NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION v. THE BOARD OF TRUSTEES OF GUILFORD TECHNICAL COMMUNITY COLLEGE
No. 470PA07
IN THE SUPREME COURT
15 April 2010
364 N.C. 102 (2010)
HUDSON, Justice.
I strongly believe that buyers’ liability must be premised on something more than general notions of equity that “seem[] to be resorted to only to cover loose reasoning or to span a gap without noticing it.” 2 Mechem § 1986, at 1552. Because sellers fail to show that buyers in any manner contributed or enabled the theft of the sales proceeds by Parker, sellers cannot shift their loss to buyers, and the loss must “lie where it has fallen.” 1 Mechem § 749, at 532. I recognize that this is a difficult case, but “we cannot break into well-settled principles of law in hard cases. If we did, we would have no orderly system, and law would be a ‘rope of sand.’ ” Liles, 197 N.C. at 417, 149 S.E. at 379. Therefore, I respectfully dissent.
Justice HUDSON joins in this dissenting opinion.
Immunity— sovereign—waiver—workers’ compensation insurance—insurance guaranty association
The doctrine of sovereign immunity did not bar the North Carolina Insurance Guaranty Association (NCIGA) from being reimbursed by Guilford Technical Community College (GTCC) pursuant to
Justice EDMUNDS dissenting.
Chief Justice PARKER and Justice TIMMONS-GOODSON join in this dissenting opinion.
On discretionary review pursuant to
Nelson Mullins Riley & Scarborough LLP, by Christopher J. Blake and Leslie Lane Mize, for plaintiff-appellant.
Smith Moore Leatherwood LLP, by Sidney S. Eagles, Jr. and Matthew N. Leerberg, for defendant-appellee.
Roy Cooper, Attorney General, by Christopher G. Browning, Jr., Solicitor General; John F. Maddrey, Assistant solicitor General; and Gary R. Govert, Special Deputy Attorney General, for State of North Carolina, amicus curiae.
North Carolina League of Municipalities, by Andrew L. Romanet, Jr., General Counsel, and Gregory F. Schwitzgebel, III, Senior Assistant General Counsel; and North Carolina Association of County Commissioners, by James B. Blackburn, III, General Counsel, amici curiae.
HUDSON, Justice.
Here we address whether sovereign immunity bars the North Carolina Insurance Guaranty Association (“NCIGA“) from being reimbursed by Guilford Technical Community College (“GTCC“) through its Board of Trustees, pursuant to
I. Background
NCIGA is a “nonprofit, unincorporated legal entity” created and governed by the Guaranty Act.
GTCC is a two-year accredited community college operating under
(4) “Covered claim” means an unpaid claim, including one of unearned premiums, which is in excess of fifty dollars ($50.00) and arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which [the Guaranty Act] applies as issued by an insurer, if such insurer becomes an insolvent insurer after the effective date of this Article and (i) the claimant or insured is a resident of this State at the time of the insured event; or (ii) the property from which the claim arises is permanently located in this State. “Covered claim” shall not include any amount awarded as punitive or exemplary damages; sought as a return of premium under any retrospective rating plan; or due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation or contribution recoveries or otherwise.
Id.
(a1) The [NCIGA] shall have the right to recover from the following persons the amount of any “covered claim” paid on behalf of such person pursuant to this Article:
(1) Any insured whose net worth on December 31 of the year next preceding the date the insurer becomes insolvent exceeds fifty million dollars ($50,000,000) and whose liability obligations to other persons are satisfied in whole or in part by payments under this Article[.]
On 20 September 2005, NCIGA filed a declaratory judgment complaint in the Superior Court in Wake County seeking “a judicial determination ... whether GTCC is obligated to reimburse the NCIGA under the terms of the Guaranty Act in connection with the ... payments expended by the NCIGA in connection with ‘covered claims’ arising from the insolvency of Reliance.” NCIGA sought an adjudication that “under the express terms of the Guaranty Act,” specifically
GTCC moved to dismiss NCIGA‘s complaint under Civil Procedure Rules 12(b)(1), 12(b)(2), and 12(b)(6) on the sole ground that NCIGA‘s claims for reimbursement against GTCC are barred by sovereign immunity.
In a unanimous opinion, the Court of Appeals reversed, holding that NCIGA could not “defeat GTCC‘s sovereign immunity defense.” Guar. Ass‘n v. Bd. of Trs., 185 N.C. App. at 524, 648 S.E.2d at 862.
II. Analysis
Under the Guaranty Act, NCIGA‘s obligation to pay an employer‘s “covered [workers’ compensation] claims” arises when the employer procures workers’ compensation insurance from a licensed and authorized insurer that then becomes insolvent. See
This Court has long held:
It is an established principle of jurisprudence, resting on grounds of sound public policy, that a state may not be sued in its own courts or elsewhere unless by statute it has consented to be sued or has otherwise waived its immunity from suit.
