Untitled Texas Attorney General Opinion ( 1942 )

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
eRumo.yM~
--
lionorablsJ. P. Olbbr, Comdseioner
Caaualtf fnruranoo Cd8si0n
Board of fn8lIranor Commirdon~r8
h8tin, T8X88
-8r sirs opinion 100. O-4593
88 br lf.ibl8 for a8-
ty vfth the pmirionr
CiYfl StabIt Of
IPATIOEI DLADSE
WITHOUT 00%
Ho Oontfngent
Lirbillt~,
l?opoliayhol&r in this oorrganrina-8 anr
U8bllit othor than the DfJporft Promiu8 or
Prombun $aidi the ooqanp harlng roo@mulrted,
Honorable f. P. Ulbbr, CommI88Ion~r, Paga 2
and n0w hating intaot, 8 rr00 rurplu8 equal
to tho 0apital stoak r8quIrod of a daaostlo
8tOok ill8IW8llO8 OOlnpaAftraA8oOtiAg the 8ame.
klxulof lnsurano8. Thl8 I8 In oooordanoo
with the ocmpany'8 By-LaW8 and tha prod-
8iOA8 Of the MUtUd Ill8UT8UO8 tit Q88806 by
th0 a3st LO(Ci8latU~. 1929, Fi'irrt
0811.d &W-
810``. Pa&8 90, Chapter 40, S0otIon 10.
“‘MtMal. Pal'tiOIpCitIOnt Th8 in8U.P.d18, by
rirta0 of thI8 polloy, a member of the oan-
pany, 8ubjeOt to the ~f;LaWS,rr?or~noe to
rhioh 18 had, and 8 8ll be ontltlod to suoh
unabrorbed DeporIt~8r8mium or Divlbontla8
may be deolared b the Board of DiT8OtOr8
or Bxeoutir8 Gonau Ittw, 8UbjeOt. horotor,
to approval by thr Board or In8uraAoa &me
ai88iOA.r8 Ot the State Or TOXa8 bOiOm bO-
In6 paid.9
‘ml8 brpartmont ha8 al80 plW80?1bed th8 rollOwIng
18agurge to bo amd by a r8oIprooal erohangb when
the lliglbIllty r~cplrementr are met:
"'80 GCBPl'IRURt?T I3BIIDYt Lpopol1oyhoXior
in thi8 tiohango inOIl& lAy liability other
than the bpo8It pnmlum or pm5Ium paid8
the uohange harlug aaoaruleted and now har-
Ing lntaot a tree surpl08 in the uouut do-
fined by Artlot 5026 a8 arndod br Ghaptrr
8, Pam 4l7, Aots 46th b@blatPra 1939,
Regular S88810nr Thlr l8 in aoaorlanoe dth
th e lxohangM &tiOlO# Of &r8Olll8nt 8od th8
ptiviriona~ or the roion’odto ArtIolo (5026).t
W8 are roqoltlngmmerou8 InquIrI88 .Inoonnoot1cm
with there prGV181On8. Wo, thrroiore, i~8peOtit.diy
roquort Jrouropinion on thO iOuO*ing quO8tiOnt
%% the 8vont that a mutual Io8uranao oodapany
or a noiprooal or lntor-iMur0n00 0xohan@m i8-
8~08 polioI oontaixhiag tho sppropriato ioro-
going non-oontingentlirbllitr prwIrIon8 pm-
8orIbedby the department and boron tho oxpira-
tioa Of PO110188thu8 188UO6, the mUtU81 iU8Ul-WLOO
oompany or the no & p & -o l
o rohang0
a l 88oomo8 in-
80lYMt, r0ul.dthe polio oldor bo .lIableiOr
a8ee88ment or for a oont.ngont
P addltianal premIum?R
Ifonorrblo3. P. bibbr, UoxmI88ioner,Pago 3
Tho lo t rofrrrrd to In the 8ooond prragraph o?
pltr
_ _ lOtt8r a8 "YlltUIl
_-_- -_ -8UanO8
- __ - - et p8888d !g th? W8t Lo-
glrlature, 1929, Flr#t OUlW Sblllon, page 90, chapter 40,
smotlon10". %8 &rtiCple 48&a-10, VeIPI10n’8 &tIOtatOd Civil
StatUt08, jliOh ~tIO1~ I8 88 ?olloW8t
Vho pOliOi 8hal.l provide ror a premium
or promlum doporltpqabl.0in oarh, and lxoept
a8 horeln prorlded tar a oontlngwnt premium at
lea86 lqttal60 the pre&mi or prelaiumdepO8it.
