OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN Hon. R. 0. watrr8,Co8drrioner Hoard oi fnruramo Commi8rloarr8 Austin, Toxar Dear Slrr greater and may d to rl8k8 or 1088 pinion of,thir de- hp8 barn keoelted. Otter a8 fO11OW81 8.d UO&8LM’8 CO@M- or approvala8 it8 or wrltlng viorkmen~r oom- uranoo,a partlolpatlonand an rh8nbr d rk8 ‘Of a gi~on er ~$11 bo written on a parti- Vhr Attorney Oonoralhrld in an opln- ion dated D8oembbrr lb, 1228, that a company oould not u8e a partlolpatlon 8nU 888os81mat plan of.oprratlonrhloh would apply t0 80101 Ot it8 pO110188 but not t0 ti1 it8 QO1101.8, 202 Hon. R. 0. Watarl, Pago R the selection OS tho8e to which it rroald a,?ly to 110 dthln the dlecretloa OS the carrier. Vhr AttorneyGeneral held ln an oplnlcn dated %oeaber 16, 1958, that the Retmspeo- tit8 Rating Plha oould ba legally adopted by whloh risk8 oi a &iron sits and larger oould llsot a plan nhambpthay would participate or be o8rerssd in acaordanoedth theirlndl- ridual expdrfMo8 and that risk8 of lOS8.than ths gtr8n 8ize would not be eligible. *In view of the two oplnlona zxentloned, we rsquart your opinion as to nhether or net there 18 any'legal barrier to our ap;roral Of the plM of Opaxation and andorsemnt a8 requarted by the 8aid aarriar which glen till raqulr8 that the andorsa;eentbe attached to pO11C188 r0r ri8k8 or given slzr or greeter and sar &ot be atteahed to rirks of lass than tba glvqn.81Z0.D The propored ondorrercantto be attached to pOlI- ales Sor rIak8 of a given size or grastar and which may 'not be attaohed to risks ot less than the &Ivan 81213,read8 a8 iOiiOW8: *The 'assuredwill.pay tha Catcpanpthe manual or e~8rlsnoe rate8 of :reJlfrcns appll- aabb tothis pollcy a8 promulgated by tha Board (d Insumncs ComIss:oner8 of Texas, (1) litlie pretfuas 80 mid are lnsufflolent to prorido far the psyment of, (a) all gald and lnourrad lObeel, Inol``dlnglegal and other lspansa8 lnoidsntal thereto arI8Ing under til8 pollorg and (b) ruoh par osnt of all prelniuft8 a8 my be agreed u?on bstneez the assured and the Company, wbloh per oent rhall be ratafned by the Compaajr the assured dll py to thr Company upon damaad, such addltloncl emamtr ., 203 Hon. R. 0. Sator:,Pegs 3 a8 nay be necessary to provide adequate re- serve8 ooinut8d a8 presorlbed by the Board of Insurance CommIesloner8 under the lneur- anoa kin of the 3.at.e or Ttz~xa8~ (2) fr the preaiua80 paid 8hell prove to be ore than surrlolent to 8o protide rorthe payment 6t the chars88 uentlonedIn (al and (b) or ,(lI,and the malntananno of adqqunte reearves doltpitedon tii jOifCIe8 a8 rtated in 2 hex-dot, T&e Company will return the exae88 to the a88UrOd, aooording to ouoh pban8 a8 may be adopt- ed by the Compeny, s8 and when such return shall be approved by ths Eoard of Insuranoe Comalr- 8loLlersor Texar. (3) The paapmentaprovided to be made under (1) and (2) above shall be made arter th? exp1rat:o.oof tho ye&r'8 perfed for wklchthe policy Is rrltten aal provided all premIuPlphereunder hcve be3n gald, and not OthelFW18..This endorsement shall not apply oa pollcie8, (a) the estlmted s~ual premium &a ohown on the pollcfr 1s 1068 than of vikloh,~ Fire Thousand Dollar8 ($5,OOO.OGj, or (b) pol- Icier to which 18 attaohed the hetrospeatlYe Rating Plan Zndorsenent, 'This Eodorsement, when ea\ntersIged by a dulr authorized Agent or the Company and attaohed.to Fclloy No. WC 188ued to by tin Ametioan’Ganeral Insuranae Company, shall be ralld