Can a Texas community college buy liability insurance for its child-care center?

Plain-English summary

San Jacinto College runs child-care centers that are licensed by the state. A state child-care licensing statute, Human Resources Code section 42.049, requires every licensed child-care center to carry liability insurance. The Commissioner of Higher Education asked whether buying that insurance would put the College on the wrong side of the Texas Constitution. The worry was a specific one: article III, section 52(a) forbids a public body from giving away public money for nothing, and the College figured it was generally immune from being sued, so paying insurance premiums might look like spending public money for no benefit (an unconstitutional "gift").

The Attorney General said the College could buy the insurance. Article III, section 52(a) bars only "gratuitous" payments, meaning payments for which the public body gets nothing in return. A payment is not gratuitous if the public body receives consideration. Here the College does get something back. The College is not as immune as it assumed: Texas law waives governmental immunity for certain injuries (for example, those involving motor vehicles or a condition or use of property), and the College can also be exposed under federal law, such as civil rights claims under 42 U.S.C. section 1983, which state immunity does not block. So in some situations the insurance would actually pay claims the College would otherwise owe.

On top of that, even when the College turns out to be immune, an insurance policy typically carries the insurer's duty to defend, so the College would still get legal representation to assert that immunity. Because the premiums buy real coverage and a defense, the purchase is supported by consideration and is not a gift. The Attorney General concluded the College could maintain the required liability insurance under section 42.049 without violating article III, section 52(a), whether or not the College was immune.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

San Jacinto College and other community colleges (as the opinion held for them): The opinion concluded a college could buy the liability insurance required by Human Resources Code section 42.049 for its child-care centers without violating article III, section 52(a), because the premiums were supported by consideration and were therefore not a gratuitous payment.

On the immunity concern (what the opinion described): The opinion explained that the College was not entirely immune. Texas law waives governmental immunity for certain injuries, and federal claims such as those under 42 U.S.C. section 1983 fall outside state immunity, so the insurance could pay claims the College might actually owe.

On the value of a defense (what the opinion noted): The opinion noted that even if the College were sued over an injury for which it could not be held liable, the insurer's duty to defend meant the College would still receive legal representation in return for the premiums.

Common questions

Could a Texas community college legally pay for liability insurance on its child-care center?
The opinion concluded it could. The required insurance under Human Resources Code section 42.049 was not an unconstitutional gift because the college received consideration in return.

Why was there a constitutional question at all?
The opinion explained that article III, section 52(a) of the Texas Constitution bars a public body from making "gratuitous" payments, and the college worried that paying premiums while immune from suit would be spending public money for nothing.

Isn't a community college immune from lawsuits anyway?
The opinion explained that the college was not fully immune. State law waives immunity for certain injuries, and federal civil rights claims under 42 U.S.C. section 1983 are not blocked by state immunity, so the insurance could cover real exposure.

What if the college turned out to be immune in a particular case?
The opinion explained that the policy still had value, because the insurer's duty to defend would provide the college with legal representation to assert its immunity.

Background and statutory framework

San Jacinto College operates child-care centers licensed by the Texas Department of Family and Protective Services, and Human Resources Code section 42.049 requires a licensed child-care center to maintain liability insurance. Tex. Hum. Res. Code Ann. § 42.049(a) (West 2001). The constitutional question arose under article III, section 52(a) of the Texas Constitution, which prohibits the Legislature from authorizing a political subdivision to grant public money or a thing of value to any individual, association, or corporation. Tex. Const. art. III, § 52(a). That provision bars "gratuitous payments," but a payment is not gratuitous if the political subdivision receives return consideration. Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002).

The Attorney General found that the College received consideration. Although a community college's operation of a child-care facility might fall within sovereign immunity, no authority definitively said so, and Texas law waives governmental immunity for personal injury and death caused by an employee's negligence arising from the operation or use of a motor-driven vehicle or equipment, or from a condition or use of tangible personal or real property, where the employee would be personally liable. Tex. Civ. Prac. & Rem. Code Ann. § 101.021 (West 2005). The College could also be liable under federal law beyond the reach of state immunity, such as claims against local governments under 42 U.S.C. section 1983. Monell v. Dep't of Soc. Servs. of N.Y.C., 436 U.S. 658, 690-91 (1978). Because the College could be liable under state or federal law, the premiums bought real coverage, and in any event the insurer's duty to defend, determined by the pleadings and the policy terms, would supply legal representation. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast Motor Lines, 939 S.W.2d 139, 141 (Tex. 1997); Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Ins. Co. of N. Am., 955 S.W.2d 120, 138 (Tex. App.-Houston [14th Dist.] 1997), aff'd, Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692 (Tex. 2000). The Attorney General therefore concluded the College could maintain the insurance under section 42.049 without violating article III, section 52(a).