St&oha mutual oompaw may i8SUS a polloy wIthout
a aontlngont promlum uhI10, but only while, It
ha8 a 8urplu8 equal to the oapltal requirrd 0r
a do3ne8tIortook in8Pr8nOO oompanf tranraotlng
the 88M kinds o? inruranti, but anr 8u0h oompan~
my f88UO a poliof providing that the hol&r O?
anr ruoh polior 8hall be liable ?Or no greater
amount thau the premittm or premium dOpO8it ex-
pre88rd la the pollay. X? at any tlu thr abtit-
ted l88et8 are 1088 than tho uaoarnod premIw4 re-
bervo, other lIabIlit~o8 aad the required 81arplur~
the oomp8tty ehall Immediately oolleot upon poll-
Oh8 with a ooatlngont premium a 8U??iOi@At pro-
portionato part theno? to re8tore aaoh a88rt8,
profldod no member 8hall be Uable ?or any part
or suoh oontlngmt premium in 8x0088 o? the amount
demandedwithin one par artor the tormlnatlon o?
th8 QOliOr. The Board may, by written order, dl-
Mot that QrOO0Oditl~860 MUtOM 8uOh a88Ot8 be
do?onod durfq the time ifx.6 in ruoh OfbOr.*
The ?I?th ~nggh o? pur latter roiorr to Arti-
Oh 5026, remoil’ anotated
OIrll Qtatutrr (I8 mndod. Tho
portiOn O? 8UOh & tiOl@
lpplloable 60 thi8 qUO8tfOA, tOllOW8t
1).
. . suoh ponr or attorney or 0th~ au-
thority ououtod by the 8ub8orlberr at any ru0h
lxohango 8hall provide that 8a0h 8ubroriben ohau
be llablo, In addition to the premium or pnlirrr
depO8it 8peOi?iOd iU the pOiiO3 OOUt?aOt, t0 a
oontlngent lIabllIty equal in amount to omS``-
tlonal annual premium or premium dOpO8it.
8Ub88l'ib@r8at moh l xohange relypZ'oVi6.bf amOe-
ment that the proalan or premium dWO8it 8pOOi?i@d
In the pollor oontraet on all ?om8 a? in8uranoo
exoept lI?e 8hall oonstltute their ontirr llabll-
Ity t&o@ the lxehan$e while, but only while,
Honorable t. P. Qibb8, Oommi88ion8r, Pag8 4
the free surplus of the reolprooal exohangcia
lqua1 to Two mtt~a Th0tt8aa Dollar8 ((200,000)~
pr+d* that I? suoh lxohange +8 not or tt
not applylag to aonangr wormen~8 8ompen8atxon,
emplomrrt llabllltf, or sontrsotr providing In-
domnIty agaIn8t leg81 llabilltf to third per8on8,
exoept lutoaoblle pub110 liability and ro rtf
danu3gOwhich I8 not 8UbjoOt to the regu!at~n8
Of the Intrr8tato Oommeror ~O~I8IBIOA,the Rall-
road ComnI88lon 0r TeXa8, or other 8ImIlar bodler
In the tarloue Statea, 8uoh exohange mnf proride
by agreement that the premiumor premium 60pO8it
8peOi?I@& In the policy oontraot 8h811 oon8tItute
the 8Ub80ribsrt8 OntiM llablllt~ through the @I-
ohange nhlle, but only whllo, It maintain8 a fro@
surplu8 of not lera than Fifty Thousand Dollar8
($50,0001 if Otif On@ kina of iII8UNInOO 18 0X-
ohanged nIth an addItIOna Ten Thourand Dollar8
(#lO,OO6) or rm rurplu8 for eeoh additIonal
