El Paso Court of Appeals weighs in with split among the courts and holds no proprietary functions exist in contract claims

Christopher L. Gay and Steven L. Carroll v. The City of Wichita Falls, 08-13-00028-CV (Tex. App. – El Paso, August 13, 2014).

This is a contractual immunity case involving the payment of disability benefit premiums for City police officers. The El Paso Court of Appeals joins the San Antonio Court in a split amongst the Circuits on whether the proprietary/governmental dichotomy exists in contract claims.

Gay and Carroll were police officers for the City of Wichita Falls. The City created a trust to obtain group insurance.  Once obtained, the City paid the premiums for its employees. After their retirement in 2011, Gay and Carroll filed claims for disability benefits. Sun Insurance denied their claims. They filed suit against the City for breach of contract, promissory estoppel and a host of other causes of action. The City filed a plea to the jurisdiction asserting it does not administer the policy and makes no decisions regarding benefits. It merely pays the premiums. It also does not have a contract with Sun Insurance, the trust does. The trial court granted the plea and the Plaintiffs appealed.

The court first addressed the Plaintiffs primary argument, which is the providing of insurance benefits is a proprietary function and so they can bring a breach of contract claim without triggering immunity. The El Paso Court of Appeals addressed the split in the courts of appeals on this subject, where the Third Court believes the proprietary/governmental dichotomy exists in contract claims and the Fourth and several others hold it does not. After a lengthy analysis, the El Paso Court agreed with the San Antonio Court and held the dichotomy does not exist in a contract context.  This is mainly due to the legislature’s enactment of Tex. Loc. Gov’t Code Chapter 271, which waives governmental immunity in contracts only under very specific conditions. The City was therefore involved in governmental functions by providing premiums for benefits. And since Chapter 271 does not waive immunity for unwritten contracts or promises, (the contract was between the trust and Sun Insurance only) no waiver of immunity exists.

If you would like to read this opinion click here. Panel: Chief Justice McClure, Justice Rivera, and Justice Rodriguez. Opinion by Chief Justice McClure.  The attorneys listed for the City are Jennifer W. Decurtis,  Miles Risley, William Andrew Messer, and Julia M. Vasquez.  The attorneys listed for Gay and Carroll are Jason Hungerford and Ken Slavin.

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