The federal government is everywhere. It employs nearly 9.1 million workers, which is nearly 6% of total U.S. workforce. This includes nearly 2.1 million federal employees, 4.1 million contract employees, 1.2 million grant employees, 1.3 million active duty military personnel, and more than 500,000 postal service employees. They operate trucks, construct highways, build buildings, drive heavy equipment, blanket our highways with government vehicles, and are ubiquitous in our national economy. Every year, government pays an estimated $35 billion annually because of vehicle crashes alone, an estimated 12.6% of the total economic cost of crashes (Federal 7.1%, State/local 5.5%). For limited government advocates, the numbers are astonishing. For subrogation professionals, however, the numbers should represent a tremendous opportunity.
The federal government does not simply roll over and let you sue them. They enjoy sovereign immunity. Sovereign immunity refers to a government’s immunity from being sued by its citizens in its own courts without its consent. It can trace its roots as far back into the English common law as the 13th Century. Underlying sovereign immunity is the concept that “the king can do no wrong,” because his word was the law. The American legal system is predicated on an entire body of laws not found in any books – English Common Law. Sovereign immunity found its way into American law books via the common law. Long before the Federal Tort Claims Acts was passed, the only way to sue the federal or state government was to get its consent, something rarely given. For many years after the ratification of the U.S. Constitution, there were no exceptions to the immunity of the federal government.
Federal Tort Claims Act
The Federal Tort Claims Act (FTCA) is a limited waiver of the sovereign immunity of the U.S. It was passed in 1946 in order to make the federal government liable for certain torts and actions of its employees in the same way a private individual might be liable, although with many exceptions. Title IV, 60 Stat. 812, “28 U.S.C. Pt. VI Ch. 171”, 28 U.S.C. §§ 1346(b), 2671-2680. The FTCA allows recovery “for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” It is strictly construed in favor of the federal government and all ambiguities are decided in favor of the government. The FTCA operates vicariously – if a government employee commits a tort in the course of his or her employment, the federal government, not the employee, becomes the defendant. All damages are paid by the government, not the employee. The federal district courts have exclusive jurisdiction over FTCA actions.
The FTCA relies on substantive tort law of the state in which the claim is filed. Molzof v. U.S., 502 U.S. 301 (1992). Therefore, if a particular action is not recognized in that particular state, the plaintiff cannot sue. Midwest Knitting Mills, Inc. v. U.S., 950 F.2d 1295 (7th Cir. 1991). The extent of the U.S. liability under the Act is determined by state law, except that punitive damages are not allowed. 28 U.S.C. § 2674; Molzof, supra. The FTCA is the exclusive remedy in any civil case resulting from actions committed by a federal employee in the course and scope of employment. If the employee is sued in state court rather than the U.S., the Attorney General will have the case removed to a federal court, once it has been certified that the employee was acting within the scope of his or her employment.
Process for Making a Claim and Filing Suit
Under the Federal Tort Claims Act (FTCA), a person who plans to file a personal injury action against the federal government must present a written “notice of claim,” or “administrative claim,” to the government agency that is responsible for the injury. A notice of claim is a prerequisite to a personal injury action against the federal government. If no notice of claim has been given, a court will dismiss the action. In order to sue the federal government, you must first file an administrative claim prior to filing suit. This claim must give the governmental agency enough notice of its nature and basis so that it can begin its own investigation and evaluation, and it must demand payment for a “sum certain.”
The administrative claim must be filed within two (2) years of the injury. 28 U.S.C. § 2401(b). Tort claims against the U.S. are forever barred unless they are first presented in writing to the appropriate federal agency within two (2) years of accrual of the cause of action, and then brought in court within six (6) months following denial by that agency. 28 U.S.C.A. § 2401(b); Severtson v. U.S., 806 F. Supp. 97 (E.D. La. 1992). Failure to file an administrative claim means any lawsuit will be dismissed for lack of subject matter jurisdiction. After a plaintiff files an administrative claim, the government must deny the claim in writing before suit can be filed. If the government does not take action on the claim within six (6) months, it will be considered denied and then suit can be filed. 28 U.S.C. § 2675(a). After the claim is denied (either by direct denial or inaction), the plaintiff has six (6) months to file suit. 28 U.S.C. § 2401(b).
Sufficient detail and notice must be contained in the claim. It must be specific enough to make the government aware of the action, so it can prepare to defend itself. The claim is not required to provide more than the minimal details of the facts involved in the incident in order to give the government sufficient notice. A Standard Form 95 is frequently used to present claims against the U.S. under the FTCA. Standard Form 95 is not technically required to present a claim under the FTCA, but it is a convenient and safe format for supplying the information necessary to bring an FTCA claim and is the preferred method for doing so.
