TEE ATTORNEY GENERAL 

OFTEXA~ 

Mr. John Oeorio, Chairnma 

Board of Insurance Coxmniasioners 

InternationalLife Building 

Austin, Texas 

Deer Mr. Osorio: 

opinion mo. ww-164 

Re: Construction of Article 14.25 

of the Insurance Coda af Texas 

as to what attorneye' fees and 

other defense expenses may be 

paid out of the mortuary or relief funds, subject to the approval of the Roara of Insurance 

Commissioners. 

Your recent request for an opinion of this department on 

the question as herein ateted has been received. 

We now quote from your letter as follows: 

"In view of the Pact that Article 14.25 provides 

that payments out of the mortuary fund for other than 

claims shall be subject to approval by the Board of Insurance Commissioners, we respectfully recluest yam 

opinion as to what is-meant by the statute in using 

the Language 'attorneys' fees and necessary expenees 

arisIng out of the defense, settlement or peym9nt of 

contested clalme'." 

Article 14.25 of the Insurance Code of Texas provides in 

pert as follars: 

"Assessments, when collected, shall be divided into 

at least two (2) funds. One (1) of these ehall be the 

Blortuery or relief fund, by whatever name it mey be 

called in the different associations, from which claims 

uader certificate shall be paid, and to .a limited extent 

the costs of defending contested claims, and nothing 

else; and the other fund shall be the expense fund from 

which e-es may be &mid. . -"I 

"Such associations shall provide in its by-laws 

for the portion of its assessments to be allocated to 

the mortuary or relief fund and may provide for the 

payment out of said mortuary or relief fund of attorneys' fees and necessary emees arising out of the 

defense, settlement or payment of contested claims. 
Hon. John Osorio, pge 2 (~~-164) 

_., - 

Any such pymant out of the mortuary or relief 

fund for other than claims ahall be subject to 

the approval of the Board of Insurance Conunissionera. 4, 

Article 14.30 provides in pert as follows: 

"It shall not be unlawful for an association 

to contest claims for valid reasons; but claims may 

not be contested for delay only or for capricious 

or inconsequential reasons, or to force settlement 

at less than full payment. Therefore, if liability 

is to ba denied on any claim, the association is 

hereby required to notify the claimant within sixty 

160) days after due proofs are received that the 

claim will not be paid, and failing to do so, it 

will be presumed as a mstter of law that liability 

has been accepted." 

These two Articles were formerly Sections I2 and 14 of 

Senate Bill No. 135 of the 46th Legislature, Regular Sessior, 1939; and 

we believe the legislative intent requires them to be construed together. 

The wording of the first paragraph of Article 14-25 makes 

it clear that only one class of claims is unconditionally payable out of 

the mortuary fund, and that is "claims under certificates". 

The statute provj.d.es further that, 'To a limited extent 

the costs of defending contested claims . . .(I may be paid out of such 

fund, and the sta.tute goes on to emphasize this limitation by adding, 

"and nothing else." 

This limited extent to which the costs of defending contested claims applies is defined more zlearly by the subseWent language 

of this statute, whfch provides that, . . . and may provide for the peymant out of said mortuary or relief funa of attorneys' fees and necessary 

expenses arising out of the defense, settlement or payment of contested 

claims." It therefore appears that the Legislature intended to limit the 

use of the mortuary funds to those attorneys 'fees and the necessary expanses only relating to the actual contested defense, or actual settlement 

or payment of the eontested claims. A further indication that this procedure was to be followed in the unusual defense situation and not as a 

regular procedure was given when the Legislature went further and provided 

that, "Any such payment out of tha mortuary or relief fund for other than 

claims shall be subject to the approval of the board of Insurance 

Commissioners." 

It therefore appears certain that the Legislature, in allowing certain costs to be taken out of the mortuary or relief fund 
- . . _ 

Hon. John Osorio, page 3 (~~-164) 

intended that these be strictly limited to type and character expressly 

stated, and that the Board of Inmrance Commissioners should retain tight