Subject: IN THE SUPREME COURT OF TEXAS
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Date: Sat, 24 Mar 2007 14:17:59 -0500

IN THE SUPREME COURT OF TEXAS

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No. 05-0340

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Ben Bolt-Palito Blanco
Consolidated Independent School District, Petitioner,

v.

Texas Political Subdivisions
Property/Casualty Joint Self-Insurance Fund, Respondent

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On Petition for Review from the

Court of Appeals for the Fourth District of
Texas

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Argued March 22,
2006

Justice O’Neill delivered the opinion
of the Court, joined by Chief Justice
Jefferson, Justice
Wainwright, Justice
Brister, Justice Medina,
and Justice Johnson.

Justice Willett delivered a dissenting
opinion, joined by Justice
Hecht

Justice Green did not participate in
the decision.

The issue in
this insurance coverage dispute is whether a self-insurance fund composed of
local political subdivisions enjoys governmental immunity against a fund member
school district’s coverage claim. In the suit underlying this appeal, fund
member Ben Bolt-Palito Blanco Consolidated Independent School District (“Ben
Bolt”) sued the Texas Political Subdivisions Property/Casualty Joint
Self-Insurance Fund (the “Fund”) after the Fund denied a claim for benefits
under its policy. The Fund asserted immunity in a plea to the jurisdiction,
which the trial court denied. A divided court of appeals reversed, concluding
that the Fund is immune from suit. 163 S.W.3d 172, 176-77. We agree that the
Fund possesses governmental immunity. However, after the court of appeals
rendered its judgment, the Legislature enacted a limited immunity waiver for
breach of contract claims against governmental entities.[1] We conclude that the statutory waiver
applies to this insurance-coverage dispute. Accordingly, we reverse the judgment
of the court of appeals.

I. Background

The Texas
Interlocal Cooperation Act (the “Act”) allows political subdivisions to contract
with one another to more efficiently share resources and responsibilities. Tex. Gov’t Code §§ 791.001-.033
(“The purpose of this chapter is to increase the efficiency and effectiveness of
local governments by authorizing them to contract, to the greatest possible
extent, with one another and with agencies of the state.”). Id. § 791.001. Under
the Act, a local government may contract with another local government to
perform authorized governmental functions and services. Id.
§ 791.011 Local governments under the Act include municipalities, special
districts, counties, and other political subdivisions, as well as combinations
of such entities. Id. § 791.003(4).

Ninety-two
local governmental entities formed the Fund involved in this dispute by entering
into an Interlocal Cooperation Agreement to pool funds to provide casualty
insurance to participants. The Fund provides a self-insurance risk pool and
claim administration for its members. Participants in the Fund include eight
counties, six municipalities, forty-three independent school districts, and
various special districts and other political subdivisions.

Ben Bolt, a
small school district in Jim Wells County, purchased an insurance policy from
the Fund for a coverage period between April 2002 and 2003. In December of 2002,
Ben Bolt sustained extensive water and mold damage to one of its school
facilities and submitted a claim to the Fund. Until that point Ben Bolt had
paid, and the Fund had accepted, all premiums due under the policy. The Fund
denied the claim on the basis that the alleged loss was not covered under Ben
Bolt’s policy. Ben Bolt then filed a declaratory-judgment action seeking a
determination that the loss was a covered occurrence under the insurance
agreement’s terms, and any “other further relief” to which it might be entitled.
In response, the Fund asserted immunity in a plea to the jurisdiction and motion
to dismiss, which the trial court denied. The Fund then filed an interlocutory
appeal. Tex. Civ. Prac. & Rem.
Code § 51.014(a)(5). The court of appeals held that, as a
governmental entity, the Fund is entitled to immunity from suit; finding no
legislative waiver of that immunity, the court of appeals reversed and dismissed
the case for want of jurisdiction. 163 S.W.3d 172, 177.

