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WIILL WIlLSOnl June 11, 1958 

AT-x-GRNEY GENERAL 

Hon. Zollle Steakley Opinion No. WW-447 

Secretary of State 

Austin, Texas Re: Whether a domestic OP. 

foreign corporation may 

Hon. William A. Harrison 

Commissioner of Insurance 

qualify in Texas to act 

as the general agent of 

Austin, Texas an, insurance company 

other than a life lnsurGent 1 emen: ante company. 

You have each submitted requests for the opinion of this 

office as to whether a domestic or foreign corporation may~quallfy 

in Texas to act as the general ~a,gent of an insurance company other 

than a life Insurance company. The Secretary of State has also 

submit ted two purpose’ c,lauses of proposed corporations which 

desire to do business in Texas as such general agents; We have 

also received, and carefully.consldered briefs of attorneys representing corporations ,havlng an interest in the question involved. 

The basic question to be determined is as follows: 

“Under the .provlslons of the Texas Business Corporation 

Act, may a corpo’ratlon be formed or may a foreign corporation be admitted to do business in Texas to act as the 

general agent for an insurance company other than a life 

insurance company?” 

The opinion request of the Commissioner of Insurance refers 

to certain opinions by prior Attorneys General, specifically 

referring to Opinion No. O-1931 dated February 14, 1940, by 

Honorable Gerald C. Mann, and Opinions No. 063250 dated May 14, 

1941, and O-7302 dated August 19, 1946, by Honorable Grover 

Sellers, all of the oplnlbns being addressed to Honorable Marvin 

Hall, Flre’lnsurance Commlsjloner of the. Board of Insurance 

Commissioners. All of these opinions specifically hold that a 

general agent’s license could not be granted by the Board of 

Insurance Commissioners to a corpcratlon on account of the 

statutory provlalons then in force and dffect, and which are still 

in force and effect, being Article 2105, and Section 3, Article 

21.14, Texas Insurance Code. Attorney General’s Opinions Nos. 

O-3250 and O-7302 also held that absent the provisions prohlbltlng a corporation to act as agent for an insurance company, 

including a life insurance company, there was no statutory 

provlsl,on in the general corporation laws of Texas which would 

permit the creation of a domestic corporation to act as general 
Hon. Zollle Steakley 

Hon. William A. Harrison, page 2. (WW-447) 

agent for an insurance company of any description, or for’ a 

foreign corporation to secure a permit to do business in Texas 

for that purpose. All of ttie opinions of the Attorneys General 

were rendered prior to the effective. Dante of the Texas Business 

Corporation Act, and therefore if the provisions of the Texas 

Business Corporztlon Act did not enlarge the purposes for which 

such a corporation could be formed, or for which a foreign 

corporatlop might receive a certificate of authority to conduct 

such business in Texas, then, of necessity, the holdings of the 

prior Attorneys General in the opinions above referred to should 

be followed. 

Article 2.OI-B(1) of the Business Corpcratlon Act speclfltally provides that no corporation may adopt or be organized 

under or obtain authority to transact business in this State under 

the act if any one or more of.lts purposes for the transaction of 

business in this State is expressly prohibited by any law of this 

State. 

Article ,21.02 of the Insurance Code provides that ,any person 

who solicits insurance on behalf of any lnsur,ance company or who 

takes or transmits other than for himself any application for 

insurance to.or from such company, or who shall receive or 

deliver a policy of insurance of any such’ company, or who shall 

examine or inspect any risk or receive or collect or transmit 

any premium of insurance, or make or forward any diagram of any 

building or buildings, or do or perform any other Let in the 

making or consummating of any contract of insurance for or with 

such insurance company, or who shall examine. into or adjust any 

loss for any such insurance company, whether any of such acts 

shall be done at the request or by the employment of such lnsurante company; shall be held ‘to be the agent of the company for 

which the act is done. Article 21.05 provides that no corporation shall be licensed or granted a certificate of auth~orlty ads 

the agent or representative of any life insurance company who in 

any manner places life ~insurance, poIlc,ies or contracts in Texas. 

Article 21.14; Section 1, provides that “Insurance agents, as 

that term is defined, in the .laws of this State, shall for the 

purpose of this article be divided into two classes: Local 

Recording Agents and Sollcltors.w. Section 3, Article 21.14, 

provides specifically that *‘Th.e Board shall not issue a license 

to a corporation.” 

The Texas Insurance Code does not specifically define the term, 

“general agent”, nor are any references to a general agent to 

be found therein except lnSe&lon 20(d), Article. 21.14, which 

provides that “any General Agent or State Agent or Branch Manager 

representing an admitted and licensed insurance company or 

carrier, 

capactty” 

or insurance. c’ompanles or carriers, in a, supervisory 

shall be exempt from all provisions of Article 21.14. 

