Can a Texas state agency buy insurance on mail or freight it ships?

Texas AG Opinion JM-547: Insuring Mail in Transit

Plain-English summary

The Texas Rehabilitation Commission asked whether it could insure freight or mail while it was in transit. The commission had held off in the past because a line of Attorney General opinions said state agencies need specific statutory authority before they can buy insurance. The question was whether that rule blocks an agency from buying postal or freight insurance on things it ships. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

The AG said it does not. The earlier opinions dealt with property insurance and liability insurance, and they rested on the ideas that insurance premiums were "fixed and expected" costs the legislature had to provide for specifically, and that the legislature had carved out specific insurance authorizations. Insuring mail or freight in transit is different. An agency head is responsible for the care and safekeeping of state property, and buying insurance from the carrier to protect that property while it is being shipped is a reasonable way to do that. In practice the insurance is just an added cost of postage or transportation, and like postage generally it is not a fixed and expected expense but a contingent one. So an agency may pay for mail or freight insurance out of money appropriated for contingent or operating expenses, and it does not need any special statutory authorization to do so. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. The statutes governing state property management and agency purchasing have since been recodified (much of former article 601b is now in the Government Code). Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule or citation mentioned here.

Common questions

Can a state agency insure its mail and freight while it is being shipped?

Yes. The AG concluded a state agency does not need specific authorization to insure mail or freight in transit, because that insurance functions as an added cost of postage or transportation. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

Doesn't the rule say agencies need a statute before buying insurance?

For property and liability insurance, yes, and the AG did not disturb that rule. But the AG explained that mail and freight insurance in transit is a different situation: it is a reasonable means of caring for state property and is effectively part of the shipping cost, not the kind of standing property or liability coverage the earlier opinions addressed. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

What funds can pay for it?

Money appropriated for contingent expenses or operating expenses. The AG treated postal and freight insurance like postage generally, which is a contingent expense rather than a fixed and expected one, so it can be paid from those appropriations. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

Background and statutory framework

The AG began with the settled line of opinions holding that a state agency may not buy property insurance without specific authority, reasoning that premiums are "fixed and expected" expenses that cannot be paid from a general contingent-expense appropriation and must be provided for by the legislature, and that a Senate Concurrent Resolution expressed legislative intent that no insurance be taken out on public buildings or their contents. A parallel line held that agencies may not buy liability insurance without specific statutory authority, on the theory that the legislature's practice of specifically authorizing liability coverage in particular situations signals that agencies may not buy it otherwise. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

The AG concluded those opinions do not reach mail or freight in transit. Agency heads are responsible for the care and safekeeping of state property in their agencies' possession, and buying postal or freight insurance from the carrier to cover property in transit can be a reasonable means of caring for that property. Such insurance is, in effect, an additional cost of postage or transportation, and like postal expenses generally it is not a "fixed and expected" expense. Because contingent expenses include postage, an agency may spend money appropriated for contingent or operating expenses on postal or freight insurance without specific authorization. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

Citations and references

The opinion cited the following authorities. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

Statutes:

• V.T.C.S. art. 601b, § 8.03(a) (care and safekeeping of state property)

Attorney General opinions cited:

• Attorney General Opinions O-201 (1939); O-184 (1939); M-1257 (1972); M-753 (1970); H-1318 (1978); H-742 (1975); V-1423 (1952)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0547
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0547.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

September 18, 1986

Mr. Vernon M. Arrell
Commissioner
Texas Rehabilitation Commission
118 East Riverside Drive
Austin, Texas 78704

Opinion No. JM-547

Re: Whether a state agency may insure mail or freight in transit

Dear Mr. Arrell:

You ask whether the Texas Rehabilitation Commission may insure freight or mail in transit. You explain that the commission has not done so in the past because of a number of attorney general opinions that have said that state agencies must have specific statutory authority to purchase insurance.

This office has issued opinions stating that state agencies may not purchase property insurance without specific authority. An early opinion supported that holding on the basis that premiums on insurance policies could not be paid out of an appropriation for "contingent expenses" because such expenses were "fixed and expected" expenses that had to be specifically provided for by the legislature. Attorney General Opinion O-201 (1939); see also Attorney General Opinion O-184 (1939). The opinion also cited a Senate Concurrent Resolution expressing legislative intent that no insurance be taken out on public buildings or their contents. A number of opinions have followed opinion O-201. See, e.g., Attorney General Opinions M-1257 (1972); M-753 (1970); O-201 (1939).

This office has also issued opinions stating that state agencies may not purchase liability insurance without specific statutory authority. See, e.g., Attorney General Opinions H-1318 (1978); H-742 (1975); M-1257 (1972). The reasoning underlying those opinions is that, because the legislature has specifically authorized various state agencies to purchase liability insurance in certain circumstances, the legislature has indicated that state agencies may not purchase liability insurance without such specific authorization.

We do not think that it follows from these opinions that a state agency may not insure mail or freight in transit. Agency heads are responsible for the care and safekeeping of state property possessed by their agencies. V.T.C.S. art. 601b, § 8.03(a). Purchasing postal insurance or freight insurance from the carrier to cover such property when it is in transit may be a reasonable means of caring for state property. In such circumstances, insurance purchased to cover mail or freight in transit is, in effect, an additional cost of postage or transportation. Also, like postal expenses generally, expenditures for insuring mail and freight are not "fixed and expected" expenses. See Attorney General Opinion V-1423 (1952) ("contingent expenses" include postage). Therefore, a state agency may spend money appropriated for contingent expenses or operating expenses for postal or freight insurance.

SUMMARY

A state agency does not need specific authorization to insure mail or freight in transit.

Very truly yours,

Jim Mattox
Attorney General of Texas

JACK HIGHTOWER
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General