Honorable Ned Price, Chairman Opinion No. M-989
State Board of Insurance
1110 San Jacinto Boulevard Re: Whether a school district
Austin, Texas may purchase with public
funds insurance policies
providing described
coverage,against bodily
injury and'property
damage, and.related
Dear Sir: questions.
In your recent letter you have requested the opinion
of this office on the following questions:
1. May a school district purchase with
public funds an insurance policy protecting the
district against claims for bodily injury, where
the coverage afforded by the policy is broader
than the liability imposed on the district by
the Texas Tort Claims Act because of exceptions
provided in that Act? The proposed coverage i6
limited to bodily injury liability only.
2~. Whether a school dis,trictmay.purchase
with public funds an insurance Policy protecting
the individual officers and employees of the
district while engaged in their official duties,
against tort claims for 'bothbodily injury and
property damage.
3. Whether a school district may purchase
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Hon. Ned Price, page 2 (M-989)
with public funds an.insurance policy protect-
ing persons not officets or employees of the,
district against tort claima for bodily injury
and property damage,.'.
. Article6252-19, Vernon's Civil Statutes, the Texas
Tort Claims Act,
authorizes the purchase by school districts
of insurance to protect themselves-againstclaims against
them brought under the'provisions of the Act. The Act limits
those~'claimsto damages for "personal injuries or death,"
commonly called "bo&ly injury" in insurance contracts.
In reply to your first question, our opinion is
that under Article 6252-19 a school district may legally
purchase insurance protection against claims against it for
bodily injury arising only from the risks recognized under
Section 3 of that Article even though the policy does not
expressly exclude those claims set out as exemptions in
Se&ion 14 of that statute. We recognize that the Tort
Claims Act applies to school districts only insofar a8 it
concerns motor vehicles. Art. 6252-19, Sec. 19A.
.We have reached'this conclusion because of the
nature of a liability insurance policy, whereby the insurer
agrees to indemnify the insured for claims for which the'in-
sured is legally liable. In any action brought under Article
6252-19 against a school district for damages arising from
bodily injury, any exemption provided by Section 14 must be
utilized as a defense. Peuartment of P.ublicSafetv v. Great
Southwest Warehouses, 325 S.W.Zd 493 (Tex.Civ.App. 1961,
error ref. n.r.e.). Whether the exemption is 6 valid defense.
under the facts of the case, would be a matter for judicial
determination. If the school district were held liable, it
would obviously be for the 'reasonthat the complained-of
tortious act did not fall within the exclusions listed in
the statute, and liability would be imposed under the general
provisions of the Tort Claims Act. We see no constitutionallY
invalid use of public funds in this circuqnatance.
We:'recognizethe difficulties that are faced by the
'InsuranceCommission, insurance carrier8 and units of govemae
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Hon. Ned Price, Page 3 (M-989)
in writing insurance coverage for the exposures imposed by
the Tort Claims Act in the absence of special policies.tailored
for governmental unite. The standard liability policies simply
are not, in our view, adequate vehicles for the special prob-
lems that exist. This is not to say, of course, that any il-
legality arises from the use of standard policies, but their
continued use makes a difficult problem that much harder. We
would also point out that the continued use of standard lia-
bility policies may well make the rate adjustment duties of
the Insurance Commission more burdensome than should reaaon-
ably be expected. See Attorney General's Opinion M-546 (1969),
wherein we'obae,rve,d that the Commission has a duty under
Articles 1.04(b) and (c) and 5.01, Texas Insurance Code to
fix and maintain fair, reasonable, and just inaurance,premium
rates in accordance with its published rules and regulations
in this connection. Therefore, regardless of the form of
policy used, we.preaume that one of the principal factors
considered in setting premium rates will be the risks to
which the governmental unit is exposed under the Tex'asTort
Claims Act.
In your second question you inquire whether a school
district may legally purchase, with public funds, liability
coverage to protect its officers and employees, while engaged
in their official duties, againa'ttort claims for both bodily
injury and property damage.
