June 24, 1988 

Honorable David H. Cain Opinion No. JM-923 

Chairman 

Committee on Transportation Re: Whether an unincorTexas House of Representatives porated association insurP. 0. Box 12068 ante carrier organized 

Austin, Texas 78769 under the Texas Lloyd's 

plan may serve as a l'corporate surety" under article 

5160.A, V.T.C.S. (RQ-1308) 

Dear Representative Cain: 

You ask whether an unincorporated association insurance 

carrier organized under the Texas Lloyd's Plan, Insurance 

Code, article 18.01 et sea., can serve as a "corporate 

surety" in providing a performance and a payment bond when 

required by article 5160.A, V.T.C.S. We conclude not. 

Article 5160.A provides as follows (emphasis added): 

Any person or persons, firm, or corporation, hereinafter referred to as "prime 

contractor," entering into a formal contract 

in excess of $25,000 with this State, any 

department, board or agency thereof; or any 

county of this State, department, board or 

agency thereof; or any municipality of this 

State, department, board or agency thereof: 

or any school district in this State, common 

or independent, or subdivision thereof; or 

any other governmental or quasi-governmental 

authority whether specifically named herein 

or not, authorized under any law of this 

State, general or local, to enter into 

contractual agreements for the construction, 

alteration or repair of any public building 

or the prosecution or completion of any 

public work, shall be required before 

commencing such work to execute to the 

aforementioned governmental authority 

authorities, as the case may be, t:: 

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Honorable David H. Cain - Page 2 (JM-923) 

statutory bonds as hereinafter prescribed, 

but no governmental authority may require a 

bond if the contract does not exceed the sum 

of $25,000. Each such bond shall be executed 

bv a coroorate suretv or coroorate sureties 

dulv authorized to do business in this State. 

In the case of contracts of the State or a 

department, board, or agency thereof, the 

aforesaid bonds shall be payable to the State 

and shall be approved by the Attorney General 

as to form. In case ~of all other contracts 

subject to this Act, the bonds shall be 

payable to the governmental awarding 

authority concerned, and shall be approved by 

it as to form. Any bond furnished by any 

prime contractor in an attempted compliance 

with this Act shall be treated and construed 

as in conformity with the requirements of 

this Act as to rights created, limitations 

thereon, and remedies provided. 

(a) A Performance Bond in the amount of 

the contract conditioned upon the faithful 

performance of the work in accordance with 

the plans, specifications, and contract 

documents. Said bond shall be solely for the 

protection of the State or the governmental 

authority awarding the contract, as the case 

may be. 

(b) A Payment Bond, in the amount of the 

contract, solely for the protection of all 

claimants supplying labor and material as 

hereinafter defined, in the prosecution of 

the work provided for in said contract, for 

the use of each such claimant. 

By its terms, as set forth in the underscored sentence, 

article 5160.A requires a bond to be executed by a 

"corporate" surety. 

Article 18.01 of the Insurance Code, however, provides 

as follows (emphasis added): 

Individuals, partnerships or associations 

of individuals, hereby designated "underwriters," are authorized to make any insurance, except life insurance, on the Lloyd's 

plan, by executing articles of agreement 

expressing their purpose so to do and comP. 4631 
, 

Honorable David H. Cain - Page 3 (JM-923) 

plying with the requirements set forth in 

this chapter. 

Article 18.03 of the Insurance Code delineates the meaning 

of "any insurance" by providing (emphasis added): 

The attorney shall file with the Board of 

insurance Commissioners a verified application for license setting forth and 

accompanied by: 

. . . . 

(c) The kinds of insurance to be effected, 

which kinds of insurance may be as follows: 

. , . . 

7. Fidelity and suretv bonds insurance. 

. . . . 

Thus, by its terms, the Insurance Code authorizes a Lloyd‘s 

company to write "fidelity and surety bonds insurance." 

Article 5160.A and the Insurance Code are in apparent 

conflict. In the case of an apparent conflict between a 

general provision and a special provision, the statutes must 

be read together and harmonized if possible. Halsell v. 

Texas Water Commission, 380 S.W.2d 1, 15'(Tex. Civ. App.~ - 

Austin 1964, writ ref'd n.r.e.). In doing so, the general 

provision is controlled or limited by the special provision. 

See Trinitv Universal Ins. Co. v. McLauahlin, 373 S.W.2d 66, 

69 (Tex. Civ. App. - Austin), reh'a denied, 374 S.W.2d 350 

(1963). As between article 5160.A and the Insurance Code, 

the special requirement of a corporate surety therefore 

controls or limits the general authorization of a Lloyd's 

company to write fidelity and surety bond insurance. Put 

another way: Although the legislature has authorized 

Lloyd's companies to write fidelity~ and surety bond 

insurance, the legislature requires a corporate surety when 

public work is concerned. 

This conclusion is supported by the date of enactment 

of each statute. The provision for Lloyd's companies to 

write "fidelity and surety bond insurance" became law in 

1921. Acts 1921, 37th Leg., ch. 127, 55 1 & 3, at 238. The 

requirement that a "corporate surety" stand behind both a 

performance bond and a payment bond on behalf of a 

contractor doing public work became law in 1959. Acts 1959, 

56th Leg., ch. 93, 5 1, at 155. The legislature is presumed 

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Honorable David H. Cain - Page 4 (JM-923) 

to have known when it required a corporate surety that it 

had earlier authorized Lloyd's companies to write 

and surety bond insurance. 

fidelity 

See Garner v. Lumberton Ind. 

Sch. Dist., 430 S.w.2d 418, 423 (Tex. Civ. Austin 

1968, no writ). The legislature is 

APP. - 

intended to use the word 

also presumed to have 

"corporate" for a purpose. See 

Cameron v. Terre1 & Garrett. Inc., 618 S.W.2d 535, 540 (Tex. 

1981). Thus we can only conclude that the 

requirement of 1959 for a corporate surety for public 

special 

works 

controls over the general authorization in 1921 for a 

Lloyd's company to write fidelity and surety bond insurance. 

See State v. Easlev 404 S.W.2d 296 

Halsell v. Texas Watei Commission, su&, 

300 (Tex. 1966): 

380 S.W.2d at 15. 

SUMMARY 

The requirement in article 5160.A of 'a 

bond executed by a "corporate surety" authorized to do business in Texas is not satisfied 

by surety bond insurance issued by a Lloyd's 

company authorized to do business in Texas. 

,z[z& 

MATTOX 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

LOU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman,. Opinion Committee 

Prepared by F. Scott McCown 

Assistant Attorney General 

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