.                                                 &ate of QJexae
     DAN MORALES
      ATTORNEY
            GESERAL.                                  May 3, 1995

           Mr. Todd K. Brown                                     Opinion No. DM-346
           Executive Director
           Texas Workers’ Compensation Commission                Re: Whether article V, section 53 of
           4000 South M-35                                       the 1993 General Appropriations Act
           Austin, Texas 78704-7491                              authorizes the Texas Workers’ Compen-
                                                                 sation Commission to obtain liability
                                                                 insurance for its employees and whether
                                                                 the purchase of director’s and officer’s
                                                                 liability insurance by a state agency as
                                                                 authorized by that provision constitutes a
                                                                 waiver      of the    state’s   sovereign
                                                                 immunity (RQ-770)

           Dear Mr. Brown:

                    You ask whether the Texas Workers’ Compensation Commission (the
           “commission”) is authorized to obtain liability insurance for its employees. The Texas
           Tort Claims Act, chapter 101 of the Civil Practice and Remedies Code, governs the tort
‘;         liability of state agencies and political subdivisions of the state. Section 101.027 of the
           Civil Practice and Remedies Code provides as follows:

                           (a) Each governmental unit may purchase insurance policies
                      protecting the unit and the unit’s employees’ against claims under
                      this chapter.

                           (b) The policies may relinquish to the insurer the right to
                      investigate, defend, compromise, and settle any claim under this
                      chapter to which the insurance coverage extends.



                    ‘The tern “employee”for purposesof the TexasTort ClaimsAct means“a person, includingan
           officeror agent, who is in the paid serviceof a governmentalunit by competentauthority.” Civ. Prac. &
           Rem. Code 5 101.001(l). Because the members of the Texas Workers’ Compensation Commission are
           entitled to reimbursementfor actual necessaryexpensesand actual lost wages due to attendance at
           commissionmeetings,see LaborCode 5 402.011,they are “in the Paid service”of the departmentand are
           therefore“employees”for purposesof section101.027of the Civil Practiceand RemediesCode.
Mr. Todd K. Brown - Page 2                     (DM-346)




                 (c) This state or a political subdivision of the state may not
           require an employee to purchase liability insurance as a condition of
           employment if the state or the political subdivision is insured by a
           liability insurance policy. [Footnote added.]

Article V, section 53 of the 1993 General Appropriations Act, Act of May 27, 1993, 73d
Leg., R.S., ch. 1051, art. V, 5 53, 1993 Tex. Sess. Law Serv. 4463, 5363, provides in
pertinent part as follows:

           Sec. 53. Tort Claims Act. None of the funds appropriated in this
           Act may be expended for the purpose of purchasing policies of
           insurance covering claims arising under the Texas Tort Claims Act.
           Notwithstanding the foregoing, state agencies may purchase
           director’s or officer’s liability insurance with appropriated funds for
           the agency’s appointed commission or board members and executive
           management staff* [Footnote added.]

       We understand that insurance companies have offered fbll coverage for all
commission employees at no additional cost over the costs for coverage of the commission
members3 and executive management. You ask, “if such additional coverage can be
obtained at no additional costs to the state, is it permitted by the scope of Section 53.”

        Section 53 prohibits the use of appropriated fhnds for the purchase of liability
insurance covering claims under the Texas Tort Claims Act and permits the use of
appropriated funds for the purchase of director’s and officer’s liability insurance. That
section 53 prohibits the use of appropriated kmds for the purchase of liability insurance
covering claims arising under the Texas Tort Claims Act for employees does not by
implication permit the department to obtain such insurance for its employees at no cost.
We believe, however,‘that section 101.027 of the Civil Practice and Remedies Code
authorizes the department to obtain such insurance. Subsection (a) of that provision
authorizes the department to purchuse liability insurance. covering claims under the Texas
Tort Claims Act for its employees. We see no reason why that authority would not
include the authority to obtain such liability insurance for employees at no cost. We

        *We note that in the past, appropriationsacts containedprovisionssimilar to section 53 that
includedthe first sentenceof section 53 but not the second. This office repeatedly concluded that these
provisions precluded state agencies from using appropriated funds to purchase any liability insurance
under the Texas Tort Claims Act. See, e.g., Attorney General Opinions JM-889 (1988), Jh4-625 (1987),
N-551 (1986), H-900 (1976),M-1215 (1972). The second sentenceof section 53 first appeared in the
1993 General Appropriations Act. See in& p. 5.

