Untitled Texas Attorney General Opinion ( 1939 )

No. 3088 C. H. Lewi.8v. Ind. School
Did,. of Austin,Sup. Ct.,
involvesthis question.
.
INSURANCE- MUTUALCOMPANIES
1. Countiesand other politicalsubdivisionsmay
not legallyinsurepropertyin mutual fire in-
surancecompaniesbecauseof the prohibitions
containedin Section52 of Article3 of the
Texas Constitution.
2. That part of section6 of the Acts of the
Forty-firstLegislature,FirstCBlled Session,
Chapter40, p. 90, (Vernods AnnotatedCivil
Statutes,Article4860a-8) purportingto give
public corporationsthe right to purchasein-
surancein mutual companiesla unconstitution-
al, being in violationof Section52 of Art.
3 of the Texas Constitution.
(This.opinion
overrulesConferenceOpinion
No. 2880)
OFFICE OFTHN AT'i?OHNFX
GENERAL
September20, 1939
Hozl E. G. Moseley
...CidlDistrictAttorney
Dallas,Texas
Att'n: Hon. Harold McCracken,Assistant
Dear Sir:
,OplnlonNo. O-924
Eon. E. G. Moseley,page 2, (O-924)
Re: Can the countyof D&as obtain in-
surancein a mutual fire or casualty
commwithout violatingthe laws of
the state of Texas?
This office is in receiptof your inquiryas statedabove. In view
of the importanceand difficultyof the questionas reflectedby the
variousrulingsheretoforemade by this Departmentduringformeradminietra-
tions,and the lack of Judicialexpressionby the Courtsof Texas on the
exact point involved,ve have undertakento reviewall available authorities
on the subject.
The first expressionof the AttorneyGeneral'sofficewe have found
appearsin a letter opiniondated August 8, 1919,writtenby Assistant
AttorneyGeneralE. F. Smith to Eon. Fred L. Blundell. In that opinionit .,
was held that schooltrusteeswere not authorizedunder the law to insure
schoolbuildingsor propertyin mutual fire insurancecompanies. The reason
given was that .amutual fire insurancecompanywas to a certainextent a
partnership, No authoritywas quoted. (Letter opinions,AttorneyGeneral,
Vol. 230, p. 235).
The first conferenceopinionon this questionwas renderedto Miss
Annie Webb Blanton,State Superintendentof Public Instruction,
on June 14,
1921, by AssistantAttorneyGeneralL. C. Sutton. Holdingeach member of
a mutual companyto be in the insurancebusinessthe opiniondenied authori-
ty for an independentschooldistrictto insurewith a mutual fire insurance
company. (ConferenceopinionNo. 2361, AttorneyGeneral,Vol. 56, Conference
s opinions,p. 274).
It Is to be noted opinionNo. 2361``1 approvedas a conferenceopinion
by AttorneyGeneralC. M. Cureton,now Chief Jueticeof our SupremeCourt.
c On June 27, 1923, Mr. Sutton,the author of opinionNo. 2361, supra,
wh;te a letteropinionto Hon. S. M. N. Marrs, State Superintendent of Pub-
lic Instruction,holdingthat becauseof the languageof Senate Bill 213
(Cn. 180, page 392, GeneralLaws, Thirty-eighthLegislature, RegularSession,
1.923
1, authorizing public or private corporations,boards or associatedto
hold policiesin any mutual insurancecompaniesorganizedthereunder,that
echo01districtwould come within the purviewof the words "publiccorpora-
tion" and thereforehad authorityto insure schoolbuildingsin such mutual
companies. (Letteropinions,AttorneyGeneral,Vol. 260, p. 219).
A letter opiniondated April 22, 1931, writtenby AssistantAttorney
GeneralGrady Sturgeonto Hon. Frank W. Martin,held the Legislaturewithout
constutut~ionalauthorityto sanctionmutual insurance.bycounties,cities
or schooldistricts. He cited Section52 of Article3 of the Constitution,
assertingthat.ipsurance by counties,citiesand schooldistrictin such
companieswould be in derogationof such constitutional provision. (Letter
opinions,AttorneyGeneral,Vol. 320, p. 745).
