UiNAWFoHD C. MAHTIN 

### AUWI-XN.TEXAS 78711

AProIaNRYOENERAL February 17, 1970 -” 52&& =A ’ Honorable J.C. Dingwall Opinion No.. M-582 State Highway Engineer Texas Highway Department Austin, Texas 78701 Re: Questions conce,rning the purchase of group insurance for State Highway DeDear Mr. Dingwall: partment employees.

Your recent request for an opinion ofthis office submits questions concerning the application ofArticles 3.50 and 3. 51.ofthe Texas Insurance Code, as amended. These questions are:

“1. Can the Texas Highway Department participate inthe premium cost for Highway Department employees and appointive officials under apolicy 

### or policies of

### grouphealth, accident, accidental death and dismemberment, disability income replacement andhospital, surgical and/or medicalexpense insaranoe?

.. ...

“2. Can the Texas Highway Department participate inthe premium cost of group policies which provide. hospital, surgical and/or medical expense insurance for dependents of Highway Department employees and appointive officials?

“3. Can the Texas Highway Department participate inthe,premium cost of group life insurance policies for Highway Department employees and appointive officials?

“4. Can the Texas Highway Department procure contracts with 3 insurance company authorized to do,

. business inthis state and participate inthe cost for group insurance found tobe legal inquestions 1, 2and 3as listed above?

-2771-Honorable J.C. Dingwall, page 2 (R-582)

“5. Ifthe answer to question 4 above is found to be negative as itmay apply to certain types 

### ofinsurance companies, can the Texas Highway Department, acting through a Board of Trustees or similar arrangement, consisting of Highway employees and appointed by the Highway Commission, procure contracts with such insurance companies authorized to dobusiness in this state and participate inthe cost for group insurance found tobe legal inquestions 1, 2and 3as listed above?

“6. Can the Comptroller legally pay the premium cost under S.B. 574, 61st Legislature, Regular Session, and as authorized by the Texas Highway Department out ofthe State Highway Fund for such group insurance coverage as found legal in questions 1, 2. 3, 4or 5as listed above?”
Article 3.50 ofthe Texas Insurance Code deals with group life insurance upon public employees. Article 3. 51 deals with medical and disability insurance upon State employees and medical insurance upon the dependents of such employees.

Article 3. 50, Section 1, provides, inpart, as follows:

“No policy of group life insurance shall be delivered inthis State unless it conforms to one ofthe following descriptions:

‘1.

. .

‘I(3) A policy issued to any association of employees ofthe United States Government or any subdivision thereof, provided the majority ofthe members of such association are residents ofthis state, an association of public employees, an incorporated city, town or village, an independent school district, common school district, state colleges or universities, any association 

### ofstate employees, any association of state, county and city, town or village employees, and any associa-

-2772-Honorable J.C. Dingwall, page 3(M-582)

tion of any combination of state, county or city, town or village employees and any department of the state government which employer or association shall be deemed the policyholder to insure the employees of any such incorporated city, town or village, or any such independent school district, of any common school district, of any such state college or university, of any such department of the state government, members of any association of state, county or city, town or village or of the United States Ciovernment or any subdivision thereof, provided the majority of such employees reside inthis state, employees for the benefit of persons other than the policyholder subject to the following requirements:

‘1.

. l’(b) The premium for apolicy issue.d to any policyholder authorized to be such policyholder, under Subsection (3) of Section 1, Article 3. 50, Texas Insurance Code, may be paid inwhole or in part from funds contributed by’the.employer, ‘or in whole or inpart from funds contributed by the persons insured under said policy

. .”
Article 3. 51, Section l(a) provides:

“(a) The State of Texas and each of its political, governmental and administrative subdivisions, departments, agencies, associations ofpublic employees, and the governing boards and authorities of each state university, colleges, common and independent school districts or of any other agency or subdivision ofthe public school system of the’;State of Texas are authorized to procure contracts with any insurance company authorized to do business inthis state insuring their respective employees, or if an association of public employees is the policyholder, insuring its respective members,