By application of this principle, a subordinate division of the state, or agency exercising statutory governmental functions ... may be used only when and as authorized by statute.
Smith v. Hefner, 235 N.C. 1, 6, 68 S.E.2d 783, 787 (1952) (citations omitted). “Waiver of sovereign immunity may not be lightly inferred and State statutes waiving this immunity, being in derogation of the sovereign right to immunity, must be strictly construed.” Guthrie v. N.C. State Ports Auth., 307 N.C. 522, 537-38, 299 S.E.2d 618, 627 (1983) (citations omitted). Consistent with these rules of construction, we have held that an express statutory waiver of sovereign immunity for a substantive claim made under one statute can continue and apply to a subsequent action seeking reimbursement from the State under a separate statute when the subsequent action “arises out of” the underlying substantive claim. Teachy v. Coble Dairies, Inc., 306 N.C. 324, 332, 293 S.E.2d 182, 186-87 (1982) (holding that “[i]rrespective of whether G.S. Chapter 1B codifies the right to
The Workers’ Compensation Act contains a clear and unmistakable waiver of the State‘s and its subdivisions’ sovereign immunity with respect to workers’ compensation claims by their employees.
Neither the State nor any municipal corporation within the State, nor any political subdivision thereof, nor any employee of the State or of any such corporation or subdivision, shall have the right to reject the provisions of this Article relative to payment and acceptance of compensation... [p]rovided, that all such corporations or subdivisions are hereby authorized to self-insure or purchase insurance to secure its liability under this Article and to include thereunder the liability of such subordinate governmental agencies as the county board of health, the school board, and other political and quasi-political subdivisions supported in whole or in part by the municipal corporation or political subdivision of the State.
Id.; see Estes v. N.C. State Univ., 89 N.C. App. 55, 58, 365 S.E.2d 160, 161 (1988) (”
The General Assembly has mandated that every employer subject to the Workers’ Compensation Act maintain the ability to pay compensation benefits, either by purchasing workers’ compensation
However, even if an employer purchases insurance to secure its liability, the employer still remains primarily liable to its injured employees for any claims that fall under Chapter 97 in the event its insurer becomes insolvent. See
Standing alone, the proposition that the employer under the Work[ers‘] Compensation Act should be relieved of liability for the compensation to his injured employee by reason of the insolvency of his insurance carrier would present no serious difficulty. The liability of the employer under the award is primary. He, by contract, may secure liability insurance for his protection, but his obligation to the injured employee is unimpaired. Into the construction of every act must be read the purpose of the Legislature, and the underlying purpose in this instance (Work[ers‘] Compensation Act) was to give relief to work[ers]. This relief in the nature of things had to be charged against the employer.
The primary consideration is compensation for injured employees. The title and theory of the act import the idea of compensation for work[ers] and their dependents.
The statute requires the employer to insure and keep insured his liability or furnish proof of his own ability to pay the compensation. It is further provided that insolvency of the employer shall not relieve the insurer, and manifestly the insolvency of the
insurer should not relieve the insured, nothing else appearing. The obligation of the insurance company is to insure the employer against liability under the act, and while the statute gives to insurer the right of subrogation, that is for the benefit of the insurer and not intended to impair the right of the injured work[er] to compensation from the insured employer.
210 N.C. at 21, 185 S.E. at 440-41 (citations and internal quotation marks omitted). Thus, according to the Workers’ Compensation Act and the principle enunciated in Roberts, GTCC remained at all times primarily liable on any workers’ compensation claims at issue here.
” ‘Legislative intent controls the meaning of a statute; and in ascertaining this intent, a court must consider the act as a whole, weighing the language of the statute, its spirit, and that which the statute seeks to accomplish.’ ” Hyler v. GTE Prods., Co., 333 N.C. 258, 262, 425 S.E.2d 698, 701 (1993) (citations omitted), superseded in part by statute, Workers’ Compensation Reform Act of 1994, ch. 679, sec. 2.5, 1993 N.C. Sess. Laws 394, 399-400 (enacting
Where radical and systematic changes have been made in setting up a system of such wide scope as we find in the Work[ers‘] Compensation Act, and one so markedly remedial in its nature, the break with the past must necessarily be viewed with liberality in order to accomplish its purposes; and its provisions, liberally construed, given that effectiveness which alone will protect the act from erosion and regression.