Statute of Limitations
Typically, the FTCA’s two (2) year statute of limitations will apply, even to allow a claim which would be time-barred under applicable state law. However, under the FTCA, “[t]he United States shall be liable… in the same manner and to the same extent as a private individual under like circumstances.” 28 U.S.C.S. § 2674. State law establishes FTCA causes of action, but federal law defines the limitations period. In other words, “the FTCA incorporates the substantive law of the state where the tortious act or omission occurred.” Augutis v. United States, 732 F.3d 749 (7th Cir. 2013). This creates some tension between applying the FTCA’s procedural time limitation and adhering to the “same manner and to the same extent” requirement of the FTCA. Therefore, in states that treat statutes of limitations or repose as substantive, rather than procedural, the FTCA’s procedural requirements are to be in followed in addition to those substantive state requirements. For states which treat statutes of limitations or repose as procedural, only the FTCA two (2) year statute will apply. In some states, statutes of limitations and/or statutes of repose are considered to be procedural, or even a hybrid between the two, and the FTCA two (2) year statute of limitations is not preempted by state law. The tendency has been to rule that statutes of repose are substantive and statutes of limitations are procedural.
Right to Jury Trial
There is no right to a jury trial in actions brought under the federal statute, except in actions to recovery wrongfully collected taxes or penalties, even if one would have existed in a suit against the employee. 28 U.S.C. § 2402; 28 U.S.C. § 1346(a)(1).
The FTCA allows recovery “for injury or loss of property, or personal injury or death….” 28 U.S.C. § 1364(b)(1). Compensatory damages are the only damages recoverable. Injunctions, attorneys’ fees, and/or punitive damages are expressly forbidden. 28 U.S.C. § 2674; Joe v. U.S., 772 F.2d 1535 (11th Cir. 1985). Attorneys’ fees claimed by attorneys for successful plaintiffs are limited to 25%. 28 U.S.C. § 2678. Unlike the Tort Claims Acts of many states, the FTCA does not contain a damages cap. The amount recoverable is unlimited, other than limitations a private party would be limited under the relevant state law. Therefore, the U.S. is able to take advantage of any damage limitations or tort reform measures in the state in which the suit is pending. Carter v. U.S., 982 F.2d 1141 (7th Cir. 1992).
Exceptions to FTCA
While the FTCA waives immunity of the federal government, it does not waive all immunity for all actions. There are major exceptions set forth in the statute 28 U.S.C. § 2680.
Product Liability Claims. Products liability claims are not specifically addressed in the FTCA. However, cases that have dealt with questions of federal government liability for defective products generally dispose of such claims on a government contractor or discretionary function grounds. In one case against the federal government involving exposure to toxic chemicals by an infant, the claims against the government were barred under either the independent contractor exception or discretionary function exception. Goewey v. U.S., 886 F. Supp. 1268 (S.C. 1995). Strict liability for ultra-hazardous activities is also not allowed against the federal government under the FTCA. Laird v. Nelms, 406 U.S. 797 (1972).
Discretionary Acts. This is the broadest and most contentious of the FTCA’s exceptions. As is the case with most of the state Tort Claims Acts and state case law involving claims against states, municipalities, and local governments, the most significant exception to liability under the FTCA is the “discretionary function” exception. The federal government retains immunity for the discretionary acts of government employees. A “discretionary function” is an act involving an exercise of personal judgment. The basis for the discretionary function exception to the FTCA is the legislative branch’s desire to prevent judicial second-guessing through tort actions of legislative and administrative decisions grounded in social, economic, and political policy. The discretionary function exception appears to be, in some respects, an affirmative defense that can arise to an absolute defense and allow the federal court to dismiss claims. This defense to liability arises when the act in question requires the exercise of judgment in carrying out official duties.
