l _ April 5* 1950

Hon. Qeorge 8. Butler, ChaUman Board of Insurance Commissioners **Austin,** Texas Opinion No. V-1034 Legality of funma sewfoe policy “plan” of ’ the. American National Intwr-’

Dear MIT, Eutler:

Your recent request rtituted by American N+o%l outlines 8 “plpa” Insurance Company insurance u+gr. .8 inand one Ben Wkl&3ma. to .sall- tdfe .i?!iGiG&ipv.le-~Ilo~f )I,-tn.conjunction w3th tne irsu-

‘^* ‘tide by ‘Williams; o&r II@ under the name of InsUlwd

~. ,.,:-..~- ,,\ s ,~ .*, Funeral Service, of a so-oalled “Funeral Serv&oe Contract” mhweti Williams undcrtakws to sppmwe e llat of Funeral Directors and tb obtaia tR& p~%OiPrtion,in providing funerals fog poltdgholdera. SPeo%- men policies, funeral service oontracta and variow supplementary Instruments are attached to ycrtrrrequest which reads: ance Company.

“Wfll you please advise mewhether these transactions by the lnstwaace corn-- pany and Insurance Funerak Servloe, or either of them ere In conS+llct ~1% See

### tzona 23 and 24 of Actiole ~33-1, 

### or Article 5053, Vernon8s Texas Civil Statutw, u wended.” The Sections from Artiole 506&1'pPevf&r
%0l 23. Any 1nd~v1bua1, indtvi- &ala, firms, co-partnerships, oorporation~ or aesoclationtr doing the bu8ine66 of **provldlrq burial**  or funeral benefltr, which under any clrcumstanoes may be pafable partly or who117 in merohandiae or saviaes not in exce56 of One HwtdWd atId Fifty ($150.00) Dollars, or the value. Oeorge 8. Butler, page 2 (V-lQ34) ,‘

.

thtireof ’
, are hereby declared to be burial bompanle8, aasocfatfows or socfetfes, and ehalp organize 

### under provfsfons of Chapter 274 **Acts** of the Forty-ffrat Legislat&e, $29, **and** 

### amemdsen%stheP&og amd shall operate under and be Sovernad W Chapter 274, Aote of the 

### FortpfSrrt Leglilature, 1929, and amendment6thereto, and thfs Act, .I% shala be 

### wlawful for afiy fmdivfdual, fndiv%duaPs, ifpmm, oopattnm8hfpeo oorpomtfonr, or ul)oaiatloMp 08tMF thim thoaL de?&- tikbve, **.tO engage**  **In the**  bumfmess **of &wovfcUS8g** **‘ burl**  al m furtwa’i befifmuffts, t&f& War any alraumutasrcem raybo paMwhoPl~ar mrtly in rrchandO8e OP reFvfaes.

“Sea. 24* Poliefer OP anrtifloater .ir+ue4 bj btwfal arsoefatloq -1 &wtw iide fw~payment of the.bmkefft fn oartati 8tlpxPated waWfw rsb burfti mIMiaoo Mieh #half be 

### maha&.¶~. fn t?n polle;l 

### 0 oertffiaato anadhppraord &awl of R6Wrame CoMd.rsfowr am ‘
, or the ruronabOe value am sta8ed fn the 

### Woe ~oithe poffe7g unlerr the ,fnrured rhail &t the time said poBf@y fa fseued elort to have 66me paid in cash- The pol90 ohaP1 Show %m m%%mg the eleo%Lon a&. xx 8&m

### am~oafatfom ~rnrn~~ said gfty ebPP’ 

### fafP OPrefume 84 Poarpnfms%r 

### urahaandfee md eerwfaam propv%(kd for a the~pfkfog, mm@ &mPB be paid fw e96hog BPfeffy8 Ame~fcann sllatfoaaX has 

### mcitlfffod m lndustrfal fife fnsumk%ce 

### ptdfay $0 provfde fop parment upon the dea%h of &he insured “at %be ilfrectlaa of the beneffcfen”y’ to ‘Ims~@d FepwePm.p Srpppjloeop to InsuredJknepal Sepvfoe and Texas Funeral Dfrectorr and

‘habalmers Assoefatfow the praceeda of %he polpcy which contains provisions desfgned to leave an option with the benefloiary to 

### receive or direct payments~otherwiseo The salesmen, agents of the %nsurawce company, endeavor alao to seoIppe an ass~S~~~% of the proceeds of the polioy fro16 the insured to Ir@uPed FuAePaPService or the **Arsoclatlon** in comfdera%fon of whZeh Insured ?ual r81 Service gaeoer an agPeemmta oalPed a “Rneral Servlae Contract oa to apply suah ppooeeds to the purahue of a funeraP. The latter also **obligates** Impred

### .. . . .~ ,

80th aeo*ge B. Butler, page 

## 3 (v-1634)

,., _‘~’ E%she*alServiae ‘io.eeleot a staff of “approved” &era1 U3matora who till, under contract, bury the dew& bYa proper’wmna and glrb him bs much for his inbuParioe 819would be 

### @iPen to those Paying LIlike amount etW than through the 

### lneurahce arraqement. Thla omtract generally outlln?s Item of aefvice which the %ip$roved funeral direators will f ’trrnl6h under v~lou# 0Qwmstancee. All ib’ aontingent upon pamnt by American Hational of the proceeds of the policy to In&wed iWtera1 Service, Ang exuena of proceeds above the tkme~al directorlr aharges go to the bensflalary named in the policy cw other authorloed perman.

