Hon. L. H. Flewellen, Chairman 

Industrial Accident Board 

Austin, Texas Opinion No. V-1341 

Re: Application of new reduced discount rate for 

present payment of unmatured workmen's corn nsation under H. B. EJ 

Acts 52nd Leg., to pa& 

ments occasioned by 

injuries occurring prior 

Dear Mr. Flewellen: 

to the effecti? :date of 

this Act. : 

Your request for an opinion deals with the proper 

application of House Bill 89, Act& 52nd Leg., ,R.S. 1951, 

ch. 78, p. 127, fixing the discount rate for prepayment or 

acceleration of weekly workmen's compensation benefits at 

48, effecting a reduction from 6% theretofore allowable. 

Your question asks generally which rate applies to cases 

involving compensable injuries occurring prior to April 25, 

1951, the effective date of the Act. 

The Act provides in part: 

'Section 1. That Section 15a of Article 

8306 of the Revised Civil Statutes of Texas, 

1925, be and the same is hereby amended so as 

to hereafter read as follows: 

" 'Set . 15a. In any oase where compensation 

is payable weekly at a definite sum and for a 

definite period, and it appears to the board that 

the amount of compensation being paid is inadequate to meet the necessities of the employee or 

beneficiary, the board shall have the power to 

increase the amount of compensation by correspondingly decreasing the number of weeks for which 

the same is to be paid allowing discount for present payment at the rate of four per cent (4$), 

Compounded annually; provided that in no case shall 

the amount to which it is increased exceed the 
Hon. L. H. Flewellen, page 2 (V-1341) 

amount of the average weekly wages upon 

which the compensation is based; provided 

it is not intended hereby to prevent lump 

sum settlement when approved by the board.' 

"Sec. 2. That Section 1 of House Sill 

No. 877, Chapter 248, Acts of the Fortysecond Legislature, Regular Session, 1931, 

be and the same is hereby amended so as to 

hereafter read as follovs: 

"'Section 1. 

'In all cases when the payments of 

weekly compensation due an injured employee 

or beneficiary coming within the provisions 

of the Workmen's Compensatlon Act are accelerated by increasing the amount of compensation by correspondingly decreasing the number 

of weeks for which the same is to be paid, 

and when the liability of the insurance company is redeemed by the payment of a'lump sum, 

by agreement of parties interested, or as a 

result of'an order made by the Industrial Accident Board or a judgment rendered by a court 

of competent jurisdiction, and when advanced 

payments of compensation are made, and in all 

cases when compensation is paid before becoming due, discount shall be allowed for present 

payment at fyy per cent (4$), compounded annually. . . 

The quoted portion of Section 2 amends Article 8306a, V.C.S. 

The only pertinent change in the statutes amended is in the 

rate of discount. 

Your specific questions are: 

"Question No. One: Since said amended, 

Section 15a of Art. 8306, supra, reduces the 

discount rate for present payment from 6% 

(legal rate of interest) to 4$, compounded 

annually, does said new discount rate of 4$, 

compounded annually, apply to unmatured weekly 

compensation payments for which an insurance 

carrier is liable for compensable injuries occurring previous to April 25, 1951, as well as 

for compensable injuries OCCUrring on and after 

said date? 

!‘ 
Hon. L. H. Flewellen, page.3, (V-1341) 

'Question No. Two: Since said amended 

Section 1 of H. B.~'No. 877, Chap. 248, Acts 

of the 42nd Legislature; Regular; Session, 

1931; (Vernon's Ann. C'iv. St., Art. 8306a) 

reduces the discount rate from 6$, compounded 

annually to 4%; compounded annually, does 

said new discount rate of4%, compounded annaully, apply to unmatured weekly compensation payments for which an insurance carrier 

is liable for compensable injuries occurring 

previous to April 25;'1951, as well as for 

compensable injuries on and after said date?" 

In Traders' & General Ins. Co. v. Powell, 65 S.W. 

2d 269 (Tex. Comm. App. 1933), the Court held that an amendment to the workmen's compensation statutes fixing the discount rate at 6% was not applicable to an injury and judgment 

thereon rendered in the trial court prior to the effective 

date of the amendment, noting that the claimant's rights 

arose and had been adjudicated prior to the effective date. 

