Untitled Texas Attorney General Opinion ( 1943 )

TEICATTORNEY GENERAL
OF-TEXAS
AUSTXN II.TEXAS
GERAID C, MANN
ATrOxauSY GIENEHAI.
Honorable 0. P. Lockhart.
Chairman, Board of Insurance Commissioners
Austin, Texas
Dear Sir: Opinion No. O-5559
Re: Would the use of the farm prdpotied
by a statewlc% mutual astiessmeiit
life.;health and accident'conipang,
operating under the provisions of
Articles 485gf and”5068-1, Vernon's~
Annotated Civil Statutes, be in
violation of the laws reltiting-to
insurable interest? And another
question.
Your letter of August 20, 1943, requesting the
bpinion of this department on the questtons stated therein, is
as follows:
"A statewide nutual'assessment life, health
and accident company, operating under the provL-
slons of Articles 4859f ana 5068-1, R.C,S., ha3
submitted for the approval of this Department a
proposed new family group policy form which con-
tains the following wording:
"ALL BENEFITS SHALL BE PAID AT THE DIRECTION
OF TRE PRINCIPAL INSURED
TO AT
OR anv other funeral home. funeral director. OP
undertaker to the extent of their interesfs'derlved
by the furnishing of funeral merchandise and/or
services in the burial of the insured. Any amount
over and above that due and owing to the fun'ermel
home, funeral director, or undertaker shall be paid
to the principal insured.'
"The benefits are payable in cash and will,
in most cases be an amount in excess of $150.00.
The so-called principal insured is, Fn fact, the
beneficiary of the policy, as head of the family
to be insured. If the original principal insured
dies then another member of the family becomes the
principal insured.
Honorable 0. P. LOckhart, page 2 Q-5559
"The company proposes to sell the policy
may .or may not
through duly licensed agents who .,. 8.
be in some'wag identified also witn tne particu-
lar undertaker whose name is to be inserted in
the blank space of the provision quoted.
"Your opinion is respectfully requested as
follows:
"(1) 'Would the.use of this form in the manner
contemplated be in violation of the laws relating
to insurable interest?
"(2) Would the effect of the policy be such t~hat
the statewide company would be unlawfully Invading
the field reserve&to burial associations, under
.Sectlon 23 of Article 5068-11"
The insurance company desiring to use the form or
clause which is quoted in your letter is a statewide nnrtual
assessment life, health and accident company, operating under
the provisions of Articles 4859f and 5068-1, Vernon's Anno-
tated Civil Statutes.
Apparently the policy in which the proposed clause
is to be inserted belonga to a class sometimes denominated in-
dustrial insurance.
"The purpose of this character of insurance
seems to have for its object, not the creation of
a fund to provide for the future support and main-
tenance of the family or near relatives of the ln-
sured having an insurable interest in his life, or
to augment his estate, as oralnary life insurance
does; but to provide a reasonable fund with which
the insured may procure in his last sickness, which
in many cases may be lingering in character, need-
'ingaid and assistance by way of nursing and medical
attention, etc. and to secure a respectable and
decent burial." (Metrolpolitan Life Insurance Com-
pany vs. Nelson, 186 S.W. 520.) (Court of Appeals
of Kentucky)
An insurance policy containing a clause similar to the
one under consideration was approved by the Commission ofAppeals
of Texas In the case of Scott vs. American National Insurance
Company 276 S.W. 643.
The quoted clause under consldeyatioiiIs what is corn-
monlg known as facility of payment clause , that is, the benefits
Honorable 0. P. Lockhart, page 3 Q-5559
are paid directly to the party entitled to receive the same by
virtue of having been designated both by the insurer and the in-
sured as the party to receive said benefits by'vlrtue of having
furnished certain services or undertaking certain obllgatlons of
the prlnclpal Insured.
With reference to the term "facility of payment clauses"
it is stated in Texas Jurisprudence Vol. 24, page 779:
,.,
"Often inserted In lnaustrlal policies are
so-called 'facility of payment' clauses whereby
the insurer reserves the right to pay the Pnsur-
ante to any person selected by it as equitably en-
titled thereto. sunder such a clause which permits
the Insurer to pay either to the beneficiary named
in the policy or to any other-person appearing 'to
be equitably entitled~thereto, payment may be made
to another than the named beneficiary, providedhe
Is equitably entitled thereto, as, for Instance,
where he has pald the burial expenses.." (Also see
Couch on Insurance Vol. 2, Section 311a; Scott vs.
American National Insurance Company, supra; Ameri-
can Citizen Labor & Protective Ins. bf Texas vs.
Wesley, 9 S.W. 500; and Border Insurance Company
VS. Monk, 103 s.w. (26) 825)
We are familiar with the general rule that requires
the beneficiary to have an insurable interest in the insured In
ordinary life Insurance policies. (See Texas Jurisprudence Vol.
24, page 769 and the authorities cited therein) We a0 not
believe"that it is necessary to pass upon the questlon whether
or'not an insurable interest rmst exist forkit Is our opinion
that such insurable interest does exist because under the'pollcy
under consideration the principal insured Is the beneficiary.
The question of insurability is not Involved insofar as the
undertaker of the funeral home Is concerned.
In view of the foregoing authorities it Is our opinion
that your first question should be answered in the negative, and
Is so answered.
Your second question Is answered in the negative also.
In connection with the answer to your second question It is to
be noted that section 3 of Article 5068-1, Vernon's Annotated
Civil Statutes merely provides that assoclatlons,'persons or
corporations doing the business of providing burial or funeral
benefits, where benefits are payable partly or wholly In merchan-
dise or services not in excess of $150.00 and declared to be
burial companies nust organize under the provisions of Chapter
274, Acts of the 41st Legislature. Under the policy under con-
Honorable 0. P. Lockhart, page 4 Q -5559
sideration the insurance company proposes to pay the entire
benefits in cash and in most instances the benefits will eirceed
the sum of $150.00. The Insurance company does not propose to
engage in the business of provialng burial or funeral benefits
in any manner. The insurance company does not pay anythlng in
merchandise'or services. The insurance company merely prdposes
to pay In cash to the funeral home or undertaker Forcertain
benefits rendered by the funeral home or undertaker at the di-
rection of the principal Insured.
Yours very truly
ATTOFUiEYGENERAL OFTEXAS
s/Ardell Williams
Ardell~Wllliams
Assistant
AW:ff:wc
APPROVED SEP 8, 1943
s/Gerald C. Mann
ATTORNEY GENERAL OF TEXAS
Approved Opinion Committee By s/%iB Chairman