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State v. Kentucky Insurance Guaranty Association5/30/1997
f the permittee failed to comply with other aspects of applicable statutes and regulations. Therefore, pursuant to KRS 304.36-080(1)(a) KIGA becomes liable for performance bond where the permittee fails to obtain an adequate bond after the insolvency. However, 304.36-080(1)(b) limits KIGA's obligation to those instances where the permittee violates applicable statutes and regulations other than the performance bond requirements. In most cases, KIGA will only become liable if a permittee fails to obtain a new performance bond and fails to properly reclaim the mining site. This interpretation best carries out the intent of the statutes creating the KIGA and the statutes requiring performance bonds to insure proper reclamation.
885 S.W.2d at 318.
The court's holding was underscored in the closing lines of the opinion when it stated " is liable to the [Cabinet] for such performance bond when and if the permittee violates applicable statutes and regulations other than those involving performance bond requirements." Id., (emphasis supplied). This holding is a natural extension of the Kentucky Supreme Court opinion in Kentucky Insurance Guaranty Association v. Natural Resources and Environmental Protection Cabinet, Ky., 781 S.W.2d 519,521 (1989) [hereafter KIGA I ], wherein the court held that "a liberal construction of this act [creating KIGA] to effectuate its stated purpose ... requires us to hold that the Cabinet's claim against the bonding companies is coexistent with its claim against the permittees under the mining permit."
Together the decisions in KIGA I and KIGA II establish that the Cabinet's cause of action against KIGA accrues when the Cabinet would first have had a claim against the permittee for a violation beyond that created by the insurer's insolvency. In this case, that point in time was no later than the date on which a notice of noncompliance was issued to the permittee for a violation other than the mere failure to maintain a performance bond issued by a solvent insurer. Reviewing the record, it is apparent that on each of the bonds the Cabinet issued a notice of noncompliance regarding actual substantive violations of the mining reclamation statutes and regulations such as inadequate vegetation or improper grading and backfilling. In some instances there was one notice for failure to maintain an adequate bond and a second notice shortly thereafter for substantive violations, while in at least one case the substantive reclamation violations and bond adequacy violation were combined in one notice. Under either scenario, it is the date of the notice of noncompliance for actual reclamation violations which is dispositive of the issue at hand. Without question the Cabinet's cause of action against KIGA on any given bond accrued no later than the first date after the insurer's insolvency on which the Cabinet cited the permittee for substantive reclamation violations. All of the notices of noncompliance applicable to the properties secured by the bonds at issue on this appeal were issued more than seven years prior to the filing of the petition for declaratory relief by KIGA. At the time the petition was filed, no administrative actions had been commenced by the Cabinet. Thus, it is quite evident that the circuit court was correct in concluding that the Cabinet's causes of action had accrued and KRS 413.220(3), applicable by analogy, had run its course prior to the filing of KIGA's petition for declaratory relief.
Although the Cabinet suggests that the recent opinion in Natural Resources and Environmental Protection Cabinet v. Whitley Development Corp., Ky. App., 940 S.W.2d 904 (1997), supports its position, we disagree. In that case the performance bonds in disp
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