kind or In8uranao lx 0h a ng 0a
(InoludIngeatomo-
bile pub110 liability and property damag8 whloh
18 not 8ubjeat to the regulation80r tlm Inter
8tate 0oEperoe &NUMi88iOtl,the Railroad aomnI8-
8Ioa O? hXa8, or other 8Imilar boaI@ In the
tarIou8 Stats8), but not more than One attar
Thousand Dollar8 (#lOO,OOO)surplus 8hnll be ro-
qulred~provided, howrfer,that any dOM8tiO re-
alprooal organIs prior to the lffOOtiV8 date
of thir Act whioh ha8 born and 18 oxohanging Om-
traot8 wltlsaut oontlngrnt liability an6 whIoh
6008 not hate the ml.nlmm rurplw r*quInd br
thlr Sootion to oxohange 8uoh eontraotr, mar oon-
tinuo to exohangr oontraetrwithout oontlngent
lIabIlIty until Dooembor Sl* X943, provided that
*(a) On Deoember $1, 1939, Dooomber 31,
194o,.~oe~mbor31, 194l, aad Dosomber 31, 1942,
it shell hato inorea8ed it8 rurplus by r88 OtiVe
WOUAt8 0r twntprite (25) per oentum of t@ he dir-
ferenoe between the 8urplaa lri8ting on DW@mbW
31. 1938, and the rurplu8 herein required of 8
reoIprooal before it i8 p0rPritt04 to 8XOhang@ OOD-
traotr without omtlngent liability; and
m(b)
At no time during eaoh oaleadarmar
a? the period above re?erreato 8hall the 8urplu8
.
i
Paga 5
Honorable J. P. Olbbr, Oollpi88Ioner,
be lesr than thlrtr (30) per oentum of the pn-
aIum8 altten during#rob 8uoh year1 and
'(0) fil othor pXWi8IOn8 Of thi8 Aot 8hall
b8 oomplled with; and
*(a) xr 8uah reoIprooalrail8 to Inenare
it8 8Pirp1U8 in aOOOrd8UOO with thi8 8Ub8OOtfOA,
8uOh r8OfprOOal ehall b 8ttbJeot to the minImum
8urplus a8 above-arntfonod,or dI8oontInue ex-
ohanging polio188 without oontlnent UabIlIt~.
. . . .(I
I)
The brie? aooompanfinghour letter 8llttao8to the
Df86riOt hurt Oa88 O? Wrist 2iora-0~ Reoelver, f8. Trinity
Portland Cement 00.. 0t al, No. 51,& on the docket of the
126th Df8triOt oourt a? TraYi Oounty, 'hxa8. The jml@nent
br the a0m in thi8 OO80 WO8 entered x8r 1, 1933, and I8 or
reoord In the 01~11 mlnutrr of said Court In Volume 50, page
1. Thi8 @a88 oOntaln@d an frrua Involving a 8tatatorT po-
rI8ion 8imilar to those oontainod In the 8bon uoted 8tatute
8aId provlllon being Sootion 16a of Artlole 8308 of the Work-’
men'8 Oomp4nratIon L8w Aotr or 1917 a8 amen404 by the 42na
Legi8latPre in 1939 whioh $8 a8 fOilOwN
4300. 16a. Whonwu the ti8ooIatIon 8hcll
h a lolo eumula ted,
at the end of any oalrndar fur,
an admitted rurpla8 In 8x0088 or Inourred 108808,
lxpen8e8 and unearned prmtdwm or other liablll-
tie8 amountin(lto tho 8UE or Two Hundred Thoaraad
DO11U8 (#ZOO,OOO.OO)or EON* tho lIablllt~ of
_ it8 member8 fO~a8808M#~t tttkd,r &'tiOlO 8308, 800.
tfon 15 rha11 b8 rurpea(lod, and it 8hall b8 au-
thor&d t0 188U8 pOliOi UOt 8UbjeOt 60 688088.
