COLLEGES AND UNIVERSITIES ‑- COMMUNITY COLLEGES ‑- INSURANCE ‑- STATE RISK MANAGEMENT ACT ‑- PURCHASE OF BONDS AND LIABILITY INSURANCE FOR COMMUNITY COLLEGES

COLLEGES AND UNIVERSITIES ‑- COMMUNITY COLLEGES ‑- INSURANCE ‑- STATE RISK MANAGEMENT ACT ‑- PURCHASE OF BONDS AND LIABILITY INSURANCE FOR COMMUNITY COLLEGES

(1) Under the provisions of chapter 270, Laws of 1977, 1st Ex. Sess., the risk management office of the State Department of General Administration is vested with the authority and responsibility for the purchase of (a) liability and property insurance covering the state's community colleges and (b) such surety bonds as are necessary for those institutions.

(2) This same authority and responsibility also extends to the purchase of liability insurance obtained at state expense to cover the trustees, officers or employees of the community colleges under RCW 28B.10.844; however, it does not extend to the purchase of liability insurance as a part of the compensation plan for community college officers or employees under RCW 28B.10.660.

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                                                                 January 12, 1978

Honorable Vernon L. Barnes, Director
Department of General Administration
218 General Administration Building
Olympia, Washington 98504

                                                                                                                   Cite as:  AGO 1978 No. 1

Dear Sir:

            By letter previously acknowledged you have requested our opinion on a question which we have divided and paraphrased as follows:

            (1) Does chapter 270, Laws of 1977, 1st Ex. Sess. vest the risk management office of the Department of General Administration with authority and responsibility for the purchase of (a) liability and property insurance covering the state's community colleges and (b) such surety bonds as are necessary for those institutions?

             [[Orig. Op. Page 2]]

            (2) Assuming an affirmative answer to question (1), does this same authority and responsibility also extend to liability insurance obtained at state expense to cover the trustees, officers or employees of the community colleges under RCW 28B.10.660 or RCW 28B.10.844?

            We answer question (1) in the affirmative and question (2) in the manner set forth in our analysis.

                                                                     ANALYSIS

            Although chapter 270, Laws of 1977, 1st Ex. Sess., is commonly referred to as the "State Risk Management Act," it is apparent from a reading of the act in its entirety that it addresses two separate but interrelated concerns.  The first three sections of the act express a policy requirement that the state manage its liability and property risks in accordance with certain described principles, while §§ 4, 5 and 6 provide for the centralized purchasing of insurance and surety bonds for state agencies so that cost savings resulting from volume purchasing may be realized.1/   The task of implementing the risk management policy provided for by the act is given to the director of General Administration who, in turn, is to act through the risk management office established by § 2 of the law.  Under that section, the risk manager is first to identify and evaluate the state's various liability and property risks and then is to decide whether insurance should be purchased to cover those risks or whether, instead, they should be covered by a self-insurance program.2/   And then, if  [[Orig. Op. Page 3]] it is decided that some form of commercial insurance should be purchased the risk manager, with certain limited exceptions, is to do the purchasing of that insurance ‑ together with such surety bonds as may be required by the various state agencies involved.  See, RCW 43.19.190 and RCW 43.19.1935 which, as respectively amended by §§ 4 and 6 of chapter 270, now read (in material part) as follows:

            "The director of general administration, through the state purchasing and material control director, shall:

            ". . .

            "(2) Purchase all material, supplies, services and equipment needed for the support, maintenance, and use of all state institutions, colleges, community colleges and universities, the offices of the elective state officers, the supreme court, the court of appeals, the administrative and other departments of state government, and the offices of all appointive officers of the state:  PROVIDED, That the provisions of this act shall not apply in any manner to the operation of the state legislature except as requested by said legislature:  PROVIDED, That primary authority for the purchase of specialized equipment, instructional and research material for their own use shall rest with the colleges, community colleges and universities:  PROVIDED FURTHER, That primary authority for the purchase of materials, supplies and equipment for resale  [[Orig. Op. Page 4]] to other than public agencies shall rest with the state agency concerned:  PROVIDED FURTHER, That authority to purchase services as included herein does not apply to personal services authorized for direct acquisition from vendors by state organizations and filed under the provisions of RCW 39.29.010 through 39.29.030, unless such organization specifically requests assistance from the division of purchasing in obtaining personal services and resources are available within the division to provide such assistance:  PROVIDED FURTHER, That the authority for the purchase of insurance and bonds shall rest with the risk manager under RCW 43.19.1935 as now or hereafter amended;

            ". . ."  (RCW 43.19.190 as amended by § 4, chapter 270,supra)

