Hon. L. H. Flewellen, Chairman

IndustrialAccident Board Austin, Texas Opinion No. V-1341

Re: Application ofnew reduced discountrate for present payment of unmatured workmen's corn nsation underH. B. EJ Acts 52nd Leg., to pa& ments occasionedby injuries occurring prior

Dear Mr. Flewellen: to the effecti? :dateof this Act. :
Your request for an opinion deals with the proper applicationof House Bill 89, Act& 52nd Leg., ,R.S.1951, ch. 78, p. 127, fixing the discount rate for prepayment or accelerationof weekly workmen's compensationbenefits at 48, effectinga reduction from 6% theretoforeallowable. Your questionasks generally which rate applies to cases involvingcompensable injuries occurring prior to April 25, 1951,the effective date of the Act.

The Act provides in part:
'Section 1. That Section 15a ofArticle 8306 of the Revised Civil Statutes of Texas, 1925,be and the same ishereby 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 definiteperiod, and it appears to the board that the amount of compensationbeing paid is inadequate to meet the necessities of the employee or beneficiary, the board shallhave the power to increase the amount of compensationby 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$), Compoundedannually; provided that in no case shall the amount to which it is increased exceed theHon. L. H. Flewellen, page 2 (V-1341)

amount of the average weekly wages upon which the compensation isbased; provided it is not intendedhereby to prevent lump
sum settlementwhen approvedby 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 ishereby amended so as to hereafter read as follovs:
"'Section1.

'Inall cases when the payments of weekly compensationdue an injured employee
or beneficiary coming within the provisions of theWorkmen's CompensatlonAct are acceleratedby increasingthe amount of compensation by correspondinglydecreasing the number of weeks for which the same is to be paid, and when the liability of the insurance company is redeemedby the payment of a'lump sum, by agreement of parties interested,or as a result of'an ordermade by the IndustrialAccident Board or a judgmentrenderedby a court of competent jurisdiction,and when advanced payments of compensationare made, and in all cases when compensation is paidbefore becoming due, discount shall be allowed for present payment at fyy per cent (4$),compoundedannually.

. . The quoted portion of Section 2 amendsArticle 8306a,V.C.S. The only pertinent change in the statutes amended is in the rate of discount.

Your specific questions are: "QuestionNo. One: Since said amended, Section 15a of Art. 8306, supra, reduces the discount rate for present payment from 6% (legalrate of interest) to 4$, compounded annually, does said new discount rate of 4$, compounded annually, apply to unmatured weekly compensationpayments for which an insurance carrier is liable for compensable injuriesoccurring previous toApril 25, 1951, as well as for compensable injuries OCCUrring on and after said date? !‘Hon. L. H. Flewellen, page.3, (V-1341)

'QuestionNo. Two: Since said amended Section 1 of H. B.~'No.877, Chap. 248, Acts of the 42nd Legislature; Regular; Session, 1931; (Vernon'sAnn. 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 insurancecarrier is liable for compensable injuriesoccurring 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'srights
arose and had been adjudicated prior to the effectivedate. The decisionwas based on the following languageat page 270:

"Itwill be observed that whatever rights defendant in error had aroseiunder the provlsions of the policy issuedunder 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 controversybecame a part of the contract. It is true the Legislaturehas 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.
"TheForty-Second Legislature (chapter248) enacted article 8306a (Vernon'sAnn. Civ. St.)

lroviding 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 adjudicatedprior .:g to this time, the provisionsof article 8306a $ would not control,unless classifiedas 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." (Rsphasisadded.)

InAssociated 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 compensationpayable to an injuredworkman 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 governedby that act. The effect of the amendment, if applied, vould be to tipair the obligationsof 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.andthe statuteunder which itwas issued control the compensation to be paid the employee as the result of the accident and injuries suffered."

See,, also, Great American IndemnityCo. 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'sCOLpensation, Sec. 8.

Since the amendmenthere 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 involvedwill govern. You are therefore advised that in the absence of circumstances indicatingCOVerage under a~later policy, the discount provided for inHouse 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 ofbenefits under theWorkmen's Compensation law, does not apply to Injuries coveredby policies of workmen's compensation insurance issued prior to Its effective date.

APPROVED:

Jesse P. Luton, Jr. ReviewingAsslstant

Charles D. Mathews FirstAssistant
NMc/rt Yours very truly,

PRICE D4NIEL