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,trict may.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 'both bodily 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 protecting persons not officets or employees of the, 

district against tort claima for bodily injury 

and property damage,.'. 

. Article 6252-19, 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~'claims to 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'insured 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.ublic Safetv 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 'reason that 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:'recognize the difficulties that are faced by the 

'Insurance Commission, 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 problems that exist. This is not to say, of course, that any illegality 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 liability policies may well make the rate adjustment duties of 

the Insurance Commission more burdensome than should reaaonably 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'as Tort 

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't tort 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 automobile 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 

-funds for this purpose is removed by .the 1971-72 General Appropriation 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. HOWever, 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 'coverage for 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. Viewing 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 employees~ 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 conflict with this holding. 

Your third question aska about the incidental coverage 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 omnibus 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,ith regard to your apecific~ 

question, the liability of school districts is limited by 

the Texas Tort Claims Act. The actions .of third parties do 

not impose liability upon these governmental unite, particularly since we note.that gwernmental vehicles may only be used 

by authorized governmental personnel. In the apeCific.example cited by you, school districts do npt own driver education 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~ion of Article III, Section 51, Texas Constitution. 

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 expressly exclude those claims set out as exemptions 

in Section 14 of that statute. 

As an element of government employees' compensation, school distri,cta may properly purchase 

necessary liability insurance inthe name o,f such 

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 protecting 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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