I _ R-875 

T~~EAI%ORNEY GENERAL 

OPTEXAS 

PRICE DANIEL 

..YcTcmNEY GENERAI. 

Auclnlv 11. TEXAS 

December 4, 

Hon. George 8. Butler, Chairman 

Board, of Insurance Commissioners 

Austin, Texas Opinion 

1947 

No. V-450 

Re: Authority to organize 

certain non-profit insurance associations 

writing policies on employees of a single emplayer . 

Dear Sir: 

Your letter of October 16, 1947, reads aa 

follows: 

*Please advise me whether ‘associations which limit their membership 

to the employees and the families of 

employees of any particular designated 

firm, corporation, or individual, and 

which are not operated for profit and 

which pay no commissions to anyone and 

whose operating expenses do not exce6d 

One Hundred Dollars($lOO) per month’ 

may now be organized and, upon making. 

the report required by Vernon’s Article 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 ,assoolation described in your letter. 

Said Article Is Vernon’s codification of H.B. 

303; General Laws, 43rd Legislature, 1933, Regular Session, Chapter 245, Page 856, as amended by subsequent 

Legislatures 0 

That Act was designed to .regulate only those 

organizations already in existence prior to January 1, 

1933, It applied solely to Wcorporations carrying on 
Hon. George B. Butler, Page 2, V-450 

in this State the statewide business of mutually protecting or insuring the lives of their members by assessments made upon their members." Section 19. 

By H. B. 373, General Laws, 44th Legislature, 

1935, Regular Session, Chapter 264, Page 651, Section 

6, dealing with examinations of such asso,ciations by 

the Board of Insurance Commissioners, the original Act 

was amended by adding the following'provisions: 

"It shall be the duty of the Commiasioner to require any corporation, person, 

firm, association, local mutual ,aid association or any local association, company, 

or organization, to have a certificate of 

authority before being authorixed to carr 

on any insurance business in this 4. S ate. 

, in any event, any such comoanv, oerson, 

firm, association,, or local organiiation, . 

local aid association, or local organization is writing xform of insurance whatsoever without 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 organization from writing any insurance 

of any kind or character without a permit." 

(Emphasis supplied throughout this opinion) 

While the original Act of 1933 was limited In 

its operation, as above noted, the Act of 1935 by its 

terms applied to all forms ,of insurance and to all types, 

of insurance enterprises theretofore or thereafter organized in requiring a permit as a condition to doing business. In other respects, however, the Actremained applicable solely to the statewide mutual 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 orlginal Act was again amended and for the first time specifically mentioned the type of organization to which 

you refer. By the 1937 amendment, they were 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,e 3, V-450 

The Amendment of ~1937 added to the provisions 

of Section 6, above quoted, the following: 

“‘Provided no ,provisions of this 

Act shall be construed to apply 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 ‘shall make 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 Commissioners may require. No such association shall be permltted to operate, however, without mak,ing report to the Insurance, Department ‘and getting 

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 

this Act goes into effect within which tc 

comply with its conditions. If any organization fails to qualify under this Act or 

fails to comply with its requirements in any 

manner it shall be the duty of the Board of 

Insurance Commissioners to report the same 

to the Attorney General who shall at the request of said Board file such ‘suit as may 

be necessary to wind up the affairs of such 
Hon. 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 certificates of authority 

for associations which limit their membership to the employes and the famil$es of emplcyes of any particular designate& firm, 

corpotatfon, or individual and 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 portion might 

be construed to require annual reperta on 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 1937 Act to be 

‘*to amend Section 6 of” the original Act 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 certificate8 ef authority” 

to such associations. We, therefore, conclude that such 

associations were,by the 1937 amendment, entirely excluded from the operation of the Aot, since up to that time 

no such association was 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, consistent with the 

caption, to exclude such an association fmm the operation of Section 6. 

The further provision of the 1937 Amendment repealing all laws or parts of laws requiring 

permits or aertificatea of authority for associations 

referred to by you, left them free to organize without such permit or certificate, subject only to such 

other laws as might apply to them. 

Subsequent amendments by 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 

organization of 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 requiring permits or, certificates, of authority to 

do business, and, in Artiale 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, 

dealing with,~.Fraternal Benefit Societies, we are unable to determine from that description alone whether 

an association wlth.such characteristics may be organized under any other particular law. 

SUMMARY, 

Article 4859f, v. C. s., by its terms 

has no application to vassociations whioh 

limit their membership to the employees 

and the families of employees of any particular designated firm, corporation, or individual, and whldh are not operated for 

profit and which pay no commissions to anyone and whose operating ,ex 

ceed One Hundred ,Dollars t g 

enses, don not ex100) ,per mont’hv 

except to repeal all laws or pa’rts of laws 

in forc’e prior to August. 21,’ 1937,’ the etfective date of B. B . ,893, Gen & Spea. Laws, 

45th Leg. ) 1937, Reg.‘seSS;, Chapter 257, 

Page 522, which required them 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