MS 2025-02-S-Morris-Harris-February-19-2025-Surplus-Insurance-Proceeds February 19, 2025

Can a Mississippi county put leftover insurance money into the general fund after a covered building has been fully repaired?

Short answer: No. Under Mississippi Supreme Court precedent (Adams v. Helms, 1909), insurance proceeds for a damaged county building are not part of the general fund. They are a trust fund reserved for repairing, maintaining, or improving that specific property. Surplus from a completed repair stays in trust for the same property's future needs.

Disclaimer: This is an official Mississippi Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Mississippi attorney for advice on your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official AG opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original AG opinion (PDF)

Plain-English summary

Bolivar County had a county-owned building damaged by some covered loss. The insurance carrier paid out, the county fixed the building, and money was left over. The board of supervisors wanted to know whether the surplus could be moved to the county general fund for general purposes, or had to stay tied to the damaged property.

The AG said the surplus stays with the property. Mississippi Code Section 19-7-7 lets counties insure their public property. The Mississippi Supreme Court interpreted that statute long ago in Adams v. Helms (1909), holding that insurance proceeds are not general fund money. They are a trust fund, dedicated to replacing or restoring the destroyed property as long as the county still needs that asset. The AG read that holding to extend to surplus left over after a completed repair: the money stays in trust for the repair, maintenance, or improvement of that covered facility.

The AG also flagged two procedural points. First, the office cannot interpret the terms of an insurance policy, so any policy-specific question goes to the carrier. Second, for guidance on the mechanics of expenditure, the AG referred the county to the Department of Audit's Technical Assistance Division.

What this means for you

For county boards of supervisors and county clerks

When you receive insurance proceeds for a damaged county building or other covered asset, set up the funds in a way that preserves their trust character. Do not deposit them into the general fund. Keep them in a dedicated account or sub-account tied to the specific property. Track repair expenditures against those funds. When repairs are complete and a surplus remains, leave the surplus in the dedicated account for future repair, maintenance, or improvement of the same property.

For finance directors and CPAs auditing county funds

This opinion confirms that surplus insurance proceeds are restricted by trust principles even after the immediate repair is complete. Treat them like a permanently restricted balance for that asset, not as available reserves. Auditors should flag any general-fund transfer of insurance surplus on a damaged county building.

For county attorneys

If a board insists on tapping insurance surplus for general purposes, push back with this opinion and Adams v. Helms. The board's exposure includes audit findings and potential personal liability for misapplied public funds. The AG declined to interpret the specific insurance policy, so if the board has a theory that the policy authorizes a different use, that question has to be put to the carrier in writing first.

For taxpayers and journalists

When a county receives a large insurance payout (typically after a fire, weather event, or other casualty), watch what happens to any leftover funds after repairs. Mississippi law treats those leftovers as restricted trust funds for the same property. A general-fund transfer is the kind of decision that should attract scrutiny.

Common questions

What if the building is no longer needed?
Adams v. Helms put the trust character in conditional terms: the funds are reserved for the destroyed property "so long as the county stands in need of the thing so destroyed." If the county genuinely no longer needs the asset (because of consolidation, demolition, or sale, for example), the legal analysis may shift. The AG did not address that scenario in this opinion. Talk to your county attorney and the Department of Audit before redirecting funds in that situation.

Can the surplus be used for unrelated capital improvements at the same building?
The AG framed permitted uses as "repair, maintenance, or improvement of the covered facility." Improvements to the covered facility appear to be on the list. Improvements at a different facility do not.

Can the money sit in trust indefinitely?
The opinion does not impose a time limit. Practical guidance is to track the funds in a dedicated account and document the policy reason for retaining them. If the funds become disproportionate to the future maintenance needs of the building, that might trigger a follow-up legal question.

What about a damaged building that was insured but not actually repaired?
The opinion addresses the surplus-after-repair scenario. The Adams v. Helms doctrine arguably applies more strongly when the loss has not been remediated: the proceeds are still earmarked for replacing the destroyed property. The same principles should govern.

Does this apply to municipal buildings too?
The opinion addresses Section 19-7-7, the county property insurance statute. Cities have separate statutes and case law, but the trust-fund principle in Adams v. Helms is broadly cited and likely informs the analysis for municipal property insurance proceeds as well. Check with your city attorney.

Background and statutory framework

Mississippi Code Section 19-7-7 authorizes counties to insure public property, including county-owned buildings, against loss. The statute does not by itself say what happens to the proceeds.

The Mississippi Supreme Court answered that question in Adams v. Helms, 48 So. 290 (Miss. 1909). The court held that insurance proceeds are not part of the county general fund but instead are a trust fund, "to be used only for the purpose of replacing the property destroyed, so long as the county stands in need of the thing so destroyed." That trust character carries through to the surplus left after a completed repair: the AG concluded the board must maintain the proceeds in trust for repair, maintenance, and improvement of the covered facility.

The AG declined to interpret the underlying insurance policy because Section 7-5-25 limits the office to prospective state-law questions, not contract interpretation. For policy-specific guidance, the county should consult the carrier. For the mechanics of expending county funds, the Department of Audit's Technical Assistance Division is the right resource.

Citations

Miss. Code Ann. § 19-7-7 (county insurance authority for public property)
Miss. Code Ann. § 7-5-25 (scope of AG opinions)
Adams v. Helms, 48 So. 290, 291 (Miss. 1909) (insurance proceeds as trust fund for property replacement)
MS AG Op., Welch (June 23, 2021) (AG cannot interpret contract terms)

Source

Original opinion text

February 19, 2025

Stephanie Morris-Harris, Esq.
Attorney, Bolivar County Board of Supervisors
Post Office Box 698
Cleveland, Mississippi 38732

Re: Surplus Insurance Proceeds

Dear Ms. Morris-Harris:

The Office of the Attorney General has received your request for an official opinion.

Background

Bolivar County ("County") owns a facility, covered by an insurance policy, that was damaged. The County filed a claim under the insurance policy, and funds were paid to the County for repairs. Once full repairs were made to the covered facility, surplus insurance proceeds were left over.

Questions Presented

Does the Bolivar County Board of Supervisors ("Board") have the authority to deposit the surplus insurance proceeds into its general fund for general county purposes, or must the Board only use the surplus insurance proceeds towards the repair, maintenance, or improvement of the covered facility?

Brief Response

The Board does not have the authority to deposit the surplus insurance proceeds into the county general fund.

Applicable Law and Discussion

As an initial matter, the Office of the Attorney General is authorized to issue opinions on prospective questions of state law only, in accordance with Mississippi Code Annotated Section 7-5-25. Our office "cannot by official opinion interpret the terms or provisions of an agreement or contract or infer facts that may be relevant to our opinion." See MS AG Op. Welch at *1 (June 23, 2021). For further guidance on any applicable provisions of the County's insurance policy, we refer the Board to its property insurance carrier.

Section 19-7-7 authorizes counties to insure certain public property, including county-owned buildings, against loss. The Mississippi Supreme Court interprets Section 19-7-7 such that insurance proceeds are not a part of the county general fund but instead are "a trust fund, to be used only for the purpose of replacing the property destroyed, so long as the county stands in need of the thing so destroyed." Adams v. Helms, 48 So. 290, 291 (Miss. 1909).

Therefore, state law dictates that the Board must maintain the insurance proceeds in trust for the repair, maintenance, and improvement of the covered facility.

For further guidance regarding the proper expenditure of public funds, we refer you to the Technical Assistance Division of the Department of Audit.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Caleb A. Pracht
Caleb A. Pracht
Special Assistant Attorney General