Lyles v. City of Charlotte

• Decision Date: 08 November 1996
• Docket Number: No. 439PA95,439PA95
• Citation: 344 N.C. 676,477 S.E.2d 150
• Parties: Debra Kay LYLES v. The CITY OF CHARLOTTE and Motorola, Inc.
• Court: North Carolina Supreme Court

Page 150

477 S.E.2d 150

344 N.C. 676

Debra Kay LYLES v. The CITY OF CHARLOTTE and Motorola, Inc.

No. 439PA95.

Supreme Court of North Carolina.

Nov. 8, 1996.

James, McElroy & Diehl, P.A. by William K. Diehl, Jr., G. Russell Kornegay, III, and Richard B. Fennell, Charlotte, for plaintiff-appellee.

Smith Helms Mulliss & Moore by L.D. Simmons, II, and Leigh F. Moran, Charlotte, for defendant-appellant City of Charlotte.

WEBB, Justice.

The Court of Appeals based its decision on its holding that the City of Charlotte had waived its sovereign immunity by participating in a local government risk pool. N.C.G.S. § 160A-485 provides that a city may waive its sovereign immunity for civil liability in tort by purchasing liability insurance or by participating in a local government risk pool pursuant to article 23 of General Statutes chapter 58. N.C.G.S. § 58-23-5 provides in part:

In addition to other authority granted pursuant to Chapters 153A and 160A of the General Statutes, two or more local governments may enter into contracts or agreements pursuant to this Article for the joint purchasing of insurance or to pool retention of their risks for property losses and liability claims and to provide for the payment of such losses of or claims made against any member of the pool on a cooperative or contract basis with one another....

N.C.G.S. § 58-23-5 (1994). N.C.G.S. § 58-23-15 provides in part:

A contract or agreement made pursuant to this Article must contain provisions:

....

(3) Requiring the pool to pay all claims for which each member incurs liability during each member's period of membership, except where a member has individually retained the risk, where the risk is not covered, and except for amount of claims above the coverage provided by the pool.

N.C.G.S. § 58-23-15(3) (1994).

The plaintiff argues and the Court of Appeals held that because the City has the right, in certain circumstances, to use funds contributed by the other entities for the payment of claims, the entities had pooled retention of their risks for liability claims and provided for the payment of such claims made against any member of the pool on a cooperative or contract basis. This, says the plaintiff, makes the agreement a local government risk pool within the meaning of N.C.G.S. § 58-23-5. The plaintiff says it does not matter that the City must repay funds it has drawn from another entity. The plaintiff contends this does not keep the agreement from providing for the payment of claims made against a member on a cooperative or contract basis with one another, which is the essence of a local government risk pool. We disagree.

In determining whether the City has joined a local government risk pool, we look first at N.C.G.S. § 58-23-1, which defines "local government." Only counties, cities, and housing authorities are defined as local governments for purposes of joining a local government risk pool. The Charlotte-Mecklenburg Board of Education could not join a risk pool pursuant to this statute. We need not determine the effect this would have on the agreement because we do not believe the agreement in any event constitutes a local government risk pool.

In Blackwelder v. City of Winston-Salem, 332 N.C. 319, 420 S.E.2d 432 (1992), we held that the City of Winston-Salem did not enter a local government risk pool when it organized a corporation to handle claims against it. We held that two or more local governments must join to create a local government risk pool. There are no other cases interpreting the statute as to what constitutes a local government risk pool.

As we read the statute, there must be more risk-sharing than is contained in the City's agreement in order to create a local government risk pool. N.C.G.S. § 58-23-15 provides that a local government risk pool agreement must contain a provision that the pool pay all claims for which a member incurs liability. We do not believe the pool has paid a claim if it is reimbursed for it.

N.C.G.S. § 58-23-5 provides that local governments may enter risk pools "to pool retention of their risks for ... liability claims." As we read this language, the risks of the parties must be put in one pool for the payment of claims in order to have a local government risk pool. This was not done in this case.

