Could a Kentucky property valuation administrator buy errors and omissions insurance with office funds?

Plain-English summary

In 1996, Kentucky's Attorney General said a property valuation administrator could not buy errors and omissions insurance with official funds unless the General Assembly had specifically authorized the expense. The AG did not accept a general county-official expense test as enough authorization. He said the insurance primarily benefited the officeholder personally, while the official bond protected the public interest.

The opinion also corrected the office's own history. Earlier opinions had briefly approved this type of purchase under a county home-rule statute, but a later opinion withdrew that view after the statute was declared unconstitutional. OAG 96-24 expressly withdrew the remaining inconsistent opinion, OAG 77-90.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Property valuation administrators

The AG concluded that insurance against an official's errors and omissions was not an allowable office expense without explicit legislative authority. He rejected the idea that a letter from the Auditor of Public Accounts and a general expense test alone could authorize the purchase.

County auditors and officials reviewing expenses

The opinion discussed Funk v Milliken, which required official expenses to meet conditions including public benefit and proper budgeting. The AG said that test did not resolve whether this insurance could lawfully be budgeted in the first place. He also said the official bond, rather than the proposed policy, protected the public interest.

Readers of earlier AG opinions

The AG reaffirmed several earlier opinions requiring legislative authority and withdrew OAG 77-90. He explained that the prior approval in OAG 77-63 had already been withdrawn after its statutory foundation fell away.

Common questions

Was errors and omissions insurance an allowable Kentucky PVA office expense in this opinion?
No. The AG said specific legislative authority was required before official funds could pay for it.

Did an auditor's five-part expense test authorize the purchase?
The AG said it did not settle the question. The test included proper budgeting, while the issue was whether the insurance could lawfully be budgeted at all.

Which earlier opinion did the AG withdraw?
He expressly withdrew OAG 77-90, an earlier opinion approving the insurance purchase under a county home-rule theory whose statutory basis had been invalidated.

Background and statutory framework

The opinion reviewed a sequence of earlier AG positions, the public-official expense test in Funk v Milliken, and Green River District Health Department v Wigginton on waiver of sovereign immunity. The AG concluded that an expense with those implications needed an explicit legislative enactment; no such authorization for property valuation administrators was identified.

Citations and references

• Funk v Milliken, Ky, 317 SW 2d 499 (1958)
• Green River District Health Department v Wigginton, Ky, 764 SW 2d 475 (1989)
• OAG 77-90 (withdrawn)

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG96-024.htm

Original opinion text

OAG 96-24

June 12, 1996

Subject: Purchase of errors and omissions insurance by property valuation administrator

Written by: Ross T. Carter

Requested by: Debra H. Eucker

Syllabus: Property valuation administrators may not purchase errors and omissions insurance as an allowable office expense without specific legislative authority

OAGs cited: OAG 66-49(f); 73-626(f); 75-81(f); 77-63(w); 77-90(w); 78-188(f)

Statutes construed: None

Opinion of the Attorney General

The question presented is whether the purchase of errors and omissions insur ance is an allowable office expense for property valuation administrators.

Although we have never addressed this question as it pertains to property valuation administrators, we have issued opinions stating that other public officials may not purchase such insurance without express statutory authority.

In OAG 66-49 we said that a county clerk may not purchase errors and omissions insurance as an office expense because the beneficiary of the policy is the officeholder personally, and consequently such an expense should be borne by the policyholder personally.

In OAG 73-626 we said that the Department of Transportation could not purchase errors and omissions insurance for its engineers and attorneys because the discretionary acts of those employees are protected by governmental immunity, rendering errors and omissions insurance unnecessary.

In OAG 75-81 we said that a school district could not purchase errors and omissions insurance for its board members.

In OAG 77-63 we modified OAG 66-49 and said that errors and omissions insurance serves a public purpose by allowing public officials to perform their duties free from concern about their potential liability. We found that the county home rule statute, KRS 67.083, provided sufficient authority for the purchase of the insurance. We repeated this finding in OAG 77-90.

In OAG 78-188, we observed that the county home rule statute had been declared unconstitutional, removing the legal underpinning for OAG 77-63. We reverted to the view that errors and omissions insurance was not an allowable office expense and declared that OAG 77-63 was withdrawn. Perhaps through oversight we did not withdraw OAG 77-90, and we do so now.

In November 1995, in a letter from the director of the Division of County Audits, the Auditor of Public Accounts informed a property valuation administrator that errors and omissions insurance would be an allowable expense if the expenditure satisfied the five-part test of Funk v Milliken, Ky, 317 SW 2d 499 (1958). That case holds that county fee officials may recover expenses that are reasonable in amount, beneficial to the public, for official business, properly budgeted, and properly documented.

Although the letter from the Auditor of Public Accounts provides a correct statement of the law, we do not believe that the law as applied to property valuation administrators can justify the purchase of errors and omissions insurance. The purchase of errors and omissions insurance is not beneficial to the public; as we pointed out in OAG 66-49, the public interest is protected by the public official's bond. Furthermore, the Funk v Milliken test is not entirely applicable because one of its elements is whether the expense has been properly budgeted, and the question we face is whether the expense can be properly budgeted in the first place.

With the brief exception of a period in 1977-78, our opinions of the past thirty years have held consistently that purchase of errors and omissions insurance must be expressly authorized by the General Assembly. We believe that the General Assembly has acted in reliance on the accuracy of that legal proposition when it has specifically authorized the purchase of errors and omissions insurance. Because the purchase of errors and omissions insurance under legislative authority has been held to effect a waiver of sovereign immunity, Green River District Health Department v Wigginton, Ky, 764 SW 2d 475 (1989), we do not believe that the legislature would effect such a waiver through anything less than explicit, unambiguous legislative enactment.

We therefore affirm the findings of OAG 66-49, OAG 73-626, OAG 75-81, and OAG 78-188. Property valuation administrators may not purchase errors and omissions insurance with official funds until the General Assembly provides specific legislative authority for them to do so.

A. B. Chandler III

Attorney General

Ross T. Carter

Assistant Attorney General