B-7067, MARCH 20, 1940, 19 COMP. GEN. 798

B-7067, MARCH 20, 1940, 19 COMP. GEN. 798

INSURANCE - TORT LIABILITY - PURCHASE BY GOVERNMENT AGENCIES FUNDS OF A GOVERNMENT AGENCY MAY NOT BE EXPENDED, IN THE ABSENCE OF STATUTORY AUTHORITY, TO PURCHASE INSURANCE TO COVER ITS POSSIBLE TORT LIABILITY.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE FEDERAL HOUSING ADMINISTRATOR, MARCH 20, 1940:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 16, 1940, AS FOLLOWS:

UNDER DATE OF NOVEMBER 30, 1939, WE REQUESTED YOUR RULING ON CERTAIN QUESTIONS IN CONNECTION WITH THE OWNERSHIP BY THE ADMINISTRATOR OF PROPERTIES CONVEYED TO HIM FOLLOWING DEFAULT UPON CONTRACTS OF INSURANCE UNDER SECTION 207. IN THAT LETTER WE GENERALLY DESCRIBED THE TYPE OF PROPERTY INVOLVED.

WE NOW PRESENT THE QUESTION WHETHER OR NOT THE ADMINISTRATOR CAN EXPEND MONEY OUT OF THE HOUSING FUND TO PROCURE INSURANCE AGAINST HIS TORT LIABILITY AS OWNER OF SUCH PROPERTY.

IN A LETTER DATED JANUARY 10, THE ATTORNEY GENERAL HAS STATED THAT "IT IS NOT AT ALL IMPROBABLE THE SUPREME COURT WOULD HOLD SUCH LIABILITY TO EXIST, FOLLOWING THE SAME REASONING USED IN KEIFER AND KEIFER V. R.F.C., 306 U.S. 381.' HE HAS REFERRED ALSO TO THE OPINION OF THE ATTORNEY GENERAL OF JANUARY 28, 1938, REGARDING PROBABLE TORT LIABILITY OF THE UNITED STATES HOUSING AUTHORITY AND ITS RIGHT TO PROCURE INSURANCE OR TO SET UP INSURANCE RESERVES TO PROTECT AGAINST SUCH LIABILITY. IN THE LAST PARAGRAPH OF THAT OPINION, THE ATTORNEY GENERAL RULED THAT "THE LIABILITY OF THE AUTHORITY CANNOT DEFINITELY BE DETERMINED EXCEPT BY JUDICIAL DECISION OR AMENDMENT OF THE ACT; SO THAT IF INSURANCE SHOULD BE TAKEN OUT TO PROTECT AGAINST LIABILITY FOR TORT AND THE AUTHORITY SHOULD BE JUDICIALLY HELD IMMUNE, THE INSURANCE WOULD HAVE BEEN AGAINST A LIABILITY NONEXISTENT IN FACT. INSURANCE, HOWEVER, ALWAYS IS AGAINST RISKS; AND IF THOSE UNDER CONSIDERATION ARE NOT INSURED JUDGMENTS MIGHT BE RECOVERED AGAINST THE AUTHORITY IN AMOUNTS GREATLY IN EXCESS OF THE COST OF INSURANCE.' IT WAS ACCORDINGLY HELD THAT THE HOUSING AUTHORITY COULD PROTECT ITSELF AGAINST SUCH RISKS BY THE PROCURING OF INSURANCE OR THE SETTING UP OF SUCH INSURANCE RESERVES.

THE CITED CASE OF KEIFER AND KEIFER V. R.F.C. WAS DECIDED FEBRUARY 27, 1939. ITS HOLDING SEEMS TO HAVE BEEN BASED MAINLY UPON GENERAL WORDING IN THE ACT ESTABLISHING THE DEFENDANT CORPORATION WHICH PERMITTED IT "TO SUE OR BE SUED.' SIMILAR WORDING APPEARS IN THE NATIONAL HOUSING ACT, UNDER WHICH THIS ADMINISTRATION OPERATES (SECTION 1, TITLE I).

