Untitled Texas Attorney General Opinion

GWd.dC.MSNl
AttorneyGeneral
January 28, 1939
Hon. R. L. Daniel
Chairman of Board of Insurance Commissioners
Austin, Texas
Dear Sir:
Opinion No. O-101
Re: Examination of unlicensed in-
surance organizations.
Your request for an opinion on the following ques-
tion:
"Whether Examiners are authorized to examine
all insurance organizations whether licensed or
not?
"What procedure must be followed in order to
examine books and records of the Merchants &
Farmers Life Association of Waco, Texas?"
has been received by this office.
Article 4690b reads in part as follows:
"Such examiners and assistants shall, as
directed by the Chairman of the Board of In-
surance Commissioners, perform all the duties
relative to all examinations provided by Law
to be made by the Board of Insurance Commiss-
ioners of the State of Texas, and it is the
purpose of this Act to provide for the ex-
amination hereunder by the Chairman of the
Board of Insurance Commissioners of all cor-
porations, firms or persons engaged in the bus-
iness of writing insurance of any kind in this
State whether now subject to the supervision
of the Insurance Department or not."
Article 4690 provides in effect:
"That the Commissioner or Commissioner's
examiner shall have free access to all books
Hon. R. L. Daniel, January 28, 1939, Page 2
and papers of the company or agents thereof
relating to the business and affairs of such
company and shall have power to summon and ex-
amine under oath, the officers, agents and em-
ployees of such company and any other person
within the State relative to the affairs of
such company."
Section 5 of Article 4691 provides:
"He shall also have power to institute
suits and prosecutions, either by the Attorney
General or such other attorneys as the Attorney
General may designate, for any violation of the
law of this State relating to insurance. No
action shall be brought or maintained by any
person other than the commissioner for closing
up the affairs or to enjoin, restrain or inter-
fere with the prosecution of the business of any
such insurance company organized under the laws
of this State."
Article 4408 reads as follows:
"The Attorney General, unless otherwise ex-
pressly directed by law, whenever sufficient
cause exists therefor shall seek a judicial for-
feiture of the charters of private corporations.
He shall at once take steps to seek such forfeiture
in any case where satisfactory evidence is laid
before him that any corporation receiving State
aid has, by the non-performance of its charter
conditions or any violation of its charter, or
by any act or omission, mis-user or non-user,
forfeited its charter or any rights thereunder."
Article 6253 provided:
"If any person shall usurp, intrude into
or unlawfully hold or execute, or is now intruded
into, or now unlawfully holds or excutes, any
office or franchise, or any office in any corpora-
tion created by the authority of this State, or
any public officer shall have done or suffered any
act which by law works a forfeiture of his office,
or any association of persons shall act within this
State as a corporation without being legally incor-
porated, or any corporation does or omits any act
. I
Hon. R. L. Daniel, January 28, 1939, Page 3
which amounts to a surrender or a forfeiture of
its rights and privileges as such, or exercises
power not conferred by law; or if any railroad
company doing business in this State shall charge
an extortionate rate for the transportation of
any freight or passengers , or refuse to draw or
carry the cars of any other railroad company over
its lines as required by the laws of this State,
the Attorney General, or district or county attor-
ney of the proper county or district, either of his
own accord or at the instance of any individual re-
lator, may present a petition to the district court
of the proper county, or any judge thereof in va-
cation, for leave to file an information in the
nature of a quo warrant0 in the name of the State
of Texas. If such court or judge is satisfied
that there is probably ground for the proceeding,
he shall grant such leave and order the information
to be filed and process to issue."
Article 4682a reads as follows:
"All the powers, duties and prerogatives here-
to fore vested in or devolving upon the Commissioner
of Insurance or the State Insurance Commission or
any member thereof as now constituted by statute
shall hereafter be had, enjoyed, and exercised by
the Board of Insurance Commissioners as herein creat-
ed. The duties heretofore placed upon and the powers
and privileges heretofore exercised by the State Fire
Marshall are now to be placed upon and exercised and
enjoyed by the Fire Insurance Commissioner."
Article 4682, Section 11 and 12 provides:
"11. Shall suspend or revoke certificate.--
He shall suspend the entire business of any company
of this State, and the business within this State
of any other company, during its noncompliance with
any provision of the laws relative to insurance, or
when its business is being fraudulently conducted,
by suspending or revoking the certificate granted
by him. He shall give notice thereof to the Insur-
ance Commissioner or other similar officer of every
State, and Shall publish notice thereof. He shall
give such company at least ten days notice in writ-
ing of his intention to suspend its right to do
business or revoke the certificate of authority
Hon. R. L. Daniel, Jan 28, 1939, Page 4
granted by him, stating specifically the reason
why he intends such action.