Hon. E. G. Moseley,page 3, (O-924)
The most recent conferenceopinionon the subjectbefore us was written
by AssistantAttorneyGeneralEverettF. Johnsonto Hon. S. M. Ii.Marre on
March 23, 1932. The opinionreviewedthe authoritiesat the time, and held
it permissiblefor counties,citiesand schooldistrictsto purchasesuch
i~nsurance
. The opinionheld.political subdivisions did not violateeither
section52 of Article3 or section3 of Article11 of the Constitutionof
the state of Texas. The opinionwas based on the statutoryprovisionsof
Chapter9, Title 78 of the RevisedCivil Statutes,as amended. All prior
opinionsholdingto the contrarywere overruled,the letteropinionof Mr.
Sturgeon,supra,being particularized.(ConferenceopinionNo. 2880,Report
and Opinions,AttorneyGeneral,193S-1932,p. 165).
At the requestof Hon. T. M Campbell,Jr., Fire InsuranceCommiseioner,
a letter opinionwas writtenby AssistantAttorneyGeneralBrann Fulleron
November23, 1927 advisingthat the city of Denton, Texas, could ineure
its municipalbuildingwith a mutual fire insurancecompany,the statute
auttorizingany "publiccorporation"to hold policiesin mutuals. Quoting
SenateBill 213 of the Thirty-eighthLegislature(Article'4867, R. C. S.
1925, now Article486oa-S,Vernon'sAnnotatedRevisedCivil Statutes),the
opinionof Mr. Fuller then used the followinglanguage:
"Accordingly,the Legislaturehas In an unequivocalexpressionauthor-
ized municipalcorporationsto beoome members of mutual insurancecompanies
and hold policiestherein. As a consequencethereof* * * as far as statu-
tory law is concerned,the legal right of a municipalcorporationto become
a member of a mutual insurancecompanybecame perfect."'
However,the writer took cognizanceof the decisionsof the Commis~lon
of Appeals in the case of City of Tyler v. Texas Employer'sInsurance
Association,288 S.W. 409, rehearingdenied,294, S.W. 195, statingthe
effect of "dicta"in that case to have been to cast doubt upon the con8titU-
tionalityof Article 4867, supra,(Letteropinions,AttorneyGeneral,Vol.
291, 486).
The last expressionwe have been able,tof%nd is in a letteropinion
writtenby AssistantAttorneyGeneralRichard Brooksto Eon. John F. Sutton,
on August 15, 1938. This opinionfollowedconferenceopinionNo. 2880,
supra. (Letteropinions,AttorneyGsneral,Vol. 382, p. 704).
Thus, we find the questionhere presentedby you to have been the subject
of studyby this Departmenton at least seven differentoccasions,under
five differentadministrations, with three opinionsholdingmutual insurance
illegalfor politicalsubdivisions, and four to the contrary,at least one
of which indicatesseriousdoubt on the part of the author.
The positionassumed in the brief you submitwith your opinionrequest
is that the purchaseof insurancein a mutual fire or casualtycompanywould
violate section52 or Article 3 of ths Constitutionof Texas, which reads
as follows:
Eon. E. G. Moseley,page 4, (O-924)
"The Legislatureshall have no power to authorizeany county,city,
town or politicalcorporationor subdlvislonof this state to lend its
creditor to grant public money or thing of value in aid of or to any
individual,associationor corporationwhatsoever,or to become a stock-
holder in such corporation,associationor company."
Section3 of Article 11 of the Constitutionof Texas rsade:
"No county,city or other municipalcorporationshall hereafterbecome
a subscriberto the capitalof any privatecorporation,or associationor
make any appropriationor donationto the same, or in any wise loan its
credit;but this shall not be construedto in sny way affect any obligation
heretoforeundertakenpursuantto law."