At the outset we would point out that officers and
employees of State agencies are authorized to have full auto-
mobile liability coverage purchased for them by the specific
language of,Articles 61662-10, 6252-19a, and 6674s-10, Vernon's
Civil Statutes. (We note that authority to expend appropriated
-fundsfor this purpose is removed by .the 1971-72 General Ap-
propriation Act.) Further. by virtue of Section 9 of Article
6252-19, all units of government are authorized to purchase
insurance for the unit and its officers and employees, to
cover liabilities'impoaed by the Texas Tort Claims Act. HOW-
ever, such officers and employees have an individual exposure
to~liability for acts arising out of their official dut~ies,
and this exposure is much broader in scope than the liability
imposed by the Tort Claims Act upon units of government. We
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Bon. Ned Price, page 4 (M-989)
consider.that it would be an extremely rare circumstance
where an,employee’s individual liability would be a problem
other than in an automobiie case, and for this reason will
limit our discussion to the problem of purchasing automobile
liability 'coveragefor employees of school districts.
We have been unable to find any specific authority
for school districts to purchase automobjle liability coverage
for their employees. On the other hand, we find no specific
rule making such purchases improper, and it is our view that
school districts have the implied authority to prwide this
coverage. We base this opinion on the fact that these unite
of government have the authority to set employee pay levels
and that the purchase of insurance coverage by employers is
a universally accepted element of employee salaries. View-
ing the'purchaae of insurance as an element of employee
compensation, on the aame.baais as pensionplans, group life
and group health and accident policies, we find no violation
of Article III, Section 51, Texas Constitution. See Bvrd v.
Citv of Dallas, 118 Tex. 28, 6 S.W.28 738 (1928)s Friedman
v. American Suretv Co. of New York, 137Tex. 149, 151 S.W.Zd
570 (1941). You are accordingly advised that it is the opinion
of this office that school districts may properly purchase
necessary liability insurance for officers and employees
of such,unite in the name of such employees or for the em-
ployees~as a group, who dre exposed to individual liability
by virtue of their official duties. Attorney General's
Opinion M-475 (1969) is,overruled to the extent of its con-
flict with this holding.
Your third question aska about the incidental cover-
age that is provided'for third parties 'by virtue of the omnibus
clause of the standard Texas liability policies. In asking
this question, you cite the example of driver training students
who riceive coverage by virtue of the fact that they drive
school-insured cars with the permission of the school district.
Although we recognize how deeply ingrained the omni-
bus clause is in the insurance industry in Texas, it is our
duty to take a strict view of the power of school districts
to spread a inantle of protection further than that authorized
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Hon. Ned Price, page 5 M-989)
by Constitution and statute. W,ithregard to your apecific~
question, the liability of school districts is limited by
the Texas Tort Claims Act. The actions .ofthird parties do
not impose liability upon these governmental unite, particular-
ly since we note.that gwernmental vehicles may only be used
by authorized governmental personnel. In the apeCific.ex-
ample cited by you, school districts do npt own driver edu-
cation vehicles, but these cars are the property of local
automobile dealers. Omnibus clause coverage for student
drivers would thus appear to be the responsibility of persons
other than.the school district. You are accordingly advised
that it is the opinion of thia office that no school district
may legally purchase liability insurance except to insure
against risks that have been imposed on it by law because
to do otherwise would constitute a~gift or donation of public
funds in violat~ionof Article III, Section 51, Texas Consti-
tution.
SUMMARY
School districts may legally purchase
insurance protection against claims for bodily
injury arising out of only the risks recognized
by Section 3 of Article 6252-19, Vernon's Civil
Statutes, even though the policy does not ex-
pressly exclude those claims set out as exemptions
in Section 14 of that statute.
As an element of government employees' compen-
sation, school distri,ctamay properly purchase
necessary liability insurance inthe name o,fsuch
employees who are exposed to individual liability
by virtue of their official duties.
A school district may not.legally purchase
with public funds an insurance policy protect-
ing persons not its officers or employees~against
tort claims for bodily injury and property
damage.
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Hon. Ned Price, page 6 W-989)
Prepared by Malcolm &. Quick
Assistant Attorngy General
APPROVED :
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. AlJew, Co-Chairman
Melvin E. Corley
lioughton'Brownlee
Rex White
Dick Chote.
SAMMcDANIBL
Staff Legal Assistant
ALFREDWALKER
Executive Assigtant
NOLA WHITE
First Assistant
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