met&. It 8hall be the autr
08 the Board or Xn8tir-
an00 Qoamiulonus to 6*texain* promptly aftor the
riling or tho annual Statement of thr AWooIation,
whether or not '8aoh an amount of rurplur lxirtr
@Ad if it find8 that it 6008, it rhall 80 8tat0 in
a aertI?Ioate. Suoh oortifioato rhall remain in
full for00 and a006 for one (1) fur or until
8uoh the a8 a lator report to o r lx88iaatIon bf
the De rtxmnt of fn8uranro 8hall 8how the~8urplu8
to be r088 than Two HttndMd thourand ($200,000.00)
Doll~r8, whennpon the Board or Sn8uranoe Ootdr-
donor8 ahall oattool and nroko iraoh cwtI?loat@
Honorable f. P. ~ibb8,'ConmIs8Ioner,Page 6
and requlro the A8soeIatIon to 18~ QOiiOf88 utb-
jsot to l88088lUWt uttaerArt1010 8308, Seatlon 15,
a8 ther were prior to the time when 8uoh 8urpla8
of Two mta0a Thousand (r)2OO,OOO.OQ)bollar8 or'
more war first aooumUlate4.~
Purporting to aot In aoaordanre dth thlr 8tatutorr
prOvi8fOA, the hnbexz%ent8 Reolprooal A88OOiatlon of Rou8$,ton,
Texa8, In 1929 8nd again Ih 1930 lttaohed an endorsement to
oontraot8 188UOd during ruoh year prwiaing for ‘8U8p@A8iOn Of
liabilitr t0 I88b8W@tlt, rubrtantiallya8 fOllOW8t
"By tirtru of thr,aoo~mulatIonbf the Iclro-
elation at the end of the year iamedIatelypro-
00aing the year of i88U8 of this oontraot of a
aa5ittra 8arplae In 0x0088 or lnourrea 108808,
oxpmwr and unerrnrd premiums amounting to more
than #200,000.00 in aooordanoe wlth Seotlon 1641
of put 3 and Sootion 2 of part 4 of Chapter 179,
A&r of 194, Stat8 of Tex88, and/or a4 d8ma-
memtr thereof, and by virtue of authority of thb
Ieruranoe Department of the State of T8z11, the
home 0??1oo 8tato O? thI8 A88OOiatfOA, the llabll-
itr t0 a88e88WUt oi the 8UbsOribrr ttW@d in thin8
oontraot 18 8U8QbAd@dattag the warrant oalendar
par 8d for ruoh further period a8 tho A88ooia-
tlon rhall oontlnue to m8InteIn uaImpaIrod ruoh
lrplue of more than $2OO,OOO.O0.
=ROthiA& horeln ootttain@d 8hl11 be hold to
waive, vary, altar or 8Xhnd any or the term8 lud
oondit3onr 0r thl8 oaatraat 8xoept 88 art.4 Iboi-8.
WAttaohod to ma,r0rring a part 0r 00ntraot
Ho. , f88U8d by the 8UbsOrib8r88t LMkr-
~n``~rooal A88oolatIon,Of 80U8tOnt Teu8,
to , da;:& at Bowton, Texa8, th18
a4
The Lumbermbnt8 Reolprooal A88ooiation beoame in-
8olten.t.the Court’8 detemInatIon or the begin&kg a? In-
8olrenof being July 1, 1929 and the noolru n8 a polated
J'u 31, 1930. Whbroupon, &he noeiter brought rui i in oau8e
No. 51,667 mentioned above against the polI8fhold@rmombrr
or the a88ooIation for juagmbnt levying l8808umnt8 against
8uoh meakr8 to m8k8 Up the de$iOit in th8.a8800iatiOZlt8
?UAdl In order that the debt8 and ola¶.m8 lg a In8t
it miight
.. :
84.3
Honorable J. P. Gibbs, ~OIUU&88IOMr, Page 7
be paid. Some of the 40rendant8 plenara the above voted
lndor8ement 88 a d@ ?@ A80
lgaIn8t rtoorery or 8,uoha88088meAt.
It w88 found by the Court after hearing the Ql@naiAg8, ori-
denoe, and arguments, that euoh lndor8emont we8 no bar to
reooruy of la8esaments by the reoelver In that partioular
oaext,a8 rtatea in your brie?. The Court aid not a0netrao
the 8tatute Or pa88 upon the effeot the endoreemont may hare
had I? It h8d been validly lttaahed to the pollo~ at a time
when the re re8entatIon8 waited In 8uoh snaoreementrotaa
hare re$lsoted the true faot8 a8 to the amount or surplu8,
but be886 It8 tIndIng that tho endornemontwa8 of no for08
and l??eo t
upon eVid8S4J0 that ruoh endor8ement \W8 r0~40a
UpOn ?a188 and~t~anaulentrepresentationsmade by tho oompanr,
the 8UlFplUs olaIinedtherein being, In faot, non-•ri8tont.