ati forsa ptit 3f raid policy. _’ “Counterslgned at This - day of 19 8 Agal;. Tni s. wRTHAb4 FTe'8idtJIlt" As shown by the proporsd endxsement, abova quot- ed, the plan of operation is to write all aeaured8 whoae e8tiW.ted ranualpreaIum8 exoead $5,000.00, and who here not 8boted to be rated under the Retrospectire Ratin Plan upon the baa18 of an 1nSlYidually epplled plan of partlclpatlon e.ndarse8sment a8 appear8 from the form of endorsement. However, the nbore nisntlonedplan specifically 204 Hon. R. 0. Waters, Pa68 4 prohibit8 ali whose estlmsied snnual pre;ri~is 1~8 than $5,OCO.O0 fro?,garticlpatlng In or.ogeratlnG under suah plan. Artlalos 4907, 4908, 49L1, 4913, 4914 and 4916 of Vsrnon*s Civil Anratated Ststuter rsad 48 fol- lower “ht. 4907. The said Cot?~xfs6io5 6hall make, eetablI8h end proml6ate all cla88ffI- oatlon8 of hazard8 and rata8 of premium re- 8pectlrely applloable to each, ocznterplated ati prevlded for by Title 130, kncun 88 the Workmen~s Compsnsatlan Law &d/or by the ~Long8horemenn'8~ Comptbsa- and Harbor ;S'orkcr8~ tIOn Act' a8 enact&d by the COJl6r888Of the United 3tatss. Said ComxIsslon shall publleh allretss pronulgsted by It as aff'ecttng Compensation Insuranoe In thla State, snd said rates, or any change therein, 8hal1 be publlrhed SIfteen day8 before thsp become stfectlve and In force. “Art. 4908. The Cvzzlsslon shell prs- rcrib6 standard pAi0y for?;rs to be used by all companies or sseoclatlons writing wrk- 3.811’8 comgensaticn fnlsurams,in thI6 State. Xc aompany or a68ocIatIon authorized to wkfte wrkaan~8 oompsnsatlon Insurance In ttls State shall, sxoept as hare:nafter provided for, use'any ala8slfIoatlon8 0s hazardr, rata8 or prenium, or pglloy form8 other than those mrde, established aad pro- mulgated snd prsscrIbod.by ths Commission. mArt. 49LL. The Comfaslc~ drall deter- Pine hazard8 by elassee and fix 8uch ret88 ot prei.tiuma?plIoable to the payroll 1~ eaoh Of 8uCh Ola88e8 a8 8ba11 be adOqUIt t0 the risk8 to which they apply and ocnsistent nith ths nudntename of solvenay and the are:-tion of ade-,uaterswrvs8 and s rearonsble sUrplU8, and for ouch purpose may adogt’a SYP ten Of so:;e&alsand srperIenos rating in such uanner as to take socount,of the jecullar hazard of esch lr.dlvIdualrlrk, provided such rate 8hall 205 Xon. R. C. xtlt4rs, ?eg4 5 be fair and rearu,:ablsand not conrlsoatory as to any ala80 cb tneurenoe oarrlezs autbor- lzed by law to write workm4n'# oompeneatl:n lnmrance in this State. To Insure the ade- ~uaop and reasor.ablene48of r~tea, ttn Coni- mlsaion shall take into oonsldemtion an cx- psrlenas gathered froma territory aurflolent- ly broad to lncluda the varying ctnditions ,?f the lndumtdss in ~Elab the Qlnaslf~catlcne are involved, and over a pcrlod euirloisntly lon& to lmaure that the ratas det-:rmlnediher4- from shall be just, re~laonsble,and adequate rates. The Cosxlssion shall exolang4 lnfor- mtlon and e?iperlenoedata with the rcte-making bodies of othar Strtes end atoll coneult anl national orgasnizatlonor aszoolation now or herearter exlatfns for the purpose ci'cssexbllng data for the making of compensation In,ourcncs rata. "Art. CQU . The Com$aeion ahall prescdb4 a uniform gollcy for wortien'a oozpensatlon lnsuranoe acd no ooc?azy or asaooiatlon shall Wareafter use any 0thc.rfors In writing work- aen* ooagensatl.:ninsuranoe ir thir State, provldsd that a*;' company or association my use any fora of endorasment appropriate to its