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State v. Kentucky Insurance Guaranty Association5/30/1997
ions statute for suits against a surety, barred the Cabinet's claims on this second group of surety bonds.
The hearing officer's recommendations were subsequently considered by the Secretary of the Cabinet who granted KIGA's motion for summary judgment, citing as dispositive the hearing officer's finding that the claims in question were not "covered claims." In an order clarifying his decision, the Secretary stated that because the recommendations concerning the statute of limitations were not necessary to the hearing officer's decision that portion of the recommendation was denied as moot. KIGA then petitioned the Franklin Circuit Court for a declaration that the Cabinet is barred from pursuing any claims it might have had with respect to the second group of bonds upon which the Cabinet had issued timely notices of noncompliance but failed to initiate any proceedings against KIGA during the seven years following issuance of the notices. Rejecting the arguments now advanced in this forum, the circuit court found that KRS 413.220(3) applied to bar the claims in question. Although our analysis differs from the trial court's, we agree and affirm.
I. KRS 413.220(3) APPLIES BY ANALOGY TO BAR ADMINISTRATIVE
ACTIONS BROUGHT BEYOND THE SEVEN-YEAR LIMITATION PERIOD
The starting point for our Discussion is necessarily the language of the limitations statute in question,
KRS 413.220(3):
A surety in any obligation or contract, other than those provided for in KRS 413.230, shall be discharged from all liability on it unless suit is brought on it within seven (7) years after the cause of action accrues.
The cross-referenced statute, KRS 413.230, provides a five-year limitations period in favor of sureties for specifically named persons handling funds from a decedent's estate; that statute obviously has no relevance to the instant case. To avoid the otherwise all-encompassing language of the statute, the Cabinet first argues that KRS 413.220(3) addresses judicial actions and has no application in the context of administrative proceedings. Although initially appealing, on closer examination the Cabinet's position is not justified.
Relying upon the following language in Metts v. City of Frankfort, Ky. App., 665 S.W.2d 318, 319 (1984), the Cabinet insists that the limitations statutes in KRS Chapter 413 generally are operative only within the sphere of judicial actions:
KRS 413.250 provides that an action "shall be deemed to commence on the date of the first summons or process issued in good faith from a court having jurisdiction of the cause of action." CR 3 states that a civil action "is commenced by the filing of a complaint with the court and the issuance of a summons or warning order thereon in good faith." Accordingly, the "action" contemplated by the statutes of limitations involves judicial proceedings. (emphasis added).
In Metts, the Secretary of Transportation sought to recover from the City of Frankfort an indebtedness attributable to the relocation of city sewer lines in the course of certain highway construction projects undertaken by the Department of Transportation. The city had accepted responsibility for the relocation work but had never reimbursed the Department. To recover the unpaid sums the Secretary first served notice on state officials pursuant to KRS 44.030 that the unpaid bills should be set off against certain legislative appropriations to the city. KRS 44.030 recognizes the right of the state to offset any debt owed to the state against any payment due to "any person on a claim against the state in his own right, or as an assignee of another ... ." When the city later broug
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