It,may~be noted that although the duties of a general agent are 

not specifically defined, neverthele.ss, the -words,“representlng 
Hon. Zollle Steakley 

Hon. Wllllim A. Harrison, page 3, (W-447) 

an admitted and licensed insurance company:’ or carrier. . . 

in a supervisory capactty” would definitely limit the authority 

of such general agent to act for the insurance company or 

carrier in tge supervision of the insurer’s activities. 

Article 21.14 lncorpa’ates by reference the provisions of 

Article 21.02, slrce it specifically refer& to the term 'finsUrItnCe 

agents, as that term is defined in the law of this State”. Art lcle 

21.14 provides generally for the licensing of ,a,11 insurance agents 

representing lnsurance~companles or carriers other than life 

insurance companies, and, Section 20 exempts certain classes of 

persons who perform certain of ,the functions of an lnsur&nce agent 

as defined in Article 21.02 from obtaining such license. In 

addition to exempting a general agent or State agent or branch 

manager representing an insurance company in a supervisory capacity, it is not necessary for an actual full-time home office or 

salaried traveling representative of an insurance company licensed 

to do business in Texas to have a license. Any attorney-in-fact 

or traveling salaried representative of a reciprocal or lnterinsurance exchange doing buslness?ln Texas is also exempt from the 

necessity of obtaining ‘a license, as are adjusters of losses 

and inspectors of risks, and attorneys in fact for an organization 

doing an insurance business under .the Iloyds Plan. Sub-division 

(f) of Sect ion 20, however, specifically exemptsall incorporated 

and unincorporated mutual insurance compan.lss and their agents or 

representatives operating under the authority of Chapters 16 and 

17 of the Insurance Code, and sub-division (g) exempts, in toto, 

all members, agents, employees, or representatives of any county 

or farm mutual insurance company exempted under Chapters 16 and 

17 of the Cdde. The conclusion must therefore be drawn that the 

omission of the word “corporation ” from the exemption from obtalnlng an insurance agent’s license under the provisions of Article 

21.14, which is extended to a general agent, special agent, or 

branch manager, acting in a supervisory capacity for an insurance 

carrier, does not necessarily constitute a legislative authorlzatlon~ or permission for such general agent, special agent, or 

branch manager to be a corporation. 

One of the purpose clauses submitted to the Secretary of State 

as part of the proposed articles of incorporation of a domestic 

corporation is as foIl&ss 

“To exercise a general supervision or control over the 

-.zbCsiness, of one:or more insurance companies .(excludlng life 

insurance companies) in this State (but not to operate 

insurance companies as such) and to maintain a supervisory 

office or offices, with the authority to appoint local agents 

or special agents and, in the case of fire, marine and 

casualty insurance companles,to receive, record, inspect, 

underwrit.e and flle the dally reports from local agents of 

the business done by such local agents. 
Hon. Zollle Steakley 

Hon. William A. Harrison, page 4 (WW-447) 

“In general, to carry out any other business in connection 

with the foregoing and to have and execute all the powers 

conferred by the laws..of the State of Texas upon corporations formed under the Texas Business Corporation Act and 

to do any and all things hereinabove set forth to the same 

extent that natural persons might or could do (except that 

it may not act as, nor perform the functions of, a llocal 

recording agent’ as the latter ,term is defined in the 

Insurance Code) .‘I 

Another purpose clause which has been submitted to the Secretary 

of State by a foreign corporation requesting the issuance of 

a Certificate of Authority to transactbusiness in Texas is as 

folIows: 

“To act as General Agent for admitted and licensed 

insurance companies, in a supervisory capacity, lncludlng the right to exercise a general supervision and control over the business of one or more such insurance 

companies in this State, and maintain a supervisory office 

or offices, with the authority to appoint local agents or 

special agents; to receive, record,-inspect, 

and file the dally reports~ from local agents 

done by such local agent, it being expressly 

however, that such corporation shall have no 

act in any event for an insurance company or 

lsed to transact a life insurance business. __ 

undeiwrlte 

of the business 

provided, 

authority to 

carrier authorSuch corporation 

shall have such authority, if any, as may lawfully be extended 

to it under the provisions of Article 21.38 of the Insurance 

Code of Texas.” 

It will be noted that the proposed purposes above set forth are, 

with certain exceptions hereinafter noted, almost identical. If 

the -purpoSe. cfahses:ln~ quest&on?!wer’e’ttmited tom the...phrase, :,“To. 

act Lasiganerab agent:f,er onenpermbeergdmd~ted;$nd licensed 

insurance companies or carriers in a supervisory capacity”, there 

would be no question that such purpose would be a lawful purpose 

within the meaning of Article 2.01A of the Business Cor oration 

Act since the provisions of Section 20(d), Artlc,le 21.1 e Texas 

Insurance Code, specifically except a general agent reprisentlng 

an admitted and licensed insurance company or carrier or insurance 

companies or carriers in a supervisory capacity from the prohlbltlon contained in Section 3, Article 21.14, that the Board shall 

not issue a license to a corporation. 

