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Determining What Coverage School Districts Can Purchase

December 04, 2012 Paul Taylor

general topics

Texas school districts and other educational entities may purchase coverage to protect the organization from many types of claims. They purchase workers’ compensation, liability, and auto coverage as a regular part of their risk management planning; however, when making coverage decisions, the organization should consider whether the proposed purchase would be an authorized expenditure of public funds consistent with Texas Attorney General Opinion No. H-70 (1973).

The policies

This opinion holds that an educational entity may purchase insurance to protect against the costs and expense of litigation, and to protect itself from damages where the organization is not immune. Yet, where the entity is protected from risk by governmental immunity, it may be an improper expenditure of public funds to purchase insurance to cover those risks.

Texas educational institutions are not allowed to purchase some forms of automobile insurance coverage. The Texas Attorney General has determined that public education entities are prohibited from purchasing no fault personal injury protection and uninsured/underinsured motorist coverage because providing such coverage at the expense of the organization would amount to granting public money to a private individual, which violates the Texas Constitution [Article 3, Sections 50–52; Attorney General Opinion H-602 (1975)].

These institutions may elect to purchase coverage for bodily injuries sustained by students while participating in athletic training or competition or while engaging in school-sponsored activities on campus (Texas Education Code 38.024).

The requirements

While many types of coverage help public schools control costs, the final decision on the cost benefits and the legal availability of each is an issue each administration must consider. Texas law requires public schools to maintain the following coverages:

  • Health care coverage for full-time employees that is at least comparable to the coverage offered to state of Texas employees
  • Workers’ compensation coverage to cover workers who suffer work-related injuries or illnesses
  • Medical liability coverage to cover volunteer physicians and registered nurses who administer treatment or medication to students
  • Minimum automobile liability coverage, which pays for the expenses of others in the case of accidents caused by drivers covered under the organization’s policy

The options

These entities may choose to purchase any of the following coverages:

  • Life insurance and annuities to allow employees to provide for beneficiaries when they die or save for retirement or other purposes
  • Commercial property coverage to protect against damage to property caused by fire, windstorm, lightning, or other covered perils. Other property-related coverages that typically require the issuance of a separate policy include crime and windstorm insurance for campuses in coastal areas.
  • General liability coverage to protect against wrongful acts or omissions, or the negligence of employees resulting in bodily injury or property damage. Volunteers may be included.
  • Optional collision and comprehensive auto coverage to protect district owned or regularly used vehicles from accidents in which the driver is at fault and non-traffic related damage such as theft, hail, or fire. Towing and labor coverage pays towing charges when a car can’t be driven.

The restrictions

Public schools are prohibited from purchasing the following automobile coverages:

  • Medical payments coverage pays medical and funeral expenses of injured occupants of the insured’s vehicle, regardless of who is at fault.
  • Personal injury protection (PIP) coverage pays the same as medical payments coverage, plus 80 percent of an occupant’s lost income as a result of an accident.
  • Uninsured/underinsured motorist coverage pays expenses incurred by a vehicle owner or occupants as a result of an accident that is the fault of another driver without insurance or without sufficient insurance.

The Texas Attorney General’s Office has determined that providing these coverages at the expense of the educational institution would be a violation of the Texas Constitution.

If you have questions about this article, please contact Paul Taylor, Division Director of Risk Management Legal and Regulatory Affairs, at 800.482.7276, ext. 3663.

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Tagged: coverage