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Lyles v. City of Charlotte and Motorola Inc.11/8/1996
cal government" as "any county, city, or housing authority located in this State." Thus, the City may waive its governmental immunity by purchasing liability insurance or by participating in a government risk pool. Otherwise, the City has no "risk" to protect itself against since the City is immune from suit in tort.
The City of Charlotte has purchased liability insurance for accidental injury to City employees, but contends that the claim asserted in the instant action is not covered by its liability insurance because of a specific exclusion in the policy. Although it has entered into an elaborate risk-management program with the County and the School Board, the City of Charlotte contends that it is not participating in a local government risk pool so as to waive governmental immunity. I believe that the City has waived its governmental immunity, both by the purchase of liability insurance and by entering a risk-management program which should be deemed a local government risk pool.
The problem with allowing local governments to enter into "joint undertaking" contracts, such as the one at issue in the instant case, is that it gives local governments the unbridled discretion to pay some claims and to assert governmental immunity as to those claims that it does not wish to pay. Under such a scheme, the decision of the local government officials is not reviewable, and the awards to injured parties may be distributed on an arbitrary basis without any opportunity for the injured party to have the decision of the local government reviewed by the courts. Even the State of North Carolina does not have such unbridled discretion. Thus, I conclude that a municipal corporation may not benefit by participating with other local governments in a risk-management program which is tantamount to a statutory local government risk pool without losing its governmental immunity for claims covered by the risk-management program.
Article 23 of Chapter 58 of the North Carolina General Statutes is known as the Local Government Risk Pool Act. The Local Government Risk Pool Act provides in pertinent part:
In addition to other authority granted pursuant to Chapters 153A and 160A of the General Statutes, two or more local governments may enter into contracts or agreements pursuant to this Article for the joint purchasing of insurance or to pool retention of their risks for property losses and liability claims and to provide for the payment of such losses of or claims made against any member of the pool on a cooperative or contract basis with one another, or may enter into a trust agreement to carry out the provisions of this Article. . . . Such local governments shall give the Commissioner 30 days' advance written notification, in a form prescribed by the Commissioner, that they intend to organize and operate risk pools pursuant to this Article.
N.C.G.S. ยง 58-23-5 (1994).
In Blackwelder v. City of Winston-Salem, 332 N.C. 319, 420 S.E.2d 432 (1992), this Court examined a government risk-management program and concluded that it did not operate as a waiver of sovereign immunity. The City of Winston-Salem had organized a corporation named Risk Acceptance Management Corporation (RAMCO) to handle claims against the City of $1,000,000 or less. All officers and directors of RAMCO were employees of the City. RAMCO obtained part of its funds for operations by issuing tax exempt certificates with payment of the certificates guaranteed by the City. The City agreed to pay to RAMCO $600,000 annually and to reimburse RAMCO for operating expenses, borrowed funds, and all other costs. We held that because the City of Winston-Salem had not joined with any other local government unit in the
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