            "As a means of providing for the procurement of insurance and ((public official)) bonds on a volume rate basis, the director of general administration through the ((division of purchasing)) risk management office shall purchase or contract for the needs of state agencies in relation to all such insurance and ((public official)) bonds:  PROVIDED, That the individual ((public official)) statutory bonds of elected state officials, insurance requirements of colleges and universities, insurance requirements of toll project agencies, and insurance covering proprietary activities of state agencies, other than motor vehicle coverage, may be procured directly and independently by themafter consultation with the risk management office:  PROVIDED FURTHER, That authority to purchase insurance may be delegated to state agencies.  Insurance in force shall be reported to the risk management office periodically under rules established by the director.  Nothing contained in this section shall prohibit the use of licensed agents or brokers for the procurement and service of insurance.

            "The amounts of insurance or ((surety)) bond coverage shall be as fixed by law, or if not fixed by law, such amounts shall be as fixed by the director of the department of general administration.

             [[Orig. Op. Page 5]]

            "The premium cost for insurance acquired and ((surety)) bonds furnished shall be paid from appropriations made to the state agency or agencies for which procurement is made, and all vouchers drawn in payment therefor shall bear the written approval of the ((division of purchasing)) risk management office prior to the issuance of the state warrant in payment therefor.  Where deemed advisable the premium cost for insurance and bonds may be paid by the central stores revolving fund which fund shall be reimbursed by the agency or agencies for which procurement is made."  (RCW 43.19.1935 as amended by § 6, chapter 270, supra)

            Question (1):

            Clearly, these two statutes, as amended, apply to the procurement of surety bonds and the purchase of liability and property insurance for the protection of state agencies (i.e., to cover the liability and property risks of such agencies).3/   However, in the case,inter alia, of the state colleges and universities an exception to the general rule exists in that under the first proviso to RCW 43.19.1935 the authority and responsibility for procuring necessary insurance (other than motor vehicle coverage) remains vested in those institutions ‑ subject only to a requirement that the risk management office be consulted before any such insurance is purchased. The critical issue, insofar as your first question is concerned, is thus simply that of whether the term "colleges and universities," as used in that proviso, includes the state's community colleges as now administered under chapter 28B.50 RCW.4/   We are of the opinion that it does not and, therefore, we answer your question in the affirmative.5/

             [[Orig. Op. Page 6]]

            Both RCW 43.19.1935 and RCW 43.19.190 originated as parts of chapter 178, Laws of 1959, a comprehensive law relating to state purchasing.  RCW 43.19.1935 originated as § 18 of that act and, although later recodified by § 43.19.1935, chapter 8, Laws of 1965, its language remained unchanged until the above quoted 1977 amendment. RCW 43.19.190, on the other hand, was amended on several occasions during this interim period ‑ and most significantly in 1967.  But, as originally enacted by § 1, chapter 178,supra, that statute read, in pertinent part, as follows:

            "The director of general administration, through the division of purchasing, shall:

            ". . .

            "(2) Purchase all material, supplies and equipment needed for the support, maintenance, and use of all state institutions, colleges and universities. . ."  PROVIDED, HOWEVER, That primary authority for the purchase of specialized equipment, instructional and research material for their own use shall rest with the colleges and universities: . . ."  (Emphasis supplied)

            At that time, however, the community colleges were not state agencies at all ‑ for only with the subsequent enactment of chapter 8, Laws of 1967, 1st Ex. Sess.,supra, did those institutions become such agencies.  Cent. Col. Ed. Ass'n v. Board Com., 82 Wn.2d 128, 508 P.2d 1357 (1973).  Therefore, it would seem fairly obvious that the legislature's original, 1959, use of the term "colleges and universities" in chapter 178, supra, only encompassed the several four year state colleges and universities and not the community, or "junior," colleges which were then being operated by local school districts in the state.  Moreover, as we will next note, the legislature itself clearly demonstrated that understanding of its own prior legislation when, in 1967, it passed the new state community college act above referred to.

            By reason of that act, the community colleges ceased to be adjuncts of the common school system and, instead, became two-year state institutions of higher education.  Cent. Col. Ed. Ass'n v. Board Com., supra.  Therefore, among other things, the question of purchasing their necessary supplies and materials  [[Orig. Op. Page 7]] had to be resolved ‑ and it was, by § 51 of the community college act itself.  By that section the legislature expressly amended RCW 43.19.190,supra, to read as follows:

            "The director of general administration, through the division of purchasing, shall:

            ". . .

