Opinion ID: 2331492
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Heading Rank: 9

Heading: Statutory Amendment Affecting a Vested Right

Text: Generally, a statute operates prospectively unless there is clear language indicating the legislature intended it to operate retrospectively. Owen Lumber Co. v. Chartrand, 276 Kan. 218, 220, 73 P.3d 753 (2003). Here, the legislature stated its intent to make the amendment retroactive in K.S.A. 2010 Supp. 40-2910(c) by applying the amendment to all claims not paid before the effective date of the amendmentjust as KIGA had requested. But even when such legislative intent is clear, courts still must consider whether a statutory provision's retrospective application will affect vested rights, thereby violating due process. 276 Kan. at 220-21, 73 P.3d 753. The term vested rights describes rights that cannot be abolished by retroactive legislation. Resolution Trust Corp. v. Fleischer, 257 Kan. 360, 365, 892 P.2d 497 (1995). It is a conclusory term, and the vested rights analysis is inseparable from the ultimate due process inquiry. See 257 Kan. at 364-65, 892 P.2d 497. Kansas courts consider the following three factors when determining whether legislation created a vested right: (1) the nature of the rights at stake ( e.g., procedural, substantive, remedial), (2) how the rights were affected ( e.g., were the rights partially or completely abolished by the legislation; was any substitute remedy provided), and (3) the nature and strength of the public interest furthered by the legislation. 257 Kan. at 369, 892 P.2d 497. As to the first factor, Brennan argues the coverage provided by the Guaranty Act is remedial in nature. KIGA argues the amendment is either procedural or remedial because it provides a means for individuals to get claims against insolvent insurance companies paid by KIGA. Procedural laws relate to the `machinery for carrying on the suit, including pleading, process, evidence, and practice' and `the mode or proceedings by which a legal right is enforced, that which regulates the formal steps in an action.' 257 Kan. at 366, 892 P.2d 497. It is clear that this amendment was not procedural. But it is more difficult to determine whether the amendment was substantive or remedial. Substantive laws give or define the right, give the right or denounce the wrong, or create liability against a defendant for a tort committed. 257 Kan. at 366, 892 P.2d 497. The two most recent cases finding an amendment was substantive pertained to amendments extinguishing a cause of action. In Fleischer, the issue was whether the holder of an accrued tort action had a vested property right in that cause of action before it reached final judgment. This court held there was a vested right under the facts. 257 Kan. at 374, 892 P.2d 497. In Kelly v. VinZant, 287 Kan. 509, 197 P.3d 803 (2008), this court held an amendment eliminating a cause of action under the Kansas Consumer Protection Act against a medical provider for negligence was substantive because the amendment excluded a group previously liable under that Act. 287 Kan. at 521, 197 P.3d 803. Remedial statutes `reform or extend existing rights, and having for their purpose the promotion of justice and the advancement of public welfare and of important and beneficial public objects, such as the protection of the health, morals, and safety of society, or of the public generally.' In re Estate of Brown, 168 Kan. 612, 617, 215 P.2d 203 (1950). K.S.A. 2010 Supp. 40-2910 is more appropriately characterized as reforming the terms of an existing right because it changed the types of coverage a claimant was required to exhausteffectively broadening the circumstances in which KIGA is allowed to offset other insurance payments. It did not create or extinguish the previous statute's requirement that a person claiming a recovery from KIGA exhaust other insurance coverage. Therefore, we conclude it is a remedial statute. Historically, this finding would terminate the vested rights analysis because courts grouped procedural and remedial laws together under the rule that there is no vested right in any particular remedy or method of procedure. Fleischer, 257 Kan. at 366, 892 P.2d 497. But this court recognized that a remedial statute could affect a vested right in Owen Lumber Co. There the court held that the legislature may retroactively modify remedies by which rights are enforced, unless the modification has the practical effect of abolishing the right. 276 Kan. at 225, 73 P.3d 753. We cited the following explanation from a commentator: `The [United States Supreme] Court has recognized that the removal of all or a substantial part of the remedies for enforcing a private contract may have the same practical effect as an explicit denial of the right. Thus the relevant factor in determining the weight to be given to the extent to which a preexisting right is abrogated is not whether the statute abolishes rights or remedies, but rather the degree to which the statute alters the legal incidents of a claim arising from a preenactment transaction; the greater the alteration of these legal incidents, the weaker is the case for the constitutionality of the statute.' Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv. L.Rev. 692, 711-12 (1960). 276 Kan. at 223, 73 P.3d 753. Since a statute may be remedial and affect a vested right, the first factor is not determinative of the vested rights analysis. The first factor (the nature of the right) must be balanced against the others, including how the right was affected, whether a substitute remedy was provided, and the public interest furthered by the legislation. 276 Kan. at 227, 73 P.3d 753. Applying these factors in concert supports a finding that Brennan had a vested right for three reasons. First, the statutory amendment extinguished Brennan's right to recover from KIGA and there was no substitute remedy with the insolvent insurance policy. Second, the Guaranty Act's stated purpose is to avoid financial loss to claimants or policyholders, and the entire statutory scheme is designed to cover the obligations of insolvent insurance companies while sharing the burden from those obligations among all member insurers. Third, the strong statutory language reciting that KIGA was deemed the insurer to the extent of its obligations on the covered claims and obligated to the extent of the covered claims indicate a statutory right arose at the time PHICO was declared insolvent. K.S.A. 40-2906(a)(1), (2). As a final point, KIGA argues the general principal that a plaintiff has no vested right in any rule of law to remain unchanged for his or her benefit. But in Fleischer, this court held that rule applies to prospective amendments, not to the retroactive application of legislation to an accrued and pending claim. 257 Kan. at 367-68, 892 P.2d 497. KIGA's argument is without merit. We find the 2005 amendment adversely impacted a vested right, thereby violating Brennan's due process rights.