Therefore it is necessary to analyze the phraseology of each of 

the foregoing purpose clauses in order to ascertain whether all 

or any part thereof would authorize a corporation to do or 

form any of the. functions connected with the issuance of an 

perinsurance POIicy which are specifically described in Article 

21.03, supra. While the words, “to act as general agent”, do not 
. ’ 

Hon. Zollle Steakley 

Hon. William A. Harrison, page 5 (WW-447) 

appear in the purpose clause of the proposed domest lc corporation, 

nevertheless, this purpose clause, when construed in its entirety, 

clearly authorlees a corporation to act as a general agent for an 

insurance carrier or carriers, not only in a supervisory capacity, 

but also to perform certain of the functions of such insurance 

carrier, which is manifested by the use of the word, “control”, 

and therefore the parenthetical phrase (“but not to operate 

insurance companies as such) ” does not negative the broad power 

of the general agent to exercise control over the functions 

specifically referred to later on in the purpose clause. 

The purpose clause of the proposed domestic corporation authorizes a corporate general agent “to carry out any other business 

in connection with the foregoing, and to have and execute all of 

the powers conferred by the laws of the State of Texas upon 

corporations formed under the Texas Business Corporation Act, 

and to do any and all things hereinabove .set forth to the same’ 

extent that natural persons might or could do, . . .I’ with the 

exception that it could not perform any of the functions of a 

local recording agent as that term is defined in the Insurance 

Code. The foregoing does not constitute a statement of the 

purpose for which the corporation 1s~ being formed, but 1s a declaration or restatement of the powers granted to any corporation 

under Article 2.02 of the Business Corpcratlon Act. Therefore, 

the quoted paragraph does not constitute a part of the purpose 

clause of the proposed corporation since the powers set forth 

therein are possessed by the corporation as a matter of law upon 

the granting of its charter. 

‘In the purpose clause proposed by the foreign corporation 

reqrrkstlng thk issuance of a cert,lflcate of authority there appears 

the following sentence: 

“Such corporation shall have such authority, if any, as 

may lawfully be extended to it under the provisions of 

Article 21.38 of the Insurance Code of Texas.” 

Article 21.38 contains seven’sectlons which regulate the 

writing of insurance by insuring insurance companies or 

carriers which. are not authorlied to do business in Texas, 

and is too long to be restated here. Section 2 of .the Act 

provides, generally, for the licensing of agents thereunder, 

and provides that such license may issue “to an agent who 

is regularly commissioned to represent one (1) or more 

fire, fire and marina, i nland, casualty or surety insurance 

companies, licensed to do business in this State, . . . .e. 

It is clear that insofar as delegable duties of an 

insurance company are concerned, that Article 21.38 princlpally regulates the issuance of policies by an insurance 

company not licensed to do business in the State by local 

recording agents to the general public, such loca.1 recording 
. . - 

Hon. Zollle Steakley 

Hon. William A. Harrison, page 6 (WW-l&7)- 

agents being licensed under Artlcle,21.@ of the Texas 

-Insurance Code. As previously discussed, h corporation may not, 

act as a local reco.rdlng agent. In view of’ the nature of Article 

21.38, it is the opinion of this office that the above quoted 

purpose clause is deceptive and amounts to less than a full 

statement of the corporate purpose intended to’be pursued by 

virtue thereof and% therefore vlolat lve of Article 2.01A of the 

Business Corporation Act. 

It is the opinion of this office that a charter may be 

granted to a domestic corporation and a certificate of authority 

be issued to a foreign corporation by the Secretary of State containing a purpose clause, ‘to act as general agent for one or 

more admitted or licensed insurance companies br carriers, other 

than life insurance companies or carriers, in a supervisory 

capacity; provided that it may not act as a local recording agent 

or solicitor as such terms are defined in Section 2, Article 

21.14 of the Texas Insurance Code; and the Commissioner of 

Insurance may thereafter lawfully issue a certificate of authority or permit to such corporation in accordance with the provisions 

of the Texas Insurance Code. 

SUMMARY 

A charter may be granted to a~dqmestlc corporation and a certlflcate of authority be issued to a foreign cdrporatlon by the 

Secretary of State containing a purpose klause, “to act as 

general agent for one or more admitted and licensed insurance 

companies or carriers, other than life insurance companies or 

carriers, in a supervisory capacity,, provided that it may not act 

as a local recording agent or solicitor as such terms are defined 

in Section 2, Article 21.14 of the Texas Insurance Code”, and the 

Commissioner of Insurance may thereafter lawfully issue a certlflcate of authority or permit to such corporation for such purpose 

in acc,otidance with the provisions of the Texas Insurance Code. 

Yours ve?y truly, 

Will Wilson 

Attorney General of Texas 

FBW: lm 

APPROVED: 

OPINION CC%UTTEE: 

C. K. Richards. Chairman 

J. Mark McLaughlin 

Llnward. ‘Shivers 

s/ Fred’ B. Werkenthln 

BY 

Fred B.. We’rkenthln 

Assistant 

Reviewed for the.Attorney General 

By: W. V. Geppert