The U.S. Supreme Court has developed a two-step test to determine whether a particular government action constitutes a discretionary action. In Berkovitz v. U.S., 486 U.S. 531 (1988), affirmed in U.S. v. Gaubert, 499 U.S. 315 (1991), the Court noted that a trial court must ascertain the precise governmental conduct at issue and consider whether that conduct was “discretionary,” meaning whether it was “a matter of judgment or choice for the acting employee.” If a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow, and the employee follows it, the action is not discretionary. In many cases the issue becomes whether the act in question was controlled by a “shall” versus a “may.” If the act is governed by a “shall”, the employee has no rightful option but to adhere to the law. If it is determined that the employee’s actions were discretionary, the second element is whether the discretion requires the exercise of judgment based on considerations of public policy. The subjective intent of the employee in exercising the discretion conferred by statute or regulation is not the issue. Rather, the court looks at the nature of the actions taken and on whether they are susceptible to policy analysis. The challenged action must be based on considerations of social, economic, or political policy – the type of judgments the exception was intended to protect. The second prong is met if the actions were “susceptible to policy analysis,” regardless of whether the government employee actually made a policy determination. This second prong gives judges considerable leeway and is frequently used to reflect and inject political preferences. If both elements of the Berkovitz-Gaubert test are met, the discretionary function exception to the waiver of sovereign immunity applies and the government may not be sued.
Ministerial Acts. Immunity from tort liability does not apply if the action was mandated by law or regulation and the employee had no choice or discretion in how to undertake the actions. Ministerial acts are those that do not require an official’s discretion because they follow a predetermined plan and cannot be changed, such as following a health department checklist regulation, or they do not involve any special expertise, such as operating a motor vehicle. Similarly, if the government builds and operates something, then it has a ministerial duty to maintain it, and will be liable for failing to do so.
Examples of Ministerial Acts. Examples of ministerial or proprietary functions of government include owning and renting out real property, in which case the government is wearing its landlord hat; providing medical or psychiatric care, in which case the government wears a physician hat; owning and operating a school, in which case it wears a parent hat. Also, proprietary would be operating an electric utility. If a government escalator malfunctions, there is no statutory or regulatory law specifically governing how the government should respond in that situation. Therefore, it is discretionary and immune. A prime example of a ministerial act which is not immune and for which the government is liable is negligence in the operation of motor vehicles. U.S. v. Gaubert, 499 U.S. 315 (1991). Although driving requires the constant exercise of discretion, the official’s decisions in exercising that discretion can hardly be said to be grounded in regulatory policy.
Subrogation Under the FTCA
An insured and its subrogated insurer may both proceed against the U.S. government under the FTCA. U.S. v. Aetna Casualty & Surety Co., 338 U.S. 366 (1949). Although an insurer that is subrogated to the rights of its insured may maintain an action under the FTCA, the insurer’s claims against the government are limited to only such rights as the insured possesses. Kodar, LLC v. U.S. (F.A.A.), 879 F. Supp.2d 218 (D.R.I. 2012). The pleadings should be made to reveal and assert the actual interest of the plaintiff and to indicate the interests of others in the claim. An insurer making a subrogation claim under the FTCA must provide notice to the U.S. government under the same timeline and in the same manner as the insured. Great American Ins. Co. v. U.S., 575 F.2d 1031 (2nd Cir. 1978); Liberty American Ins. Group v. U.S. Air Force, 2008 WL 906848 (N.D. Fla. 2008). Where the insured does not file a claim with the government agency, the insurer must do so within two (2) years after the incident, regardless of when their claim payments were made. Progressive Am. Ins. Co. v. U.S., 913 F. Supp.2d 1318 (M.D. Fla. 2012). This is because the subrogated carrier stands in the shoes of its insured. If a subrogated carrier files the Form 95 claim, the form should indicate that the insured’s carrier is pursuing subrogation rights.
Administrative Notice of Claim by Subrogee
An issue which often arises is whether a Notice of Claim filed by an injured employee or insured sufficiently preserves the claim of the subrogated insurance company, or vice-versa. In Ahmed v. U.S., 30 F.3d 514 (4th Cir. 1994), the court held that when the insured relied on his auto insurer’s Notice of Claim regarding subrogation of property damage and a deductible, the insured failed to allege a sum-certain value of claim with a simple reference to a potential personal injury claim was included in the insurer’s attorney on insurer’s subrogation claim for property damage and claimant’s deductible claim, and the insurer’s attorney was not given authorization to represent the injured insured in the personal injury claim. Following settlement of insurer’s subrogation claim, the insurer’s attorney informed the Navy that he would not be seeking further payment.