        3Thecommissionmembersare appointedby the governor. See LaborCede 8 402.001(a).




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Mr. Todd K. Brown - Page 3                 (DM-346)




caution, however, that the determination whether such liability coverage is actually
obtained for employees at no cost would involve the resolution of factual issues and is
therefore beyond the purview of the opinion process.

        You also ask what level of management within the commission is insurable as
“executive management staff’ as that term is used in section 53. Section 53 permits the
purchase of “director’s or ofjcerh liability insurance with appropriated funds for the
agency’s appointed commission or board members and executive management staff.”
(Emphasis added.) The term “officer” in section 53 is taken from the private sector where
the purchase of director’s and officer’s liability insurance is a common corporate practice.
We do not believe it is used in its usual, narrow, public-sector sense, that is, a person upon
whom the legislature has devolved a sovereign function of the government to be exercised
by the officer for the benefit of the public largely independent of the control of others. See
Aldine Indep. Sch. Dist. v. Standley, 280 S.W.2d 578, 583 (Tex. 1955). Rather, we
believe that the term “officer,” when taken together with the term “executive management
staff,” is intended to refer to those who would be considered executive officers of the
department in the corporate sense, which is somewhat broader in scope. Cj Helm v.
Mutual Serv. Casualty Ins. Co., 261 N.W.2d 598, 600 @inn. 1977) (using eases in the
context of insurance policies covering private corporations by analogy to construe the
term “executive officer” in general liability policy issued to municipality); see also influ
note 4.

        The more recent cases we have found that discuss whether a particular person is an
executive o&er of a corporation for purposes of liability insurance coverage consider
such factors as the person’s connection with top officers of the corporation, the person’s
authority outside of his or her department, whether the person has a large number of
employees under his or her control, the person’s authority to hire and fire, the person’s
authority to help shape corporate policy, and the person’s authority to make contracts on
behalf of the corporation. See, e.g., Diamond Intern. Corp. v. Allstate Ins. Co., 712 F.2d
1498, 1503 (1st Cir. 1983); Vega v. Southern ScrapMaterial Co., 517 F.2d 254, 258 (5th
Cir. 1975); Industrial Indem. Co. v. Duwe, 707 P.2d 96, 100 (Or. App. 1985); Greene v.
might, 365 So.2d 551, 558 (La. App. 1978). See generalZy Joseph B. Conder, who is
An Executive Oficer of Insured Within Meaning of Liability Insurance Policy,
1 A.L.R.Sth 139-40 (1992). Although we have not found any Texas cases construing the
term “executive officer” in an insurance policy, we believe a Texas court would follow
these more recent cases in construing the term, Moreover, we believe that these factors
reflect the legislature’s intent in using the terms “officer” and “executive management
stat?” together in section 53.4

         41n Helm v. Mutual Service Casuaity Insurance Co., 261 N.W.Zd 598, 601 (Minn. I977), tbe
court limited the term “executive offker” in the context of a general liability policy issued to a




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Mr. Todd K. Brown - Page 4                  (DM-346)




        Section 402.063 of the Labor Code authorizes the commission to appoint an
executive director who “is the executive officer and administrative head of the
commission. The executive director exercises all rights, powers, and duties imposed or
conferred by law on the commission, except                [those] specifically reserved   to
members of the commission [and] serves at the pleasure of the commission.” Labor Code
5 402.041; see also id. 5 402.004(b) (voting requirements for decisions regarding
employment of executive director). The executive director conducts “the day-to-day
operations of the commission in accordance with policies established by the commission
and otherwise implement[s] commission policy.” Id. § 402.042(a). In addition, the
executive director appoints division directors who serve at his or her pleasure. Id.
§ 402.021. Thus, at the very minimum, the executive director is “executive management
staff’ for purposes of director’s and officer’s liability insurance. Whether other positions
are included in the term “executive management stat?” according to the factors described
above involves issues of fact and must be determined on a case-by-case basis.s See &so
mpra note 4.

