The State of New York has a special court, the Court of Claims, that has jurisdiction for such cases. See, for example, the case of Bauer v. State of New York (2006).
The bottom line, of course, is that the taxpayer pays, as he always does, for the negligence of the officialdom. How much have Court of Claims highway decisions cost the public ? How much has been paid by the State in out-of-court settlements ? And how much, specifically, has the T-Bone of Congress Street cost the public -- quite aside from the cost in human suffering ? These are some of the questions that I hope to explore in future postings.