August 18, 1994
Subject: Direct Restitution Or Reparation Payments to Insurers
Written By: David E. Spenard
Requested By: Hon. Richard Weisenberger
Syllabus: A trial court is not authorized to order restitution or reparation payments directly to an insurer as part of the criminal proceedings.
Statutes construed: KRS 431.200; KRS 533.030(3)
Opinion of the Attorney General
In your June 21, 1994, letter you asked whether a trial court could order a person convicted of a crime to pay restitution to an insurer who has previously compensated the crime victim. As you are aware, all criminal prosecutions in state court are maintained on behalf of the Commonwealth. See Dixon v. Commonwealth, 288 Ky. 57, 155 S.W.2d 455 (1941). The criminal proceeding does not prevent the victim or their insurer from pursuing relief in a separate civil proceeding. See RRS 431.080; KRS 431.200; KRS 500.040(2) and KRS 533.030(3). However, any order of restitution or reparation in a criminal proceeding must be authorized by statute. In our view, trial courts are without any statutory authority to order restitution to an insurer as a condition of probation. Additionally, an insurer is not a victim under KRS 533.030 or a person aggrieved within the meaning intended for KRS 431.200.
Restitution As A Condition Of Probation.
A trial court has no inherent power to grant probation. The power to grant probation is conferred by the legislature. Lovelace v. Commonwealth, 285 Ky. 326, 147 S.W.2d 1029 tl941); see generally Com. Ex Rel. Armstrong v. Collins, Ky., 709 S.W.2d 437 (1986); Commonwealth v. Reed, Ky.App., 680 S.W.2d 134 (1984) (overruled on other grounds by Pruitt v. Commonwealth, Ky., 700 S.W.2d 68 (1985)); see also Haymon v. Commonwealth, Ky., 657 S.W.2d 239 (1983) (Wintersheimer, J., dissenting). There exists no residual judicial power upon which the trial court-ma-y rely in structuring the terms of a person's probation. Hence, the trial courts ability to require restitution as a condition of probation is limited expressly to that authorized by statute.
Restitution as a condition of probation is set forth by statute, KRS 533.030(3), which states in part,
When imposing a sentence of probation or conditional discharge in a case where a victim of a crime has suffered monetary damage as a result of the crime due to his property having been converted, stolen, or unlawfully obtained, or its value substantially decreased as a result of the crime, or where the victim suffered actual medical expenses, direct out-of-pocket losses, or loss of earning as a direct result of the crime, or if as a direct result of the crime the victim incurred medical expenses that were paid by the Cabinet for Human Resources, the Crime Victims Compensation Board, or any other government entity, the court shall order the defendant to make restitution in addition to any other penalty provided for the commission of the offense.
In Clayborn v. Commonwealth, Ky.App., 701 S.W.2d 413, 415 (1985), the Court of Appeals of Kentucky observed that the statute, (KRS 533.030(3)) limits restitution to the victim's actual out-of-pocket expenses. Thus, to the extent that a victim has been compensated for a loss by insurance, there is no statutory authority to impose restitution as a condition of probation. Clayborn v. Commonwealth, 701 S.W.2d at 415. While the victim is free to proceed with an independent civil action, insurers are not entitled to any benefit under KRS 533.030 (3).
Restitution Or Reparation When Probation Not Imposed.
In addition to the authority to make restitution a condition of probation, trial courts also have the ability to order the defendant to restore the stolen property or make reparation in damages. KRS 431.200 provides, in part,
Any person convicted of a misdemeanor or felony for taking, injuring or destroying property shall restore the property or make reparation in damages if not ordered as a condition of probation.
The legislative goal of this statute is to provide victims of crime with a simple means of obtaining restoration of the property. Commonwealth v. Bailey, Ky., 721 S.W.2d 706, 707 (1986). KRS 431.200 provides the same opportunity for restitution to the victim when the defendant is ineligible for probation as KRS 533.030 provides when the defendant is placed on probation. Commonwealth v. Bailey, 721 S.W.2d at 707. Thus, KRS 533.030 (3) and KRS 431.200 are complementary. While KRS 431.200 does not limit restitution to out-of-pocket expenses, it is clear that its benefit is designed only for the actual victim of a crime, the person who directly suffers due to threats or actions of the criminal defendant. This is demonstrated by the language of KRS 533.030 as well as its complementary statutes contained in KRS Chapter 346 (Compensation of crime victims). For purposes of KRS Chapter 346, a victim is a needy person who suffers personal physical or psychological injury or death from a criminal act in Kentucky. See generally, Hulsey v. Com. Crime Victims Compensation Board, Ky.App., 628 S.W.2d 890 (1982) (board subrogated to right of victim to receive workers' compensation benefits when award to victim based on injury giving rise to compensation claim). Further demonstration of this principle is also contained in KRS 421.500 - 421.550 (Crime victim and witness protection), wherein victim means an individual who suffers direct or threatened physical, financial, or emotional harm as a result of the commission of certain crimes.
Insurers do not fall within the category of victims or aggrieved persons. The insurer does not make its payment or settlement by virtue of being directly threatened or injured by the criminal defendant. Thus, an insurance payment or settlement is not a direct loss or injury as a result of criminal activity. It is an indirect loss resulting from a contractual arrangement between the victim and the insurer. A review of the statutes and case law indicates that the legislature did not intend for KRS 431.200 or KRS 533.030 to provide any direct relief to insurers. Consequently, trial courts are not authorized to order restitution or reparation directly to an insurer as part of the criminal proceeding.
As noted, the victim and the victim's insurer retain the right to proceed against the defendant in a civil action. Further, any restitution or reparation of property to the victim under KRS 431.200 would be subject to any subrogation agreement between the victim and the insurer. However, both of those matters would be independent of the criminal proceeding.
If I can be of any additional assistance in this matter, please feel free to contact me.
David E. Spenard
Assistant Attorney General