NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION, Plaintiff, v. THE
BOARD OF TRUSTEES OF GUILFORD TECHNICAL COMMUNITY COLLEGE,
Defendant
NO. COA06-401
Filed: 21 August 2007
1. Appeal and Error--appealability--sovereign immunity--substantial right
Although defendant community college's appeal from the denial of its motion to dismiss is
an appeal from an interlocutory order, it is immediately appealable because the defense of sovereign
immunity affects a substantial right.
2. Immunity--sovereign--community college--reimbursement of payments for workers'
compensation benefits
The trial court erred by denying defendant community college's motion to dismiss a
declaratory judgment action by the Insurance Guaranty Association for reimbursement of payments
for workers' compensation benefits under the net worth provisions of the Guaranty Act in N.C.G.S.
§ 58-48-50(a1), because: (1) the cases cited by plaintiff from other jurisdictions are not instructive
when they fail to analyze whether the sovereign immunity defense is a bar to a guaranty association's
right to reimbursement from a State agency, and no legal authority exists to support a guaranty
association's right to seek reimbursement from a State agency which has asserted sovereign
immunity; (2) our General Assembly has explicitly waived defendant's sovereign immunity only as
to its institutional employees raising valid workers' compensation claims; (3) the General Assembly
is silent as to any claims for reimbursement plaintiff has against the State; and (4) there are no
provisions in the North Carolina General Statutes that present a clear waiver of defendant's
sovereign immunity or a plain unmistakable mandate for waiver of sovereign immunity.
Defendant appeals from an order entered 26 January 2006 by
Judge A. Leon Stanback, Jr. in Wake County Superior Court. Heard
in the Court of Appeals 5 June 2007.
Nelson, Mullins, Riley, & Scarborough, LLP, by Christopher J.
Blake, for plaintiff-appellee.
Smith Moore, LLP, by Sidney S. Eagles, Jr. and James R.
Holland, for defendant-appellant.
BRYANT, Judge.
The Board of Trustees of Guilford Technical Community College
(defendant-GTCC)
appeals from an order entered 26 January 2006
denying its motion to dismiss a declaratory judgment action filed
by North Carolina Insurance Guaranty Association (plaintiff-NCIGA).
Because we hold NCIGA's claim for reimbursement for payments made
on behalf of GTCC is barred by the doctrine of sovereign immunity,
we reverse the judgment of the trial court.
This case arises from claims for workers' compensation
benefits made against GTCC by its employees that were paid by NCIGA
as “covered claims” within NCIGA's obligations under the North
Carolina Insurance Guaranty Association Act (Guaranty Act). N.C.
Gen. Stat. § 58-48-1, et seq. GTCC is a two-year accredited
community college operating under the provisions of N.C. Gen. Stat.
§ 115D-1, et seq. NCIGA is a non-profit, unincorporated, statutory
association arising and existing pursuant to the Guaranty Act.
GTCC purchased workers' compensation liability insurance from
Reliance Insurance Company (Reliance). Reliance was declared
insolvent and placed into liquidation in Pennsylvania on 3 October
2001.
Following Reliance's insolvency, NCIGA fulfilled its statutory
obligations under the Guaranty Act, and began making indemnity anddefense payments in connection with GTCC workers' compensation
claims which were “covered claims” under the Guaranty Act. NCIGA
thereafter demanded that GTCC reimburse $324,013 paid by NCIGA
through 19 August 2005 on GTCC workers' compensation claims.
NCIGA's demand for reimbursement was made pursuant to N.C. Gen.
Stat. § 58-48-50(a1), a provision of the Guaranty Act which grants
NCIGA the right to recover all sums paid for “covered claims” on
behalf of an insured if the insured's net worth as of December 31
of the year preceding the insolvency of the insured's carrier
exceeds $50 million. N.C. Gen. Stat. § 58-48-50(a1) (2005). GTCC
does not dispute that it had a net worth in excess of $50 million
as of 31 December 2000.
NCIGA commenced a declaratory judgment action on 20 September
2005 against GTCC. NCIGA's complaint seeks reimbursement from GTCC
pursuant to the net worth provisions of the Guaranty Act. In
response to NCIGA's complaint, GTCC moved to dismiss pursuant to
Rules 12 (b)(1), (b)(2) and (b)(6) of the North Carolina Rules of
Civil Procedure, all on the grounds NCIGA's claims against GTCC
were barred by sovereign immunity. The trial court denied GTCC's
motion to dismiss. Defendant-GTCC appeals.