All mutual insuranceother than life insuranceis authorizedand regu-
lated hy the provisionsof chapter9 of Title 78 of the RevisedCivil
Statutesof Texas, as amended. The most recent legislativeenactmentis
containedin chapter40, p. 90, Acts Forty-firstLegislature,First Called
Session,1929. The same is codifiedas Articles@60a-l to &Oa-19, in-
clusive,of Vernon'sAnnotatedCivil Statutes.
The statutesauthorizeany number of persons,not less than twentyto
become a "body corporate"to carry on the businessof mutual insurance.
(Art. 486oa-1, Vernon'sAnnotatedTexas Statutes). "Any person propoking
to form any such companyshall subscribeand acknowledgearticlesof
incorporation with certainspecifications
* * *l),. (Art. 48m -%uch
articlesof incorporation shall be submittedto the Board of Insurance
Commissioners, herein called 'TheBoard',who shall submitthem to the Attor-
ney Generalfor examination,* + *s (Art. 48tia-4). Provisionis made for
euch a "company"writingany kinds of insurancewhich may be l&fully written
in Texas (Art. 486Oa-6). Specificprovisionis made for writingWorkmena
CompensationInsurance(Art. 4860a-7). Foreignmutual8are permittedto
transactbusinessin Texas, after complyingwith certainconditions,one of
which is to file with the Board,ofInsuranceCommissioner8 a copy of its
"charteror articleaof incorporation" (Art: 48608-u).
Article 4860a-8 is here quoted in full:
"Any public or privatecorporation,board or aeeociationin this state
or elsewheremay make application,enter into agreementsfor and hold poli-
cies in any such mutual insurancecompany. Any officer,stockholder, trust-
ee, or legal representative of any such corporation,board, associationor
estatemay be recognizedas acting for or on its behalf for the purposeof
such membership,but shall not be personallyliableupon such contractof
insuranceby reason of acting in such representative capacity. The right of
any corporationorganized.under the laws of this state to participateas a
member of any such mutual insurancecompanyIS hereby declaredto be inci- .
dentalto the purposefor which such corporationis organizedand as much
grantedas the right8and powera expresslyconferred."
Hon. E. G. Moseley,page 5, (O-924)
The next article, 48608-9,reads as followe:
"Everymember of the companyshall be entitledto one vote, or to a
nuder of votes based upon the insurancein force,the number of policies
he.Ld,or the amount of premiumpaid, as may be providedin the by-lava."
The Legislaturehas provideda means wherebyany S$ock hsurance Company
may become a Mutual Company"Ownedand controlled"by its policyholders.See
Art. 4871a,Vernon'sAnnotatedStatutes;Acts 1931, Forty-eecondLegislature,
Ch. 118, p. 200.
In Cooley'sBriefs on the Law of Insurance,(1905)Vol. I, pp. 51-52,It
is said:
"MutualCompaniesordinarilypossessno capitalstock,but are made up
of al.1the policyholderswho take the place of the stockholdersin an ordin-
ary corporation,and act throughagenciesselectedby themselves.* * *
"While,in a stock company,a stockholderis not necessarilyinsured,
and one insuredby the companysustainsno relationtheretoexceptthat
of contract,it is a distinguishingfeatureof a mutual companythat one
insuringthereinbecomesa member of the association. * + *
"The membersand stockholdersof a mutual insurancecompanyare there-
fore identicallythe same. That is to say, a stockholderof a mutual insur-
ance companyis simplyone~*ho,hasii.paidinto the,capitalof.the companyby
way of premium,and who;is:.responsiblefor its losses to that extent,and
who is entitled,when such premiumsshall have accumulatedto a largersum
than is requiredto pay the losses,to pro rata divisionthereofas profits;
* ,** and it would seem that the fundamentalprincipleof a mutual insurance
comparqis that the companyin no case can insurepropertynot owned by one
of its own members."
(Citingauthorities).
In the supplementto the same work (lqlq),Vol. 6, p. 9, the same pro-
nouncement is made in brief language:
"Mutualcompanieshave no capitalstock,the policyholders takingthe
place of the stockholdersin an ordinarycorporation,and the cash paid in
and premiumnotes constitutethe companies'assets."