Thii ?IudUg, even if we dieregard the faat that a
‘Motrlot Court juaiplsntalone, (there having been no appeal
taken fran thir ti-ial) 18 wlthout'foroea8 a preoedent and
18 not bIndIng en any other oourt, renders this oa8e,-and
other 0~8~8.arI8In~ out or thi8 oa86, 8u h 8 Southern oriln-
mental Irh work8 fni sorrow; 101 %W. h!a!. 936 and xorrou
~8. Y&&hq Bkriaett .?brnIttuo Company, Ino., Sup. at. or. Ap.
or Virginia, 4 S, Wtr, (26) 399, this last montlonrd 8a80 b8-
ing One O?,the Oa888 Oft06 %Liyour brie? (both Of th.Oe Oa808
having held in eiroat that the queetlon o?,the valIdlty of
the lzidorsementwad re8 aajuaio&*a in the trial oourt) o?'
little or no~help~io~o~an8truin-thelaw on your qw8tIon~
b0OoU80 lt~l@av~8.illlan8we~d ttz
e qae8t$on a8 to whet the @?- ,.
root or the lador8emont would hare beon had the wwmtad
o~mplIaiiso with the'8tdtute been regular ana without fraad,
we ooneoIre It EJ be 8tdtOd~a8
~O&.&eitlo~.a8
?ollowr~ If
a .h~taa&~lnruranoo oempanf or a reolprooal or
InterIn8aranor'~eroha`` l88UO8 po1lole8 providing for non-
a88688mentor no p0ntI en6 lla'bIllt~,at a time when 8uOh
oaganf, noIprooal- orY nto*ln8uranoe lxohange ha8 in truth
and In fa8t th``trro,rurplw requirua to meet the QrO~i8fOn8 '.
O? the 8t8tU~8``‘WOU16 the holbr8 Of 8uoh pOsIOi88 be liable
for a88088mont Or for *ontIngent addItIonal proaim In the
want the oompanf. nofproaal or OXOhWig8,k@~e8 in8Olrent
4rUIAg 6h0 ii?0 04 8UOh pOiiOi@8?
we deem It tondaqtontal that QIXW%``OSW often In8ur-
attoeo'ontraotle a~osltrlot with rtatutor POWi8iOA8 aQQlfin&J
to 8uoh aontraot lra lqtalla and munt rne a to the pr0vl8loa8
Of the 8tatUtb. xtt thi8 @OAA@OtiOtI pUW at6eAtiOtt 18 direOt@d
Eonorablr t. P. Qlbb8, Ooamiaalonu, Pam 8
to the following authority:
Wtipplld4ona in a oontraot of inauranoo in
oonfllatwith, or re u&mat to, lt~tutory,prori-
llona, wh%oh lo lppPioablo to analfora a part oi
the ooatraot, mat field to the atatuto, and arm
lmalld, miner oontraota oaauot ohan@ ldatin&
rtatutorF lnn,w -Aamrioenlatioaal Inaurmoa Con-
pany fee Tabor, 230 S. W, 397; Quoon Iaouranoo
Oollgaaytar Jarter#on foe O-any, 64 Tox. 578.
