Request By:
Mr. Fred B. Creasey
Executive Director
Kentucky Association of Counties
P.O. Box 345
205 Capital Avenue
Frankfort, Kentucky 40602
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The fiscal court of each county, as a covered employer, is required to provide workmen's compensation insurance for county employees. See KRS 342.630(2). Every such employer must either take out workmen's compensation insurance with an authorized corporation or qualify as a self insurer. See KRS 342.340(1), 342.345, and
Beth-Elkhorn Corp. v. Ross, Ky., 552 S.W.2d 656 (1977) 657.
We concluded in OAG 78-115 that counties and cities may pool their workmen's compensation liabilities for the purpose of qualifying as self-insurers. See KRS 342.350, 342.630(2), and KRS 65.210-65.300 [Interlocal Cooperation Act].
Such pooling action was taken under the title of KACO-KML [Kentucky Association of Counties - Kentucky Municipal League] involving 90 counties and 180 cities in Kentucky. That group fund has been in existence for two years and is nonprofit.
Your question was written as follows:
"Since excess monies are returned to counties and cities after the payment of claims and administrative costs and these employers are not purchasing insurance, but are simply paying their own claims, it is our opinion that it is not necessary to advertise and accept bids from insurance companies on this portion of their budget expenditures."
Actually KRS 342.350 and 65.210, et seq., permit cities and counties to do jointly [self-insure] what they may do singly. Significantly by engaging in this group pooling of liabilities and assets for paying claims, there simply is no insurance to buy. The group, as a self-insurer, is providing its own insurance. The group, for this purpose, is considered to be one entity. Therefore, where this body of "one" is furnishing its own insurance, it is not buying insurance from another such as to necessitate the application of the bidding principle or procurement regulation.
Thus, we agree with your view; and it is our opinion that the procurement standards and bidding principle established in KRS 45A.345 to 45A.460 [Model Procurement Code], where adopted by local public agencies [here a county or city], or KRS 424.260 [where the code has not been adopted], has no application here, since no insurance is in reality being purchased.