A subrogated carrier is usually included in and protected by its insured’s administrative claim against the federal government under the FTCA if the original administrative claim filed by the insured was brought for the full amount of the insurer’s claim. The insured’s claim would then satisfy the claim filing requirement under § 2401(b) on behalf of the insurer and would not prejudice the government. Interboro Mutual Indemnity Ins. Co. v. U.S., 431 F. Supp. 1243 (E.D. N.Y. 1977); Severtson v. U.S., 806 F. Supp. 97 (E.D. La. 1992). In Cummings v. U.S., 704 F.2d 437 (9th Cir. 1983), the court considered an FTCA action for damages brought by an insured against the government in which the subrogated carrier filed a complaint in intervention. The government moved to dismiss the intervenor for failure to satisfy § 2401(b)’s limitation period. The court stated that the insurer as subrogee was the “real party in interest” to the extent of the subrogation. The court reasoned that the complaint in intervention had the same effect as substitution of the insurer as the real party in interest under FRCP 17(a), which relates back to the filing of the original complaint under FRCP 15(c). The 9th Circuit stated that the outcome under this analysis is consistent with the holdings of other courts which have considered the insurer/subrogee problem under the FTCA. See Wadsworth v. U.S. Postal Serv., 511 F.2d 64 (7th Cir. 1975) (amended complaint to substitute insurer as proper plaintiff related back to the filing of the original complaint by insured); Executive Jet Aviation v. U.S., 507 F.2d 508 (6th Cir. 1974).
Section 2675(a) of Title 28 and 28 C.F.R. § 14.2(a) require two elements for sufficient presentment of a claim to an agency: (1) written notice sufficient to cause the agency to investigate, and (2) a sum-certain value on the claim. See Adkins v. U.S., 896 F.2d at 1326. The sum-certain requirement is one of substantial importance, and even courts liberally construing the presentment requirement under the FTCA require that the claimant place a certain value on the claim. See, e.g., Williams v. U.S., 693 F.2d 555 (5th Cir.1982) (“we have held that no particular form or manner of giving such notice is required as long as the agency is somehow informed of the fact of and amount of the claim within the two-year period prescribed by § 2401(b).”). An insurer’s request for reimbursement alone may not adequately perform those notice-giving functions. The claims of an injured party and his insurance carrier are not always coextensive. An insurer’s claim will never exceed that of the injured party; the injured party, however, often seeks recovery for damages not encompassed in the insurer’s claim. This distinction is inherent in 39 C.F.R. § 912.6(D) which permits subrogees to present wholly compensated claims, but requires both insurers and injured parties to participate, either jointly or individually, in filing partially compensated claims. Shelton v. U.S., 615 F.2d 713 (6th Cir. 1980).
Some courts allow a subrogee to assert an FTCA claim when only its subrogor had filed an administrative claim. In Executive Jet Aviation v. United States, 507 F.2d 508 (6th Cir. 1974), the 6th Circuit held that this complied with the FTCA because “the subrogee stands in the shoes of the subrogor.” The court also reasoned that tolling the statute of limitations for the subrogee made sense because the subrogor’s administrative claim gave the U.S. “sufficient notice to begin assembling witnesses and evidence in preparation for a defense on the merits.” Id. The 9th Circuit followed Executive Jet’s holding in Cummings v. United States, 704 F.2d 437, 439 (9th Cir. 1983).
In Interboro Mutual Indemnity Ins. Co. v. U.S., 431 F. Supp. 1243 (E.D. N.Y. 1977), the insured filed a timely claim with the Coast Guard for both bodily injury and property damage arising from a car accident and filed suit within six months after it was denied, but only for personal injury. The insured’s auto carrier filed a claim for property damage which was not acted on because the insured’s claim was denied. The insurer intervened more than six months after the denial of the insured’s claim. The court held that the subrogated insurer was not included in the claim filed by the insured without its consent and was not barred by the six-month limitation. In Executive Jet Aviation, Inc. v. U.S., 507 F.2d 508 (6th Cir. 1974) and Sky Harbor Air Service v. U.S., 348 F. Supp. 594 (D. Neb. 1972), the insured filed a claim without naming the insurance company. When the insured brought suit, the government moved to dismiss on the ground that the real party in interest did not file a claim as required by § 2401(b). In Executive Jet Aviation, Inc., the court held that the insured’s filing did cover the insurance company because the government was not prejudiced and because the purpose of the FTCA was not to make recovery from the government technically more difficult. The same result was reached in Sky Harbor Air Service where the court held that the insurance company was covered by the insured’s filing.
Subrogating against the federal government requires preparation and timing. When a federal employee, U.S. Postal Service vehicle, or other federal apparatus is involved in an insurance claim, subrogation should be at the top of the list of claims handlers’ responsibilities. Check with subrogation counsel to determine what must be done and when, including whether the claim is the sort of claim for which the federal government waives immunity. For questions about FTCA subrogation, contact Gary Wickert at firstname.lastname@example.org.