        You also ask whether the purchase of director’s and officer’s liability insurance by
a state agency as authorized by section 53 constitutes a waiver of the state’s sovereign
immunity. The Texas Tort Claims Act provides for limited governmental liability, and
waives sovereign immunity to suit to the extent of that liability. See Civ. Prac. & Rem.
Code $3 101.021, .025. “To the extent an employee has individual immunity from a tort
claim for damages,” it is not affected by the Texas Tort Claims Act. Id. 5 101.026. Paid
board and commission members are “employees” for purposes of the Texas Tort Claims
Act. See supra note 1. In essence, you ask whether section 53 constitutes a waiver of the
state’s sovereign immunity to any greater extent than the waiver in the Texas Tort Claims
Act. We believe it does not for the following reasons.

(footnotecontinned)
nnmicipahty to cover only those persons “whose position, power, and duties are establishedin the
mnnicipalcharter.” We declineto amstme the appropriationsact provisionto authorizethe purchaseof
liability iasnrance.only for those departmentemployeeswhoseposition,power,and dutiesare established
pnrmant to state law. Most state agencieshave only one or at most two positions set forth by statute.
S&ion 53 uses the term “executivemanagementstatf.” Tbe use of the term srufl suggeststhat the
legislatureintendedto authorizestate agenciesto purchaseliability insnrancc for more than one or two
positions.

         ‘For example,section402.021of LaborCodereqniresthe executivedirectorto appoint“directors
of the divisions of the wmmtssion”and provides mat they “serve at the pleasure of the executive
director.”Altlwugbthe directorslistedin section402.021sre clearlyat-willemployees,we da not believe
that their at-will status is d&positivein detemriningwhetherthey are “executivemanagementstaff’for
purposesof the appropriationsact provision. Rather,whethersuch employeesare “executivemanagement
staff’will dependupon the factorsset forth above.




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Mr. Todd K. Brown - Page 5                      (DM-346)




         We believe that the second sentence of section 53 refers only to director’s and
ofiicer’s liability insurance covering claims arising under the Texas Tort Claims Act. This
language was offered as an amendment to the appropriations act by Representative
Alexander on the House floor during second reading. See H.J. of Tex., 73d Leg., at
1142-43 (1993). Representative Alexander did not explain the purpose of the amendment,
and we are not aware of any other legislative history. Therefore, we construe the
language on its face and in its statutory context. As noted above, section 101.027 of the
Texas Tort Claims Act provides that each governmental unit may purchase insurance
policies protecting its employees, including its officers and directors, against claims under
the act. For many years, section 53 and its counterparts in previous appropriations acts,
see mpm note 2, effectively prohibited state agencies from doing so, at least with
appropriated funds.6 The newly added second sentence of section 53 appears to have
been intended to eliminate this obstacle with respect to director’s and officer’s liability
insurance. It does not appear to be intended to authorize state agencies to obtain
insurance to cover suits against directors and officers arising under the common law or
 statutes other than the Texas Tort Claims Act.

         Were we to conclude otherwise, the second sentence of section 53 could run afoul
of the Texas Constitution, Article III, section 35 of the Texas Constitution prohibits the
enactment of general legislation in a general appropriations bill. See Moore v. Sheppard,
192 S.W.2d 559, 561 (Tex. 1946); Attorney General Opinions DM-93 (1992), DM-81
(1992), JIvI-1151 (1990) MW-389 (1981), MW-51 (1979), V-1254 (1951) V-1253
(1951). A rider to a general appropriations bill may do no more than “detail, limit, or
restrict the use of the [appropriated] funds or otherwise insure that the money is spent for
the required activity for which it is therein appropriated.” Attorney General Opinion
V-1254 (1951) at 17 (quoting summary).

