TULSA STOCKYARDS, INC. v. CLARK
2014 OK 14
| Okla. | 2014Background
- CompSource Oklahoma (formerly the State Insurance Fund) is a statutory, revolving workers' compensation insurer created in 1933 to provide coverage for employers as insurer of last resort; it has been administered under state control though operated to be self‑supporting.
- In Moran v. State ex rel. Derryberry (1975) the Oklahoma Supreme Court held the Fund’s monies are not State funds but trust funds held for insured employers and employees; the State may not appropriate those funds for other purposes.
- The Legislature enacted the CompSource Mutual Insurance Company Act (2013), directing CompSource to convert into a domestic mutual insurer (CompSource Mutual) effective Jan. 1, 2015, and vesting all CompSource assets in the new entity.
- Petitioner Tulsa Stockyards sued in original proceeding, arguing the transfer violates Oklahoma Constitution prohibitions on gifts of public money (Art. X, § 15(A)), impairment of contracts (Art. II, § 15), and payment from the treasury except by appropriation (Art. V, § 55).
- CompSource and the State argue the Fund’s assets are trust assets of policyholders (not State funds) and that the Legislature may place those trust assets in the custody of a domestic mutual insurer; the Act also preserves certain restrictions (e.g., no dissolution) and expresses the state will not borrow or appropriate those assets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Legal status of CompSource assets | Assets are State/property of the people; cannot be transferred to private entity without constitutional violation | Assets are trust funds belonging to insured employers/employees, not State funds | Court reaffirmed Moran: CompSource monies are trust funds for insured employers/employees, not State funds |
| Validity of converting CompSource to a mutual insurer | Legislature may not convert a state department and vest its assets in a private mutual in violation of constitutional prohibitions on gifts/appropriations | Legislature may place trust assets in a domestic mutual insurer; Act preserves trust and prevents State appropriation | Act does not violate constitution on the basis argued; Legislature may place the trust assets with a domestic mutual insurer and the trust continues |
| Continued viability of Moran precedent | Moran is outdated given later statutory and administrative changes | Moran remains controlling on the legal status of the funds despite administrative changes | Court held Moran remains sound law and controlling regarding asset status |
| Contract impairment and other constitutional claims | Transfer impairs contractual rights of insureds and violates contract clause and other constitutional provisions | Challenges were not fully briefed; statutory provisions (e.g., no dissolution) and trust protection mitigate concerns | Court declined to address some constitutional claims not fully argued and rejected the primary constitutional bar claimed; trust remains impressed on assets after transfer |
Key Cases Cited
- Moran v. State ex rel. Derryberry, 534 P.2d 1282 (Okla. 1975) (holds State Insurance Fund monies are trust funds for policyholder/employees and not State funds)
- Fehring v. State Ins. Fund, 19 P.3d 276 (Okla. 2001) (recognizes Fund as a state entity for some purposes but affirms Moran’s trust‑fund characterization)
- O.K. Constr. Co. v. Burwell, 93 P.2d 1092 (Okla. 1939) (early decision treating the Fund as a department of the State under legislative control)
- State v. Bone, 344 P.2d 562 (Okla. 1959) (held Fund functioned as a business enterprise and could be sued; influenced Moran’s analysis)
- Zaloudek Grain Co. v. CompSource Oklahoma, 298 P.3d 520 (Okla. 2012) (discusses CompSource’s hybrid character and confirms it is not a typical insurer under the Insurance Code)
- State ex rel. Wright v. Okla. Corporation Comm’n, 170 P.3d 1024 (Okla. 2007) (addresses funds’ public/private status in another statutory trust context)