Beas aontracts azw lmplmted,by #upplatiatWy eontract between Inwred Fmeral SemPae and variOw narhal diMotom o the Assocla~iion aotlng in the @Qt*Ipl~ bwhali. Bohdr am 

### Co!ItQap&Bt8d to amure pa- @ o? the utual obllgat$orrs, tid Williaam Is rri ~~~‘eheraoter o? remuneration by Ammlaan yltlon- 

### f+q!@' a$ 

## In ,omfion with the “plaq” the exact nature OS uhiah ZB not stated except that it Is not for difedt @#1X* of 

### tha polialer involved0 The “plan’ is to be p@wdded to the pub110 by a 

### rales pro am rpomored by tha Insurer 

### doguy tkowh it8 **qa$ an&**  otherwise 

### whlah pant8 art tin 8&a&a&w of “vlamom

ma rwmt qumt9on 18 WhethaP Murrd mur81 Mwfoe or PIIManta Stetimal, or both, are eng&ged Ln %M’bwiiI~@8 @f movfdfng buPla1 or funeral bme2ilrr

dr any afl*cumstancer may be paid wholZg or merohandfse OFwWvlaeas Although the exact lega 8Ma$io*rhlp of the parties i!avoPved In the “plan” is not SulPp developed by the ?aots submitted, It la olear that there exists a#~**amwment** or device carefully designed by uhlah **the** Insured may provfde in advance for a funeral TOP blmelf L Uhder the “planpn the insured aas,igns the pnsc ce&e from the fnsuranae policy to Instwed FuneWal Serw iee OF Insured Funeral SePvioe,and Texas Funeral Wreetars and Embalmers Assoalation, and reoeivea **a** funeral servfce contract along with the polfoy of insurance from Xnsured Buneral Sewfoe, In turn, the beneficiary of the lnmred reoefvea merohandfse end aenices or part merchandise and servfoea and pa& cash, or all wah in the iaoe amount of the polfavaMm. Oeorge B. Butler, page 4 (V-1034)

The plrfn Pangmge of 

### Seotfone 23 an&24 of Ai’tiale 5068*X0 rupra, pc~ufpoe an examlnatlon of all thet stunde bed&d tRe aoratraatuel veil. It is euggoHid that the prfae intention of the insured in partiolp&tfng fn the “p9ran”la to pumhaee a funeral for hi-elf. It 98 not,questfoned that he aotuallf re

### Mlve8, in come fnstanaes, a fxineral 

### a8 a **result** of the amration of the “plan.?’ If the insured intend0 to ptWOhr8e a’funepal when he entere into the contraate deefY ed to titimatePy aoaomplf6h that puFpdee and ac

### tual ‘y reaefves a funeral as a restit of partloipatfon 0 ” the “plan” afl doubt that the “plan” in queatlon 

### l ellrî a 

### funerel

48 re80Pvedp Ineaed Funeral Semfce undoubtedly caueee, 

### In eome olrcuartances, funeral mercRandlse and serviaea to 

### be rurairhed the deoeared polfayholder who has a8- 

### rl@nd Mw otw# oi R

rooeedr ot,hfr polfoy fop that purpoeeB Dir

### t $8 relponeibflfty $8 the end result OS and aocompliahes the puppore for whfah thb “plan” 18 de

### signed, **that** ia, to provide funeral aervioe benefitr in wrohandfse and 

### services, Thus the plan operatea to proximately resu9t fn a afrcumetanae uhloh the statute prohlbl;ts. Soetfon !& carpPa pPobQbfts companles’and all 

### athem not organl(sed undw &he ovfsfona **Act6** of the W&y-ffwt r of Chapter 274,
men%8 theretOo ipo8is m$fsPa wire8 1929, and **amend**

n6900 p~ovfding bwfaP or fUnsPaS beneffts, wh%chumd ~3; gho 1 w be

PayOP e **OF** aerv0 lsrpPoUfr added WObabOP~8 wd4tiaa, 

### ulllalhsf te~t~o~~’ 

### DfatPonary, Seoond

dF” defflaeo “ufPa%mstmnee” as *OR%of the oomd tfon8 under whfeh an 

### e-t taken pleoe Ed with reepeot to w&f& a fact fs determined; a condition, 

### faot 0s evm& actwmpuPfing or deteminlng the ooowrettoe **of ’** **, amothcP** **taut or**  events a.O’an aoceerory~ oorbd$tfonj 