Citations

Statutes:

• Tex. Hum. Res. Code Ann. § 42.049(a) (West 2001)
• Tex. Const. art. III, § 52(a)
• Tex. Civ. Prac. & Rem. Code Ann. § 101.021 (West 2005)
• Tex. Civ. Prac. & Rem. Code Ann. § 101.023(b), (c) (West 2005)
• 42 U.S.C. § 1983

Cases:

• Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002)
• Goss v. San Jacinto Junior Coll., 588 F.2d 96, 98-99 (5th Cir. 1979)
• Monell v. Dep't of Soc. Servs. of N.Y.C., 436 U.S. 658, 690-91 (1978)
• Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast Motor Lines, 939 S.W.2d 139, 141 (Tex. 1997)
• Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Ins. Co. of N. Am., 955 S.W.2d 120, 138 (Tex. App.-Houston [14th Dist.] 1997)
• Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692 (Tex. 2000)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0830
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2010/ga0830.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

January 4, 2011

Raymund A. Paredes, Ph.D. Opinion No. GA-0830
Commissioner of Higher Education
Texas Higher Education Coordinating Board Re: Authority of a community college to purchase
Post Office Box 12788 liability insurance to cover claims arising from the
Austin, Texas 78711 operation of a child-care center (RQ-0846-GA)

Dear Commissioner Paredes:

You ask whether the Texas Constitution forbids San Jacinto College (the "College") from purchasing liability insurance coverage for operating child-care centers.[1] You explain that the College operates child-care centers licensed by the Texas Department of Family and Protective Services. Request Letter at 1. Section 42.049 of the Human Resources Code requires licensed child care centers to maintain liability insurance. TEX. HUM. RES. CODE ANN. § 42.049(a) (West 2001). You are concerned that the College would receive nothing in return for buying liability insurance because the College is generally immune from liability. College Brief at 2. Consequently, you ask whether complying with section 42.049 would violate article III, section 52(a), of the Texas Constitution, which forbids public funds from being used for private purposes. See TEX. CONST. art. III, § 52(a) (prohibiting the Legislature from authorizing a political subdivision "to grant public money or thing of value in aid of, or to any individual, association or corporation"); see also Request Letter at 1.

Article III, section 52(a), prohibits political subdivisions from making "gratuitous payments." Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002).[2] A payment is not "'gratuitous' if the political subdivision receives return consideration." Id. Thus, the College could purchase liability insurance under section 42.049 without violating article III, section 52(a), if the College received consideration in return.

While a community college's operation of a child-care facility might come within the scope of sovereign immunity, we have found no authority definitively declaring that it does. Indeed, Texas law waives governmental immunity "for ... personal injury, and death proximately caused by the wrongful act or omission or the negligence of an employee acting within his scope of employment" arising from the "operation or use of a motor-driven vehicle or motor-driven equipment" or from "a condition or use of tangible personal or real property" if the employee would be personally liable. TEX. CIV. PRAC. & REM. CODE ANN. § 101.021 (West 2005).[3] Furthermore, the College may be liable under federal laws that are beyond the reach of state immunity. See Monell v. Dep't of Soc. Servs. of N.Y.C., 436 U.S. 658, 690-91 (1978) (holding that local governments may be liable for claims under 42 U.S.C. § 1983).

Because under certain circumstances the College could be liable for damages under state or federal law, purchasing liability insurance would not be gratuitous. In return for purchasing insurance, the insurer, not the College, would be obligated to pay for a compensable injury up to the amount permitted by the insurance policy and state law. Therefore, complying with section 42.049 of the Human Resources Code would not violate article III, section 52(a), of the Texas Constitution.

Furthermore, the College could be entitled to legal defense if it were sued or threatened with suit. See Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast Motor Lines, 939 S.W.2d 139, 141 (Tex. 1997) (explaining that an insurer's duty to defend is determined by the allegations in the pleadings and the terms of the underlying policy); see also Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Ins. Co. of N. Am., 955 S.W.2d 120, 138 (Tex. App.-Houston [14th Dist.] 1997), aff'd, Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692 (Tex. 2000) (noting that insurance carriers generally have a duty to provide legal defense for the insured). Thus, even if the College were sued over an injury for which it could not be liable, the College could still receive legal representation necessary to advance its immunity in return for maintaining insurance. Therefore, the College could maintain liability insurance under section 42.049 without violating article III, section 52(a), regardless of whether the College were immune from suit or liability.

SUMMARY

A college could purchase liability insurance under section 42.049 of the Human Resources Code without violating article III, section 52(a), of the Texas Constitution.

DANIEL T. HODGE
First Assistant Attorney General

DAVID J. SCHENCK
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Jason Boatright
Assistant Attorney General, Opinion Committee

[1] See Request Letter at 1; Memorandum attached to Request Letter from San Jacinto College at 1 [hereinafter College Brief] (documents available at http://www.texasattorneygeneral.gov).

[2] The College is a political subdivision of the state. Goss v. San Jacinto Junior Coll., 588 F.2d 96, 98-99, modified per curiam on reh'g, 595 F.2d 1119 (5th Cir. 1979).

[3] Section 42.049 requires a licensed child-care center to "maintain liability insurance coverage in the amount of $300,000 for each occurrence of negligence" involving "injury to a child" who is on the center's premises or in its care. TEX. HUM. RES. CODE ANN. § 42.049(a) (West 2001). The section 42.049 coverage requirement appears to be consistent with chapter 101 of the Civil Practice and Remedies Code, which limits the liability of a unit of local government, other than a city, to "money damages in a maximum amount of $100,000 for each person and $300,000 for each single occurrence for bodily injury or death." TEX. CIV. PRAC. & REM. CODE ANN. § 101.023(b), (c) (West 2005).