OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

eRumo.yM~ 

-- 

lionorabls J. P. Olbbr, Comdseioner 

Caaualtf fnruranoo Cd8si0n 

Board of fn8lIranor Commirdon~r8 

h8tin, T8X88 

-8r sirs opinion 100. O-4593 

88 br lf.ibl8 for a8- 

ty vfth the pmirionr 

CiYfl StabIt Of 

IPATIOEI DLADSE WITHOUT 00% 

Ho Oontfngent Lirbillt~, 

l?o poliayhol&r in this oorrganr ina-8 anr 

U8bllit 

Prombun $ 

othor than the DfJporft Promiu8 or 

aidi the ooqanp harlng roo@mulrted, 
Honorable f. P. Ulbbr, CommI88Ion~r, Paga 2 

and n0w hating intaot, 8 rr00 rurplu8 equal 

to tho 0apital stoak r8quIrod of a daaostlo 

8tOok ill8IW8llO8 OOlnpaAf traA8oOtiAg the 8ame. 

klxul of lnsurano8. Thl8 I8 In oooordanoo 

with the ocmpany'8 By-LaW8 and tha prod8iOA8 Of the MUtUd Ill8UT8UO8 tit Q88806 by 

th0 a3st LO(Ci8latU~. 1929, Fi'irrt 0811.d &W810~~. Pa&8 90, Chapter 40, S0otIon 10. 

“‘MtMal. Pal'tiOIpCitIOnt Th8 in8U.P.d 18, by 

rirta0 of thI8 polloy, a member of the oanpany, 8ubjeOt to the ~f;LaWS, rr?or~noe to 

rhioh 18 had, and 8 8ll be ontltlod to suoh 

unabrorbed DeporIt~ 8 r8mium or Divlbontl a8 

may be deolared b 

or Bxeoutir8 I 

the Board of DiT8OtOr8 

Gonau ttw, 8UbjeOt. horotor, 

to approval by thr Board or In8uraAoa &me 

ai88iOA.r8 Ot the State Or TOXa8 bOiOm bOIn6 paid.9 

‘ml8 brpartmont ha8 al80 plW80?1bed th8 rollOwIng 

18agurge to bo amd by a r8oIprooal erohangb when 

the l liglbIllty r~cplrementr are met: 

"'80 GCBPl'IRURt?T I3BIIDYt Lpo pol1oyhoXi or 

in thi8 tiohango inOIl& l Ay liability other 

than the bpo8It pnmlum or pm5Ium paid8 

the uohange harlug aaoaruleted and now harIng lntaot a tree surpl08 in the uouut dofined by Artlot 5026 a8 arndod br Ghaptrr 

8, Pam 4l7, Aots 46th b@blatPra 1939, 

Regular S88810nr Thlr l8 in aoaorlanoe dth 

the l xohangM &tiOlO# Of &r8Olll8nt 8od th8 

ptiviriona~ or the roion’od to ArtIolo (5026).t 

W8 are roqoltlng mmerou8 InquIrI88 .In oonnoot1cm 

with there prGV181On8. Wo, thrroiore, i~8peOtit.diy 

roquort Jrour opinion on thO iOuO*ing quO8tiOnt 

%% the 8vont that a mutual Io8uranao oodapany 

or a noiprooal or lntor-iMur0n00 0xohan@m i8- 

8~08 polioI oontaixhiag tho sppropriato iorogoing non-oontingent lirbllitr prwIrIon8 pm8orIbed by the department and boron tho oxpiratioa Of PO110188 thu8 188UO6, the mUtU81 iU8Ul-WLOO 

oompany or the no & p & -o ol rohang0 a l 88oomo8 in80lYMt, r0ul.d the polio oldor bo .lIable iOr 

a8ee88ment or for a oont.ngont P addltianal premIum?R 
Ifonorrblo 3. P. bibbr, UoxmI88ioner, Pago 3 

Tho l o t rofrrrrd to In the 8ooond 

pltr lOtt8r a8 "YlltUIl -8UanO8 et p8888d _ _ _-_- -_ - __ - - 

prragraph o? 

!g th? W8t Loglrlature, 1929, Flr#t OUlW Sblllon, page 90, chapter 40, 

smotlon 10". %8 &rtiCple 48&a-10, VeIPI10n’8 &tIOtatOd Civil 

StatUt08, jliOh ~tIO1~ I8 88 ?olloW8t 

Vho pOliOi 8hal.l provide ror a premium 

or promlum doporlt pqabl.0 in oarh, and l xoept 

a8 horeln prorlded tar a oontlngwnt premium at 

lea86 l qttal 60 the pre&mi or prelaium depO8it. 

