Untitled Texas Attorney General Opinion ( 1942 )

non-participating; and ala0 policies or izduatrlal
life insurahoe ulder irrtiole 4764b. provldlng for
no participafio~ privileges. The ordinary 1iPe
busineeia is profitable but the industrial llfa
buefness plhoffsa loss, and 'tha Coqxu&e whole
operatfona (inoWIing Ufg, haalth and aocident)
show A0 prQfit*
*%?I;.CompaAy dO&%6OnUuot ita'ltie, health
and aoeidant bosiness fa separate departznants. 'PBS
Usaim yaux opznfan a6 t0 whether in these eircmw
atanaeo the Company oan 1awPully py dividend8 to
the holdem of ordinarypartlolpating Lffe polleLes."
titicrle 4729; Vernon's Awotatm¶ Civki: Btatutee
grovidaar z 8,
WQ lml tiewee coiapany organfied una+ _
the lam ot thts State shall heelage orgay-say
dlvidendis to its poUoy holders, exekpt Pro;a~th>
proPllwmde by auoh wxqmny. 'ilxls&LOU izot
prohibit the isauame of polioies gmranteeing
a U~sf$uLte payment or reduatioa l.ri precsim ~aot
exce6dfag.the ~oxpenae'~oading on said prtiuiss.
%hera said reduatiOA exceeds said ex-perme XoCrd-
ir~g.,t&e propar reserve therefor mst be held
by the oonpany to prdvide for the dsc'fciemy oo
arisirg l.n the' net preniusl, abut thiq skll not
apply to gayseats t6 holders ot speotil or bosrd
oontraots hezretofoxs isswd. fro sach life ia-
surauge oompauy shall dealare or pey an3 dIvI&
dends to it& stookholders, except P,roznprofits
-3ade~ buy 9UOh OOf!@~, AOt iAOlUdiQ3 8UQ;lUs
asising ‘from sale oP.sto&.m
Axtiale l+753, Verconls Annotated Ci0I.L rjtstutas,
reads as PolSower
*It shall not be lawful ror my insurantle
cmqaany orga:anizedunder~tbo laws of tbia State
to z.ske any tiuidende, ~exeept rm= surplue gr0-
fits arising frara its businsrss, In ‘ssthatiag
..
stioh profits, there s&all be zeaeirred "U~erefrorathe
lawful reserve on all wJ8rpired risk& and al&o the
smurit oP all unpsLd l~sa88, whether adjusted of uri-
etljusted, and all other debts due and payable, ere
to beoone due and payable, by the comganye &y
dIViaSAaU Bad% OoAtIXWy t0 Amy PrOYfsiOA Or ?ihIS
hrtiale %&all aubjeot th6'oonjmxy zmkiag than to
a i0rr8ft0x0 or its ohartez; and me CotPmiasiixer
shaU.:forth'%ith revoke its &mirioate Or authorfty.
iia shaall give suah capany at least ten daya notice
iA WrlWlg of-rhia iAtent&oA to 'reVOk se14 c&k-
iioate, atatiha apeoifioaX3.y the reationa why he
intend8 to revoke the 88m~+~
&ticle 503tS1 V+Aon*s Annotated Civil Statutes
?roviaa#:
TTo life, health, l!ire, ``?ine or inI.a~& in&r-
anw ooRtpRy, orga?llzsu maf3r the laws .o::et,is. State,-~ :
ahall. sake any dioiaenas emept frvla the surpm3
prorits aria- rrom its busioasa. In esfinsting
suoh prorits, there &all be reserved t&m#rcm a
sib eqgLt to forty per csnt of the azouat received
on uAexpirsd fire risks rind pOllCieOj
aa pre~+&uzn.s
and one hundred per ebnti oi the pr&ma reoeived
on -expirea lise, ~bealth, slarine oil Inlend tlrans-
portation riSk3 eAd po~oisa, wLi.oh afSXAt 80 XT%-
served Ian hereby dedlared to bs unearned premluza.
There ahalL alao be ra%erVed tha amuAt of all WI-
paid loaaes, whether adjusted or unadjueted; all
suma due the co@aAy 8A bon,nbS,mti@i@t3, atooks
and book accounts, of wbi&i ~0 part ot the prinai-
pal or tie faterest ther5oA has been paid~durlslg
the gear: preceding suoh sstiolate of profits-, and
upon whloh suit for foreo.losare or coflection has
not been mxmeAoed or which after judmt has
been obtained thereor ehan'@iQe reJained rcole
than two year% unsatisfied, and upon whioh SAterest
shall not haye been paid. IA case Of Amy such
judgment, the interestdue or aoorued thereon and
rsmaiulng unpaid shall alao be reserved. .uls
dividends f&a&e CoAtmr~ tO'tbe,protisiOrrs 02 t&is
_.
l . I T&a. osdlnasy lire business
.“., ie pm-+
iitable but the fndustr~al Ufe buetieoa shows
a -lo ss, 8r&d the GOnpiiIy'a whole Operation% (iItoli&-
ing life, health and accident)'sh`` no .prgfit.*
Af%er a.oareful se&oh we hsve PafleU to find
crny ciaae wharo the ap~oU.ate oourba of tt-is &ate have
pmmi upon e gueetlon like or &ai.lar to the one uader
consideration. However, to cossestlg answer gow ;iues-
'uionas stated @owe, we tbiak that it ia aeceasary to
dei;er&e wðer the coiagaqf as a whole mst 2m.v~ s;lr-
&ui prof&.ts aria&g Itro:a Its ‘Jus.Lneas from atic& it oiw
logafly pag UivLdoada UnllcG the abom =8&ioood statutes
3~ %ðer each OS any oT such separate sss: dfstinot
_.
.
tionorable 3. P. Lookhart, page 5.
department8 oan legal- par dividends to the poliay holders
in eucth6epartmnt or dopmtmentr wnere ana when no potits
arS bvall8bls in other deprrtmnts of the ooqany to py
dividundo. Cardully oonsldarlng thm sbon mentioned
statute8 together, it 18 our opinion, that the oom;tany a8
II whole nirat are surplus profits from whioh it aan legally
pay divldehd8 and that mrplss profits in one or more de-
partmJlts aiha not all of the depsrtzaonts 0r the aolupany
will not suthorlse the payme,nt of diriderxle to the poll07
holder8 in those depgertments harti& wplus profitr while
other departmenta of the canpany shvw loaaae or tha oom-
pany a8 a rhoI. show8 no profita. It ie apparent that it
was the intention uid purpoar of tha Lagialatus to pro-
tect the coqany 8na the policy holdrrr u;a that the above
pl4ntimva rtatutvo 0114 rutharia the gayimit or diviaana8
to palloy holdero whvri the osqsny a(1 e whole ha6 euoh
surplus pmrits fren uhieh it oan le&ly _nay dividenda.
There is no authorim%ion for the gaynent of Ulvlaanda to
poliop holders by eoprmste 6nd dis~lnat departuente of
the oompany. The com~eny as a whole n&ust have suoh aur-
plus profit6 from wbish it aen legally pay dlVldends be-
fore any dlvidaadu oa~l be paid. Therefore, we rrspeob
fully anmer the above atatod ciuc&iiOa in the negatiV8.
Truati~ that the r0~sOine fully aneWer ycur
iqul.ry we are