Article 23 of General Statutes chapter 58 provides for the creation of local government risk pools. There are statutory requirements for organizing such a pool. The parties must give the Commissioner of Insurance thirty days' notice before organizing the pool. N.C.G.S. § 58-23-5. There are detailed requirements for creating boards of trustees and for adopting procedures for operating the pools. N.C.G.S. § 58-23-10 (1994). There are requirements for maintaining claim reserves. There is nothing in the record to show that any of these requirements have been met. While it may not by itself be determinative, the fact that the City has not complied with the statutory requirements in creating a local government risk pool should be given some weight.

The question as to whether the creation of the DIRM was ultra vires for the City was not raised by the parties and we do not address it. The dissent raises the question and in order to prevent holding that the DIRM is ultra vires determines it is a local government risk pool. The General Assembly has provided that sovereign immunity may be waived by participating in a local government risk pool, and has provided for certain requirements to establish such an organization. We believe it would be a mistake to hold that a local government may ignore these statutory requirements and create a risk pool to its own liking. The City did not intend to join a local government risk pool, and we do not believe we should hold it has done so by accident.

We hold that the City of Charlotte has not joined a local government risk pool.

The plaintiff also argues that the City, by the purchase of the General Reinsurance policy, has waived its sovereign immunity for the amount of each claim in excess of $250,000 but for not more than $1,250,000. This policy covers claims for bodily injury of City employees by accident and excludes coverage for "bodily injury intentionally caused or aggravated by or at the direction of the Insured."

The plaintiff brought this action as a Woodson claim, alleging that the defendant knew or should have known that its action in instructing its officers how to use the radios was substantially certain to cause the death or serious injury of an officer. Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222 (1991). We presume this was done so that the workers' compensation claim would not be plaintiff's exclusive remedy. We do not pass on the question of whether the papers filed in this case show that the evidence would support a Woodson claim. The parties have not raised that question, and on this appeal, we shall assume the plaintiff has a Woodson claim.

The defendant says that by bringing an action based on the allegation that the City knew its action was substantially certain to cause death or serious injury, the plaintiff has alleged a claim that is not covered by the General Reinsurance policy. It says the policy covers accidents and excludes injuries intentionally caused. The plaintiff says the death of her husband was accidental and was not caused intentionally.

In this argument, defendant City must prevail. In N.C. Farm Bureau Mut. Ins. Co. v. Stox, 330 N.C. 697, 709, 412 S.E.2d 318, 325 (1992), we held that an intentional act is an accident within the meaning of a homeowner's insurance policy if the injury incurred was not intended or substantially certain to be the result of the intentional act. We are bound by Stox to hold that when the plaintiff alleged the City's action was substantially certain to cause an injury, she alleged the occurrence was not accidental. This allegation removed the claim from coverage under the policy for purposes of this action.

In Woodson, we held that facts which may support a civil action because they show a substantial certainty of injury may also support a workers' compensation claim on the theory that the claim is based on an accident. We said that the language of the Workers' Compensation Act required this result. Woodson v. Rowland, 329 N.C. 330, 348, 407 S.E.2d 222, 233. The plaintiff in this case is not making a workers' compensation claim, and the provisions of the Workers' Compensation Act are not available to her in determining whether her claim is based on an accident.

For the reasons stated in this opinion, we reverse the Court of Appeals.

REVERSED AND REMANDED.

FRYE, Justice, dissenting.

I disagree with the majority's holding in this case. The issues in this case are: (1) whether the City of Charlotte has waived its governmental immunity by entering into a joint risk-management program with other units of local government, and (2) whether the liability insurance policy provides coverage for the City against a Woodson claim.

"[U]nder the common law, a municipality is immune from liability for the torts of its officers committed while they were performing a governmental function." Wiggins v. City of Monroe, 73 N.C.App. 44, 49-50, 326 S.E.2d 39, 43 (1985). However, N.C.G.S. § 160A-485(a) establishes an exception to the common law rule:

Any city is authorized to waive its immunity from civil liability in tort by the act of purchasing liability insurance. Participation in a local government risk pool pursuant to Article 23 of General Statute Chapter 58 shall be deemed to be the purchase of insurance for the purposes of this section. Immunity shall be waived only to the extent that the city is indemnified by the insurance contract from tort liability. No formal action other than the purchase of liability insurance shall be required to waive tort immunity, and no city shall be deemed to have waived its tort immunity by any action other than the purchase of liability insurance.

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