Honorable Ned Price, Chairman Opinion No. M-989

State Board of Insurance 1110 San Jacinto Boulevard Re: Whether a school district Austin, Texas may purchasewith public funds insurancepolicies providing described coverage,

against bodily injury and'property damage, and.related Dear Sir: questions.

In your recent letteryou have requested the opinion of this office on the followingquestions:

1. May a school districtpurchase with public funds an insurancepolicy 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 thatAct? The proposed coverage i6 limited to bodily injury liability only.

2~.Whether a school dis,trict may.purchase with public funds an insurancePolicy protecting the individualofficers and employees of the districtwhile engaged in their official duties, against tort claims **for** 'bothbodily injury and propertydamage.

**3.** Whether a school districtmay purchase

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with public funds an.insurancepolicy protecting persons not officets or employees of the, districtagainst tort claima for bodily injury and propertydamage,.'.

. Article 6252-19,Vernon's Civil Statutes, theTexas Tort Claims Act, authorizes the purchase by school districts **of** insurance to protect themselves-againstclaims against **them** brought under the'provisionsof 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 opinionis that underArticle 6252-19 a school district may legally purchase insuranceprotection against claims against it for bodily injuryarising only from the risks recognizedunder Section 3 of thatArticle even though the policy doesnot 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 insofara8 it
concerns motor **vehicles.** Art. 6252-19, Sec. 19A.

.Wehave reached'thisconclusion because of the nature of a liability insurancepolicy, whereby the insurer agrees to indemnifythe insured for claims for which the'insured is legally liable. In any action brought underArticle 6252-19 against a school districtfor damages arising from bodily injury,any exemptionprovided **by** Section 14 mustbe utilized as a defense. Peuartment of P.ublic Safetv v. Great SouthwestWarehouses, 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 obviouslybe for the 'reasonthat the complained-of tortious act did not fall within the exclusions listed in the statute, and liabilitywould be imposed under the general provisions of **the** Tort ClaimsAct. We see no constitutionallY invalid use of public funds in **this** circuqnatance.

We:'recognize

the difficulties that are facedby the 'Insurance

Commission, insurance carrier8 and units **of** govemae

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in writing insurance coverage for the exposures imposed by the Tort Claims Act in the absence of specialpolicies.tailored for governmental unite. The standard liabilitypolicies simply
are not, in our view, adequatevehicles for the special problems that exist. This is not to say, of course, that any illegality arises **from** the use **of** standardpolicies, but their continued use makes a difficultproblem that much harder. We would also point out that the continueduse 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 Commissionhas 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 accordancewith itspublished 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 inquirewhether a school districtmay legallypurchase,with public funds, liability coverage to protect its officers and employees,while engaged in their official duties, againa't tort claims 

### forboth bodily injury and property damage.

At the outsetwe would point out that officers and employees of State agencies are authorized to have full automobile liability coveragepurchased for them by the specific languageof,

Articles 61662-10, 6252-19a, and 6674s-10,Vernon's Civil Statutes. (Wenote that authority to expend appropriated -fundsfor this purpose is removed by .the1971-72 General Appropriation Act.) Further.by virtue of Section 9 of Article 6252-19, all units of governmentare authorized to purchase insurancefor the unit and its officers and employees, to cover liabilities'impoaedby the Texas Tort Claims Act. HOWever, such officers and employeeshave an individual exposure to~liabilityfor acts arising out of their official dut~ies, and this exposure is much broader in scope than the liability imposedby the Tort ClaimsAct upon units of government. We

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consider.

that it 

### wouldbe an extremely rare circumstance **where** an,

employee’s individualliability

### wouldbe a problem other than **in** an automobiiecase, 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 districtshave 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 insurancecoverageby employers is
a universally accepted element of 

### employeesalaries. Viewing the'purchaae of insuranceas an element of employee compensation,on the aame.baaisas pensionplans, group life and group health and accidentpolicies, we find no violation of Article III, Section 51, Texas Constitution. See Bvrdv. Citv of Dallas, 118 Tex. 28, 6 **S.W.28 738**  (1928)sFriedman
v. American Suretv Co. of New **York, 137Tex.**  **149,** 151 S.W.Zd **570** (1941). You are accordinglyadvised that it is **the** opinion of this office that school districtsmay 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, overruledto **the** extent of its conflict **with** this holding.

Your third question aska about the incidental **cover age**  **that** is provided' **for** thirdparties 'byvirtue of **the** omnibus clause of the standardTexas liabilitypolicies. In asking **this** question,you cite the example **of** driver training students **who riceive**  coverageby virtue of the fact that **they** drive school-insured

### cars**with** the permission **of** the school district.

Although we recognizehow 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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### 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 liabilityupon these governmentalunite, particularly since we note.that gwernmental vehicles may only be used by authorized governmentalpersonnel. In the apeCific.example cited by you, school districtsdo 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 responsibilityof 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 imposedon it by law because to do otherwise would constitutea~gift or donation of public funds in violat~ion of Article III, Section 51, Texas Constitution.

SUMMARY

School districts may legallypurchase 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 properlypurchase necessary liability insurance inthe name o,fsuch employees who are exposed to individual liability by virtue of their officialduties.

**A** school district may not.legallypurchase with public funds an insurancepolicy protecting persons not its officers or employees~ against tort claims for bodily injuryand property damage.

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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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