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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 adomestic 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 lnsurGent1emen: 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,gentof an insurance company other than a life Insurance company. The Secretary of State has also submitted two purpose’ c,lauses of proposed corporations which desire to dobusiness in 

### Texas as such general agents; Wehave also received, andcarefully.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, mayacorpo

’ratlon be formed or mayaforeign 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, andOpinions No. 063250 dated May 14, 1941, and O-7302 dated August 19, 1946, byHonorable Grover Sellers, all of the oplnlbns being addressed toHonorable 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 bythe Board of Insurance Commissioners to acorpcratlon onaccount of the statutory provlalons then in force and dffect, andwhich are still in force and effect, being Article 2105, andSection 3, Article 21.14, Texas Insurance Code. Attorney General’s Opinions Nos. O-3250 and O-7302 also held that absent the provisions prohlbltlng acorporation 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 generalHon. 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 dobusiness inTexas for that purpose. All of ttie opinions of the Attorneys General

were rendered prior to the effective. Danteof the Texas Business Corporation Act, and therefore if the provisions of the Texas Business Corporztlon Act did not enlarge the purposes for which such acorporation could be formed, or for which a foreign corporatlop might receive acertificate of authority to conduct such business inTexas, 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 nocorporation mayadopt 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 whosolicits insurance onbehalf of any lnsur,ance company or who takes or transmits other than for himself any application for insurance to.or from such company, or whoshall receive or deliver apolicy of insurance of any such’ company, or whoshall examine or inspect any risk or receive or collect or transmit any premiumof insurance, or make or forward any diagram of any building or buildings, or door perform any other Let in the making or consummating of anycontract of insurance for or with such insurance company, or whoshall 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 nocorporation shall be licensed or granted acertificate of auth~orlty ads the agent or representative of any life insurance company whoin anymanner 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 twoclasses: Local Recording Agents andSollcltors.w. Section 3, Article 21.14, provides specifically that *‘Th.eBoard shall not issue a license to acorporation.”

TheTexas 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 anadmitted and licensed insurance company or carrier, capactty” or insurance. c’ompanles or carriers, in a,supervisory

shall be exempt from all provisions ofArticle 21.14. It,may~be noted that although the duties of a general agent are not specifically defined, neverthele.ss, the -words,“representlngHon. Zollle Steakley

Hon. Wllllim A. Harrison, page 

### 3, (W-447)

anadmitted and licensed insurance company:’ or carrier.

. . in asupervisory 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 lawof this State”

. Artlcle 21.14 provides generally for the licensing of,a,11insurance agents representing lnsurance~companles or carriers other than life insurance companies, and,Section 20 exempts certain classes of persons whoperform certain of ,the functions of an lnsur&nce agent
as defined inArticle 21.02 from obtaining such license. In addition to exempting ageneral agent or State agent or branch manager representing an insurance company in asupervisory capacity, it is not necessary for an actual full-time homeoffice or salaried traveling representative of an insurance company licensed to dobusiness in Texas to have a license. Any attorney-in-fact

or traveling salaried representative of areciprocal or lnterinsurance exchange doing buslness?ln Texas is also exempt from the necessity of obtaining ‘alicense, 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 Section 20, however, specifically exemptsall incorporated and unincorporated mutual insurance compan.lss and their agents or representatives operating under the authority of Chapters 

### 16and 

### 17of 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 16and 

### 17of 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 alegislative authorlzatlon~or permission for such general agent, special agent, or branch manager to be acorporation.

Oneof 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 ageneral 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 asupervisory 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 andflle 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 andto have andexecute all the powers conferred by the laws..of the State 

### of Texas upon corporations formed under the Texas Business Corporation Act and to doany andall things hereinabove set forth to the same extent that natural persons might or could do (except that it maynot 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 byaforeign corporation requesting the issuance of

aCertificate of Authority to transactbusiness in Texas is as folIows:



### “Toact as General Agent for admitted and licensed insurance companies, in asupervisory capacity, lncludlng the right to exercise ageneral supervision and control over the business of one 

### or more such insurance companies in this State, andmaintain a supervisory office
or offices, with the authority to appoint local agents or special agents; to receive, record,-inspect, andfile 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 maylawfully 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 tomthe...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 ofArticle 2.01A of the Business Cor oration Act since the provisions 

### of Section 20(d), Artlc,le 21.1e Texas Insurance Code, specifically except ageneral agent reprisentlng
anadmitted 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 acorporation.

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 acorporation to do or form any of the.functions connected with the issuance of anperinsurance POIicy which are specifically described inArticle 

### 21.03, supra. While the words, “to act as general agent”

, donot. ’

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

appear in the purpose clause of the proposed domestlc corporation, nevertheless, this purpose clause, when construed in its entirety, clearly authorlees a corporation to act as ageneral agent for an insurance carrier or carriers, not only in asupervisory 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 acorporate 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 astatement of the purpose for which the corporation 1s~being formed, but 1s adeclaration 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 apart of the purpose clause of the proposed corporation since the powers set forth therein are possessed by the corporation as amatter of law upon the granting of its charter.

‘In the purpose clause proposed by the foreign corporation reqrrkstlng thk issuance of acert,lflcate of authority there appears the following sentence:

“Such corporation shall have such authority, if any, as maylawfully 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 mayissue “to an agent who is regularly commissioned to represent one (1) or more fire, fire and marina, inland, casualty or surety insurance companies, licensed to dobusiness 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 dobusiness 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 maynot, act as a local reco.rdlng agent. Inview of ’ the nature of Article 21.38, it is the opinion of this office that the above quoted purpose clause is deceptive andamounts to less than afull statement of the corporate purpose intended to ’be pursued by virtue thereof and% therefore vlolat lve ofArticle 2.01A of the Business Corporation Act.

It is the opinion of this office that acharter maybe granted to adomestic corporation and acertificate of authority be issued to aforeign corporation bythe Secretary of State containing apurpose 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 maynot 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 maythereafter lawfully issue acertificate of authority or permit to such corporation in accordance with the provisions of the Texas Insurance Code.

SUMMARY

Acharter maybe granted to a~dqmestlc corporation and acertlflcate of authority be issued to a foreign cdrporatlon bythe Secretary of State containing apurpose 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 asupervisory capacity,, provided that it maynot 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 maythereafter lawfully issue acertlflcate 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: OPINIONCC%UTTEE: C. K. Richards. Chairman J. MarkMcLaughlin Llnward. ‘Shivers s/ Fred’B. Werkenthln

BYFred B..We’rkenthln Assistant

Reviewed for the.Attorney General By: W.V. Geppert