Essick v. City of Lexington, 232 N.C. 200, 208, 60 S.E.2d 106, 112 (1950) (emphasis added). ” ‘[T]he underlying purpose ... [of the] (Work[ers‘] Compensation Act) [is] to give relief to work[ers].’ ” Roberts, 210 N.C. at 21, 185 S.E. at 440 (citation omitted). Thus, the “primary consideration” in enacting the Workers’ Compensation Act was to compensate injured employees. Id. Because, in general, the Workers’ Compensation Act is the exclusive means for employees to recover compensation due to work-related injury or illness,3 carrying out this remedial purpose is its core function. As such, the waiver of
Enacted in 1971, the Guaranty Act “ha[s] one basic purpose: to better protect North Carolina claimants and policyholders.” State ex rel. Ingram v. Reserve Ins. Co., 303 N.C. 623, 627-28, 281 S.E.2d 16, 19 (1981). As our legislature has stated:
The purpose of [the Guaranty Act] is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment, and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers.
Section 58-40-50(a1)(1) allows NCIGA‘s workers’ compensation account to be reimbursed by high net worth employers, who are well situated to absorb the impact of their insurer‘s insolvency, thereby reflecting the legislature‘s intent that the funds be replenished for the benefit of other potential workers’ compensation claimants. Reimbursement by high net worth employers also ensures that funds are available to pay the claims of smaller employers, who are less likely to be able to pay workers’ compensation claims in the event their insurer becomes insolvent and who may be at greater risk of insolvency themselves. In addition, the Guaranty Act provides greater protection for workers’ compensation claims than for claims arising from other forms of insurance that are subject to the Guaranty Act. See id.
III. Conclusion
The legislative intent behind the Workers’ Compensation Act has always been to provide workers secure, timely compensation. The provisions of the Guaranty Act, both those involving the payment of workers’ compensation claims due to insurer insolvency and those requiring repayment of said amounts by affected employers with a high net worth, are designed to further this purpose. The legislature has clearly waived sovereign immunity through the Workers’ Compensation Act for claims by governmental employees, and this waiver applies to the provisions of the Guaranty Act involving workers’ compensation insurance. This interpretation follows the long-standing requirement that a statutory waiver of immunity be strictly construed, in accordance with a clearly expressed legislative intent. See Teachy, 306 N.C. at 331, 293 S.E.2d at 186 (stating that “the abrogation of sovereign immunity” does not “impel[] such a strict construction as to thwart ... obvious legislative intent” (citations omitted)). Thus, we conclude that the legislature has clearly and explicitly waived sovereign immunity for these underlying workers’ compensation claims, that
REVERSED.
Justice EDMUNDS dissenting.
Briefly stated, the issue in this case is whether the doctrine of sovereign immunity bars NCIGA from recovering from GTCC funds paid by NCIGA to cover workers’ compensation claims filed against GTCC once Reliance Insurance Company, which had carried GTCC‘s workers’ compensation policy, became insolvent.
The Insurance Guaranty Association Act creating NCIGA contains no waiver of sovereign immunity.
Although the majority cites Teachy v. Coble Dairies, Inc., 306 N.C. 324, 293 S.E.2d 182 (1982), as authority for its interpretation that waivers found in one statute can be portaged over to another statute, that case is distinguishable. In Teachy, the plaintiff sued the defendants for wrongful death arising out of a traffic collision. Id. at 325, 293 S.E.2d at 183. The defendants then filed a third-party complaint against the North Carolina Department of Transportation, alleging that a traffic light at the intersection where the accident occurred had been maintained negligently. Id. at 326, 293 S.E.2d at 183. When the State argued that sovereign immunity shielded it from suit, we found that the common-law “right to indemnification of a passively negligent tort-feasor from an actively negligent tort-feasor” arose out of the underlying tort claim and that the State had waived immunity from such indemnification claims in the Tort Claims Act. Id. at 332, 293 S.E.2d at 186-87. Thus, the tort theory of negligence directly underlay both the plaintiff‘s original claim and the defendants’ subsequent claim against DOT, and the Tort Claims Act waived sovereign immunity in such suits.
In contrast, the majority here bootstraps a statutory waiver of sovereign immunity that is applicable only to workers’ compensation claims into a suit over insurance liability brought by plaintiff NCIGA against defendant GTCC under the Insurance Guaranty Association Act, not the Workers’ Compensation Act. The original claims between GTCC and the injured workers involved workers’ compensation liability and were insured by third party Reliance. The majority‘s determination, that the workers’ compensation waiver in section 97-7 reaches as far as claims by a fourth party (NCIGA) for indemnification of the insurance liability of insolvent third party Reliance, is an unwarranted extension of the holding in Teachy.
Chief Justice PARKER and Justice TIMMONS-GOODSON join in this dissenting opinion.