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Honorable J.C. Dingwall, page 4 (M-582)

or any class or classes thereof under apolicy or policies of group health, accident, accidental death and dismemberment, disability income replacement andhospital, surgical and/or medical expense insurance or a group contract providing for annuities. The dependents of any such employees or association members, as the case may be, may be insured under group policies which provide hospital, surgical and/or medical expense insurance. The insureds’ contributions to the premiums for such insurance or annuities issued to the employer or to an association of public employees as the policyholder may be deducted by the employer from the insureds’ salaries when authorized inwriting by the respective employees so to do. The premium for the policy or contract may be paid inwhole or inpart from funds contributed by the employer or inwhole or inpart from funds contributed by the insured employees. When an association of public employees is the holder of such

. apolicy of insurance or contract, the premium for employees that are members of such association may be paid inwhole or inpart by the State of Texas or other agency authorized to procure contracts or policies of insurance under this section, or inwhole or inpart from funds contributed by the insured employees that are members of such association; provided, however, that any monies or credits received by or allowed to the policyholder or contract holder pursuant to any participation agreement contained inor issued in connection with the policy or contract shall be applied to the payment of future premiums and to the pro rata abatement ofthe insured employee’s contribution therefor. “The term employees as used herein inaddition to its usual meaning shall include elective and appomtive officials ofthe state. ‘1
In reply toyour first question we point out that this office has previously approved State financial participation ingroup health and

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accident insurance plans for State employees. Attorney General’s Opinion M-125 (1967) holds that the expenditure of state funds to pay the premiums for certain group insurance contracts for State employees as apart oftheir benefits or compensations is within the realm of public purpose. Based upon the prior opinion ofthis office, and the specific authority granted inthe above quoted Article 3. 51, you are advised that the Texas Highway Department may participate inthe premium cost for insurance upon Highway Department employees under a policy or policies of group health, accident, accidental death and dismemberment, disability income replacement and hospital, surgical and/or medical expense insurance.

Your second question deals with the State’s participation inthe payment of premiums on group hospital, surgical and/or medical expense insurance upon the dependents of Highway Department employees, and your third question involves the participation’in the payment ofpremiums of group life insurance on the Highway Department employees themselves. Your second and third questions involve essentially the same problems of law andwill be answered jointly. Those problems relate to the constitutionality ofthe statutes, andwe conclude that the provisions above quoted are constitutional.

InAttorney General’s Opinion M-l 38 (1967). itwas held that there was nounconstitutional gift of public funds inpermitting the State to participate ingroup life insurance premiums for State employees. InAttorney General’s Opinion M-408 (1969), dealing with the subject of insurance policies for Legislators, itwas held that there was no constitutional prohibition against the use ofState funds to make premium payments on group, health and accident insurance policies for members ofthe Legislature, but that there were constitutional prohibition against the use of State funds for the payment ofpremiums on group life policies for Legislators and their dependents and for group health and accident policies covering the dependents of Legislators. Inthat opinion itwas pointed out that Section 24 ofArticle IIIofthe Constitution of Texas specifically limits the salary and expenses which may be paid members ofthe Legislature and that Section 51 of Article IIIand Section 6(a) of Article XVI ofthe Constitution prohibit grants and appropriations for private or individual purposes. That opinion held that there was no constitutional inhibition against the use of State funds to pay for sickness and accident insurance for the Legislators themselves because:

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Honorable J.C. Dingwall, page 6 (B-582)

“Such an expenditure serves abeneficial anduseful public or governmental function inhelping to assure maximum State service and is directly related to the health andwell being ofState servants inthe performance oftheir duties. ” (Emphasis added. ) However, no such connection between the functioning’of the Legislative branch ofthe government and the payment oflife insurance premiums upon their lives or the payment of premiums for health and accident insurance upon the dependents of Legislators was found to exist, and, since the payments were in excess ofthe limitations provided by Section 24.ofArticle IIIofthe Constitution this office held that the constitutional inhibitions against appropriations for private or individual purposes barred the.payment of such premiums by the State.