______________________
Defendant argues that based on the doctrine of sovereign
immunity the trial court erred by
denying GTCC's motion to dismissbecause
: (I)
the trial court lacked subject matter jurisdiction
(II) the trial court lacked personal jurisdiction and (III)
plaintiff failed to state a claim upon which relief may be granted
.
The standard of review on appeal from a motion to dismiss is
de novo.
Hatcher v. Harrah's N.C. Casino Co., LLC, 169 N.C. App.
151, 155, 610 S.E.2d 210, 212 (2005). “Under a
de novo review, the
[C]ourt considers the matter anew and freely substitutes its own
judgment for that of the [trial court].”
In re Greens of Pine Glen
Ltd. P'ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003) (citing
Mann Media, Inc. v. Randolph County Planning Bd., 356 N.C. 1, 13,
565 S.E.2d 9, 17 (2002)).
[1] Defendant argues the trial court erred by denying their
motion to dismiss on the basis of sovereign immunity because the
trial court lacked subject matter and personal jurisdiction.
Initially, we note the immediate appeal, although interlocutory, is
appropriate because the trial court's denial of a motion to dismiss
based on GTCC's sovereign immunity defense affects a substantial
right.
McClennahan v. N.C. Sch. of the Arts, 177 N.C. App. 806,
808, 630 S.E.2d 197, 199 (2006) (Appeals raising issues of
sovereign immunity affect a substantial right and are immediately
appealable.
)
(internal quotation marks and citations omitted)
.
However,
“an appeal of a motion to dismiss based onsovereign immunity presents a question of
personal jurisdiction rather than subject
matter jurisdiction[.]” [
Data Gen. Corp. v.
County of Durham, 143 N.C. App. 97, 100
, 545
S.E.2d 243, 245-46
(2001).]
Therefore, our
Court held that the denial of a 12(b)(1)
motion to dismiss for lack of subject matter
jurisdiction is not immediately appealable,
even where the defense of sovereign immunity
is raised.
Id. at 100, 545 S.E.2d at 246.
Davis v. Dibartolo, 176 N.C. App. 142, 144, 625 S.E.2d 877, 880
(2006). Therefore, we review defendant's appeal from their motion
to dismiss
on the basis of defendant's claim that the trial court
lacked personal jurisdiction to determine whether the General
Assembly has waived GTCC's sovereign immunity for claims by NCIGA
under the reimbursement provision of the Guaranty Act
.
[2]
The reimbursement provision of the Guaranty Act states in
pertinent part:
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. . . .
N.C. Gen. Stat. § 58-48-50 (al) (2002)
(See footnote 1)
(emphasis added). Whilethe General Assembly did not define the term “insured” in the
Guaranty Act, a “person” is defined as “any individual,
corporation, partnership, association or voluntary organization.”
N.C. Gen. Stat. § 58-48-20 (8) (2002). NCIGA argues that the broad
language of “any insured” in the reimbursement provision waives
GTCC's sovereign immunity.
However, a waiver of sovereign immunity can be made only by
the General Assembly.
Wood v. N.C. State Univ., 147 N.C. App. 336,
338, 556 S.E.2d 38, 40 (2001). North Carolina courts have applied
a rule of strict construction to statutes authorizing waiver of
sovereign immunity.
Id. (citation omitted);
Jones v. Pitt Co. Mem.
Hosp., 104 N.C. App. 613, 615-16, 410 S.E.2d 513, 514 (1991). Our
Supreme Court has stated “[i]t is for the General Assembly to
determine when and under what circumstances the State may be sued.”
Jones at 615-16, 410 S.E.2d at 514 (citing
Great Am. Ins. Co. v.
Gold, Comm'r of Ins., 254 N.C. 168, 172-73, 118 S.E.2d 792, 795
(1961)). Further,
[t]he State and its governmental units cannot
be deprived of the sovereign attributes of
immunity except by a clear waiver by the
lawmaking body. The concept of sovereign
immunity is so firmly established that it
should not and cannot be waived by indirection
or by procedural rule. Any such change should
be by
plain, unmistakable mandate of the
lawmaking body.
Wood at 338, 556 S.E.2d at 40 (quotation omitted);
See OrangeCounty v. Heath, 282 N.C. 292, 296, 192 S.E.2d 308, 310-11 (1972)
(“the Courts will never say that [sovereign immunity] has been
abrogated, abridged, or surrendered, except in deference to
plain,
positive legislative declarations to that effect”) (emphasis
added);
Davidson County v. High Point, 85 N.C. App. 26, 37, 354
S.E.2d 280, 286,
aff'd as modified, 321 N.C. 252, 362 S.E.2d 553
(1987) (citation omitted) (“general statutes do not apply to the
State unless the State is specifically mentioned therein”).