"12. Report to Attorney General---He shall
report promptly and in detail to the Attorney
General any violation of law relative to insurance
companies or the business of insurance."
Articles 4875a-2 reads as follows:
"Any person or persons desiring to organize
a local mutual aid association to be operated up-
on the assessment as needed or similar plan shall
be permitted to do so upon the terms and conditions
hereinafter set forth. No person , firm or corpor-
ation shall hereafter operate in this State any
sort of a locak mutual aid society or association
paying a death benefit or other benefits and pro-
viding its fund by assessments as needed, except
under the provisions hereof, or under other speci-
fic provisions of the laws of this State."
Articles 4875a-22 provides:
"The Board shall not revoke the right of any
association to do business in this State except
upon the judgement of a court of competent juris-
diction or upon the filing of Articles of dissolu-
tion by the members of said association or the
officers for them or upon a statement being filed
with said Board showing that said membership had been
merged and taken over by another society or associa-
tion."
Article 4875a-23 reads as follows:
"Any local mutual aid association now doing
business in this State may avail itself of the
provision of this Action by filing its articles of
Incorporation, its constitution, by-laws and form
of certificates with the Board of Insurance Commis-
sioners of Texas, together with an application for
authority to continue business as such, and if such
documents, when submitted, are in conformity with
the law, the Board shall file the same and issue
certificates of authority. Such application must
be made by associations now in existence not later
than six months after effective date of this Act.
. .
Hon. R. L. Daniel, January 28, 1939, Page 5
Any association which fails to take advantage
of the provisions of this Act shall immediately
begin winding up its affairs and shall dissolve
itself not later than six months after the Act
takes effect,"
Article 4875a-27 provides:
"If any association heretofore or hereafter
doing a local mutual aid business as herein de-
fined shall cease to operate, or shall fall below
the requirements of this Act, or shall undertake
to operate without a permit or certificate of
authority, or shall fail or refuse to make the
reports as and when herein required, or shall re-
fuse to submit to examination or pay the cost
thereof, or shall conduct its business in a frau-
dulent, illegal or dishonest manner, or shall vio-
late any of the terms of this Act, shall, in addi-
tion to any other penalties imposed on it or on
its members or officers, subject itself to for-
feiture of its right to do business and to disso-
lution: and the Attorney General shall at the re-
quest of the Board of Insurance Commissioners file
such suit as may be necessary to wind up the af-
fairs of such association and if necessary have a
receiver appointed for that purpose, the venue of all
of which suits shall be laid in Travis County, Texas."
The case of State vs. Dilbeck, 297 S.W. 1049, holds
among other things:
"The state has a vital intereat in the il-
legal or unauthorized use of the franchise to
exercise corporate rights, and we know of no
authority which holds that the right to forfeit
the charter which constitutes the only authority
under which the corporation may act as such is
not peculiarly a matter of state interest. The
state alone may institute a proceeding for that
purpose, and the authority of the Attorney Gen-
eral would clearly exist independent of statute,
but he is given the express authority by arti-
cles 4408, 6253, R. S."
In view of the foregoing authorities, it is the
opinion of this Department and you are respectfully advised
that the insurance commissioner has authority to examine
all corporations, firms or persons engaged in the business
. .
Hon. R. L. Daniel, January 28, 1839, Page 6
of writing insurance of any kind in this State, whether now
subject to the supervision of the Insurance Department or
not, and upon the failure of any corporation, firm or per-
son engaged in writing insurance of any kind to submit to
any of the rules or regulations provided by law or shall vio-
late any terms of the insurance law shall, in addition to
other penalties imposed on it or its members or officers,
subject itself to forfeiture of its right to do business
and to dissolution and the Attorney General shall, at the
request of the Board of Insurance Commissioners, file such
suit as may be necessary to wind up the affairs of such
association.
Trusting that the foregoing answers your inquiry,
I remain
Very truly yours
ATTORNEY GENERAL OF TEXAS
/s/ Ardell William
Assistant
AW:AW
APPROVED:
/s/GERALD C. MANN
ATTORNEY GENERAL OF TEXAS