In its
petition to this Court, Ben Bolt contends the Fund is not a governmental entity
entitled to immunity. Alternatively, Ben Bolt claims that any immunity the Fund
may possess derives from its member political subdivisions and cannot be
asserted against its source. And even if the Fund may assert immunity against
its members, Ben Bolt argues, that immunity has been waived in a number of ways:
first, recently enacted section 271.152 of the Local Government Code is a clear
expression of legislative intent to waive governmental immunity from suit on
contract claims, Tex. Loc. Gov’t Code
§ 271.152; second, the Act contains an implied waiver of immunity from
suit for governmental units that contract under its authority, Tex. Gov’t Code §§ 791.001-.033;
and third, even absent a statutory waiver, the Fund waived its immunity from
suit by accepting payment of Ben Bolt’s premiums and inducing reliance. Finally,
Ben Bolt argues that the Legislature waived governmental immunity for actions
brought under the Uniform Declaratory Judgments Act (“UDJA”).

The Fund
counters that it is a governmental entity existing under the Legislature’s
authority and thus enjoys immunity in its own right irrespective of its members.
Moreover, the Fund argues that Chapter 271 is not a clear and unambiguous waiver
of immunity because it is unclear whether that waiver applies to the Fund’s
insurance agreement with its members, some of which are excluded from the
waiver. The Fund also contends there is no implied waiver or waiver by conduct,
and that the UDJA does not prevent the Fund from asserting immunity here. We
granted Ben Bolt’s petition for review to determine the nature and extent of the
Fund’s alleged immunity from suit.

II. Discussion

A. Standard of Review

Governmental
immunity from suit defeats a trial court’s jurisdiction. Tex. Dep’t of
Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). Whether a trial court has
jurisdiction is a question of law subject to de novo review. See Tex.
Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002).
Because the issue in this case is whether the trial court lacked jurisdiction
due to the Fund’s assertion of immunity, our review is de novo.

B. Sovereign
and Governmental Immunity

Sovereign
immunity protects the State, its agencies, and its officials from lawsuits for
damages.[2] See Tooke v. City of Mexia, 197
S.W.3d 325, 331 n.11 (Tex. 2006); IT-Davy, 74 S.W.3d at 853-54; Gen.
Serv. Comm’n v. Little-Tex Insulation Co., Inc., 39 S.W.3d 591, 594 (Tex.
2001); Fed. Sign v. Tex. S. University, 951 S.W.2d 401, 405 (Tex. 1997).
Under this centuries-old common-law doctrine, the sovereign is immune from
liability and also from lawsuits. See IT-Davy, 74 S.W.3d at 853;
Little-Tex, 39 S.W.3d at 594; Fed. Sign, 951 S.W.2d at 405.
Immunity from liability shields the State from judgments. IT-Davy, 74
S.W.3d at 853; Little-Tex, 39 S.W.3d at 594; Fed. Sign, 921 S.W.2d
at 405. Immunity from suit prohibits a suit against the State unless the
Legislature grants consent. Little-Tex, 39 S.W.3d at 594. By entering
into a contract the State waives its immunity from liability but not its
immunity from suit. Id. Thus, even if the State acknowledges liability on
a claim, immunity from suit bars a remedy until the Legislature consents to
suit. Taylor, 106 S.W.3d at 695.

The State’s
sovereign immunity extends to various divisions of state government, including
agencies, boards, hospitals, and universities. Tooke, 197 S.W.3d at 331;
Taylor, 106 S.W.3d at 694 n.3. The appurtenant common-law doctrine of
governmental immunity similarly protects political subdivisions of the State,
including counties, cities, and school districts. Taylor, 106 S.W.3d at
694 n.3; see also Harris County v. Sykes, 136 S.W.3d 635, 638 (Tex.
2004). A political subdivision enjoys governmental immunity from suit to the
extent that immunity has not been abrogated by the Legislature. See
IT-Davy, 74 S.W.3d at 853.

It is clear
that the Fund in this case is composed of members which, like Ben Bolt, are
themselves governmental units entitled to immunity. However, the Fund asserts
discrete governmental-unit status in its own right separate and apart from its
members. If it is true, as the Fund contends, that the Fund itself enjoys
immunity from suit, then the extent to which the Fund might derive immunity from
its members is immaterial. Accordingly, we begin by examining the nature of the
Fund.