            "(2) Purchase all material, supplies and equipment needed for the support, maintenance, and use of all state institutions, colleges, community colleges, and universities . . ." PROVIDED, HOWEVER, That primary authority for the purchase of specialized equipment, instructional and research material for their own use shall rest with the colleges,community colleges, and universities: . . ."  (Emphasis supplied)

            By thus amending RCW 43.19.190, the legislature seems clearly to have manifested an understanding that the term "colleges and universities," by and of itself, did not include the community colleges.  Therefore, in order to bring those institutions under the general state purchasing law the legislature felt it necessary to pass this 1967 amendment.  But what about the comparable phraseology in RCW 43.19.1935, supra?  Here, by way of contrast, the prior reference to colleges and universities was not amended.  Nor, as we have seen, was that feature of the first proviso to RCW 43.19.1935 amended by § 6 of chapter 270, Laws of 1977, 1st Ex. Sess., supra.  Instead, the legislature there once again retained the "old" language of the proviso insofar as its basic scope is concerned and merely inserted a requirement for "consultation" with the new risk management office which was established by the 1977 act.

            Given this historical background the answer to your initial question appears clear.  Both by its failure to amend RCW 43.19.1935 in 1967 and by its similar failure to do so in 1977 (insofar as the term "colleges and universities" is concerned) the legislature indicated a basic policy decision.  As we perceive it that decision, simply stated, was not to grant to the community colleges the same freedom as was possessed by the four-year colleges and universities to purchase their own insurance ". . . directly and independently . . ." of the Department of General Administration through its division of purchasing.  [[Orig. Op. Page 8]] We thus answer that question, as above indicated, in the affirmative ‑ meaning that, in our considered opinion, chapter 270,supra, does indeed ". . . vest the risk management office of the department of general administration with the authority and responsibility . . ." for the purchase of liability and property insurance covering the state's community colleges, and of such surety bonds as are required by those institutions.

            Question (2):

            Notwithstanding the enactment of chapter 270, supra, another statute, RCW 28B.10.660, continues to provide that:

            "The . . . trustees of any of the state's institutions of higher education may make available liability, life, health, health care, accident, disability and salary protection or insurance or any one of, or a combination of, the enumerated types of insurance, or any other type of insurance or protection, for the . . . trustees and students of the institution.  The premiums due on such protection or insurance shall be borne by the assenting . . . trustees, or students.  The . . . trustees of any of the state institutions of higher education may make liability insurance available for employees of the institutions. The premiums due on such liability shall be borne by the university or college."6/ 

            In addition, RCW 28B.10.844 provides that:

            "The . . . board of trustees of each of the state's institutions of higher education . . . are authorized to purchase insurance to protect and hold personally harmless any . . . trustee, officer, employee or agent of their respective institution, . . . from any action, claim or proceeding instituted against him arising out of the performance of failure of  [[Orig. Op. Page 9]] performance of duties for or employment with such institution . . . and to hold him harmless from any expenses connected with the defense, settlement or monetary judgments from such actions."

            Moreover, it is clear that in both of these statutes the term "institutions of higher education" includes the community colleges.  See, RCW 28B.10.015.  Accordingly, the remaining question to be here considered in the light of our affirmative answer to Question (1), above, is whether the same authority and responsibility on the part of the risk manager now also extends to liability insurance obtained at state expense to cover the trustees, officers or employees of the community colleges under the above quoted provisions thereof.  Our answer is in the affirmative insofar as liability insurance obtained under RCW 28B.10.844 is concerned but it is in the negative with regard to RCW 28B.10.660.

            The basic difference which we see between the two statutes is this:  RCW 28B.10.660, on the one hand, provides for the purchase of liability insurance, at state expense, basically as a part of the covered employees' compensation plan.  In other words, that insurance is not purchased for the purpose of covering state (i.e., community college) liability risks,per se, either directly or indirectly.  Therefore, in our opinion, such insurance as may be purchased under RCW 28B.10.660 may continue to be purchased by the community colleges independently.7/

             On the other hand, as we read it, RCW 28B.10.844,supra, has as its purpose the indirect coverage of state liability risks through the purchase of a form of liability insurance which, unlike that purchased under RCW 28B.10.660, deals only with risks involved in the course of employment.  It thus redounds both to the benefit of the covered officers or employees and their employers (e.g., the community colleges) by affording an alternative resource for the payment of legal claims which, under established principles of agency and tort law, may theoretically run against both the offending officer or employee and his or her employing higher educational institution.  For that reason, in our opinion, such liability insurance as is purchased under RCW 28B.10.844 (as opposed to RCW 28B.10.660) is now subject to the risk manager's jurisdiction under chapter 270,supra, and thus must henceforth be procured by him unless, in his discretion, the risk manager elects to delegate that authority to the community colleges.