SCHOOL DISTRICTS ‑- INSURANCE POLICIES ‑- COMPETITIVE BIDS

SCHOOL DISTRICTS ‑- INSURANCE POLICIES ‑- COMPETITIVE BIDS.

A school district of the first class may, but is not required to, advertise for bids in purchasing a contract of public liability or fire insurance, although the anticipated premiums may exceed $1,000.00.  The board of directors of a district must act in good faith in awarding the contract for insurance.

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                                                                 August 28, 1957

Honorable Charles O. Carroll
Prosecuting Attorney
King County
County City Building
Seattle 4, Washington                                                                                                              Cite as:  AGO 57-58 No. 116

Attention:  K. G. Smiles, Chief Civil Deputy

Dear Sir:

            This letter is written in answer to your request for an opinion on several questions relating to the method used by a school district to purchase insurance.  We paraphrase your questions as follows:

            (1) Must a school district of the first class advertise for bids for a contract of liability insurance or fire insurance when the anticipated premiums thereon are in excess of $1,000.00?

            (2) May a school district of the first class waive irregularities in a bid received by it when the call for bids recites that the board reserves "the right to reject any or all bids, and to waive any informalities"?

            We answer your first question in the negative.  Your second question is answered in the analysis.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            Question (1)

            It is a general rule that a municipal corporation, in the absence of statutory, constitutional or charter provisions to the contrary, is not required to advertise or call for bids or let a contract to the lowest bidder.  Dalton v. Clarke, 18 Wn. (2d) 322, 329; Reiter v. Chapman, 177 Wash. 392, 396.

            A school district of the first class is required by statute to advertise for bids in certain cases.  The statute reads in pertinent part as follows:

            "When, in the opinion of the board, the cost of any furniture, supplies, building, improvements, or repairs will equal or exceed the sum of one thousand dollars, the board shall give due notice by publication . . . of the intention to receive bids therefor; and the board shall determine the specifications for such bids which shall be public . . ." (RCW 28.62.170)

            The immediate question is whether or not the purchase of an insurance policy comes within the purview of the above statute.  In our opinion, it does not.  A contract of insurance is not "furniture, supplies, building, improvements, or repairs."  Moreover, it has been held that statutes much broader in their coverage than RCW 28.62.170 are not applicable to insurance policies purchased by a municipality.  SeeLondon & Lancashire Indemnity Co. v. Upper Darby Township, 28 Del. Co. 223 (Pennsylvania) and Lynd v. Heffernan, 146 N.Y.S. (2d) 113 (New York).

            We conclude, therefore, that a school district of the first class is not required to advertise for bids under RCW 28.62.170 for the purchase of liability or fire insurance although the anticipated premiums for the insurance may be in excess of $1,000.00.

            Question (2)

            The facts upon which your second question is predicated are as follows: A school district of the first class advertised for bids for comprehensive and public liability insurance.  The advertisement, as well as the bid documents,  [[Orig. Op. Page 3]] specified that the board of directors reserved "the right to reject any or all bids and to waive any informalities."  The bid documents required each bidder to specify the insurance company or companies which would provide the coverage under his bid.  The apparent low bidder failed to comply with this requirement.  After the bids were opened, the apparent low bidder supplied the board of directors with the names of the insurance companies with whom the insurance would be placed and exhibited to the board a photostatic copy of the quotations received by him from the insurance companies.  The photostatic copy bears a date prior to the date the bids were opened.

            You specifically desire to know whether or not the board of directors may legally waive the requirement that the bidder designate the insurance companies providing the coverage and award the contract to the apparent low bidder.

            When a municipality is required by statute to advertise for competitive bids and to award the contract to the lowest bidder, irregularities in the bid may require that the bid be rejected.  In 10 McQuillin, Municipal Corporations (3rd ed.), at page 364, the author states:

            ". . . An important question, therefore, sometimes arising, is whether the municipality is in duty bound to reject a bid not in compliance with the proposal or whether it may, in its discretion, overlook the insufficiency and notwithstanding its existence award the contract to one who is the lowest bidder but has not strictly complied with the request for bids.  In some cases it has been held that the municipality may accept such a bid.  The rule supported by reason would seem to be that if the omission or irregularity is merely technical it may be overlooked, but that if it is a substantial requirement affecting the amount of the bid, or the like, the municipality must reject such bid notwithstanding it is the lowest bid."

            However, as we pointed out in our answer to your first question, the board of directors of the school district was not legally required to advertise for bids.  Consequently, the rule stated above is not applicable.

            In the present case, the board could properly secure the insurance it required by any recognized method of purchasing such insurance.  Having adopted a bid procedure, the board could insert provisions, such as were inserted in the present case, reserving the right to reject any and all bids and to waive any informalities.  Such provision was obviously intended to give the board a wide latitude in exercising its discretion in awarding the contract for the best interests of the school district.

             [[Orig. Op. Page 4]]

            When a municipality is not required to advertise for competitive bids but does so, no more is required than that, in awarding the contract, the municipality act in good faith for what it deems to be the best interests of the municipality.  Peter's Garage v. City of Burlington, 3 A. (2d) 634, 636, 121 N.J.L. 523; affirmed,Ballinger v. City of Burlington, 8 A. (2d) 579, 123 N.J.L. 227.

            We have examined the record forwarded to this office with your opinion request.  It indicates that the board is satisfied that the insurance companies with whom the insurance will be placed are financially sound and will give adequate service to the district.  There is nothing in the record to indicate that the school district will suffer any financial loss or that the best interests of the district will not be served by awarding the contract in the manner contemplated.  On the contrary, it appears that a substantial saving will result to the taxpayers of the district if the contract is awarded to the apparent low bidder.  Whether or not the board is acting in good faith in this matter is a question which it can determine more easily than this office.  However, we find nothing in the record indicating a lack of good faith.

            It is our opinion, therefore, that the board of directors of the school district may legally waive the requirement that the bidder indicate in his bid the companies with whom the insurance will be placed and may award the contract to the apparent low bidder.

            We trust the above information will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

ELVIN J. VANDEBERG
Assistant Attorney General