February 3, 1977

Mr. Russell Shoemaker, Chairman 
Day County Commissioners 
Webster, South Dakota 57274

Official Opinion No. 77-17

Liability insurance for county hospitals

Dear Mr. Shoemaker:

You have requested an opinion on the following questions:

QUESTIONS: 

1.  To what extent is a county hospital protected by sovereign immunity? 
    
2.  To what extent should the county carry liability or malpractice insurance?

IN RE QUESTION NO. 1:

County hospitals are authorized by SDCL 34-8, and the specific authority for purchasing liability insurance is found in SDCL 34-8-9 and provides: 
    
The board of county commissioners of any county maintaining or operating or who may hereafter maintain and operate, a county hospital or hospitals under the provisions of this chapter, may enter into contracts for public liability insurance, covering and protecting the employees and servants at such hospital or hospitals against liability for negligence or malpractice of said employees or servants, for and in such amount or amounts as said governing body may deem advisable and may pay for the same out of the operating and maintenance fund of such hospital or hospitals.

The South Dakota Supreme Court has interpreted this statute in Jerauld County v. Saint Paul-Mercury Indemnity Co., 71 N.W.2d 571 (1955).  The Court held that no action lies against a county for the negligence of its officers, employees and agents unless expressly permitted by statute.  A county is merely an instrumentality of the State created for the purpose of carrying out governmental functions and is afforded the same protection from suit as is the State.

The sovereign immunity of units of local government was affirmed in Shaw v. City of Mission, 225 N.W.2d 593 (1975).  The Court stated therein that the fact the Legislature limited authorization for purchase of liability insurance to coverage for protection of employees and servants indicates its awareness of the rule of sovereign immunity of the local governmental unit.

In answer to your first question, a county is immune from liability when exercising governmental powers and functions by virtue of the fact that it is an agent or instrumentality of the sovereign state.  Unless and until the Legislature modifies or removes the sovereign immunity, it is absolute in this regard. Conway v. Humbert, 145 N.W.2d 524 (1966).

IN RE QUESTION NO. 2:

The sovereign immunity of the State of South Dakota and its political subdivisions, as discussed in question no. 1, does not necessarily extend to officers and employees thereof.  The recent trend of court decisions is such that the concept of sovereign immunity does not extend to agent-employees who commit acts of personal negligence.  Loonan Lumber Company v. Wannamaker, 131 N.W.2d 78 (1964).  Some courts have examined the nature of the function performed and attempted to distinguish between ministerial and discretionary duties imposing personal liability only in the former.  Horner v. Terpin, 258 N.W. 140.  However, more recent decisions, including the United States Court of Appeals (8th Cir.) in Shumaker v. Sommer, have stated that the liability of the employee arises from the breach of duty owed to the public without reference to the nature of the function performed.  Under either theory, it is my opinion that employees of county hospitals are potentially personally liable for negligent acts performed in the course of employment. Therefore, to the extent the board of county commissioners desires to cover and protect said employees, SDCL 34-8-9 authorizes purchase and payment by the county of liability insurance.

The nature and amount of coverage are, of course, policy decisions in which this office will not get involved.

Respectfully submitted,

William J. Janklow
Attorney General

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