The decision was based on the following language at page 

270 : 

"It will be observed that whatever rights 

defendant in error had aroseiunder the provlsions of the policy issued under the old law. 

Article 8306. Since the enactment of the 

workmen's compensation statutes in this state, 

the courts have held that the legal relation 

of employee, employer, and insurer operating 

thereunder is contractual. Middleton v. Texas 

Power & Light Co., 108 Tex. 96, 185 S.W. 556; 

Patton v. New Amsterdam Casualty Co.,(Tex. Corn. 

App.) 36 S.W.(2d) 1000. The provisions of the 

statutes existing at the time of the Issuance 

of the ~011~s in controversy became a part of 

the contract. It is true the Legislature has 

the power to change the remedy, if it sees fit, 

without affecting the provisions of the obligations of the contract, if an adequate remedy is 

provided for. Patton v. New Amsterdam Casualty 

co., 

(Tex . 

supra; Farmers' Life Ins. Co. v. Wolters 

Corn. App.) 10 S.W.(Zd) 698. 

"The Forty-Second Legislature (chapter 248) 

enacted article 8306a (Vernon's Ann. Civ. St.) 

l 

roviding for a discount on lump sum awards of 

per cent. This act did not become effective 

until August 22, 1931. Since defendant in error's 
2b4 Hon. L. H. Flewellen, page 4 (V-1341) 

rights arose and had been adjudicated prior .:g 

to this time, the provisions of article 8306a $ 

would not control, unless classified as being *+, 

g 

remedial in nature. An analysis of the terms 

of article 8306a with resnect to the discount 

rate plainly shows that it affects the vital 

obligation of the contract and Is not remedial 

in nature." (Rsphasis added.) 

In Associated Employers' Reciprocal v. Brown, 56 

S.W.2d 483, 485 (Tex. Civ. App. 1932, error dism.), in 

speaking of an amendment of the statute increasing the 

mum compensation payable to an injured workman to $20.00, 

ft is stated: 3 ~,.a ,$ 

,A I, 

. . . By the terms of the statute in force ii* .:*; 

at the time the policy in this case was issued, 

$15 per week was the maximum amount which could 

be recovered, and the rights of Brown as to the 

amount of recovery is governed by that act. The 

effect of the amendment, if applied, vould be to 

tipair the obligations of the original contract, 

which cannot be done." 

..'i 

i 

The holding in the Brown case is cited-in Texas Employers' 

Ins. AssIn. v. Whiteside, 77 S.W.2d 767, 770(Tcx. Civ. 

App. 1934), wherein the court said: 

I4 

. . . The contract of insurance.and the 

statute under which it was issued control the 

compensation to be paid the employee as the 

result of the accident and injuries suffered." 

See,, also, Great American Indemnity Co. v. McElyea, 57 S.W.26 

966 (Tex. Civ. App. 1933, error ref.); Ocean Accident & Guarantee Corp. 71. Pruitt, 58 S.W.26 41 (Tex. Comm. "88. l--3T$ix 

Norwich Union 1ndemnltv.C~. v. Wilson, 17 S.W.26 

Civ. App. 1929, error dism.); 45 Tex. Jur. 367, Worlhnen's COLpensation, Sec. 8. 

Since the amendment here considered is of the same 

. nature as that involved in the Powell case, it is our opinion 

that the law as it existed at the time the policy was issued 

covering the claims involved will govern. You are therefore 

advised that in the absence of circumstances indicating COVerage under a~ later policy, the discount provided for in House 

Bill 89 will not apply to claims for injuries occurring prior 

to its effective date. 
-Hon. L. H. Flewellen, page 5 (V-1341) 

SUMMARY 

H. B. 89, Acts'52nd Leg., R. S. 1951, 

reducing discount rate on accelerated or advance payments of benefits under the Workmen's 

Compensation law, does not apply to Injuries 

covered by policies of workmen's compensation 

insurance issued prior to Its effective date. 

APPROVED: 

Jesse P. Luton, Jr. 

Reviewing Asslstant 

Charles D. Mathews 

First Assistant 

NMc/rt 

Yours very truly, 

PRICE D4NIEL