Untitled Texas Attorney General Opinion ( 1939 )

Thisopinion holasthat proposed Insurance
p0JFcg provisions providing for an asslgn-
ment to the issuing company by the insured
of all his dividend earnings and all hls
right, title and Interest in such policg,~to
the extent of his, as well as the benefl-
ciary's, Indebtedness of every kind and
character are void.
OFFICE OF TRE ATTORNRY GENERAL
August 8, 1939
Honorable Walter%. Woodward, Chairman
Board of Insurance Commissioners
Austin, Texas
Dear Sir:
- Optnion No. 0-886~
Re: Whether certain provisions of
a proposed policy of Mutual
Reserve Life Insurance Company
are legal.
This will acknowledge receipt of your letter of May
26, 1939, fin which you submit for an opinion of this depart-
ment the question of the valldlty of the"hereinafter quoted
proposed insurance policy provisions viewed Mthe light of
Articles 4764b (also, codified as Article 3832a), 5068a, 4809,
and 4811 of the~Revised Civil Statutes of Texas, 1925. Such
provisions are:
"It being contemplated that the applicant,
and/or the beneflclary might be or become in-
debted to the Company otherwise than by reason
Honorable Walter C. Woodard, August 8, 1939, page 2 0-886
of or in connection with such policy, it is agreed
that if any liability accrues against the company
under the terms of any policy issued on or under
this application, or any renewal of any such poIloy,
or any policy issued in lieu thereof or exchange
therefor, any and all such indebteaiiessto the %om-
pany, directly'or 'indirectly,of whatsoever'kind,
el-therby the Insured or 'any beneficlary;shall-be
deducted in any settlement.of such policy, or of
any benefit thereunder, and I hereby irrevocably
transfer and assign unto said Texas Mutual Reserve
Life Insurance Company such policy, and/or any'and
all beriefits'thereunder,aid/or any right to any
settlement thereunder to the extent necessary to
cover and discharge any and
.,all of such Indebtedness."
"I hereby lrrevocably'asslgn to Te%as Mutual
Reserve Life Insurance Company all of my rights,
title and InterestYIn and to all of the surplus
profits which has accrued or may'accrue'to me
as is provided for-In Chapter 7
under my-~'polrcy
of the Revise& CivllStatutes of~the State.'of-
Texas, 1925, and advance-Sal&sum or any portion
thereof that in'the -judgment of the Board of
Directors of the Company may be necessary to en-
able the Company to promote or conserireits .bus-
~iiessor to enable It to comply with any require-
ment of the law."
_
ArtFcle 4764b,~'RevlsedCivil Statutes~of Texas, 1925,
also codified by Vernon as ArtLcle 3832a, reads:
"The castisurrehder value of any life lnsur-
ante policy which has been'in force more than two
years;'shall be exempt from liability for any debt,
and shall not be subject to forced sale, or other
process to satisfy any debt, provided-'amember or
members of the'famlly of the insured are the bene-
flclarles under such pollcg, and in event they are
only partially the beneficiaries then such policies
shall'be SC exempt to the extent of their beneficiary
Interest. This adt shall not apply to debts arising
under the policy nor to d~ebtssecured by lawful as-
signment of the policy."
Article 5068a, Revised Civil Statutes of Texas, 1925,
reads :
"Section'1. No money or benefits of any
kind to be paid or rendered on a weekly, monthly
- .
Rouorable Walter C. Woodward, August 8, 1939, page 3 o-886
or other periodic or installment basis to the
insured or any beneficiary.under any policy of
insurance iss~uedby a life, health or accident
Insurance company;including mutual and fra-ter-
nal~insurande, or~under any plan or program of
annuities and benefits in use by any``employer,
shall be liable to execution, attachsient,~gar-
nishment or other process or be seiied, taken
or appropriated or applled by any legal or
equitabZe process or operation'of law to bay
any debt or liability of the insured or of any
beneflclary, either before or after said money
or.heneflts isor'are paid orrendered,~.ex&ept
f'brpremiums payable on such policy or a debt
of the insured secured by a pledge thereof.
"Sec. 2. Wherever any policy or insurande
or pian or program of annuties Andybenefits'men-
tioned in Section 1 of this Act shal'lcontain a
grovislon against assignment or commutation by
any beneficiary thereunder of the money or bene-
tits to be paid or rendered thereunder, or any
rights thereln. any assignment or Commutation or
any attempted assignments or commutation by su.c.h
beneficiary of sucilmoney or benefits or rights
in vloiatlon of such provision shs.11~be wholly
void. "
_. .~_
Article"483.3,Revised Civil Statutes o,f'Texas~;'l925-,~
provides that the ?et premium shall be calculated inaccord-
ante with the prorrisionsof Article 4808, Revised Civil
Statutes '4 Texas, 1.925,and provides that no portion of such
net premium so arrived at sb.allever be used forkany’ Character
of e'xpenseof the company or for any purpose other than the
nayment of death losses, surrender values, lawful dividends
i.0policyholders, loans on policies, snd for such investments
ES tre prescribed by law. The :mport of such article is to
@ace a statutory limitation upon the right of a company to
expend its funds.
