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 ycrtrr request which reads: 

ance Company. 

“Wfll you please advise me whether 

these transactions by the lnstwaace corn-- 

pany and Insurance Funerak Servloe, or 

either of them ere In conS+llct ~1% Seetzona 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%s theP&og amd 

shall operate under and be Sovernad W 

Chapter 274, Aote of the FortpfSrrt Leglilature, 1929, and amendment6 thereto, 

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 ‘burlal 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 anad hppraord 

&awl of R6Wrame CoMd.rsfowr am ‘, 

or the ruronabOe value am sta8ed fn the 

Woe ~oi the 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 OP refume 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 Srpppjloe op 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 FuAePaP Service or 

the Arsoclatlon in comfdera%fon of whZeh Insured ?ual r81 Service gaeoer an agPeemmta oalPed a “Rneral 

Servlae Contract o a 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*al Serviae ‘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 819 would be @iPen to those Paying LI like 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 toamure 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 “vlamo m 

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 OF wWvlaeas 

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 polfava 
Mm. 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 reMlve8, 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 

deef 

Y 

ed to titimatePy aoaomplf6h that puFpdee and actual ‘y reaefves a funeral as a restit of partloipatfon 

0” the “plan” afl doubt that the “plan” in queatlon 

l ellra î funer4 e8 rl e80P vedp 

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 Dirt $8 relponeibflfty $8 the end result OS and 

aocompliahes the puppore for whfah thb “plan” 18 designed, 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 amendn6900 p~ovfding bwfaP or fUnsPaS beneffts, wh%ch umd 

~3; gho 

1 

w be 

Pay OP 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 more OP Ierr oxtrameoua ooaditforss a non-ersen$ial or 

ouu*l detallo.o,” 

(Pa. SuppaIi 

172 Atl. 659 

umlI~~8” as 
ovor roasonebl~ lik3y to be 

* 135 S.B. 408 (aa. 

e is noted8 

* 0s0 ‘Clruu6wtaneos are iaets or 

gy&6aMl%p awouml, or about nom oen- 

**.* 

WQ eaamot 

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 tlmb snatmmatr 8x~0*ed at the 8am 

t&m clr o6m%mwvoraneourl~ ioa- thr nm porpwe and in 

Cb OOWBQ ,ot,Qhe map 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% l 8 to m origfaal cow 

mat aAd 8a rrr;tmmmt~ bhrwti 4~94 *Ma beveral inrtmmmtr oonetltPcin# pwt OF the Hu, txwlr84Uol? Wt 

&la@ree twethim 10 Tex. JUP, 286, ContFaotr, 

8r& ib. 2@ 

eu Wwm olOe4~ 12 AmL Swr. 781, aoa2 p and *mea thora altwt.. 

‘“Whme b a~lhfry refer8 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 arr part 

epla 

rein ta anolt 

Whom a ttHtlt& does not 

OP writfn#, W uuah other writ- 

&au wa8 m&3 as a maet of tin #*mm tmmmw- 
Hon. Oeorge B. Butler, page 6 (%1034) 

therefore must be taken ana construed together as though 

th8y were one fnstrument D Wann v. 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- 

-uitt 2 S.W;%d 421 (Comm, App, is: F!m: EPlett v.XcMahon, 

&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 OP services. 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)rfaB or fEnnePal benefits 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 Company descrfbed 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, 

PRICE DANIEL 

Attorney Oeneraa 

APRIOVJSDn 

Charles D. Mathews 

Executive Assistant 

c2s-w 

BYi 

A : 

.-.&ALA c.-- 

Everett Hutahinaon 

Assistant