IT WOULD SEEM OBVIOUS, THEREFORE, THAT THE ADMINISTRATOR AS OWNER OF PROPERTIES CONVEYED TO HIM IS SUBJECT TO THE SAME POSSIBLE RISK REFERRED TO IN THE ATTORNEY GENERAL'S OPINION WITH RESPECT TO THE UNITED STATES HOUSING AUTHORITY.

YOUR OPINION IS REQUESTED, THEREFORE, UPON THE QUESTION WHETHER PAYMENTS FOR INSURANCE PREMIUMS TO PROTECT AGAINST SUCH RISK ARE PROPER.

IN THE ATTORNEY GENERAL'S OPINION RELATING TO THE UNITED STATES HOUSING AUTHORITY, 39 OP. ATTY. GEN.---, OP. NO. 64, TO WHICH YOU REFER, IT WAS SAID:

CONSIDERING ALL THE FUNCTIONS, POWERS, AND DUTIES OF THE AUTHORITY, AND THE TREND OF COURT DECISIONS INVOLVING OTHER GOVERNMENT-OWNED CORPORATIONS, I AM OF THE OPINION THAT IT IS POSSIBLE AND NOT IMPROBABLE THAT THE HOUSING AUTHORITY MAY BE HELD LIABLE FOR DAMAGES OR LOSS OCCASIONED BY THE NEGLIGENCE OF ITS AGENTS OR EMPLOYEES. I AM ALSO OF THE OPINION THAT SECTION 13 (D), WHICH PROVIDES THAT "THE AUTHORITY MAY PROCURE INSURANCE AGAINST ANY LOSS IN CONNECTION WITH ITS PROPERTY AND OTHER ASSETS (INCLUDING MORTGAGES)," IS BROAD ENOUGH TO AUTHORIZE THE PROCUREMENT OF INSURANCE TO PROTECT THE AUTHORITY AGAINST LOSSES OF THE NATURE REFERRED TO IN YOUR LETTER.

THESE CONCLUSIONS PRESENT THIS PROBLEM: AS STATED BY THE GENERAL COUNSEL FOR THE HOUSING AUTHORITY IN HIS MEMORANDUM TRANSMITTED WITH YOUR LETTER, THE LIABILITY OF THE AUTHORITY CANNOT DEFINITELY BE DETERMINED EXCEPT BY JUDICIAL DECISION OR AMENDMENT OF THE ACT; SO THAT IF INSURANCE SHOULD BE TAKEN OUT TO PROTECT AGAINST LIABILITY FOR TORT AND THE AUTHORITY SHOULD BE JUDICIALLY HELD IMMUNE, THE INSURANCE WOULD HAVE BEEN AGAINST A LIABILITY NONEXISTENT IN FACT. INSURANCE, HOWEVER, ALWAYS IS AGAINST RISKS; AND IF THOSE UNDER CONSIDERATION ARE NOT INSURED JUDGMENTS MIGHT BE RECOVERED AGAINST THE AUTHORITY IN AMOUNTS GREATLY IN EXCESS OF THE COST OF INSURANCE. UNDER THE CIRCUMSTANCES AND UNTIL THE LIABILITY OF THE AUTHORITY IS DETERMINED JUDICIALLY OR BY AN AMENDMENT TO THE ACT, IT IS MY OPINION THAT IT MAY PROTECT ITSELF AGAINST SUCH RISKS BY THE PROCUREMENT OF INSURANCE OR THE SETTING UP OF INSURANCE RESERVES. ( ITALICS SUPPLIED.)