The absolute and unqualified protection of sovereign immunity
extends to suits against State “departments,
institutions and
agencies.”
RPR & Assocs. v. State, 139 N.C. App. 525, 528, 534
S.E.2d 247, 250 (2000) (emphasis added),
aff'd, 353 N.C. 362, 543
S.E.2d 480 (2001) (citation omitted).
As a sovereign, the State of
North Carolina is immune from suit absent its consent to be sued or
waiver of immunity.
Welch Contr., Inc. v. N.C. DOT, 175 N.C. App.
45, 51, 622 S.E.2d 691, 695 (2005) (citing
Battle Ridge Cos. v.
N.C. DOT, 161 N.C. App. 156, 157, 587 S.E.2d 426, 427 (2003)).
GTCC, as a community college and an institution of the State
(See footnote 2)
, is
authorized to waive its governmental immunity from liability
through the purchase of liability insurance for negligent ortortious conduct that results in bodily injury or property damage.
N.C. Gen. Stat. § 115D-24 (2005). GTCC is also authorized to waive
its immunity by purchasing insurance to cover liability for
workers' compensation claims.
NCIGA argues the net worth provision compels its right to
reimbursement from GTCC and that GTCC has waived its sovereign
immunity by purchasing workers' compensation liability insurance
from Reliance. We are ultimately unpersuaded by these arguments.
First, the cases cited by NCIGA from other jurisdictions are not
instructive where they fail to analyze whether the sovereign
immunity defense is a bar to a guaranty association's right to
reimbursement from a State agency.
See, e.g., Borman's, Inc. v.
Mich. Prop. & Cas. Guar. Assoc., 925 F.2d 160 (6th Cir. 1991)
(upholding as constitutional Michigan's net worth provision);
Minn.
Ins. Guar. Ass'n v. Integra Telecom, Inc., 697 N.W.2d 223, 231
(Minn. 2005) (permitting the guaranty association to recover from
an insured with a net worth over $25 million);
Rhode Island
Insurer's Insolvency Fund v. Leviton Mfg. Co., 716 A.2d 730, 735
(R.I. 1998) (upholding as constitutional Rhode Island's net worth
provision allowing for reimbursement). In fact, no legal authority
exists to support a guaranty association's right to seek
reimbursement from a State agency which has asserted sovereign
immunity. NCIGA's second argument, that GTCC has waived sovereign
immunity, also fails. With respect to workers' compensation claims
against GTCC, the Community Colleges Act provides that “all
institutional employees” are protected under Chapter 97 of the
General Statutes of North Carolina (Workers' Compensation Act).
N.C. Gen. Stat. § 115D-23 (2005). Further, community colleges are
authorized to “purchase insurance to cover workers' compensation
liability.”
Id.
Accordingly, our General Assembly has explicitly
waived GTCC's sovereign immunity only as to its institutional
employees raising valid workers' compensation claims. However, and
most notably, the General Assembly is silent as to any claims for
reimbursement NCIGA has against the State.
Accordingly, we have found no provision in the North Carolina
General Statutes that presents a “clear waiver” of GTCC's sovereign
immunity or a “plain, unmistakable mandate” for waiver of sovereign
immunity. Absent clear proof that the State has waived sovereign
immunity pursuant to the reimbursement provision of the Guaranty
Act, we are compelled to reverse the trial court's denial of
defendant's motion to dismiss.
See Sellers v. Rodriguez, 149 N.C.
App. 619, 623, 561 S.E.2d 336, 339 (2002) (holding in order to
state a cognizable claim against a government entity plaintiff
“must allege and prove” waiver of sovereign immunity).
Moreover, dismissal is appropriate “where the face of the
complaint discloses some insurmountable bar to recovery.”
Newbernev. Dep't of Crime Control & Pub. Safety, 359 N.C. 782, 784, 618
S.E.2d 201, 203 (2005). As discussed above, accepting the factual
allegations in NCIGA's complaint as true, dismissal is proper
because NCIGA cannot defeat GTCC's sovereign immunity defense.
NCIGA's allegations fail to state a claim upon which relief can be
granted. We therefore reverse the trial court's denial of
defendant's motion to dismiss.
Reversed.
Judges WYNN and HUNTER concur.
Footnote: 1