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State v. Kentucky Insurance Guaranty Association5/30/1997
ng continuing violations. We have reviewed the cases applying the concept and are unpersuaded. A common law trespass claim was the focus in Ferguson v. Utilities Elkhorn Coal Co., Ky., 313 S.W.2d 395 (1958). Similarly, a common law nuisance claim was at issue in Lynn Mining Co. v. Kelly,
Ky., 394 S.W.2d 755 (1965). The Cabinet cites no Kentucky law that extends the continuing violation premise in those nuisance and trespass cases to an action against a surety arising from a performance bond and we perceive no sound legal basis for so holding.
Furthermore, public policy considerations support this Conclusion. KIGA cites Commercial Standard Insurance Company v. Alabama Surface Mining Reclamation Commission, Ala. Civ. App., 443 So. 2d 1245 (1983), in which the Court interpreted a statute of limitation requiring complaints alleging violations of the Reclamation Commission's regulations to be filed within ninety (90) days of the event giving rise to the complaint. The Court rejected the Commission's argument that the limitations statute does not run in favor of a permittee or a surety on a mining operation where the violation is continuing, stating:
To adopt the Commission's interpretation would nullify and eliminate the limitation provision entirely. There would be a diminished incentive to press for early reclamation. There would be no end to the surety's obligation under the bond. To remove a time limit for enforcing reclamation is to encourage delay of reclamation.
443 So. 2d at 1247. In our opinion, it is precisely because the violations are continuing and unabated that KRS 413.220(3) should be deemed applicable by analogy, as it is perhaps the only incentive for the Cabinet to promptly pursue such matters.
IV. FILING OF PROOFS OF CLAIM WITH LIQUIDATORS FOR THE INSOLVENT SURETIES IS IRRELEVANT TO THE REQUIREMENT THAT SUIT AGAINST KIGA BE INITIATED WITHIN SEVEN YEARS
Finally, the Cabinet asserts that it preserved its right to seek bond forfeiture by filing proofs of claims with the liquidators of the insolvent insurers and with KIGA. While such filings may have been required to preserve the Cabinet's rights against the insolvent insurers and to put KIGA on notice, they are totally irrelevant to the issue of whether the statute of limitations has been tolled for a cause of action against KIGA. In the seven years following issuance of notices of noncompliance, the Cabinet failed to initiate a proceeding against KIGA in any forum as required by KRS 413.220(3), applicable literally to a court proceeding and by analogy to an administrative proceeding. The Cabinet appears to confuse the filing of a proof of claim so as to preserve its rights to perhaps obtain some recovery against the insolvent surety with the institution of the proceedings against KIGA necessary to recover on a "covered claim" and satisfy the statute of limitations. They are clearly distinct steps with clearly disparate purposes. The fact that the filing of a proof of claim is essential to preserve the Cabinet's rights in liquidation proceedings, as well as to notify KIGA of its potential liability, has absolutely no bearing on whether the Cabinet proceeded against KIGA in a timely manner. In this case, the Cabinet plainly did not proceed against KIGA in the available seven-year period and its claims are time-barred.
The judgment of the Franklin Circuit Court is affirmed.
ALL CONCUR.
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