The above mentioned opinions (M-408 and 138) are to be distinguished. Itwill be observed that Attorney General’s Opinion M-408 involved insurance coverage for State Legislators, whose compensation and expense allowances are established and expressly limited by the Constitution, while Attorney General’s Opinion M-138 deals with State employees, whose salaries and other rights to compensation are determined by the Legislature under power

. . given. itby Section 44 of Artitle III ofthe Constitution. Inother words, under the Constitution the Legislature may fix its own salary or compensation only within the Constitutional limitations, but there are no such limitations affecting the amount ofthe benefits and compensation ofother state employees. Of course, the Constitutional provisions ofArticle III, Section 51 andArticle XVI, Section 6(a), forbiding grants and appropriations for private or individual purposes unless authorized by the Constitution, apply toboth Legislators and public employees. But we do not deem any ofthese Constitutional prohibitions to be applicable to Articles 3. 50 and 3. 51 ofthe Insurance Code, as amended. What might be considered avalid “compensation” to public employees, if given to Legislators, might be prohibited by the plain limitations provided by Section 24 of Article IIIofthe Constitution and thus become anunconstitutional gift or appropriation for private purposes. See Terre11 v. Middleton, 187 S.W. 367, 371-373, (Tex. Civ. App. 1916, error ref. 108 Tex. 14, 191 S.W. 1138, reh. den. 108 Tex. 19, 193S.W. 139).

Byrd v. City of Dallas, 118 Tex. 28, 6S.W. 2d 738 (1938) involved a constitutional challenge to the validity of apublic employees’ pension program.

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Honorable J.C. Dingwall, page 7 (M-582)

The Court stated:

“It is academic to say the Legislature has power to pass any law which its wisdom suggests that is not forbidden by some provision ofthe Constitution (federal or state. ) Ifthe pension provided for in this Act is a gratuity or a donation to the beneficiary, itis clearly forbidden by the fundamental law. On the other hand, if itis apart ofthe compensation of such employee for services rendered to the city, or itbe for apublic purpose, then clearly it is a valid exercise of the legislative power. ‘I (Emphasis added. )
Inapplying theByrdtest, our question becomes amatter of determining whether the legislative authorization contained inArticles ‘3.50 and 3.51, quoted above, for State participation inthe payment ofpremiums for group life insurance upon its employees or group hospital, surgical and,/or medical expense insurance policies that cover the dependents of its employees may be considered as apart ofthe benefits or compensation for such employees for services rendered to,the State. The authorization for these types of expenditures was first enacted in 1967, by way of amendment toArticles 3. 50 and 3. 51. The authorizationjwith certain additions which are not material tothis opinion) was specifically reenacted in 1969, subsequent to our 1967 opinion, M-138, above.

We cannot assume that the Legislature intended to authorize an unconstitutional deed; rather, it is our duty to interpret the legislative act so as to give itfull constitutional effect, if such be reasonably possible. Friedman v. American Surety Co. of New York, 137 Tex. 149, 151 S.W. 2d 570, 578 (1941); Greene v. Robinson, 111 Tex. 516. 8S.W. 2d 655 (1928); 53 Tex. Jur. 2d 225, Statutes, Section 158. A conclusion that the expenditures referred to inyour questions No. 2and No. 3are intended tobe part ofthe compensation for State employees would render the statutes constitutional and at the same time give full effect to the clearly expressed will of the Legislature. We so conclude.