From Ruling Case Law, (14 Rawle C. L. 847, $12) we quote the following:
"As regardsrightsand remedies,the policyholdersin a mutual insur-
ance companyare stock holdersthereinthe same as owners of stock in a
stock corporation, there being no charterprovisionto the contrary. Their
interestsare two-fold: They are both ineurersand insured. In respectto
the former,they are bound to share in the losses and entitledto share in
the profitsof the businewa,on the basis of a partnership,except so far as
the charteror policy contractprovidesotherwise. Each member to the
Bon. E. G. Moseley,page 6, (O-924)
extentof hie premiumnote insure8every other member who was such when he
became a member,or became and continuedto be euch dtiring hia membership
and he, in turn, is insuredby every other member to the extent of hi8 prem-
lum note. + * *'I
See, also, Huber v. Martin,127 Via. 412, 105 N.U. 1031, 1135, 115 A.S.R.
1023, 7 Ann. Cas. i+OC,3 L.R.A. (N.S.)653; Sugg v. Farmers'Mutual Ineurance
Associar.ion (Term.)63 S-W. 226, 228; Whiteheadv. Farmers'Fire & Lightning
Mutual InsuranceCompany(MO. App.) 227 MO; App. 891, 60 S.W. (2nd)65; Buck
v. Ross (S. D.) 240 N.W. 858; Wermuthv. Minden LumberCompany(La.) 57 So.
170; State v. Willett,(Ind.)86 N.E. 68; Greenlawv. Arooatook County,
PatronsMutual Fire InsuranceCompany(Maine)105 Atl. 116.
In consideringyour inquiryve havekead many caaee in this and other
jurisdictions.While the precisequestionof the legalityof politicalsub-
divisionspurchasingmutual fire insurancehas not been before our Texas
appellatecourts,we have three case8 construingvariousphases of our
UorkmensCompensationAct, containinglanguage'wedeem conclusiveof the
question.
In the case of Texas Employers"InsuranceAssociationv. City of Tyler,
plaintiffsoughtto recoverunpaidpremiumson an employer'spolicyof in-
surancetaken out by the City of Tyler, under the Workmen'.9CompensaticmAct
and for penaltiesfor mfsrepresentatiormae to its payrolls. A generaldemur-
rer wa6 sustainedin the districtcourt,and the InsuranceAssociationap-
pealedto the TexarkanaCourt of Civil Appeals. Appellee,city of Tyler, in-
sistedupon two propositions(1) that an incorporatedcity or town could not
avail itselfof WorkmenleCompensationInsurance and (2) that the city could
not becauseforbiddenby the terms of Section52 of Article3, and Section3
of Article11, of the Constitution, become a member of the Employer'sInsur-
ance Association. With referenceto the latter contention, JusticeHodges
wrote a8 follows;(283 S.W. 292 at p. 933):
"But concedingthat the Legislaturedid intendthat this Act should
apply to incorporatedcitiesand towns,the questionarises,is there any
constitutional restrictionwhich forbidssuch minicipalities becomingmem-
bere of employers'insuranceassociations?Counselfor appelleecontend8
that there is and refers to the followingprovisionsof the State Constltu-
tion:
(QuotingSection52 of Article3, and Gection3 of Article11, hereinabove
set forth).
"The financialdifficultiesinwhich citiesand countiesformerlybe-
came involvedby lendingtheir creditto aesistrailwayconstruction, and
which causedthe adoptionof those provision8of the Conetltution,is a part
of the legal historyof the state. -To,avoldthose and similardifficultlen
was the plain purpoeeof those inhibitiona.While the Texas Employers' '
InsuranceAssociationie a corporation,it is not strictlya privatecorpora-
tion and is not organizeda6 a privateenterprisefor profit. It baa no
-
. . . ‘.
