June 24, 1988

Honorable David H. Cain Opinion No. JM-923 Chairman Committee onTransportation Re: Whether anunincorTexas House ofRepresentatives porated association insurP. 0. Box 12068 ante carrier organized Austin, Texas 78769 under the Texas Lloyd's planmay serve as a l'corporate surety" under article 5160.A, V.T.C.S. (RQ-1308)

DearRepresentative Cain:

You askwhether anunincorporated association insurance carrier organized under the Texas Lloyd's Plan, Insurance Code, article 18.01 et sea., can serve as a "corporate surety" inproviding aperformance and apayment 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 intoa formal contract inexcess of $25,000 with this State, any department, board or agency thereof; or any county of this State, department, board or agency thereof; or anymunicipality of this State, department, board or agency thereof: or any school district inthis State, common or independent, or subdivision thereof; or any other governmental or quasi-governmental authority whether specifically named herein ornot, authorized under any law of this State, general or local, to enter into contractual agreements forthe construction, alteration orrepair of anypublic 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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statutory bonds as hereinafter prescribed, but no governmental authority may require a bond ifthe contract does not exceed the sum of $25,000. Each suchbond shall be executed bv acoroorate suretv orcoroorate sureties dulv authorized todobusiness inthis State. In the case ofcontracts of the State or a department, board, or agency thereof, the aforesaid bonds shall bepayable to the State and shall be approved by theAttorney General as to form. In case~ofall other contracts subject to this Act, the bonds shall be payable to the governmental awarding authority concerned, and shall be approved by itas to form. Any bond furnished by any prime contractor in an attempted compliance with thisAct 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 thework inaccordance with the plans, specifications, and contract documents. Saidbond 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, inthe prosecution of thework provided for insaid contract, for the use of each such claimant.
By its terms, as set forth inthe 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 tomake any insurance, except life insurance, on the Lloyd's plan, by executing articles of agreement expressing their purpose soto 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 filewith the Board of insurance Commissioners averified application for license setting forth and accompanied **by:**

. . . . (c)The kinds of insurance tobe effected, which kinds of insurance maybe as follows:

. , . . 7. Fidelity and suretvbonds insurance.

. . . . Thus, by its terms, the Insurance Code authorizes a Lloyd‘s company towrite "fidelity and surety bonds insurance."
Article 5160.A and the Insurance Code are in apparent conflict. In the case of anapparent 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.). Indoing so, the general provision iscontrolled 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). Asbetween article 5160.A and the Insurance Code, the special requirement ofa corporate surety therefore controls or limits the general authorization ofa Lloyd's company towrite 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 acorporate surety when public work isconcerned.
This conclusion is supported by thedate 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 ispresumed

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tohave known when itrequired a corporate surety that it had earlier authorized Lloyd's companies towrite and surety bond insurance. fidelity See Garner v. Lumberton Ind. Sch. Dist., 430 S.w.2d 418, 423 (Tex.Civ. Austin 1968, nowrit). The legislature is APP. - intended touse theword also presumed to have "corporate" for apurpose. 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 acorporate surety forpublicspecial works controls over the general authorization in 1921 for a Lloyd's company towrite 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 todobusiness inTexas isnot satisfied by surety bond insurance issued by a Lloyd's company authorized to dobusiness inTexas.



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MATTOX Attorney General ofTexas

MARY KELLER FirstAssistant Attorney General

LOUMCCREARY 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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