         Specific statutory authority is necessary to authorize state agencies to purchase
liability insurance.7 Attorney General Opinions TM-625 (1987), H-1318 (1978). The
second sentence of section 53 would be constitutionally intirm if it were construed to
authorize state agencies to obtain insurance to cover suits against directors and officers
arising under the common law or statutes other than the Texas Tort Claims Act, to the
extent such authority does not exist under general law. Although we realize there is some
question as to the utility of director’s and officer’s insurance for claims arising under the


         %ee AttorneyGeneralOpinionsJM-889 (1988), JM&25 (1987), JM-551 (1986), H-900 (1976),
M-1215 (1972).

         7For statutes authorizing state agencies to purchase liability insurance, see Civil practice and
 Remedies Coda section 101.027 and Government Code section 612.002.




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Mr. Todd K. Brown - Page 6                    (DM-346)




Texas Tort Claims Act,s we cannot conclude that the legislature intended impermissibly to
enact general law authorizing the purchase of broader insurance coverage in the
appropriations act See Gov’t Code 5 3 11.021(l) (it is presumed that in enacting a statute
the legislature intended compliance with the constitution). We also note that if the second
sentence of section 53 were construed to authorize state agencies to purchase director’s
and officer’s insurance for claims arising under other statutes and the common law, we
would have to careMy consider whether such coverage would run afoul of article III,
section 51 of the Texas Constitution. See Tex. Const. art. III, $ 51 (legislature shall have
no power to make any grant or authorize the making of any grant of public moneys to any
individual); Attorney General Opinion H-70 (1973) at 5-6 (where there is no risk of
governmental liability, to provide insurance fimds to discharge the liability of an individual
 school district trustee would be a grant of public money or aid of an individual in violation
 of article III, sections S1 and 52 of the Texas Constitution).

        For the foregoing reasons, we conclude that the second sentence of section 53
authorizes state agencies to purchase director’s and officer’s liability only for claims
arising under the Texas Tort Claims Act. Therefore, we also conclude that the second
sentence of section 53 does not waive sovereign immunity to any greater extent than it is
waived by the Texas Tort Claims Act.




            *As noted above,the Texas Tort Claims Act does not waive individual immunity. See Civ. Prac.
 & Rem. Code 5 101.026. A suit against a state employeeor memberof a state govemingbody in his or
 her personalcapacitywouldnot arise under the TexasTort ClaimsAct. In addition,a state employeeor
 memberof a state governingbody is entitled to indemnitieationin suits arising out of a bread range of
 officialconduct. See id. ch. 104. If we are correctthat the secondsentenceof section 53 refers only to
 director’sand officer’sliability insurancecoveringclaimsarising under the TexasTort ClaimsAct, then
 it is difficultto imaginewhat sort of claimssuch insnrancewouldcover.




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Mr. Todd K. Brown - Page 7              (DM-346)




                                   SUMMARY

              Section 101.027 of the Civil Practice and Remedies Code
         authorizes the Texas Workers’ Compensation Commission (the
         “commission”) to obtain liability insurance against claims under the
         Texas Tort Claims Act for employees. Section 53 of article V of the
         1993 General Appropriations Act precludes the commission from
         using any appropriated fimds for the purchase of such insurance.
         Together these provisions authorize the commission to obtain liability
         insurance against claims under the Texas Tort Claims Act for
         employees at no cost. The determination whether liability coverage
         is actually obtained for employees at no cost would involve the
         resolution of factual issues.

               The terms “officer” and “executive management staff’ in section
          53 refer to those persons who could be considered executive officers
          of the commission as that term is used in the private, corporate
          sector. The executive director of the department is “executive
          management staff’ for purposes of director’s and officer’s liability
          insurance.    Whether other positions are included in the term
          “executive management staff’ must be determined on a case-by-case
          basis.

              The second sentence of section 53, article V of the 1993 General
          Appropriations Act does not waive the state’s sovereign immunity to
          any greater extent than it is waived by the Texas Tort Claims Act.




                                                    DAN MORALES
                                                    Attorney General of Texas

JORGE VEGA
First Assistant Attorney Genera)

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Mary R. Crouter
Assistant Attorney General




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