THE OPINION THAT THE SAID AUTHORITY WAS AUTHORIZED TO PROCURE SUCH INSURANCE APPEARS TO BE BASED, NOT ON THE RIGHT TO SUE AND BE SUED, OR THE POSSIBLE LIABILITY OF THE AUTHORITY FOR NEGLIGENCE, BUT ON SECTION 13 (D) OF THE UNITED STATES HOUSING ACT (50 STAT. 888, 895) WHICH PROVIDES THAT "THE AUTHORITY MAY PROCURE INSURANCE AGAINST ANY LOSS IN CONNECTION WITH ITS PROPERTY AND OTHER ASSETS (INCLUDING MORTGAGES).' THE ATTORNEY GENERAL'S VIEW THAT THE HOUSING AUTHORITY PROBABLY WOULD BE LIABLE FOR NEGLIGENCE IS SUPPORTED TO SOME EXTENT, BY THE CASE OF KEIFER AND KEIFER V. R.F.C., 306 U.S. 381, WHEREIN IT WAS HELD, IN EFFECT, THAT THE LIABILITY OF A GOVERNMENT CORPORATION EMPOWERED GENERALLY "TO SUE AND BE SUED" IS NOT CONFINED TO SUITS SOUNDING ONLY IN CONTRACT. ALSO SEE THE RECENT CASE OF FEDERAL HOUSING ADMINISTRATION V. RUTH BURR, NO. 354, OCTOBER TERM, 1939, DECIDED FEBRUARY 12, 1940, WHEREIN THE SUPREME COURT HELD THAT THE FEDERAL HOUSING ADMINISTRATION WAS SUBJECT TO GARNISHMENT FOR MONEYS DUE TO AN EMPLOYEE. THE DETERMINING FACTOR IN THESE LATTER CASES APPEARS TO HAVE BEEN THE CONGRESSIONAL AUTHORIZATION "TO SUE AND BE SUED.' BUT, AS IS INDICATED BY THE ATTORNEY GENERAL'S OPINION, SUPRA, THE FACT OF LIABILITY IS NOT DETERMINATIVE OF WHETHER INSURANCE AGAINST SUCH LIABILITY MAY BE PROCURED. THE DETERMINING QUESTION IS: ASSUMING THE FEDERAL HOUSING ADMINISTRATION IS LIABLE IN TORT, HAS IT AUTHORITY TO PROCURE INSURANCE AGAINST SUCH LIABILITY?

SECTION 1, TITLE I, OF THE NATIONAL HOUSING ACT, AS AMENDED, PROVIDES THAT "1THE ADMINISTRATOR * * * MAY MAKE SUCH EXPENDITURES * * * AS ARE NECESSARY TO CARRY OUT THE PROVISIONS OF THIS TITLE AND TITLES II AND III, WITHOUT REGARD TO ANY OTHER PROVISIONS OF LAW GOVERNING THE EXPENDITURE OF PUBLIC FUNDS.' SECTION 207 (F), TITLE II, CREATES A "HOUSING FUND" TO BE USED AS A REVOLVING FUND FOR CARRYING OUT THE PROVISIONS OF SECTION 207, AND SECTION 207 (L) PROVIDES, IN PART, AS FOLLOWS:

NOTWITHSTANDING ANY OTHER PROVISIONS OF LAW RELATING TO THE ACQUISITION, HANDLING, OR DISPOSAL OF REAL AND OTHER PROPERTY BY THE UNITED STATES, THE ADMINISTRATOR SHALL ALSO HAVE POWER, FOR THE PROTECTION OF THE INTERESTS OF THE HOUSING FUND, TO PAY OUT THE HOUSING FUND ALL EXPENSES OR CHARGES IN CONNECTION WITH, AND TO DEAL WITH, COMPLETE, RECONSTRUCT, RENT, RENOVATE, MODERNIZE, INSURE, MAKE CONTRACTS FOR THE MANAGEMENT OF, OR ESTABLISH SUITABLE AGENCIES FOR THE MANAGEMENT OF, OR SELL FOR CASH OR CREDIT OR LEASE IN HIS DISCRETION, ANY PROPERTY ACQUIRED BY HIM UNDER THIS SECTION; * * *