Sin60 tho uordlng of Artlol~ 4860a-10 dsallog with
mutual lnauranoa oosupanioa la oubatantlall dlrrrrrnt from
Artlolr 5026 Aoallq with reolprooala and L tor-lnaurano~
lo h a ng aauoh
a ,Artlolea will be treated aoparatoltla thir
oplnlonr
Thara are threa possible oonetruotlonaof Art1018
486Oa-10 am tar am lamo lpplloa to the oontlaipntllabllltf
0r poii0*0ia8r8~ The rb8t or thO80 00n8truotion8 wad
hare the ltatato meaa that wh6n Oh& lrplua roaohaa the ro-
qalred amouat aat forth lo the atatoto, no polloyhol~r,
whefhor him pollrf k laauod prior to, or after tha time
luoh rurplaa lr roaohod, ahall be liable for any tarthrr
aa~oramrntajavan ir the 2-0pha lu r p fue baoma aired
arrriq the tlm ror whioh the polioloa are iraw& i”%
oplnioa thla lntm-protatlonla inoomot llnao the itat::
rakoa no pro+lalon.rer roaovl~ the oocflnfpnt 1labllitJ
lttaohlngto pollrirr lraued ~rlor to the tiso that tho r6
q r a lrlurplu
d la naohrdi Morootu tha etatuto oontlaqoa
le r0u0r:'
?fr at ray tlmo tha ablttod laaota are laar
than tho~anoarnod
%%o last quoted pretlaionlpeoiiylmgpolLoloawith
a oontlagent pramlam olouly lndloatea that thora Wy k out-
ltandiry fro olaaaea 0r polloleaj oao olaaa boaring a Oon-
tingant llabllitr aad one olaaa without a ~ontlIle````~;~iablllt~;
7,
i00n4 00ti8tru0ti0n +0uld hm th0 aSmWe man
"tro ma laaud without eontin@nt llablkltr oarrf
thit thi pol
lfonorabla J. P. Gibbs, Oomaiaaloa~r~ Pago 9
BUOh lxrmpf~lion
for o!ilrao long am the requlrad atwplua re-
aialaaBnlmpalraa, thtta making tho lx o mp tlo
trama ooating0ot
l.s.tty dopoad upon the oontlauad lxlateaoo of the roqulrad
The atatuta may8 la liteot that the oaapaay~y
la a ue
l*poJlo* without a oontln4potproadum whllo but onlf
whll8, W nqulrad aurplua oxlata. It doom not ;a, that the
lromptlon irem oontlngoat llablllt~ ehall oantlarrrwhllo, but
odlf whllo, tho nqulrad aurplua oxlata. It doom not apoolry
any tlm6 whoa the lxoarptioa from oontlagoat llabllity ahall
oaaaa, but apoolrlea only th& tlaw dIUlIIgwhioh the oompany
nar laaue pollolea without a oontlageat prenilua. In erdor to
a do pthla
t loooad oonatruotloait would be aeoeaaar~to read
into the atatuqd'aprorlaloathat the l xomptloarrau oontla-
gent llabllltf ahould oeaao wba the required lurplua beoomra
lapaired. Suoh a oonatruotloawould do rlolenoo to the term
o? thr atatutar
The third #OtI8t?uOtlOA whloh we bellova to be in a+
oordanoa with the
ltatuto mean that
gin haulag polloloa with go oontiiuont .llabilltr or mny kl@d,
and that ii at a later data, it beoame nooraiart to make fia
laaeaamont, auoh ~aaraaaoat oould not,ba mad6 on thoao polXolo8
sly raaohod tho roqulrwlJnlma lurplua
on that auoh pollof la ``O?oo aubjeot to
Or oouraa, the oompaa``a rl6ht to laauo
auoh pollolra oeaaoa, at tha momat it8 larploa’``falla below the
mpoir0a rinimr.
Ii I&, ,thoiororo our oplnloa thaf &fs pxwlslona
tprnirhaa by JOO ior prlnt~ late m&ual pollof ooatnotr
should %a lmoadod in part am tallon that’.pmtlon of the
rovlalon ma4ingmao pollo~olaor in thla lompaq laoura qr
Plablllty other lib&ntho 4opoalt proaium or proniua Raid”
ahoula road lubatantiall~ a8 tollowal atho holder of thla
polioy l,aeura no llablllty other than the dapO8it g?OnirU or
premium paid.*
It la not anoommon ror a rutma oaapanr to urlta
inauranao on the oaab plan am wall am on tha lraoaamoat plm.
oooloy@a &lore on Xaauraaoo, 2nd M.,Vol. 2, PO 1576reaA*
la part am r0siorrt
@mmra a oorpany la luthorlud to do buainoaa
0p1the oa& plan am roll am on the mutual pla
846
Honorable J. P. Qlbba, Ooamlaaloaer,Page 10
promlum notea siren by mmbora laaurlng on the
latter plan aaf be la a ea a to
edpay loaaea mua-
talaed on pollolea written.oa tho eaah plan.’
