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F I S C A L I M P A C T R E P O R T

SPONSOR Komadina

DATE TYPED 02/08/05 HB

SHORT TITLE Substantive Law Applied to Government

SB 104

ANALYST McSherry

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

Indeterminate Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

General Services Department (GSD)

Administrative Office of the Courts (AOC)

Office of the Attorney General (OAG)

Corrections Department (CD)

SUMMARY

Synopsis of Bill

Senate Bill 104 proposes to add a new section to NMSA 1979, Chapter 38,“Trials.” The bill

would name the new section “Fairness in Litigation” and proposes language providing that if the

state, or political subdivision of the state, sues a defendant, and by suing that defendant seeks to

recover the value of a benefit or service provided to the state to or on behalf of a person injured

by the defendant, then the state or political subdivision would be subject to the same substantive

law that would apply as when the injured person himself or herself sues the defendant.

Significant Issues

According to the General Services Department (GSD) this bill appears to impact the right of the

state or local government to seek reimbursement for worker’s compensation benefits. GSD con-

tinues, that if this would be the result of the proposed statute, then in turn, the change could im-

pact the entire rate and premium structure and balance sheet of worker’s compensation self-

insurance funds and the premiums for purchased insurance coverage

The Office of the Attorney General (AGO) assumes that the bill is meant to address situations

Senate Bill 104 -- Page 2

where the state or a local government is subrogated to the rights of a plaintiff after it provides

medical or other services to that plaintiff. AGO continues stating this subrogation would entitle

the state or local government to prosecute a claim against the defendant causing injury to the per-

son receiving benefits from the state or local government. AGO asserts that there are only a few

situations in which the state or a local government obtains subrogation rights. For example,

NMSA Section 61-29-27 1978 Comp. allows the Real Estate Commission to be subrogated to

the rights of a judgment creditor when it pays a claim from the Real Estate Recovery Fund.

County indigent hospital and county health care boards are subrogated to the rights of a hospital

receiving payment from the county indigent hospital claims fund pursuant to NMSA Section 27-

5-10 1978 comp. AGO state that this bill would presumably apply in those situations.

The bill does not define the term “substantive law,” or “injury,” and is unclear what the terms

would encompass.

AGO proposes that there is a danger that the bill, if enacted, could be construed as a blanket

waiver of sovereign immunity when the state or a local government pursues a subrogation claim.

AGO provides that “substantive law” is distinguished from “procedural law,” and different sub-

stantive law has historically been applied to governmental entities as distinguished from private

parties; different statutes of limitations, standing requirements, etc. could apply depending upon

whether the plaintiff is a government or private party.

The Corrections Department reports that the purpose and meaning of this bill are unclear to the

Department.

PERFORMANCE IMPLICATIONS

.

AGO asserts that the bill is unclear as to its application and impact on subrogation suits brought

by the state or local governments. At worst, states AGO, it could waive sovereign immunity in

such suits and subject those governments to all claims and defenses applicable against private

parties.

FISCAL IMPLICATIONS

GSD relates that the bill could impact the entire rate and premium structure and balance sheet of

worker’s compensation self-insurance funds and the premiums for purchased insurance cover-

age.

The AOC cites a minimal administrative cost for statewide update, distribution, and documenta-

tion of statutory changes. Any additional fiscal impact on the judiciary would be proportional to

the administrative burden on court dockets, if any. New laws, amendments to existing laws, and

new hearings have the potential to increase caseloads in the courts, thus requiring additional re-

sources to handle the increase.

TECHNICAL ISSUES

Definitions for substantive law and injury may be useful to clarify the intended meaning of the

proposed bill.

Senate Bill 104 -- Page 3

OTHER SUBSTANTIVE ISSUES

The Administrative Office of the Courts states that this bill is directed to the substantive law and

is therefore without impact on procedural law under which the State is treated differently from

other litigants.

ALTERNATIVES

AGO suggests that the bill should specify the actions it is intended to target, along with specific

sections of substantive law the sponsor believes the state and local governments should be sub-

jected to when bringing subrogation suits. The AGO further suggests that the intent of the bill

could be more clearly defined, to avoid the possibility of subjecting the state and local govern-

ments to laws and claims intended to apply only to private parties.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

According to GSD, state and local government entities would continue to be governed by the

New Mexico Tort Claims Act, the New Mexico Worker’s Compensation Act, and other existing

substantive law and common law which govern governmental entities.

POSSIBLE QUESTIONS

1.

What is the intended outcome of the proposed bill; and can this purpose be .

2.

Are definitions needed, and available, for the terms “substantive law” and “injury” used

in Senate Bill 104.

EM/yr/njw