IT IS A SETTLED POLICY OF THE UNITED STATES TO ASSUME ITS OWN RISKS AND THE ESTABLISHED RULE IS THAT, UNLESS EXPRESSLY PROVIDED BY STATUTE, FUNDS FOR THE SUPPORT OF GOVERNMENT ACTIVITIES ARE NOT CONSIDERED APPLICABLE GENERALLY FOR THE PURCHASE OF INSURANCE TO COVER LOSS OR DAMAGE TO GOVERNMENT PROPERTY. 13 COMP. DEC. 779; 14 ID. 836; 23 ID. 269; ID. 297; 4 COMP. GEN. 690; 7 ID. 105; AND 17 ID. 55. IT IS NOT SUFFICIENT THAT THERE IS NO LAW SPECIFICALLY PROVIDING THAT THE UNITED STATES SHALL NOT INSURE ITS PROPERTY AGAINST LOSS, BUT RATHER THAT THERE IS SOME LAW WHICH SPECIFICALLY AUTHORIZES IT. 14 COMP. DEC. 836. THE BASIC PRINCIPLE OF FIRE, TORNADO, OR OTHER SIMILAR INSURANCE IS THE LESSENING OF THE BURDEN OF INDIVIDUAL LOSSES BY WIDER DISTRIBUTION THEREOF, AND IT IS DIFFICULT TO CONCEIVE OF A PERSON, CORPORATION, OR LEGAL ENTITY BETTER PREPARED TO CARRY INSURANCE OR SUSTAIN A LOSS THAN THE UNITED STATES GOVERNMENT. TO THIS POLICY OF THE GOVERNMENT TO ASSUME ITS OWN RISKS NO MATERIAL DISTINCTION IS APPARENT BETWEEN ASSUMPTION OF RISK OF PROPERTY DAMAGE AND ASSUMPTION OF RISK OF TORT LIABILITY. THE POLICY OF THE UNITED STATES IN THIS RESPECT RELATES TO THE RISK AND NOT TO THE NATURE OF THE RISK.

I FIND NO PROVISION IN THE NATIONAL HOUSING ACT, AS AMENDED, AUTHORIZING YOU GENERALLY, SPECIFICALLY, OR BY IMPLICATION, TO PROCURE INSURANCE OF THE KIND IN QUESTION. SECTION 1, TITLE I, AUTHORIZES YOU TO MAKE SUCH EXPENDITURES AS ARE NECESSARY TO CARRY OUT THE PROVISIONS OF THE ACT AND IN DECISION OF OCTOBER 29, 1936, A-80873, YOU WERE INFORMED THAT THIS OFFICE WOULD NOT OBJECT TO THE USE OF THE FUNDS INVOLVED TO PAY PREMIUMS ON HAZARD INSURANCE PROCURED ON PROPERTY ACQUIRED BY YOU. THAT DECISION WAS BASED ON YOUR DETERMINATION THAT SUCH INSURANCE, ON THE PROPERTY, WAS NECESSARY TO CARRY OUT THE PROVISIONS OF TITLE II OF THE ACT. IT IS NOTED, IN THIS CONNECTION, THE ACT HAS SINCE BEEN AMENDED AND NOW SPECIFICALLY PROVIDES IN SECTION 207, TITLE II, THAT YOU MAY INSURE PROPERTY ACQUIRED THEREUNDER. HOWEVER, THE SAID ACT CONTAINS NO SPECIFIC AUTHORITY FOR PROCURING INSURANCE AGAINST YOUR POSSIBLE TORT LIABILITY AS OWNER OF SUCH PROPERTY, AND IT HAS NOT BEEN SHOWN, NEITHER IS IT APPARENT, THAT THE PROCUREMENT OF SUCH INSURANCE IS NECESSARY TO CARRY OUT THE PROVISIONS OF THE NATIONAL HOUSING ACT, AS AMENDED.