Hon. E. G. Moseley,page 7, (O-924)
capjtalstock,and issuesno sharesto stockholders.It engages in no
speculativeenterpriseand contractsno debts,exceptthose identicalto
its operationin the performanceof its statutoryduties. It i.6what its
name indicates,a mutual insuranceassociation. Subscribersdo not become
such for profit,but for protectionagainstliabilitiesdifficultto escape,
and to secure immunitieswhich other lava deny to employersof labor.Mid-
dletonv. Power & Light Company,185 S.W. 556, 108 Tex. 96; City of Dallas
v. Employers'InsuranceAssociation(Tex. Clv. App.) 245 S.W. 946. We,
therefore,concludethat the Constitutionimposesno barrierto membership
by incorporatedcities in an employers'insuranceassociation."
(Underscoringours.)
The Court of Civil Appealsreversedthe districtcourt,reversingand
remandingthe cause for trial.
A writ of error was granted,and the opinionof the Commissionof
Appeals
(SectionB), IS found in 288 S.W. 409. After reviewingthe statutesauthor-
izingthe Texas Employers'InsuranceAssociation,which are very similarto
the statutespertainingto mutual fire insurancethe opinionof Judge Spear
reads as follows:
' * * * These and other provisionsof the act make it clear to ua that
the Texas Employers'InsuranceAssociationis a corporationengagedin the
ins~urancebusinesson the mutualplan, whose subscribersare stockholdersin
such corporation. For this reason section52 of the Constitution, above
quoted,forbidscitiesand towns from becomingstockholderstherein.
"Eut whether such Employers'InsuranceAssociationbe technicallya cor-
poraticnor not, it is clear to us that the whole plan of the Workmen'sCom-
pensationAct is such that the constitutional provisionthat the Legislature
has 'no power to authorizeany * * * city (or) town * * * to lend its credit
or to grant public money or thing of value in aid of, or to, any individual,
associationor corporationwhatsoever',applieswith full force. Becominga
member.ofsuch associationunder our act necessarilywould requiresuch city
or town to do these very things. In the nature of the subscriber's obligation
- Its agreementto be assessedfor the purposeof paying losses - it lends its
credit.* * *11
In hissopinionon motion for rehearing,JusticeSpeer holds the Texae
InsuranceAssociationnot to be such a privatecorporationas is'forbidden
to be createdby speciallaw, then adds:
"But it does not followthat such associationdoes not have the ele-
ments of a private corporation,and in fact it does have, not only by leg-
islativedeclaration,but by contextas well, the essentialelementsof a
privatecorporationand expeclallythose elementewhich bring the concern
under the banof section52, Article3, of our Consitutionquoted in the
originalopinion.* * *We have merely indicatedour opinionthat the nature
of such association,whether 'technically a corporationor not' is such that
municipalcorporationscannotbecome subscriberstheretowithoutviolating
. . .
Hon. E. G. Moseley,page & (O-924)
constitutional
limitations."
In the ca8e of SouthernCasualtyCompanyv. Norgan,12 S.W. (2nd) 200,
the Commi8sionof Appeals, sectionA, recognizedthe holding in the city of
Tyler case. Both Judge Nickelsand Judge Crltz (now AssociateJustice of
our SupremeCourt)wrote upon the subject. In this case Morgan,an employee
of the city of Weatherford,was injured. The city was a subscriberto the
Texas Employers'InsuranceA8eociation,and had a policy coveringits employ-
ees, includingplaintiffMorgan. The Fort Worth Court of Civil Appeals,
while recognizingthe city of Tyler case as correctlyholdi.ng
a city could
not legallytake insurancewith a mutual companybecauseof its inability
under the constitutionto become a stockholder;neverthelesspermittedplain- *
tiff's judgmentto stand,holdingthe defendantSouthernCasualtyCompany
estoppedto deny liabilityon thatgound and said the city'sultra vires act
in subscribingto the associationdid not make the policy void. (Southern
CasualtyCompanyv. Morgan, 299 S.W. 476).
When the Commissionof Appeal8 consideredthe case,Judge Nickelsre-
ferredto the city of Tyler case and supplementedthe opinionof the Court
of Civil Appeals,referringto section52 of Article3 of the Constitution,
making this pertinentstatement:
"It Is observed,in passing,that Texas Employers'InsunrnceAssocia-
tion in it8 corporatenature and method of businessbelongs in a class dls-
tinctlvefrom that which includedGeorgiaCasualtyCompanyor Southern
CasualtyCompany,so-called'oldline' companies."
