I

_ R-875



### T~~EAI%ORNEY 

### GENERAL

OPTEXAS

PRICE DANIEL ..YcTcmNEYGENERAI. 

### Auclnlv11. TEXAS
December 4,

Hon. George 8. Butler, Chairman Board,of Insurance Commissioners Austin, Texas Opinion 1947

No. V-450
Re: Authority to organize certainnon-profit insuranceassociations writing policies on employees of a single emplayer

. Dear Sir:
Your letter of October 16, 1947, reads aa follows: *Please adviseme whether ‘associationswhich limit theirmembership to the employeesand the families of employees of any particulardesignated firm, corporation, or individual,and which are not operated for profit and which pay no commissionsto anyoneand whose operating expensesdo not exce6d One Hundred Dollars($lOO) per month’ may now be organized and, upon making. the report requiredby Vernon’sArticle 48591, Section 6, be given an annual permit to operate axempt from the other insuranoe laws of this State.*
We will first exanine the 

### l pplioatien of Article 4859f, V. C. S., upon the type of ,assoolationdescribed in your letter.

Said Article Is Vernon’s codificationof H.B. 303; General Laws, 43rd Legislature, 1933, Regular Session, Chapter 245, Page 856, as amendedby subsequent Legislatures0

That Act was designed to .regulate only those organizationsalready in existence prior to January 1, 1933, It applied solely to Wcorporationscarrying onHon. George B. Butler, Page 2, V-450

in this State the statewidebusiness of mutually protecting or insuring the lives of their members by assessmentsmade upon their members." Section 19.

By H. B. 373, General Laws, 44th Legislature, 1935, Regular Session, Chapter 264, Page 651, Section 6, dealingwith examinations of such asso,ciations by the Board of Insurance Commissioners, the originalAct was amended by adding the following'provisions:

"It shall be the duty of the Commiasioner to require any corporation,person, firm, association, localmutual ,aidassociation or any local association,company, or organization,to have a certificate of authority before being authorixed to carr 4. on any insurancebusiness in this S ate.

, in any event, any such comoanv, oerson, firm, association,, or local organiiation,

. local aid association, or local organization is writing xform of insurancewhatsoeverwithout a permit, or certificate of authority~

issued by the Department of Insurance of Texas, it shall be the duty of the Commissioner to make known said fact to the Attorney General of the State of Texas, who is hereby required to institute proceedings in the District Court of Travis County to restrain such corporation,person, firm, association, company, local aid association or organizationfrom writing any insurance of any kind or characterwithout a permit." (Emphasissupplied throughout this opinion) While the originalAct of 1933was limited In its operation,as above noted, the Act of 1935 by its terms applied to all forms ,ofinsurance and to all types, of insurance enterprises theretofore or thereafter organized in requiringa permit as a condition to doing business. In other respects, however, the Actremained applicable solely to the statewidemutual assessment type of association in existence prior to 1933.

By H. B. 893, General Laws, 45th Legislature, 1937, Regular Session, Chapter 257, Page 522, the orlginalAct was again amended and for the first time specificallymentioned the type of organization to which you refer. By the 1937 amendment, theywere exempts from the provisions of Section 6 which as noted had theretofore required them to have a permit or certificate of authority to do business.Hon.,George,B.Butler, Pag,e3, V-450

The Amendment of~1937added to the provisions of Section 6, above quoted, the following:

“‘Providedno ,provisionsof this Act shall be construed toapply to ahy corporation,association,or partnership, individual; or joint stock company, engaged in the,u&ertaking buslness, or to any advertfslng corporatlon, assoclatloh, and/or pa,rtnerahip, individual,or joint stock company