Opinion M-l 38, mentioned above, relies, inpart, upon the reasoning advanced inOpinion WW-888, where this office held that the Board of Texas Statr Hospitals and Special Schools was authorized to rent housing for the business manager of a state school. The authorizations inquestion

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Honorable J.C. Dingwall, page 8 (~-582)

(for group life insurance on the employees and group hospital, surgical and/or medical expense insurance policies covering their dependents) involve basic living expenses ofState employees. The Legislature, in enacting these statutes, was apparently motivated by a desire, among other things, tokeep the State employees’ compensation in line with the cost of living. State participation in group insurance programs that are anormal expense of modern life, in our opinion, must be considered as compensation for the employee and not a gratuity. See Friedman v. American Surety Co. , supra.

In response to your second and third questions, you are therefore advised that it is the opinion ofthis office that the Texas Highway Department may participate inthe premium cost of group policies which provide hospital, surgical and/or medical expenses insur.ance for dependents of Highway Department employees and appointive officials, and can participate inthe premium cost of group life insurance policies for such employees.

With regard to your fourth question, your attention is directed ,toAttorney General’s Opinion WW-986 (1961), and the authorities cited therein which construe Section 52 ofArticle IIIofthe Constitution. Based upon such opinion you are advised that the State may not enter ‘into any contract whereby itwould become amember (or shareholder) in amutual insurance company. The language ofSection l(a) ofArticle 3. 51 ofthe Insurance Code authorizing the procurement of such insurance from “any insurance company authorized to dobusiness inthis state” must be construed inthe light ofthe prohibitions contained in said Section 52 ofArticle IIIofthe Constitution. We are aware of no restriction, other than good business discernment, which would prohibit the State from contracting with any other type of insurance company.

With regard to your fifth question, it is our opinion that the State agency may not authorize trustees to dowhat it could not doby and for itself. It could not confer upon others a greater authority than itpossesses under the Constitution and statutes. Therefore, inour opinion, the action ofthe State agency, through trustees or other agents, inpurchasing~ insurance inamutual company would be prohibited by Section 52 ofArticle III

### ofthe Constitution.

Your sixth question, regarding the authority ofthe Comptroller

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Honorable J.C. Dingwall, page 9 (M-582)

to pay the premium costs suthorixcd by the Texas Highway Department under Articles 3. 50 and 3. 51, (as amended and reenacted by S.B. 574, 6lst Legislature, R.S. , 1969, Ch. 414, p. 1371) is answered inthe affirmative. See Attorney General’s Opinion M-138 

# (1969) and our answers to questions one, two and three above.
SUMMARY By virtue ofthe specific authority granted inArticle 3.51 ofthe Texas Insurance Code the Texas Highway Department may participate inthe premium cost for Highway Department employees and appointive officials under apolicy or policies of group health, accident, accidental death and dismemberment, disability income replacement and hospital, surgical and/or medical expense insurance.

By virtue ofArticle 3. 51 ofthe Texas Insurance Code the Texas Highway Department may participate in the premium cost of group policies which provide hospital, surgical, and/or medical expense insurance for dependents of Highway Department employees and appointive officials, and by virtue of Article 3. 50, said Department may participate inthe premium’cost of group life insurance policies for such employees and appointive officials.By virtue ofSection52 of Article IIIofthe Constitution of Texas aState agency may not enter, eitlier directly nor through trustees or agents into any contract whereby itwould become a shareholder in amutual insurance company. Articles 3. 50 and 3. 51 ofthe Texas Insurance Code contain no prohibition regarding the authority of the State to contract with any other type of insurance company.

The Comptroller may legally pay the premium costs authorizctl by lhr Texas Highway Ikpartmcnt under Articles 1%. 50and ~3.

5Iof the Texas Insurance Code.

-2779-Honorable .I.&. Dingwall, page 10 (i-582)

Prepared by Ralph R. Rash Assistant Attorney General
APPROVED: OPINION COMMITTEE
Kerns Taylor, Chairman W. E. Allen, Acting Co-Chairman Wayne Rodgers Roger Tyler Ray McGregor Jack Goodman Rex White
MEADE F. GRIFFIN Staff Legal Assistant
ALFRED WALKER Executive Assistant
NOLA WHITE First Assistant

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