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TO BE PUBLISHED IN THE OFFICIAL REPORTS
 

OFFICE OF THE ATTORNEY GENERAL
 State of California
 

DANIEL E. LUNGREN
 Attorney General
 

OPINION : 

: No. 91-714 

of : 

: February 4, 1992

DANIEL E. LUNGREN : 

Attorney General : 

: 

CLAYTON P. ROCHE : 

Deputy Attorney General : 

: 

THE HONORABLE DE WITT CLINTON, COUNTY COUNSEL, LOS ANGELES 

COUNTY, has requested an opinion on the following question: 

May two or more local public entities, by a joint powers agreement, provide the

initial capitalization for a California domiciled mutual insurer which will provide liability insurance

to the participating entities and other qualified local public entities? 

CONCLUSION 

Two or more local public entities, by a joint powers agreement, may provide the

initial capitalization for a California domiciled mutual insurer which will provide liability insurance

to the participating entities and other qualified local public entities. 

ANALYSIS 

It is proposed that a California domiciled mutual insurer will be established by natural

persons filing the requisite articles of incorporation. (See Corp. Code, § 200; Ins. Code, § 4010 et

seq.).1 The initial capitalization for the mutual insurer will be provided by two or more local public 

1

"A `mutual' insurer is an insurance corporation without capital stock owned by its policyholders

collectively . . . ." (Ins. Code, § 4010.) "Any person, government or governmental agency, state

or political subdivision thereof, public or private corporation, board, association, estate, trustee or

fiduciary may be a policyholder member of a mutual insurer." (Ins. Code, § 4014.) 

1. 91-714
 
 

entities under the terms of a joint powers agreement. (See Gov. Code, § 6500 et seq.).2 The entities 

will receive in return for such capitalization a contribution certificate or surplus note. The mutual 

insurer will provide liability insurance to the signatories to the agreement and other qualified local

public entities. The mutual insurer will be designated in the joint powers agreement as the entity

administering the agreement. (§ 6506.) 

The question presented for resolution is whether local governmental entities have the

authority to enter into the proposed arrangement. We conclude that such arrangement would be

authorized under the Joint Exercise of Powers Act (§§ 6500-6599; "JPA") read in conjunction with

specified other statutory schemes. 

The JPA authorizes two or more federal, state, or local agencies (§ 6500), when

authorized by their governing authority, to enter into agreements, to "jointly exercise any power

common to the contracting parties" (§ 6502). "The agency or entity provided . . . to administer or

execute the agreement may be one or more of the parties to the agreement or a commission or board

constituted pursuant to the agreement or a person, firm or corporation, including a nonprofit

corporation, designated in the agreement . . . ." (§ 6506.) For proposes of the JPA "the

[administering] agency is a public entity separate from the parties to the agreement" (§ 6507) and

"shall possess the common power specified in the agreement and may exercise it in the manner or

according to the method provided in the agreement" (§ 6508). However, the common power "is

subject to the restrictions upon the manner of exercising the power of one or more of the contracting

parties, which party shall be designated by the agreement." (§ 6509.) 

As a general proposition, the JPA does not grant any new powers. In The City of

Oakland v. Williams (1940) 15 Cal.2d 542, 549, the Supreme Court observed: "A statute thus 

authorizing the joint exercise of powers separately possessed by municipalities cannot be said to

enlarge upon the charter provisions of said municipality. It grants no new powers but merely sets 

up a new procedure for the exercise of existing powers." (See also 71 Ops.Cal.Atty.Gen. 266, 267

(1988).) 

An exception to this rule appears in the Mark-Roos Local Bond Pooling Act of 1985

(§§ 6584-6599; "Mark-Roos"), a recent addition to the JPA. As stated in section 6587, "[t]his article

shall be deemed to provide a complete and supplemental method for exercising the powers

authorized by this article, and shall be deemed as being supplemental to the powers conferred by

other applicable laws." 

The express purpose of Mark-Roos is "to assist local agencies in financing public

capital improvements, working capital, liability and other insurance needs, or projects whenever

there are significant public benefits [as specified therein] for taking that action." (§§ 6586.) Section 

6588 sets forth various "additional powers" of public entities besides those set forth in the remainder

of the JPA, including the authority to: 

"(c) Issue bonds, including, at the option of the authority, bonds bearing

interest, to pay the cost of any public capital improvement, working capital, or

liability or other insurance program. 

". . . . . . . . . . . . . . . . . . . . . . . . . . 

2

All further section references are to the Government Code unless otherwise indicated. 

2. 91-714
 
 

"(i) Receive and accept from any source, loans, contributions, or grants,

in either money, property, labor, or other things of value, for, or in aid of, the

construction financing, or refinancing of public capital improvement, or any portion

thereof or for the financing of working capital or insurance programs, or for the

payment of the principal of and interest on bonds if the proceeds of those bonds are

used for one or more of the purposes specified in this section. 

"(j) Make secured or unsecured loans to any local agency in connection

with the financing of capital improvement projects, working capital or insurance

programs in accordance with an agreement between the authority and the local 

agency. However, no loan shall exceed the total cost of the public capital

improvements, working capital or insurance needs of the local agency as determined

by the local agency and by the authority. 

