Opinion ID: 1300198
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Heading Rank: 2

Heading: analysis

Text: 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 N.C.G.S. §§ 58-48-20(5), -48-35 (2007), -48-20(4) (2001). The Guaranty Act also gives NCIGA the right to reimbursement if it has made payments on workers' compensation claims for a high net worth employer whose insurer is insolvent. See Id. § 58-48-50(a1)(1). Thus, both NCIGA's obligations to pay an employer's (here, GTCC's) workers' compensation claims and its right to obtain reimbursement from [a]ny insured high net worth employer arise from GTCC's having elected to insure its underlying workers' compensation liability with Reliance. Id. Yet, the Guaranty Act is essentially silent on the question of sovereign immunity, and the term insured is not defined therein. 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 sued 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 indemnification[,]. . . . [t]he right to indemnification arises out of a tort claim, the State's immunity to which was abrogated by the Tort Claims Act,  and consequently, the State may be joined as a third-party defendant, whether in an action for contribution or in an action for indemnification, in the State courts (emphasis added)). Similarly, the central issue before us here involves reimbursement that arises out of a substantive workers' compensation claim, the State's immunity to which was abrogated by section 97-7 of the Workers' Compensation Act. Id. at 332, 293 S.E.2d at 187. 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. N.C.G.S. § 97-7 (2007). The Act provides, in pertinent part: 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) (G.S. [§] 97-7 extends the Workers' Compensation Act to the State. As an `employer' under the Act, the State may not `reject the provisions of [the] Article relative to payment and acceptance of compensation.' (second alteration in original) (citations omitted)). Further, section 115D-23 specifically applies the Workers' Compensation Act to institutional employees of the state's community colleges. The statute requires the State Board of Community Colleges to make the necessary arrangements to carry out those provisions of Chapter 97 for its employees and authorizes the board of trustees of each community college to purchase insurance to cover workers' compensation liability. N.C.G.S. § 115D-23 (2007). 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 insurance from an authorized corporation, association, organization, or in any mutual insurance association formed by a group of employers so authorized or by self-insuring. Id. § 97-93 (2007). The term `employer' includes, inter alia, the State and all political subdivisions thereof, [and] all public and quasi-public corporations therein. Id. § 97-2(3) (2007). In section 115D-23 the General Assembly has specifically authorized the board of trustees of each community college to purchase insurance to cover workers' compensation liability if the institution elects not to self-insure. Id. § 115D-23. If an employer, including the State and its entities, elects to purchase workers' compensation insurance, it still must comply with the provisions of the Workers' Compensation Act and the Guaranty Act by purchasing insurance only from an entity that is licensed and authorized to transact insurance business in this State. 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 id. § 97-94 (2007); Roberts v. City Ice & Fuel Co., 210 N.C. 17, 21, 185 S.E. 438, 440-41 (1936). As this Court stated in Roberts: 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 N.C.G.S. § 97-25.1 (2007)). As noted by this Court, the Workers' Compensation Act is a remedial statutory scheme: 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 sovereign immunity in N.C.G.S. § 97-7 should be construed and applied to statutes, such as the Guaranty Act, in a manner that effectuates the primary purpose of the Workers' Compensation Act. 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. N.C.G.S. § 58-48-5 (2007). With regard to workers' compensation claims, the Guaranty Act ensures that employees will be compensated in a timely manner even when the employer's insurer becomes insolvent. See id. § 58-48-35. As such, the provisions of the Guaranty Act pertaining to NCIGA's workers' compensation account are intended to promote the goals of the Workers' Compensation Act, and as our legislature has instructed, the Guaranty Act shall be liberally construed to effect the purpose under G.S. 58-48-5 which shall constitute an aid and guide to [its] interpretation. Id. § 58-48-15 (2007). 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. § 58-48-35(a)(1) (stating, inter alia, that: (1) although NCIGA's obligation includes only the amount of each covered claim that is in excess of fifty dollars ($50.00) and is less than three hundred thousand dollars ($300,000), NCIGA  shall pay the full amount of a covered claim for benefits under [] workers' compensation insurance;  and (2) NCIGA is not obligated to pay a claimant's covered claim, except a claimant's workers' compensation claim if . . . [t]he insured had primary coverage at the time of the loss with a solvent insurer in a minimum amount specified by statute. (emphases added)).