Statute of Limitation on Officials’ Surety Bonds Action Is 3 Years, Georgia Court Says

Surety carriers providing bonds for elected officials in Georgia this week discovered that a statute of limitations on claims litigation is only three years in some cases – not six or 20 years as one insurer had initially believed.

“…Because both the limitation period for bonds under seal and for public official bonds were legislative enactments, to the extent there was a conflict between the two, the more recent statute controlled,” the Georgia Court of Appeals concluded, citing previous court rulings. “And the more recent statute contained the three-year limitation period applicable to public official bonds.”

The case began in 2008. It made regional headlines nine years later when a bookkeeper for Glynn County Superior Court, in southeast Georgia, was charged with stealing thousands of dollars from the court over the years. At one point, an estimated $673,000 was missing from the court’s public collections, including child support payments, according to news reports at the time.

The bookkeeper, Larry Morten, had been hired by Lola Jamsky, the elected clerk of the court. The county obtained two $100,000 bonds from Old Republic Surety Co. on Jamsky, to protect against losses from misconduct in office.

Jamsky was never charged with wrongdoing, but evidence showed that she may have been aware of missing funds and had moved money from other accounts to cover shortfalls, the appellate court explained. In 2014, unable to ignore clear signs that Morten was embezzling funds, she fired the bookkeeper. He was later convicted on theft charges.

Jamsky retired in 2015 and died four years later.

In March 2017, Glynn County officials notified Old Republic of the loss and an upcoming audit. In 2019, the county filed formal claims on Jamsky’s surety bonds.

Old Republic denied the claims, initially contending that Georgia’s six-year statute of limitations on breach of contract claims had expired, that the theft had actually happened several years earlier, and that there was no evidence that Jamsky herself had acted dishonestly.

Glynn County filed suit against Old Republic, charging breach of contract and bad faith by the surety company. Meanwhile, the county was able to partially collect on separate bonds covering employee theft.

Following a lengthy discovery period, attorneys for Wisconsin-based Old Republic determined that a more favorable statute existed – a three-year statute for actions on bonds on public officials.

The trial court sided with Glynn County, though, and awarded the county $339,000 from the bonds, plus interest.

On appeal, the appellate judges overturned the trial court’s decision. Despite the lack of certainty in state law about which statute of limitations applied to which type of bond, the judges reasoned that when two laws conflict, the newer one takes precedence.

The key date was not when the embezzlement happened, but when county officials learned of it and of Jamsky’s conduct in dealing with the theft, Appeals Court Judge Todd Markle wrote in the Feb. 24 opinion.

“Here, the County was aware of both the theft and the financial reports identifying Jamsky’s lack of supervision over the money management in her office no later than 2014,” the opinion notes.

The County contended that Jamsky’s actions amounted to fraud and concealment that would pause the statute of limitation. “Even if we were to consider Jamsky’s conduct as fraud and concealment, rather than negligent mismanagement, it is clear that, for several years prior to the time it filed suit, the County was aware that Jamsky was mishandling money,” the judges wrote.

The appellate court concluded that the county had enough information prior to March 2017, when it notified Old Republic of the loss. The complaint seeking payment on the bonds, filed more than three years later, in September 2020, was barred by the statute of limitation. The court did not fully explain why county officers waited years to file a claim on the bonds.

Topics Georgia