C. The Fund

Chapter 2259
of the Texas Government Code authorizes “governmental unit[s],” which include
“local government[s],” to self insure. TEX. GOV’T CODE §§ 2259.031–.034;
2259.001. The issuance of public securities or use of money for the purpose of
funding self insurance “is a public purpose of the governmental unit.”
Id. §2259.032. Chapter 2259 specifically provides that a governmental
unit’s establishment and maintenance of a self-insurance program “is not a
waiver of immunity.” Id. § 2259.002. Types of local governments able to
self-insure under Chapter 2259 include a “municipality or other political
subdivision of this state or a combination of political subdivisions, including
a combination created under Chapter 791.” Id. § 2259.001(2).

Chapter 791
of the Government Code, known as the Interlocal Cooperation Act, allows local
governments to contract with each other to collectively perform certain
governmental functions. Id. § 791.011(a). The Act defines the term
“local government” to mean a “county, municipality, special district, . . . or
other political subdivision of this state or another state” or a combination of
two or more political subdivisions. Id. § 791.003(4)(A), (E).
Because the term “local government” includes a combination of political
subdivisions, the Fund itself would appear to enjoy local-government status
under the Act.[3] Further indication that the
Legislature intended such pooled entities to operate as distinct governmental
units is found in the provisions of Chapter 2259, which allows local governments
to self-insure, together with the provisions of Chapter 791 allowing local
governments to pool resources for that purpose.

We have said
that where the governing statutory authority demonstrates legislative intent to
grant an entity the “nature, purposes, and powers” of an “arm of the State
government,” that entity is a government unit unto itself. See Harris County
Flood Control Dist. v. Mann, 140 S.W.2d 1098, 1101 (Tex. 1940) (holding
statute creating flood-control District demonstrated legislative intent that the
District be a state agency and a political entity distinct from the County,
despite the identical boundaries of the District and County). A district with
“[s]uch powers of government and with the authority to exercise such rights,
privileges and functions” to achieve its purpose is considered a governmental
unit. Id. (quoting Tex. Const. art. XVI § 59(b)). In Mann, the
District had a governmental purpose—flood prevention, reclamation and
conservation of land—and public funding to carry out its mission. Id. We
reasoned that the “nature, purposes and powers” of the Act creating the
flood-control District showed legislative intent that “this District shall exist
and function as a governmental agency and a body politic and corporate,
separate, independent, and distinct within itself.” Id.

Similarly,
Chapter 2259 and the Interlocal Cooperation Act imbue self-insurance pools with
nature, purposes, and powers reflecting the Legislature’s intent that the Fund
exist as a discrete governmental unit. An interlocal contract may provide a
governmental function that each contracting party is authorized to individually
perform. Tex. Gov’t Code §
791.011(c)(2). The Legislature has expressly authorized combinations of
political subdivisions formed under the Act “to perform governmental functions
and services.” TEX. GOV’T CODE
§§ 791.003(4)(E), 791.011(a). The Act defines “governmental functions and
services” to include any “governmental functions in which the contracting
parties are mutually interested.” Id. § 791.003(3)(N). Local
governments clearly have an interest in guarding against risk, and the
Legislature has explicitly authorized combinations of political subdivisions
created under the Interlocal Cooperation Act to provide self-insurance. TEX. GOV’T CODE
§§ 2259.001(1)-(2), 2259.031. The Legislature has also authorized these
combinations to issue public securities and use available money to finance a
self-insurance pool, which is defined as a “public purpose” of the governmental
unit. Id. §§ 2259.001(1)-(2), 2259.031(b)(1), 2259.032. In sum,
the Legislature has determined self-insurance to be a function of local
governments, and we see no reason why legislatively approved pooling of
resources to perform this function would diminish its governmental character.
See Op. Tex. Att’y Gen. No. MW-347 at 2 (1981) (stating “[s]elf-insurance
is a function of local governments if the government does not have
insurance.”).