Judge Critz wrote a concurringopinionwhereinhe used the fallowing
language:
"I concur in the result recommendedin this case In the opinionof
Judge Nickels,and I agree, in the main, with the holdingas expressedin
his op!.nion..I also Rgree with the holding in City of Tyler v. Texas
Employers~InsuranceAssociation(Tex. Corn.A``.),288S.W. 409, that the
Workmen'sCompensatioii Law of Texas, by its expressterms, does not apply
and towns, or other municipalcorporations.However,I do not
to c1~ti.e.s
agree with that part of the opinionin City of Tyler v. Texas Employers'
InsuranceAssociationwhich seems to hold that the Legislatureof this state
la withoutpower to apply the :provieions of the Workmen'sCompensationAct
(Rev. St. 1925, Arts. 8306-83~9)to citiesand towns, providedtheir insur-
ance is not carriedin a mutual insuranceconcernand does not involvethe
city or town a8 a member of or stockholderin such a concern. In other
words, I see no constitutional bar to.citiesand towns being brought under
the provisionsof the Workmen'sCompensationAct if its Insurancei.8carried
in what is known as an old line insurancecompany..a* *
"In the City.ofTyler case, the policy of the.insurancewas issuedby
Texas Employers'InsuranceA88ociation,a.mutual insurancecOrnpan&chartered '
under the laws of this state,and the taking out a policy in said association
clearlyinvolvedthe city as a member of or stockholderin said concern,a
(. _... -
Hon. E. G. Moeeley,page 9, (O-924)
thl.ngclearl~v
prohibitedby the articleof cur Conetl.tut:on
cfted,and the
holdingto that effect ruled that ca8e.* * * (Underscoring
ours
In the case of McCalebv. ContinentalCasualtyCompany,(Tex. Civ.App.)
li3 SW. (2nd) 347, (Tex.Sup.Ct.) 116 S.W. (2nd)679, the COU% of Civil Ap-
peals held that citiesand towns cam8 within the provisionsof the Workmen's
CompensationLaw, but resifflrmedthe .holdingin the city of Tyler case that
the Texas Employers'InsuranceAssociationie a mutual aseociation,of which
the subscribersare etockholders and that under the constitutiona micipal
corporationmay not laufullybecomea subscriberof that association,because
of its mutual character. We quote one paragraphof the court of C4vll Ap-
peals:
"And it has been decided,in effect,that municipalCorpOMtiOn8 may
insuretheir employees,under the provisionsof the act, in a non-mutual,
or 'oldline' company,and therebyacquireall the benefits,and assume all
;...the
responsibility, of a lawful subscriberunder the act. SouthernCasualty
.Companyv. Morgan, 8upra;Great AmericanInd. Companyv. Blakey, supra."
(GreatAmericanInd. Companyv. Blakey,Tex. Civ. App., 107 S.W. (2nd) 1002).
When the case came before our SupremeCourt,JusticeSharp wrote the
opinion,holdingthe court of Civil Appeal8erred in holdingthe Workmen'8
CompensationAct a8 writtenappliedto cities,towns and municipalcorpora-
tiOn8,but with referenceto the right of municipalcorporationsto insure
employees,ve quote the following:
"In 1926 the questionreachedthis court, and it was first held that
the Workmen'sCompensationLaw appliedonly to ordinaryprivatecorporations,
and that the law did not apply to cities,towns or municipalcorporations.
City of Tyler v. Texas Employers' InsuranceAssociation,Tex. Corn.App.,
288 S.W. 409; Id.,Tex.Com.App. 294 S.W. 195; See also SouthernCasualty
Companyv. Morgan,Tex. Corn.App., 12 S. W. (2nd) 200; Adklnsonv. City of
Port Arthur,Tex. Civ. App. 293 S.W. 191, writ of error refused;Brooka v.
