Untitled Texas Attorney General Opinion ( 1970 )

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,rn-
ing the purchase of
group insurance for
State Highway De-
Dear Mr. Dingwall: partment employees.
Your recent request for an opinion of this office submits ques-
tions 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 partici-
pate in the premium cost for Highway Department em-
ployees and appointive officials under a policy or policies
of group health, accident, accidental death and dismem-
berment, disability income replacement and hospital,
surgical and/or medicalexpense insaranoe? .. ...
“2. Can the Texas Highway Department partici-
pate in the premium cost of group policies which provide.
hospital, surgical and/or medical expense insurance for
dependents of Highway Department employees and ap-
pointive officials?
“3. Can the Texas Highway Department partici-
pate in the, premium cost of group life insurance policies
for Highway Department employees and appointive offi-
cials?
“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 in-
surance companies, can the Texas Highway Department,
acting through a Board of Trustees or similar arrange-
ment, 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 insur-
ance found to be legal in questions 1, 2 and 3 as listed
above?
“6. Can the Comptroller legally pay the pre-
mium cost under S. B. 574, 61st Legislature, Regu-
lar 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 de-
livered 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 in-
corporated 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 associa-
tion 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 associa-
tion 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 per-
sons insured under said policy . .”
Article 3. 51, Section l(a) provides:
“(a) The State of Texas and each of its
political, governmental and administrative sub-
divisions, departments, agencies, associations
of public employees, and the governing boards and
authorities of each state university, colleges, com-
mon 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 con-
tracts with any insurance company authorized to do
business in this state insuring their respective em-
ployees, 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 in-
surance 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’ contri-
butions to the premiums for such insurance or an-
nuities issued to the employer or to an association
of public employees as the policyholder may be de-
ducted by the employer from the insureds’ salaries
when authorized in writing by the respective em-
ployees so to do. The premium for the policy or con-
tract may be paid in whole or in part from funds con-
tributed 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 em-
ployees 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 con-
nection 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 there-
for.
“The term employees as used herein in addi-
tion 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 pub-
lic purpose. Based upon the prior opinion of this office, and the speci-
fic 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 ex-
pense 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 constitu-
tionality 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 partici-
pate 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 pro-
hibition 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 ap-
propriations 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 help-
ing to assure maximum State service and is di-
rectly 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 pay-
ments 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 .pay-
ment 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 affect-
ing 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 unconstitution-
al 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 Con-
stitution (federal or state. ) If the pension provided
for in this Act is a gratuity or a donation to the bene-
ficiary, it is clearly forbidden by the fundamental
law. On the other hand, if it is a part of the compensa-
tion 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 de-
termining 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 amend-
ment 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 un-
constitutional 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 expendi-
tures 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 constitu-
tional 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 reason-
ing 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 there-
fore 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 de-
pendents 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 con-
strued 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~ in-
surance 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 af-
firmative. 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, dis-
ability 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 hos-
pital, surgical, and/or medical expense insurance for
dependents of Highway Department employees and ap-
pointive 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 Consti-
tution of Texas a State agency may not enter, eitlier di-
rectly nor through trustees or agents into any contract
whereby it would become a shareholder in a mutual in-
surance company. Articles 3. 50 and 3. 51 of the Texas In-
surance 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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