Many of our
courts of appeals have considered self-insurance pools, though composed of
political subdivisions, to be distinct governmental entities apart from their
membership. See, e.g., Campbell v. Tex. Employers’ Ins.
Ass’n, 920 S.W.2d 323, 329-30 (Tex. App.—Houston [1st Dist.] 1995, no writ)
(citing with approval a Texas court of appeals case that refers to a
self-insurance risk pool as a governmental entity to hold that a private company
that contracted to provide services to the Texas Association of School Boards’
self-insurance fund was not entitled to governmental immunity); TML
Intergovernmental Employees Benefits Pool v. Prudential Ins. Co. of Am., 144
S.W.3d 600, 605-07 (Tex. App.—Austin 2004, pet. denied) (holding an insurance
pool bringing a declaratory judgment waived immunity from suit, necessarily
implying possession of immunity in order to waive it); Milner v. City of
Leander, 64 S.W.3d 33, 38-40 (Tex. App.—Austin 2000, no pet.) (treating
self-insurance fund as governmental entity and concluding that the Legislature
did not waive its immunity); cf. Campbell, 920 S.W.2d at 329-31
(suggesting that school boards’ self-insurance fund was a governmental entity,
but immunity did not extend to private company providing claims-adjustment
services to the fund); Tex. Workers’ Comp. Comm’n v. City of Bridge City,
900 S.W.2d 411, 414 (Tex. App.—Austin 1995, writ denied) (holding that because
municipalities’ risk pool derived its existence and powers from legislative
enactments, it was subject to legislative control and supremacy to the same
extent as other political subdivisions); GAB Bus. Servs., Inc. v. Moore,
829 S.W.2d 345, 350-51 (Tex. App.—Texarkana 1992, no writ) (intimating that
municipalities’ risk pool was a governmental entity, but holding that immunity
did not extend to private company that contracted with pool to adjust claims);
see also Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers Comp.
Comm’n, 74 S.W.3d 377, 384 (Tex. 2002) (noting that, in determining whether
certain Labor Code provisions applied to the risk pool itself in addition to its
1600 member municipalities, the Commission did “not dispute that [the] Risk Pool
itself qualifies as a political subdivision” within the meaning of those
provisions).

We conclude
that the Fund’s “nature, purposes and powers” demonstrate legislative intent
that it exist as a distinct governmental entity entitled to assert immunity in
its own right for the performance of a governmental function. With regard to
that function, the Fund enjoys the same governmental immunity as other political
subdivisions. Having concluded that the Fund enjoys immunity in its own right,
we need not decide whether the Fund’s immunity is also derivative of its
members.

D. Waiver of
Immunity

With the
Fund’s governmental immunity shield, Ben Bolt’s claims are barred absent a
waiver of that immunity. It is the province of the Legislature to consent to a
suit against a governmental entity. IT-Davy, 74 S.W.3d at 853. “We have
consistently deferred to the Legislature to waive sovereign immunity from suit,
because this allows the Legislature to protect its policymaking function.”
IT-Davy, 74 S.W.3d at 854. Because immunity from suit protects the public
coffers, “the claims process is tied to the appropriations process, and the
priorities that guide the latter should also inform the former.” Tooke,
197 S.W.3d at 332. The exposure of governmental entities to liability may shift
tax resources away from their intended purposes and toward defending lawsuits
and paying judgments, thereby hampering government functions. IT-Davy, 74
S.W.3d at 854. For this reason, the Legislature is better suited than the courts
to weigh conflicting public policies associated with waiving immunity and
subjecting the government to increased liability, the burden of which the public
must bear. Id.

Ben Bolt
argues that Section 271.152 of the Local Government Code provides a clear and
unambiguous waiver of the Fund’s immunity from suit for breach of its insurance
agreement with Ben Bolt. That section provides:

A local
governmental entity that is authorized by statute or the constitution to enter
into a contract and that enters into a contract subject to this subchapter
waives sovereign immunity to suit for the purpose of adjudicating a claim for
breach of the contract, subject to the terms and conditions of this subchapter.

TEX. LOC. GOV’T CODE § 271.152.[4] The statute’s plain language allows
for enforcement of contracts against local governmental entities by waiving
their immunity from suit. The Fund does not dispute that the statutory waiver
language itself is clear and unambiguous. However, the Fund argues that Section
271.152 provides only a limited waiver for some governmental units in certain
circumstances, and does not apply to the Fund or its insurance agreements.

First, the
Fund points out that Section 271.151(2) defines a “[c]ontract subject to this
subchapter [subchapter I of chapter 271]” as “a written contract stating the
essential terms of the agreement for providing goods or services to the
local governmental entity that is properly executed on behalf of the local
governmental entity.” Id. § 271.151(2) (emphasis added). The Fund
argues that its insurance contract with Ben Bolt is not a “[c]ontract subject to
this subchapter” because, under the policy, no goods or services are provided
to the Fund; rather, the Fund provides insurance to its contracting
members in exchange for payments. Consequently, the Fund contends, the insurance
agreement is not subject to the statutory waiver.