". . . . . . . . . . . . . . . . . . . . . . . . . . . . 

"(r) Enter into any agreement or contract, execute any instrument, and

perform any act or thing necessary, convenient, or desirable to carry out any power

authorized by this article." 

Section 6591 specifically provides: 

"(a) The [joint powers] authority is authorized from time to time to issue

bonds to provide funds to achieve its purposes. 

"(b) Bonds may be authorized to finance a single public capital

improvement, working capital, or insurance program for a single local agency, a

series of public capital improvements, working capital, or insurance program for a

single local agency, a single public capital improvement, working capital, or

insurance program for two or more local agencies, or a series of public capital

improvements, working capital, or insurance program for two or more local agencies

. . . ." 

Thus, in addition to the JPA providing for a procedure for governmental agencies to

exercise a common power, Mark-Roos expressly provides that joint exercise of powers agencies

may jointly issue bonds to finance liability and insurance needs. We also note that the JPA is 

cumulative to other express powers possessed by the contracting agencies. (In re City and County

of San Francisco (1923) 191 Cal. 172, 180-181.)3 

3

Accordingly, "pooling agreements" authorized by section 990.8 do not constitute a limitation

upon other joint powers arrangements. Also, the express exception for pooling agreements added

in 1978 to Article XVI, section 6 of the California Constitution (prohibiting gifts of public funds or

lending of public credit) would not preclude other agreements. This constitutional provision

appears to have been added to clarify the law, not to provide an exclusive means for local entities

to jointly acquire liability insurance. (See Voters Pamp., Prim. Elec. (June 6, 1978) p. 34.) Indeed, 

in 1975 we concluded that pooling agreements would be authorized under the JPA even without

specific legislation to that effect. (56 Ops.Cal.Atty.Gen. 411 (1973).) 

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Moving from the JPA to other general laws, the Tort Claims Act (§§ 810-997.6)

authorizes a local public agency to insure itself and its employees against tort and inverse

condemnation liability (§ 990). Section 990.4 states: 

"The insurance authorized by this part may be provided by: 

"(a) Self-insurance, which may be, but is not required to be, funded by

appropriations to establish or maintain reserves for self-insurance purposes. 

"(b) Insurance in any insurer authorized to transact such insurance in this 

state. 

"(c) Insurance secured in accordance with Chapter 6 (commencing with

Section 1760) of Part 2 of Division 1 of the Insurance Code. 

"(d) Participation by a hospital district and its medical staff in a reciprocal

or interinsurance exchange as provided in Section 1284 of the Insurance Code. 

"(e) Any combination of insurance authorized by subdivisions (a), (b), (c), 

and (d)." 

Section 990.8 keys into the JPA as follows: 

"(a) Two or more local public entities, by a joint powers agreement made

pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7

may provide insurance authorized by this part or for any other purpose by any one

or more of the methods specified in Section 990.4. Where two or more hospital

districts have joined together to pool their self-insurance claims or losses, any

nonprofit corporation created pursuant to subdivision (p) of Section 32121 of the

Health and Safety Code, and affiliated with a hospital district which is a party to the

pool may participate in the pool. 

"(b) Two or more local public entities having the same governing board

may be coinsured under a master policy and the total premium may be prorated

among those entities. 

"(c) The pooling of self-insured claims or losses among entities as

authorized in subdivision (a) of Section 990.4 shall not be considered insurance nor

be subject to regulation under the Insurance Code." 

Accordingly, under the Tort Claims Act a local entity has the power (1) to insure

itself against liability (§ 990); (2) to acquire such insurance from any insurer in this state, which

would include a mutual insurer (§ 990.4); and (3) to join with other local entities pursuant to the JPA

to provide such insurance by any means specified in section 990.4, which would include acquisition

from a mutual insurer (§ 990.8). 

Juxtaposing the foregoing express powers of local agencies under the Tort Claims

Act with the extremely broad authorizations contained in Mark-Roos, we believe that two or more

local agencies are authorized to enter into a joint exercise of powers agreement to procure insurance

from a mutual insurer to be established by a private individuals (§§ 990, 990.4, 990.8) and to

accomplish this by providing the initial capitalization for such mutual insurer. (§§ 6588, 6591.)

Although the mutual insurer would be formed by private individuals, it would be owned by the local 

4. 91-714
 
agencies as the policyholders. (Ins. Code, § 4010.) Additionally, under the JPA the mutual insurer,

a corporation, may be designated in the agreement as the entity to administer it. (§ 6506.) 

Insofar as the proposed mutual insurer would provide insurance to local entities other

than those participants in the joint powers agreement, its charter would be the controlling authority,

not the joint powers agreement. In short, such insurance to other public agencies would be an

incidental effect of the total arrangement. 

In answer to the question presented, therefore, we conclude that two or more local

public entities may, by a joint powers agreement, provide the initial capitalization for a California

domiciled mutual insurer which will provide liability insurance to the participating entities and other

qualified local entities. 

* * * * * 

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