May 20, 1993
Mr. Garland Garrett Deputy Secretary for Highways Department of Transportation PO Box 25201 Raleigh, NC 27611
Re: Advisory Opinion Employee Insurance Committee
G.S. 58-31-60
Dear Mr. Garrett:
This is in response to your request of this office to review the Agreement to provide coverage for NCDOT employees for whole life insurance, accident, cancer, sickness and salary continuation provided for by Colonial Life and Accident Insurance Company. You further requested advice on the validity of the award of the payroll deduction slot and the Agreement.
Employee Insurance Committee: Insurance for NCDOT employees is provided for by G.S. 5831-60. That statute provides for the appointment of an Employee Insurance Committee, the competitive selection of insurance products, and the award of a payroll deduction slot to an insurance company. It is "completely autonomous in its selection of insurance products and insurance companies…." G.S. 58-31-60(b).
There are nine members on the NCDOT Insurance Committee, including one vacancy. The present Committee members do not appear to have been appointed on a rotating basis as is required by the statute. Most of the members were appointed June 30, 1991, but none appear to have been appointed for a specific term as required by G.S. 58-31-60(b). The members serve for three year terms with the terms of three members expiring each year. The Department has been previously advised that the existing appointees could be assigned terms as of the date of their appointments to comply with the terms of the statute calling for alternating terms of three years. This leaves several holdovers now on the Committee and several more whose terms will expire June 30, 1993. The Committee is irregular in that the appointments are not in accordance with the statute. Based upon the information available, it is our opinions that the irregularity of the Committee can be corrected and that it does act "de facto" as constituted with several members serving whose terms have expired.
Payroll Deduction Slots: Subsection (c) of G.S. 58-31-60 provides that the Committee "shall select only one company per payroll deduction slot." It also provides for a written agreement. The Committee determines the best proposal meeting the needs of the employees and "shall award a payroll deduction slot to the company submitting the proposal that meets those needs and desires." The procedure is set out in subsection (c1). Subsection (c) further provides that "the insurance company awarded a payroll deduction slot shall, pursuant to a written agreement setting out the rights and duties of the insurance company, be afforded an adequate opportunity to solicit employees…"
Contract with Colonial Life: The present contract with Colonial Life was entered into on June 22, 1992, for four years. The Agreement of June 22, 1992, was entered into between the Employee Insurance Committee of the Department of Transportation, the North Carolina Department of Transportation, Little, Pendleton and White, Inc. And George Willoughby (collectively Agents of Record), and Colonial Life and Accident Insurance Company. It appears that the Insurance Committee went through the statutory process to select the insurance products and award the payroll slot to Colonial. The Agreement was executed by the Chairman for the Employee Insurance Committee, by the Deputy Secretary for the North Carolina Department of Transportation, by George Little for Little, Pendleton and White, Inc., George Willoughby for George Willoughby (as Agents of Record), and by Colonial Life and Accident Insurance Company by its Vice President.
The selection of the insurance products and the award of the payroll slot to Colonial Life and Accident Insurance Company is not the function of the North Carolina Department of Transportation. The Agreement is to set out the rights and duties of the Insurance Company and to provide the Insurance Company an adequate opportunity to solicit employees. We believe the statute contemplates an autonomous Insurance Committee, and a contract between the NCDOT Insurance Committee and the Insurance Committee and the Insurance Company awarded the payroll slot. Since the Committee is an autonomous agency for the purpose of selecting insurance products and awarding payroll slots, the Department of Transportation is not a proper party to the contract. While the contract is irregular, we do not believe in this case it makes the contract void or voidable. It appears to be otherwise proper with the exceptions hereinafter discussed.
Agents of Record: The contract included as parties Agents of Record and it was also executed by these third parties as Agents of Record. Paragraph 2 of this Agreement provides that "The Agents of Record are appointed as the agents of record for all accident, cancer, sickness, salary continuation and whole life insurance provided by Colonial to the Department’s employees during the term of the Agreement." There is a clear lack of authority under G.S. 58-31-60 to contract with reference to the Agents of Record. To the extent that the parties are appointed by the contract as Agents of Record and included as parties, the Agreement is void. The Agent of Record is an insurance company matter and not a matter subject to contract pursuant to G.S. 5831-60. We therefore conclude that the part of the Agreement as it relates to the Agents of Record is not valid as to the NCDOT, the Insurance Committee, or the Insurance Company. Since the part of the contract involving Agents of Record exceeds the authority of the Committee and the NCDOT and is void, the Insurance Company is free to select its own Agents of Record pursuant to Chapter 58.
Our review of this Agreement has been made upon the basis of information available and on the assumption that the matters were otherwise proper.
Please advise if we can be of any further assistance.
Reginald L. Watkins Senior Deputy Attorney General
Eugene A. Smith Senior Deputy Attorney General