It is true
that Ben Bolt is a consumer of insurance that the Fund offers. But the
relationship between the Fund and its members differs from the ordinary
consumer/seller relationship. As the Fund has acknowledged, its members elect a
governing board, and a board subcommittee resolves claims disputes. To that
extent, at least, the Fund’s members provide services to the Fund. Moreover, the
statute’s legislative history indicates that, by enacting section 271.152, the
Legislature intended to loosen the immunity bar so “that all local
governmental entities that have been given or are given the statutory authority
to enter into contracts shall not be immune from suits arising from those
contracts.” House Comm. On Civil
Practices, Bill Analysis,
Tex. H.B. 2039, 79th Leg., R.S. (2005) (emphasis added). There is no indication
that the Legislature intended to exclude self-insurance fund agreements from
enforcement. While the mere act of self-insuring does not itself constitute a
waiver of immunity, see Tex.
Gov’t Code § 2259.031, entering into “a written contract stating the
essential terms of [an] agreement for providing goods or [insurance] services to
[a] local governmental entity” clearly does. Tex. Loc. Gov’t Code § 271.151(2),
.152.

The Fund next
contends Section 271.152 does not clearly and unambiguously waive its immunity
from suit because some of the Fund’s members, such as counties, do not meet
Section 271.151(3)’s definition of a “local governmental entity.” But as we have
said, the Fund itself is a discrete governmental unit separate and apart from
its members, and its immunity derives from the performance of governmental
functions, not from the immunities of those members that combined to form it.
The only entities expressly excluded from the statutory waiver are counties and
units of state government, and the Fund itself is neither of these.

Because the
Fund is a “local governmental entity” as defined by Section 271.151(3), and “was
authorized . . . to enter” and did in fact enter into “a written contract
stating the essential terms of the agreement for providing [insurance] services
to [a] local governmental entity,” which agreement was properly executed, Tex. Loc. Gov’t Code § 272.151(2), we conclude that the
statutory waiver applies to this insurance-coverage dispute.

Ben Bolt
asserts a number of alternative grounds upon which it claims the Fund’s immunity
from suit was waived, but does not claim that success on these other points
would afford it greater relief. Because we hold that Section 271.152 of the
Local Government Code waives the Fund’s immunity from suit, we do not consider
them.

III. Conclusion

Because
Section 271.152 of the Local Government Code waives the Fund’s immunity from Ben
Bolt’s claim arising out of the insurance agreement between the parties, we
reverse the court of appeals’ judgment and remand to the trial court for further
proceedings.

__________________________________________

Harriet
O’Neill

Justice

OPINION DELIVERED:
December 29, 2006.

[1] Act of May 23, 2005, 79th Leg., R.S., ch. 604, § 1,
2005 Tex. Gen. Laws 1548 (codified at Tex Loc. Gov’t Code
§§ 271.151-.160).

[2] Although the court of appeals termed the immunity the
Fund possessed as “sovereign,” political subdivisions of the State actually
enjoy governmental immunity. Though closely related and often used
interchangeably, sovereign immunity and governmental immunity protect distinct
entities. Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3
(Tex. 2003).

[3] We note that this definition of “local government” does
not mean that the Fund is a governmental unit for all purposes, but only for
purposes of the Interlocal Cooperation Act. Id. § 791.003 (confining
the definition of “local government” to “[withi]n this chapter”). Indeed, within
the Government Code, the Legislature defines the term “local government” to
include and also to exclude school districts for different purposes. Compare
Tex. Gov’t Code
§ 772.009(i) (defining “local governmental entity” to include a
school district concerning governmental planning), with Tex. Gov’t Code § 783.003(3)
(defining “local government” to exclude school districts under the Uniform Grant
and Contract Management Act).

[4] Because Section 271.152 is partially retroactive, it
would waive the Fund’s immunity even though it was enacted after Ben Bolt
purchased the insurance policy. See Tooke, 197 S.W.3d at 329 n.7 (citing
Sections 271.152-.154 of the Local Government
Code).