State,Tex. Civ. App. 68 S. W. (2nd) 534, writ of error refused;45 Tex. hr.
p. 455, 5 69, and cases cited. It .$a6also held that by virt~o of section
52,ofArticle3 of our Constitution, Vernon'sAnn. St. Conat.,Art. 3; 5 52,
municipalcorporationacould not take out a policy of insurancein a mutual
insurancecompanywhich would requirea city to become a member of or
stockholderin such Insurancecompany. However,on the other hand, it was
held that cities could carry insuranceissuedby old line companiesin
favor of their employees,irrespectiveof the factthat the insurermeasured
its liabilityby applicableprovisionsof the Workmen'sCompeneationLaw.
SouthernCasualtyCompanyv. Morgan,Tex. Corn.App. 12 S.W. (2nd) 200, Id.,
Tex. Corn.App. 16 S.W. (2nd) 533; MarylandCasualtyCompanyv. Rutherford
5 cir. 36 F. (2nd) 226; 45 Tex. Jur. p.p. 455-457, 0 69, 30 Tex. Jur., p. p.
527-529, 5 29. * * * .'.
"While it haa been held that the Workmen'sCompensationAct does not'
apply to cities,and that section52 of Article3 of the Constitution,
Vernon’8 Am. St. Con&., Art. 3 $ 52, prohibitsa city from becominga
member of a mutual insuranceaesociationwhose subscribersare stockholders
- . .
v
EM. E. G. Moseley,pagelq (O-924)
in such company,Buch as the Texas Employers' InSuraxe A8scziatf~on,it has
also been held that such provisionof the Constf.t.xkimdoes not pro%blt a
city from taking out employer'sliabilityinsurancelu an old line Insurance
company. Nor can liabilityto an employeeof a city who acceptsinsurance
thereunderbe defeatedon the groundthat such CMtr8Ct ia jllegalor ultra
virek as to the city. The insurer 16 estoppedfrom denyingthe validityof
the contracta6 to the employeewhere It collectsand retain6premiumsthere-
on. 30 Tex. Jur. , pp. 528, 529, Section291, and cases cited In notea: 32
C.J., p/1351, Section631, and cases cited in notes."
We, therefore,feel it incumbentupon us to overruleconferenceopinion
No. 2860, inasmuchas the express-languageof our appellatecourtsIn the
ca8e8 quoted,written since the above numberedconferenceopinion,clearly
indicatethe opinionof the learnedjudgesto be that politicalsubdlvisions
cannotlegallypurchaseinsurancefrom mutual companiesbecauseof Section
52 of ArticleIII of our constitution.We have been unableto perceiveany
possibledistinctionin law betweenmutual fire insuranceand mutual employ- <'
ers liabllltyor Workmen'6CompensationInsuranceinsofaras the constitu-
tional provisionsare applicable.
We recognizethe effortof the LegislatureIn the enactmentof Article
4860a-8,supra,to attemptto sanctionsuch itI8uFanCe by publiccorporations,
and we realizethe effect of our opinionwill be to declarethat part of the
statuteunconstitutional.We perceivesuch to be our duty In view of the ex-
pressionof our Texas courts.
After carefuland exhaustiveinveetigationof all availableauthorities,
we are of opinionand you are respectfullyadvisedthat I)allas
Countycannot
legallypurchaseinsurancein mutual fire or casualtycompanies;that such
purchasewould involvetaking mmubershlpin or becomfnga 6tockholderin such
corporation,associationor companyin directviolationor the provisionaof
the Texas Constitution.
We, therefore,overruleConferenceOpinioaNo. 2880, and all other opin-
ions and expressionsof this departmentholdingcontraryto this one.
Trustingthe above satisfactorily
atiswers
your inquiry,ws are
Yours very truly
ATl'OBNEY
GEEEEALOF TEXAS
By /a/ Ben,jemlnWoodall
BW:ob BenJamb Woodall; Assistant
This opinionhas been consideredin conference,approved,and 18 now
or&red recorded. :'
/s/ GeraldC. Mann P-
Gerald C. Mann
AttorneyGeneralof Texas P;'---“'