tions‘shallmake annual report to the Department of Insurance on blanks furnished for that purpose showing their financial condition,receipts and expendituxes,and such other facts as the Board of Insurance Commissionersmay require. No such association shall be permltted to operate, however, without mak,ingreport to the Insurance, Department ‘andgetting a permit to do so. Such permit shall be for the current year or fractional part thereof and shall expire on the 1st day of Yarch thereafter and shall be r~enewed annually upon the approval of the financial statement of the organization by the Board of Insurance Commissioners. All such organizations shall have six (6)months after the time that thisAct goes into effectwithin which tc complywith its conditions. If any organization fails to qualify under this Act or fails to complywith its requirementsin any manner it shall be the duty of the Board of Insurance Commissionersto reportthe same to theAttorney General who shall at the request of said Board file such ‘suitas may be necessary to wind up the affairs of suchHon. George B. Butler, Page 4, V-450

arsoaiation and, if necessary, have a Receive,r appointed for that purpose. The venue of such suits shall be laid in the District court of Travis County, Texas.
. .I
Vet. 2. All laws or parts of laws requiring permits or certificatesof authority for associationswhich limit their membership to the employes and the famil$es of emplcyes of any particulardesignate& firm, corpotatfon, or individualand whiah are not
Y=+“’ SoO$ 0 L,o:,ro2 i;:s:hE%t3$%%i t exceed One Hundred Dollars ($1 month are hereby expressly repealed.
It will be noted that the ad.ded portionmight be construed to requireannual repertaon the part of the organizations to which you refer. However, the caption mentions no such requirements of such organizations,but on the contrary, s$ates the purpose of the 1937Act to be ‘*to amend Section 6 of” the originalAct as amended “to exempt from the provisions thereof* assooiations of the type to which you refer, and “mpealing all laws or parts of laws requiring pennits or certificate8ef authority” to such associations. We, therefore, conclude that such associationswere,by the 1937 amendment, entirely excluded from the operation of the Aot, since up to that time no such associationwas affected by any provisions of the Act other than those of Section 6 requiring a permit or certificate of authority to do business, and the amendment is construed, consistentwith the caption, to exclude such an association fmm the operation of Section 6.

The further provision of the 1937Amendment repealingall laws or parts of laws requiring permits or aertificatea of authority for associations referred to by you, left them free to organizewithout such permit or certificate, subject only to such other laws as might apply to them.

Subsequent amendmentsby H. B. 626,General Laws, 46th Legislature, 1939, Regular Session, Chapter 7, Page 414, and H. B. 996, Aots 47th Leglslature, 1941, Regular Session, Chapter 535, Page 860, retained the same language in so far as pertinent with minor changes in sentenoe structure and punctuation,and is construed by us as affecting no change in the effect of this law.Hon. George B. Butler, Page 5, V-450

The Article is not then authority for the organizationof an association of the type mentioned. Since, so far as we can determine, the characteristics mentioned are recognized in our insurance laws only for the purpose of exempting them from the operation of Article 4859f, for the purpose of repealing all laws in existen,ce

prior to the effective.date of the Act of 1937 requiringpermits or,certificates, of authority to do business, and, inArtiale 4857; V. C. S., for the purpose of excluding them from the provisions of Chapter 8, Title 78, of the Revised Civil Statutes of 1925, dealingwith,~.Fraternal Benefit Societies,we are unable to determine from that descriptionalone whether an associationwlth.such characteristicsmay be organized under any other particular law. SUMMARY, Article 4859f, v. C. s., by its terms has no application to vassociationswhioh limit theirmembership to the employees and the families of employees of any particular designated firm, corporation, or individual, and whldh are not operated for profitand which pay no commissions to anyone and whose operating,ex ceed One Hundred ,Dollarst genses,

don not ex100) ,permont’hv except to repealall laws or pa’rtsof laws in forc’e

prior toAugust.21,’1937,’ the etfective date of B. B
.,893,Gen & Spea. Laws, 45th Leg.) 1937, Reg.‘seSS;, Chapter 257, Page 522,which requiredthem to obtain permits or certificates of authority.
Yours very truly
ATTORNEY GENERAL OF TEXAS

By m %&“\’ Ned McDaniel Assistant

APPROVED:

EMc:jmc:jrb
ATTORNEY GENERAL