Untitled Texas Attorney General Opinion ( 1988 )

June 24, 1988
Honorable David H. Cain Opinion No. JM-923
Chairman
Committee on Transportation Re: Whether an unincor-
Texas House of Representatives porated association insur-
P. 0. Box 12068 ante carrier organized
Austin, Texas 78769 under the Texas Lloyd's
plan may serve as a l'corp-
orate surety" under article
5160.A, V.T.C.S. (RQ-1308)
Dear Representative Cain:
You ask whether an unincorporated association insurance
carrier organized under the Texas Lloyd's Plan, Insurance
Code, article 18.01 et sea., can serve as a "corporate
surety" in providing a performance and a payment bond when
required by article 5160.A, V.T.C.S. We conclude not.
Article 5160.A provides as follows (emphasis added):
Any person or persons, firm, or corpora-
tion, hereinafter referred to as "prime
contractor," entering into a formal contract
in excess of $25,000 with this State, any
department, board or agency thereof; or any
county of this State, department, board or
agency thereof; or any municipality of this
State, department, board or agency thereof:
or any school district in this State, common
or independent, or subdivision thereof; or
any other governmental or quasi-governmental
authority whether specifically named herein
or not, authorized under any law of this
State, general or local, to enter into
contractual agreements for the construction,
alteration or repair of any public building
or the prosecution or completion of any
public work, shall be required before
commencing such work to execute to the
aforementioned governmental authority
authorities, as the case may be, t::
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Honorable David H. Cain - Page 2 (JM-923)
statutory bonds as hereinafter prescribed,
but no governmental authority may require a
bond if the contract does not exceed the sum
of $25,000. Each such bond shall be executed
bv a coroorate suretv or coroorate sureties
dulv authorized to do business in this State.
In the case of contracts of the State or a
department, board, or agency thereof, the
aforesaid bonds shall be payable to the State
and shall be approved by the Attorney General
as to form. In case ~of all other contracts
subject to this Act, the bonds shall be
payable to the governmental awarding
authority concerned, and shall be approved by
it as to form. Any bond furnished by any
prime contractor in an attempted compliance
with this Act shall be treated and construed
as in conformity with the requirements of
this Act as to rights created, limitations
thereon, and remedies provided.
(a) A Performance Bond in the amount of
the contract conditioned upon the faithful
performance of the work in accordance with
the plans, specifications, and contract
documents. Said bond shall be solely for the
protection of the State or the governmental
authority awarding the contract, as the case
may be.
(b) A Payment Bond, in the amount of the
contract, solely for the protection of all
claimants supplying labor and material as
hereinafter defined, in the prosecution of
the work provided for in said contract, for
the use of each such claimant.
By its terms, as set forth in the underscored sentence,
article 5160.A requires a bond to be executed by a
"corporate" surety.
Article 18.01 of the Insurance Code, however, provides
as follows (emphasis added):
Individuals, partnerships or associations
of individuals, hereby designated "under-
writers," are authorized to make any insur-
ance, except life insurance, on the Lloyd's
plan, by executing articles of agreement
expressing their purpose so to do and com-
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Honorable David H. Cain - Page 3 (JM-923)
,
plying with the requirements set forth in
this chapter.
Article 18.03 of the Insurance Code delineates the meaning
of "any insurance" by providing (emphasis added):
The attorney shall file with the Board of
insurance Commissioners a verified applica-
tion for license setting forth and
accompanied by:
. . . .
(c) The kinds of insurance to be effected,
which kinds of insurance may be as follows:
. , . .
7. Fidelity and suretv bonds insurance.
. . . .
Thus, by its terms, the Insurance Code authorizes a Lloyd‘s
company to write "fidelity and surety bonds insurance."
Article 5160.A and the Insurance Code are in apparent
conflict. In the case of an apparent conflict between a
general provision and a special provision, the statutes must
be read together and harmonized if possible. Halsell v.
Texas Water Commission, 380 S.W.2d 1, 15'(Tex. Civ. App.~ -
Austin 1964, writ ref'd n.r.e.). In doing so, the general
provision is controlled or limited by the special provision.
See Trinitv Universal Ins. Co. v. McLauahlin, 373 S.W.2d 66,
69 (Tex. Civ. App. - Austin), reh'a denied, 374 S.W.2d 350
(1963). As between article 5160.A and the Insurance Code,
the special requirement of a corporate surety therefore
controls or limits the general authorization of a Lloyd's
company to write fidelity and surety bond insurance. Put
another way: Although the legislature has authorized
Lloyd's companies to write fidelity~ and surety bond
insurance, the legislature requires a corporate surety when
public work is concerned.
This conclusion is supported by the date of enactment
of each statute. The provision for Lloyd's companies to
write "fidelity and surety bond insurance" became law in
1921. Acts 1921, 37th Leg., ch. 127, 55 1 & 3, at 238. The
requirement that a "corporate surety" stand behind both a
performance bond and a payment bond on behalf of a
contractor doing public work became law in 1959. Acts 1959,
56th Leg., ch. 93, 5 1, at 155. The legislature is presumed
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Honorable David H. Cain - Page 4 (JM-923)
to have known when it required a corporate surety that it
had earlier authorized Lloyd's companies to write fidelity
and surety bond insurance. See Garner v. Lumberton Ind.
Sch. Dist., 430 S.w.2d 418, 423 (Tex. Civ. APP. - Austin
1968, no writ). The legislature is also presumed to have
intended to use the word "corporate" for a purpose. See
Cameron v. Terre1 & Garrett. Inc., 618 S.W.2d 535, 540 (Tex.
1981). Thus we can only conclude that the special
requirement of 1959 for a corporate surety for public works
controls over the general authorization in 1921 for a
Lloyd's company to write fidelity and surety bond insurance.
See State v. Easlev 404 S.W.2d 296 300 (Tex. 1966):
Halsell v. Texas Watei Commission, su&, 380 S.W.2d at 15.
SUMMARY
The requirement in article 5160.A of 'a
bond executed by a "corporate surety" author-
ized to do business in Texas is not satisfied
by surety bond insurance issued by a Lloyd's
company authorized to do business in Texas.
,z[z&
MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
LOU MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman,. Opinion Committee
Prepared by F. Scott McCown
Assistant Attorney General
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