not a denial. The insurer sought and received, on June 27, 2000, authorization to settle the case at the insurer's sole cost for an amount the insurer deemed less than the cost of defense. (See letter of June 27, 2000) The most elementary knowledge of insurance contracts should cause the average person to know that insurance carriers settle and pay claims daily when the insurance carriers consider payment in their own best economic interest, without regard for the merits of the claim. More often than not these "settlements" are without the knowledge of their own insureds, much less their insureds consent.
At some point in time the exact amount the insurer paid should become a public record. Thus, at that point, an Open Records Request will yield the amount. It is respectfully suggested that it is not the city's responsibility to "create" a record before its time. Nor can the records of the insurance carrier be opened by a demand upon the city. OAG 90-36. (An opinion after the 1988 opinion upon which Ms. Greene strongly relies.)
Ms. Owen concluded that although "the public's interest is and should be paramount," The Courier-Journal cannot "impose upon the city a duty to direct its insurer [and its defense attorney] in the handling of the case" inasmuch as the city lacks contractual authority to do so, and has no legal obligation to do so under the Open Records Act. Nor, she closed, is the city required to create records to respond to an open records request.
It is the opinion of this office that the City of Shepherdsville's insurance carrier holds the settlement agreement at the instance of and as custodian on the city's behalf, and that the city's position that it cannot compel the insurance carrier to disclose the agreement is without merit. "In the end, it is the nature and purpose of the document, not the place where it is kept, that determines its status as a public record. " City of Louisville v. Brian Cullinan , No. 1998-CA-001237-MR and Cross Appeal No. 1998-CA-001305-MR (Ky. App. 1999).
Many of the issues that The Courier-Journal's appeal raises have been resolved in previous opinions, and are largely undisputed. Thus, it is well-established that the "settlement of litigation between private citizens and a governmental entity is a matter of legitimate public concern which the public is entitled to scrutinize." Lexington-Fayette Urban County Government v. Lexington Herald-Leader Company, Ky. 941 S.W.2d 469, 473 (1997). Moreover, "[a] confidentiality clause in such an agreement is not entitled to protection." Id. Finally, it cannot be persuasively argued that no public funds are expended in the settlement of a lawsuit between private citizens and a governmental entity by an insurance carrier when it is public funds that are expended in paying the insurance premium through which the agency relationship is formed that obligates the carrier to defend the lawsuit. OAG 91-20; OAG 92-17. Kentucky's courts have balanced "the sacrosanct right of an individual to privacy against legitimate public concerns and the right of the public to inquire into the workings of government," Lexington-Fayette Urban County Government at 473, and concluded that "there [can] be no viable contention that an agreement which represents the final settlement of a civil lawsuit . . . [involving a governmental entity and private citizens] is not a public record. " Id. at 471. And, as noted above, it is the nature and purpose of a document, not the place where it is kept, that confirms this status.
In City of Louisville v. Brian Cullinan , above, the Kentucky Court of Appeals rejected the city's argument that documentation of legal expenses billed to the city by its contract attorneys were not public records because the city was not in possession of the items requested, and therefore not the custodian of the records. The court reasoned:
There is no doubt that the records requested were prepared, owned, and used at the instance of the City. The records are nothing more than the routine billing documents generated by a law firm in representation of a client. Here, they are essentially the City's documents . . . .
City of Louisville at 4. On this basis, the court concluded that "the law firm was holding the documents at the instance of and as custodian on the City's behalf, thus conforming to KRS 61.870(6), " Id. , and affirmed the circuit court's judgment ordering production of the records.
Numerous decisions of this office support the view that public records in the custody of a private agent are subject to public inspection unless properly excluded under one or more of the exceptions codified at KRS 61.878(1)(a) through (1). For example, in 95-ORD-114 we held that a public hospital improperly denied access to a letter from the U.S. Department of Justice on the basis that the letter was not in the hospital's possession, but instead in the possession of the hospital's attorney, because the hospital failed to articulate any statutory basis for denial. Similarly, in 99-ORD-194 we held that a water district improperly postponed access to a merger agreement on the basis that the agreement was not in its possession, but instead in the possession of its attorney, holding that the fact that an agency's attorney may have possession of a public record does not negate the agency's duties under the Open Records Act. Finally, in 00-ORD-93 we held that a fire department's assertion that requested public records were not available for inspection because they were in the possession of its attorney did not constitute a sufficient legal basis for postponing the requester's access to the records. While we continue to ascribe to the view that there may be rare occasions when records identified in an open records request are not public records because they reside in the custody of a private entity, we approach this question with greater caution after the court's decision in City of Louisville v. Brian Cullinan , above. In light of this recent Court of Appeals' decision, we find neither OAG 88-43 nor OAG 90-36 dispositive of the issue in this appeal.
The record before us indicates that a settlement was reached in August, 2000, and an agreement executed and signed by the parties at the instance of and on behalf of the city. The record further indicates that the City of Shepherdsville's approval of the settlement was required and received. Although the city suggests that it lacks "contractual authority" to compel its agent, the insurance carrier, to furnish it with a copy of the settlement agreement, the city does not cite a contract provision prohibiting it from immediately requesting and receiving a copy which, as noted above, the carrier holds at the instance of and as custodian on the city's behalf. We see no reason, and no reason is presented, why the public must wait for an undisclosed triggering event before the agreement is released to the city and available for public inspection. Accordingly, we find that although the City of Shepherdsville substantially complied with the requirements of the Open Records Act in promptly responding to Mr. Riley's requests, and furnishing him with responsive records then in its possession, it erred in denying him access to the settlement agreement itself that disclosed the amount of money paid by the city's liability insurance carrier in settlement of the Washingtons' lawsuit against the city.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceedings.