UiNAWFoHD C. MAHTIN AUWI-XN.TEXAS 78711 

AProIaNRY OENERAL February 17, 1970 -” 

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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 of this office submits questions concerning the application of Articles 3. 50 and 3. 51 .of the Texas 

Insurance Code, as amended. These questions are: 

“1. Can the Texas Highway Department participate in the premium cost for Highway Department employees and appointive officials under a policy or policies 

of group health, accident, accidental death and dismemberment, disability income replacement and hospital, 

surgical and/or medicalexpense insaranoe? .. ... 

“2. Can the Texas Highway Department 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? 

“3. Can the Texas Highway Department participate in the, 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 in this state and participate in the cost for group 

insurance found to be legal in questions 1, 2 and 3 as 

listed above? 

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

“5. If the answer to question 4 above is found 

to be negative as it may apply to certain types of insurance 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 do business in 

this state and participate in the cost for group insurance found to be legal in questions 1, 2 and 3 as 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 of the State Highway Fund for such 

group insurance coverage as found legal in questions 

1, 2. 3, 4 or 5 as listed above?” 

Article 3. 50 of the 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, in part, as follows: 

“No policy of group life insurance shall be delivered in this State unless it conforms to one of the 

following descriptions: 

‘1. . . 

‘I( 3) A policy issued to any association of 

employees of the United States Government or any 

subdivision thereof, provided the majority of the 

members of such association are residents of this 

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 of state 

employees, any association of state, county and 

city, town or village employees, and any associa- 

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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 in this state, employees for the benefit of 

persons other than the policyholder subject to the 

following requirements: 

‘1. . 

l’(b) The premium for a policy 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 in whole or in 

part from funds contributed by’ the. employer, ‘or in 

whole or in part 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 

of public employees, and the governing boards and 

authorities of each state university, colleges, common and independent school districts or of any other 

agency or subdivision of the public school system of 

the’;State of Texas are authorized to procure contracts with any insurance company authorized to do 

business in this 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 a policy or 

policies of group health, accident, accidental death 

and dismemberment, disability income replacement 

and hospital, 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 in writing by the respective employees so to do. The premium for the policy or contract may be paid in whole or in part from funds contributed by the employer or in whole or in part from 

funds contributed by the insured employees. When an 

association of public employees is the holder of such . 

a policy of insurance or contract, the premium for employees that are members of such association may be 

paid in whole or in part by the State of Texas or other 

agency authorized to procure contracts or policies of 

insurance under this section, or in whole or in part 

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 in or issued in connection with the policy or contract shall be applied to 

the payment of future premiums and to the pro rata 

abatement of the insured employee’s contribution therefor. 

“The term employees as used herein in addition to its usual meaning shall include elective and 

appomtive officials of the state. ‘1 

In reply to your first question we point out that this office has 

previously approved State financial participation in group health and 

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Honorable J. C. Dingwall, page 5 (M-582) 

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 a part of their benefits or compensations is within the realm of public purpose. Based upon the prior opinion of this office, and the specific authority granted in the above quoted Article 3. 51, you are advised 

that the Texas Highway Department may participate in the 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 in the 

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 of premiums 

of group life insurance on the Highway Department employees themselves. 

Your second and third questions involve essentially the same problems of 

law and will be answered jointly. Those problems relate to the constitutionality of the statutes, and we conclude that the provisions above quoted 

are constitutional. 

In Attorney General’s Opinion M-l 38 (1967). it was held that there 

was no unconstitutional gift of public funds in permitting the State to participate in group life insurance premiums for State employees. In Attorney 

General’s Opinion M-408 (1969), dealing with the subject of insurance 

policies for Legislators, it was held that there was no constitutional prohibition against the use of State funds to make premium payments on group, 

health and accident insurance policies for members of the Legislature, but 

that there were constitutional prohibition against the use of State funds for 

the payment of premiums on group life policies for Legislators and their 

dependents and for group health and accident policies covering the dependents 

of Legislators. In that opinion it was pointed out that Section 24 of Article 

III of the Constitution of Texas specifically limits the salary and expenses 

which may be paid members of the Legislature and that Section 51 of Article 

III and Section 6(a) of Article XVI of the 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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r. . 

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

“Such an expenditure serves a beneficial 

and useful public or governmental function in helping to assure maximum State service and is directly related to the health and well being of State 

servants in the performance of their duties. ” 

(Emphasis added. ) 

However, no such connection between the functioning’of the Legislative 

branch of the government and the payment of life 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 of the limitations provided by Section 24 .of Article 

III of the 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. 

It will 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. it by Section 44 of Artitle III of the Constitution. In other 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 of the benefits and compensation of other state employees. 

Of course, the Constitutional provisions of Article III, Section 51 and Article 

XVI, Section 6(a), forbiding grants and appropriations for private or individual 

purposes unless authorized by the Constitution, apply to both Legislators and 

public employees. But we do not deem any of these Constitutional prohibitions 

to be applicable to Articles 3. 50 and 3. 51 of the Insurance Code, as amended. 

What might be considered a valid “compensation” to public employees, if 

given to Legislators, might be prohibited by the plain limitations provided by 

Section 24 of Article III of the Constitution and thus become an unconstitutional 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, 6 S. W. 2d 738 (1938) involved a 

constitutional challenge to the validity of a public 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 of the Constitution (federal or state. ) If the pension provided 

for in this Act is a gratuity or a donation to the beneficiary, it is clearly forbidden by the fundamental 

law. On the other hand, if it is a part of the compensation of such employee for services rendered to the city, 

or it be for a public purpose, then clearly it is a 

valid exercise of the legislative power. ‘I (Emphasis 

added. ) 

In applying the Byrdtest, our question becomes a matter of determining whether the legislative authorization contained in Articles ‘3. 50 

and 3. 51, quoted above, for State participation in the payment of premiums 

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 a part of the 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 to Articles 3. 50 and 3. 51. The authorizationjwith certain additions 

which are not material to this 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 it full 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. 8 S. W. 2d 655 (1928); 

53 Tex. Jur. 2d 225, Statutes, Section 158. A conclusion that the expenditures referred to in your questions No. 2 and No. 3 are intended to be part 

of the 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, in part, upon the reasoning advanced in Opinion 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 in question 

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. 1 

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 of State employees. The Legislature, in 

enacting these statutes, was apparently motivated by a desire, among 

other things, to keep the State employees’ compensation in line with the 

cost of living. State participation in group insurance programs that are 

a normal 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 of this office that the Texas Highway 

Department may participate in the 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 in the premium cost of group life insurance policies for 

such employees. 

With regard to your fourth question, your attention is directed 

,to Attorney General’s Opinion WW-986 (1961), and the authorities cited 

therein which construe Section 52 of Article III of the Constitution. Based 

upon such opinion you are advised that the State may not enter ‘into any 

contract whereby it would become a member (or shareholder) in a mutual 

insurance company. The language of Section l(a) of Article 3. 51 of the 

Insurance Code authorizing the procurement of such insurance from “any 

insurance company authorized to do business in this state” must be construed in the light of the prohibitions contained in said Section 52 of Article 

III of the 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 do what it could not do by and for 

itself. It could not confer upon others a greater authority than it possesses 

under the Constitution and statutes. Therefore, in our opinion, the action 

of the State agency, through trustees or other agents, in purchasing~ insurance in a mutual company would be prohibited by Section 52 of Article 

III of the Constitution. 

Your sixth question, regarding the authority of the Comptroller 

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. . 1 

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 in the affirmative. See Attorney General’s Opinion M-138 (1969) and our answers 

to questions one, two and three above. 

SUMMARY 

By virtue of the specific authority granted 

in Article 3. 51 of the Texas Insurance Code the Texas 

Highway Department may participate in the premium 

cost for Highway Department employees and appointive 

officials under a policy or policies of group health, 

accident, accidental death and dismemberment, disability income replacement and hospital, surgical 

and/or medical expense insurance. 

By virtue of Article 3. 51 of the 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 in the premium’cost of group 

life insurance policies for such employees and appointive 

officials. 

By virtue of Section52 of Article III of the Constitution of Texas a State agency may not enter, eitlier directly nor through trustees or agents into any contract 

whereby it would become a shareholder in a mutual insurance company. Articles 3. 50 and 3. 51 of the 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%. 50 and ~3. 5 I of the Texas Insurance Code. 

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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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