plfian or operatim, ii such endorsement shall be first subnittad to and a>pxvvadby the Comisslon, and contracts or agreement8 not wrlttsn Into the apylicatioo and 2ollcp shall be v;id and of no 4f'feCtand lnrLol5tlon of the provisions of this cbaptor, and eball be sufflolent 0au::a for revooatlon of llcenee to write workmsn'r compsni3atlonlnsuranoe with- In this Steta. *Art. 4914. Nothing in thla chapter ahall be oonotrued to prohibit the opamtlon bere- undar of any stock ooaFany, mutual cogpany, reclprooal or lntsr-lne2ramr 4xotang4, or Llo:d*r aasoolatlon, to srohlblt any stock. ooqany, sutual cospeny, ~reoiprooal, or lntar- insuranoe erohange or Lloydcr maoolmtlon, 206 Hon. ii. C. Caters, Pa&s 6 ls3uln.spartldlpatlng pollc1es, grovlded no rilvidsadto Eubscrlbers under the ?:orkmn~r Coqensatlon Aat shall t&4 effeot until the same has bean ap;roved by th4 Comlls3l:n. Go such dltldend 3ha.U be u;proved until adeQuate res ne ha3 been provided, said resrjrns to bs computed on ths saxe basis ror all 016s848 or com?anles or as3oclatlons .operetlng under t5ls chapter, aa rrdsorlbed *uder the lnsurnnos laws of the State of Texas. -Art. 4916, 80 provlsloos of the Act creating the Stat4 Insuranao Cotisslon, with r4gard t,;tha fixlnc and ;,romul&atlonor rctes for fir4 insurance or the grcscriblng of tire laauranoe ~olicl4s end form shell bs ep;;llczblsto the fixLng of coapmsatioa ln- surance olasslrlcutlons or th4 xakl& of cam- p4nsatlon lnsurano4 rLt4s or the prescribing of aox~ensatlon insurance policy form: but th4 provisions of this hot shail bc constnutd and appllsd lndepsndentlp of any other law or lawa, or garts of laws, havla~to do with tha nattar of insursncs rate8 end form4 or of fl,x- in3 th4 6utf4s or the ixet4 mumc4 COD ;1194lon.4 Under the above quoted statutes it is ths duty of t?4 Board of Insurams Comlsslcners to jmsscrlbr retes and all policy forxs thit every coximny wrItiWA coxponsa- tlon lnsuranca Ibustuse'aod such coxganies ::r4requlrsd to us4 such rates and forx4. Lpparently, the ges4~1 polioy of the Lsglslature and all Insurance leslslatlon IS to prevent d1sorlxlnatlon by tks carrier between Its pollcy- holdars. As w4 uriderstond the above lrsotlonsdplan, it Is cothlag Tore than or less than a s:,cclflodlscrlmlnatlon betwesn the policyholders of the company, md the plaa of opsrstion 18 contrary to th4 2011c144 or the Lsgfslature In such xattors. This dspartaent hold In an OplnlOn dated Ceoember 18, lG20, thct a company could not ~84 a partlolpatloa and assessrent plan of operation r!loh would-apply to som4 of Hon. R. 0. Watrra, P*gs 9 its polloles but not to all of its polloies,the asleo- tlon of those to which it rould apply to 114 wlthln the dlsoretlon of ths oarrler. In rler of the pollcl4s of th4 'Legislatureex- pressed by the forsgolng statutes, yo*urpusstion ia ro- sp4otfully answered in th4 nsgatlre. Tkie oplnlon or the Attorney C4nera1, bearing date or Deoember 16 lFclS,holdlng t&t the retrorpsotlv4 rating lor.can be ieeal:y adopted by rkloh risks of a given aPze end larger oould ele::te plr,nwhereby they would participate or ba asFessed ln aocordance wlththeir individual experience and thet risks of less than tbs given size would not be eligible, Is hereby expressly ovem ruled. Trust1nc;tha.tthe firsgoi;lafully anmars your Inquiry, we ranzln Very truly yours ATTOBKXY 5EHXW.L OP 'XXAS By (al -dL Ardell William :.sslrtsnt APi-KOTXDU!?CH 29, 1940 APROVED, OPINION coK!~mT?!z