The thlra oonatruotioiabove adopted la rupported
by the oaae of Lewis we. IndepeqdeatSohool Dlatrlot of Auatla
deoldedby the Oourt of Old1 bp&ala at Beaumont and reported
in 147 S. W. (26) 298, s&loh oaae warn revereed b tho Supreme
Oourt or Pexaa by oplnloa reported in 161 8. W.:.2d)
I 450. The
Lewla oaae warn a taxpa~r'a *ait to enJoin thr roh(ro1dlatrlot
m buyln6 a pollor la the Hlller*mutual Xnrurasoo Gompany
OLLtho grountlt&t tho prorlaloa la Artlola 486Oa``:~@itlaethe
lohool dlatriot lxpreaa authorltf to do 80 warn la ~i~olatlan ot
Seotlon 3, Artlole XI of the Texas Oonatltutionroatllng am fol-
l-1
(avooountJ, olty, or othrr mualolpal oat-poq-
tlon ahall hereafter broom* a lubaorlber to the
oapltal 0r aaf prltate 0orpoMtloa or aaaoottloa,
or make any a miprlatlon or donatloa’to’the8am,
~0~ ln lny wlPE
a oan
e lta’oredlt~ bat thla ahall not
be ocaatrued to in l4way afieot any obll(Wloa
heretofore auidortakea pursueat to law."
And la violation or S+otlon 52 ot A&isle IfI of auoh Oonatl-
tutlon reading am follow81
Vho kglalature &all hare no war to au-
thorlaoany oouty, olt , tom or otrer polltloal
oorporatloaor aubdlrirfon of tho State to Iend
lta oredlt or to grant pub110 rone~ or thing et
value in aid ~of, or to ray lndlrlaual, aaioolatlen
or oorporatfon whtaoevor’l or to kooue a atook-
holder & auoh o.orporatlon, raaoolatloa or oompaay.w
The Court or 01~11 Appnr&a held ‘thatthe purohaaa of the poll-
oy war not a leadlag of the loQo1 alatrlot~a orodlt and the?&-
by, nsooaaarll~,hold that, the poUoy involved warn ioroter
non-•ar*a*abl*. 'The Oourt lxpreaal~ adopted the tellowlILg
ltateae~t fr o l
mppell*o*a brlett
WThla polloy of laauraaoe la non-a8aeaaabla.
lie rurtlxm pa-& oan ba lxaoted.*
Honorable J. P. Olbba, Oommiaaloner,Paem 11
And tho Oourt ta mth e
laldt
?
“In the pollo)rat laaui betorb am both on
the law and on the taota, tho aohool dlatrlot
oould aevu hare been oalled on to? say additional
pa-at *a
The ,SupremeOourt rev*raed the Lowla *am* on the
ground that tho polloyholdorwaa la lrtoqt a atookholderbut
the court erld*atl~ agreed with tho Oourt 0r 01~11 Appaala
am to the non-•aaoaaablllt~of the pallor involved alnoe.the
Oourt lIpnaal~ #al&~
*It la true that the By-iawa provide that
the llablllt~ o? eaoh pollo~older la limited00
ad detem.laed to be the armouatof depoalt QPO-
mlpr apoolrled in tho pollor laaued to auoh poll-
oy holdarr.~
It la our oplnioa, themtore, thet tho holder or a
polloy la a mutual inauranoe oompaay whioh polloy pro-f1468
that lt ahall bear no ooatlaigeutliability and diloh warnla-
sued at a time whoa the oompaayhad in truth and la iaot the
?ree aurplua reqalrodby the lta tutala, not llablo ror aa-
reaaaont or to? oontlngeat addltloaalprerahm, even thotlgh
the mutual oompaay beoomea laaolreatdurlag tha life of t;Be
QOllO~.