Articis 4811, Revised CirIl Statutes of Texas, 1925;
provZ.desthat mutual companies'she.11make an annual account-
ing s;;ddeclare dlv:d,en.ds
from its surplus after deducting
t.herefroma contirgency reserve as is provided for elsewhere
'InChapter 7, Title 78, Revised Clvll Statutes of Texas, 1925,
end requires that such dividends so declared shall be paid
the policyholder in cash or in the equivalent of cash In any
no.tion
-_ stated In the policy and selected by the policyholder
5x3writing.
.
Honorable Walter C. Woodward, August 8, 1939, page 4 0-886
'. In addition to the articles of our statutes to which
you make'reference Sn your inquiry,'it 1s to be noted that
t;U?;cle4819, Revised Civil Statutes of Texas, 1925, provides
:
-~.."Thebrovlsions of'Chapter3 of this Title
when not In conflict with the.artl228 S.W. 550;‘held that pro-
visions inconsistent with the above statute are void. We deem
the language of Judge Greenwood in such case.'asa true ex-
pression of the Legislative intent, as well as the public
policy of such statute. He said:
"In order to determiiie``the
true meaning of
the'~obscureprohibition against provisions for
modes of settlement of less value than the amounts
Insured.on the face of a life Insurance policy,
-.. .
Bonorable Walter C. Woodward, August 8, 1939, page 5 O-886
plus dividends and less premiums and other indebtedness,
subject to certain exceptlons, resort can properly-
be had to the occasion'for the statute's enactment,
and to the remedy it was designed to afford, and to
all the words of the statute.
"It was formerly usual for policies of life
insurance to contain numerous conaitions~on which
the amount or amounts promised to be pald on the
death of the Insured might be reduced or entirely
defeated. Among common conditions-were those re-
lating to the insured's occupation, habits, resl-
dence, and suicide. Not infrequently the amount
of.the insurance was stated inbold type/on-the--
face of the policy, while the conditions were in-
conspicuously put on the back. Such~pollcles
could be used to lead the unwary Into the beIlef
that they held enforceable promises of real and
substantial benefits,when the promises were so
limited and conditioned as 'to'have slight actual
value. 'In this'way premiums could be collected '~
from the Insured in exchange for apparent, rather
than real, obligations on the part of the insurers.
"The above whereevils to be remedied by the
statute, which was enacted in the interest of the
lnsur~&. To accomplish the legislative intent,
the language of the statute-must be given such
signification as to afford a reasonable remedy
for these evils. The public policy declared Is
that the amounts promised to be paid on the death
of the insured are not to be withheld.nor d,imin-
lshed under limitations or conditions, except to
the extent of subsisting indebtedness to the insurer,
including premiums, save in the specially enum-
erated instances of the insured's death by suicide
or from following speclfiea hazardous occupations.
In this way the contract in this state as to bene-
fits from life insurance is rendered simple and
easily understood by all; including those lacking
legal or business experience.
9,
. . . . .
"The object of the statute being to prevent
insurers from accomplishing a diminution in the
payments promised, except as expressly authorized,
it Is mandatory. To give effect tomthe inhibited
clauses would be to abrogate or evade the-statute.
Provisions inconsistent with the statute are void."
, . I
Honorable Walter C. Woodward, August 8, 1939, page 6 O-886
Article 4812, Revised Civil Statutes of Texas, 1925,
incorporated in Chapter 7, specifically provides that muttil
life insurance companies shall ~lssueno pollcles except upon'
the participating plan with dlvldends'pagable annually as pro-
vlded In this'chapter." To provide forthe assignment by the
Insured to the lnsurer~of all future dividends or's0 much
as the Board of Dlrectorsof~the insurer should choose
:ie:::f would be in direct conflict with the plain wording
of su& statute.
All statutes dealing with a given sub,jectwhen con-
sidered together reflect the-publlc~pollcy of this state.
McCameg v. Hollister Oil Co., et al, 241 S.W. 689.
Viewingall the statutes hereinabove referred to and
the cases cited, It 1s manifest that the public policy of the
state is to protect those~who buy life insurance to the extent
of'givlng them some assurance that the?, their-estate'~orbene-
ficiary may reasonably expect to receive the face"value~of
their policies less such deductions, and only such d-eductlons
as are permltted by law. It 1s not logical to assume in the
Instant case that the great majority of lnstiance buyers would~y
or could fully understand the sign'iflcanceof the proposed pro-
visions. It Is equally as Illogical to assume that the insurer
and its agents would make a full explanation to prosepectlve
buyers of the slgnlflcance of such provlslons.
To permit the lncorporatlon of the proposed policy ``-
provisions into a policy of life insurance would be but plac-
ing a stamp of approval upon a'scheme to circumvent and de-
feat not only the plain and unambiguous expressions of the
Legislature In the statutes herein referred to, but as well
the broad public policy of the law.
For~all the reasons herein given, It Is the oplnlon
of this department, and you are so advised, that the proposed
policy provisions above quoted are contrary to the law and
cannot be Incorporated in a life Insurance policy.
Very truly yours .
LA:GO:wc ATTORNEY GERERAL OF TEXAS
This opinion has been By s/Lloyd Armstrong
considered in conference, Lloyd Armstrong
approved, and ordered recorded. Asslstant
s/Gerald C:.Eann
Gerald C. Mann
ATTORNEY GENERAL OF TEXAS