### 8n attencbmt faot oc qnn*Slfrfoatien9 often, 

### a moreOPIerr oxtrameoua ooaditforss

a non-ersen$ial 

### or ouu*l 

### detallo.o,”
(Pa. SuppaIi 172 Atl. 659 umlI~~8 ” asovor roasonebl~ lik3y to be 

## * 135S.B.

408(aa. e is noted8 *0s0 ‘Clruu6wtaneos are iaets or gy&6aMl%p awouml, or about nom oen-

**.* WQeaamot ably emtu##etC8 

## that 7-O axbhatyh it ir 

### 8twllgly ah be88 ooatmek ,ud 

### tmtwaetlonr are 6egnm&c, 016 inaepmdsat uba rho*;ld be 80 emtrr#d. It 

### $8 tanWu*W 

### tlmbsnatmmatr 8x~0*ed at the 8am t&m clr o6m%mwvoraneourl~ ioa- thr nm porpwe and in Cb OOWBQ

,ot,Qhemap tllonsmtion aw ’tO be eenm~der%U a8 m in*tnamab aad rrau asld miimmd together9 that pwole evtdanoe is 

### adrnlerible tl) ooanwt inatru*hnts 

### whwa me 

### lnsfr\arent Is made 

### a mum*9 %&at the mum mle !r t of another br 

### reiepp% l8 to m origfaal cow mat aAd 8a rrr;tmmmt~ bhrwti 4~94*Ma beveral in

### rtmmmtr oonetltPcin#



## pwt OF the Hu, txwlr84Uol? 

## Wt &la@ree twethim 

### 10Tex.JUP,286,ContFaotr,


### 8r& ib. 2@ eu Wwm olOe4~ 12 AmL Swr. 781, aoa

### 2 p and *mea thora altwt..

‘“Whmeb 

### a~lhfryrefer8 to anothm .dooItlirsrgt, that dommm t; QP 80 amch of **It** 

### a0 I# refea+tWa to, is of the 

## wit 9 to ‘bs, laat~ted arrpart 

### epla rein ta anolt 

### Whom a 

### ttHtlt&does 

### not

OPwritfn#, W uuah other writ- &au wa8 m&3 as a maet of tin #*mmtmmmw-Hon. Oeorge B. Butler, page 6 (%1034)

therefore must be taken ana construed together as though th8y were one fnstrument D Wannv. IMetroDolitan Life Iiis. co.. 41 S.W.2d 50 ~Comm.Awe 1931) mind, 91 S.w,sd $66 (‘IYex,*ClvO Ll - oyds America v. Api. 

### s error ref.); mv. Volunteer State Lffe ins, Co., 135 S.W.2d 588 (To%. Civ. AWD.

--mgreP.s 011 co. v. Col- F!m: EPlett v.XcMahon, -uitt 2 S.W;%d 421 (Comm, App, is: &tW.2d 253 (Tex. Cfv. App. 1945) :- -

As we aonstrue the 

### statute, fts purpose Is to prevent imposftfons by diecharge of contr8iats at maturity fn eerohandfee or servfoea fmprovfdentJ.y contraoted for iA advance by thoee entirely unfamflfar with their value or the relatfom of ‘that value to the premiums paid during the life of the fnsured. The “plan” under con62deration is clearly susaeptfble to most, if not all, of the abuses Inherent in ordinary funeral policies payable in merchandise and services. The funeral service insurance “plan” under consSderatlon, though the poliay ls’payable in cash by American National, carries the eame evils that are present fn polfcies payable wholly in merchandise OPservices. The “plan” supports and cnaouragea the beneficiary’s tendency to allow delivery of the pol%ay’s proceeds to some other person or persons 

### for whatever funeral the money wfll buy without regard to whether an expensive fineral fs consistent with the needs of the su~vfvops ar,d creates the means for the abuse the statute pssblbfte,. &ire Insurance Co,, 336 U.S.

We conclude that the effect of the “plan” submitted is to provide l~si)rfaBor fEnnePalbenefits which under some cf~cumstarmae me paid and recefved wholly or partly in merchandise euru se~vlcles and fes therefore unlawful under the a$at>ute, as& you are so advised.

Since in our answer we hold t&at the ’ aontravenes fn its operation., Sections 23 and 2 Artiole 506&-l, V.c.So, ie lan” of we do not deem ft necessary to conelder the applfeatfon of APtfcPe 5053, V.C.S., to the “plan D

*

SUMMANY The funemil esemfee policy “plan* of American NatfonaP Insurance Companydescrfbed fn the facts rmbmitted eonflfota.

Han, George B. l¶Utler, Pa&%? 7 **(V-1034)**

**with** Se&fens 23 and **24** or Article 5068-1, V.C.S., and is therefore unlawf'ul.
Yours very truly, PRICEDANIEL Attorney Oeneraa

APRIOVJSDn Charles D. Mathews Executive Assistant c2s-w
BYi A : .-.&ALA c.-- **Everett Hutahinaon**  

### Assistant