Suoh an laterpretatloamafaeem at firat bluah to
ba tmfdlr to thorn.pollo~ldera whore pollolea were laaued
prior to the attalmeat~o? the mqulred a= lo8 and whoao
polleloa thonroro bear a ooatlageatllabll~t~. On tho other
hand, tho mtrU1 oompaay’a lblllty to aell lnapraaoe without
oontinpgnt llablllt~ might gtsatly aid la the 8816 o? l$a
olleiea end the growth ot the oanpanf and thus benetlt the
1oldera of laaoraable pollolea by reduoiagth~ ohaaoea that
their mntlnpnt lleblllt~ would over be bA?O?OO&
Artlola 5026, aupra, dealing with later-laauraaoe
exohaagaa and reolprooala lpeolrloa the length ot flue durl.4
whloh the lxemptloa troxnooatlngentllablllty th*reln pro-
vi464 ior ahall oxlat. The statute ram la eiioot that the
ta m M J by l@-aeamt, b emade th eo a -
o r p r a m& depoalt
p r a a +m
tlra llabilltq o? the aubaorlkr, while, but only w&ile, the
free aurplua of the roolprooal or inter-lnauramelxohaa@e 18
. ‘*
f-348
Hoaorablo S. P. Olbba, Oommlial~aer,Page 12
0 aal to 4200,000.OO. Thus the exemption rrom oontlageat
1elblllty 1. lxpreaal~ arde to depeadupon the loatlauan**
or the requiredaurplum.
The olause met out in ~our.letter whloh la pre-
aorlbod br Jour department for use in tho poll*lea or re-
olprooal ad inter-laaunnoo exohangea ahould thare?*re be
altered or supplementedto ahow that the lxerptlon from eon-
tln@nt liability oeaaea whoa the re lrea marplum beoomea
irpalrad. We au&&eat that auoh prorraloa would be more aab-
ltaatlall~ la looordaaoe with the atatuto li a olauae to the
tallowing offoot be added thereto:
9ut tho exe8ptlon ?rom oontlngratllablllt~
heroin proridod for ahall oontlauo only lo lon(
am tbia exohaage maint*lna the rreo awplua re-
quired br the maid Artlola 5026.*
Xt ad&it be Bald that aaoh a oonatruotlon or Artl-
016 5026 leatea the exemption from *aatlagat llablllty or
no praotloal kaeilt to the polloyholderalnoe the lremptlon
ooatlau*a only 80 loag am a r-0 aurplue 0r $200,000.00 la
melntalaod end aIaoe am a praotloal matter no``oooealoaoould
lrl.. during auoh tlma whloh wuld require the la+ got .
an aaseaament again& the ~enbera o? the reolprooLr” ,?or later-
laauranoe exohaw, and thus ths lxemptloa la la ioroe only
urlng a t&e when it la not aooded b tho olloyholdera.
Pt la true that Arti*l* 11 o? the RevI aed 0Prlt Statubea may8
*A
trmapoaltlon 0r worde and olauae* mar be
peaortea to tien the lenteaoeor olaiae la ulth-
out mea nlng,a it rltaad&w
Art1010 11 la a ~neral rule ot atatutorr oonatruo-
tloa lald.dam la the geaoral protlaloaa of the Roti..& 01~11
Statuter.
We are unable to mar that the wordlag o? Art1010
5028 18 without meaalang beoawo th0 WOrdbu8bd ooaver a dbfl-
alto idea or latentloa o? the Legislature, even thbugh auoh
oxpnaaod intention or rule ham little or no Q~O8iOel of-.
root. We do not foal authorlred to resort to a traa8poaiti~a
of word8 la order to give tho statute more praofloal l??eo8.
Iu looordaaoe with thla holdlngpu are ulrleed am
?ollowt
1. The owner oj n polloy lasued by a @ml oompanf
providing ror ma exemptimfkanoontlngeat liability and properly
Eoaorable J. P, Gibbs, Uoxmlaaloaer, Pa,gelj
Iaaued under t&e term&iot brtlol@ 486Oa-10 note? booomer
liable ?or the ooatiageat promiua eet out in auoh Artlola.
2, Tho holder o? any polloy in a roolprooal or
later-laeuraaoelxohang ta liable for the oontlngent pre-
Q``EIprovided in drtlole 5026 at any time tho au-plum or
auoh reolprooal or laterlaaunnoe oxohaap dorm not moot
the rrinlmumrequlrementa am met out la auoh Artiole.
3. The prorlalona of aw polloy governed by Artl-
ale 5026 ar+ArtIole 4860a-10 that are In oon?Uot with and
repwaat,to auoh ArtIoloa are Iawlld ad not blqlng da
otther perty to the Iasuraao* oontraot.
We trust this opinion la a aurrloleat anewer to
hour problem.
Your8 very tmly
A’lTORWRX (BoQ1LRAL
orT5AB
Asalatant