St&oh a mutual oompaw may i8SUS a polloy wIthout 

a aontlngont promlum uhI10, but only while, It 

ha8 a 8urplu8 equal to the oapltal requirrd 0r 

a do3ne8tIo rtook in8Pr8nOO oompanf tranraotlng 

the 88M kinds o? inruranti, but anr 8u0h oompan~ 

my f88UO a poliof providing that the hol&r O? 

anr ruoh polior 8hall be liable ?Or no greater 

amount thau the premittm or premium dOpO8it expre88rd la the pollay. X? at any tlu thr abtitted l 88et8 are 1088 than tho uaoarnod premIw4 rebervo, other lIabIlit~o8 aad the required 81arplur~ 

the oomp8tty ehall Immediately oolleot upon pollOh8 with a ooatlngont premium a 8U??iOi@At proportionato part theno? to re8tore aaoh a88rt8, 

profldod no member 8hall be Uable ?or any part 

or suoh oontlngmt premium in 8x0088 o? the amount 

demanded within one par artor the tormlnatlon o? 

th8 QOliOr. The Board may, by written order, dlMot that QrOO0Oditl~8 60 MUtOM 8uOh a88Ot8 be 

do?onod durfq the time ifx.6 in ruoh OfbOr.* 

The ?I?th ~nggh o? pur latter roiorr to ArtiOh 5026, remoil’ anotated OIrll Qtatutrr (I8 mndod. Tho 

portiOn O? 8UOh & tiOll @ pplloable 60 thi8 qUO8tfOA, tOllOW8t 

1) 

. . . suoh ponr or attorney or 0th~ authority ououtod by the 8ub8orlberr at any ru0h 

l xohango 8hall provide that 8a0h 8ubroriben ohau 

be llablo, In addition to the premium or pnlirrr 

depO8it 8peOi?iOd iU the pOiiO3 OOUt?aOt, t0 a 

oontlngent lIabllIty equal in amount to omS~~- 

tlonal annual premium or premium dOpO8it. 

8Ub88l'ib@r8 at moh l xohange rely pZ'oVi6. bf amOement that the proalan or premium dWO8it 8pOOi?i@d 

In the pollor oontraet on all ?om8 a? in8uranoo 

exoept lI?e 8hall oonstltute their ontirr llabllIty t&o@ the l xehan$e while, but only while, 
Honorable t. P. Qibb8, Oommi88ion8r, Pag8 4 

the free 

l qua1 to 

pr+d* 

surplus of the reolprooal exohangcia 

Two mtt~a Th0tt8aa Dollar8 ((200,000)~ 

that I? suoh l xohange +8 not or tt 

not applylag to aonangr wormen~8 8ompen8atxon, 

emplomrrt llabllltf, or sontrsotr providing IndomnIty agaIn8t leg81 llabilltf to third per8on8, 

exoept l utoaoblle pub110 liability and ro rtf 

danu3gO which I8 not 8UbjoOt to the regu!at~n8 

Of the Intrr8tato Oommeror ~O~I8IBIOA, the Rallroad ComnI88lon 0r TeXa8, or other 8ImIlar bodler 

In the tarloue Statea, 8uoh exohange mnf proride 

by agreement that the premium or premium 60pO8it 

8peOi?I@& In the policy oontraot 8h811 oon8tItute 

the 8Ub80ribsrt8 OntiM llablllt~ through the @Iohange nhlle, but only whllo, It maintain8 a fro@ 

surplu8 of not lera than Fifty Thousand Dollar8 

($50,0001 if Otif On@ kina of iII8UNInOO 18 0Xohanged nIth an addItIOna Ten Thourand Dollar8 

(#lO,OO6) or rm rurplu8 for eeoh additIonal 

kind or In8uranao l x0h a ng(InoludIng 0a eatomobile pub110 liability and property damag8 whloh 

18 not 8ubjeat to the regulation8 0r tlm Inter 

8tate 0oEperoe &NUMi88iOtl, the Railroad aomnI8- 

8Ioa O? hXa8, or other 8Imilar boaI@ In the 

tarIou8 Stats8), but not more than One attar 

Thousand Dollar8 (#lOO,OOO) surplus 8hnll be roqulred~ provided, howrfer, that any dOM8tiO realprooal organIs prior to the l ffOOtidate V8 

of thir Act whioh ha8 born and 18 oxohanging Omtraot8 wltlsaut oontlngrnt liability an6 whIoh 

6008 not hate the ml.nlmm rurplw r*quInd br 

thlr Sootion to oxohange 8uoh eontraotr, mar oontinuo to exohangr oontraetr without oontlngent 

lIabIlIty until Dooembor Sl* X943, provided that 

*(a) On Deoember $1, 1939, Dooomber 31, 

194o,.~oe~mbor 31, 194l, aad Dosomber 31, 1942, 

it shell hato inorea8ed it8 rurplus by r88 

t@ 

OtiVe 

WOUAt8 0r twntprite (25) per oentum of he dirferenoe between the 8urplaa l ri8ting on DW@mbW 

31. 1938, and the rurplu8 herein required of 8 

reoIprooal before it i8 p0rPritt04 to 8XOhang@ OODtraotr without omtlngent liability; and 

m(b) At no time during eaoh oaleadar mar 

a? the period above re?errea to 8hall the 8urplu8 

. i 
Honorable J. P. Olbbr, Oollpi88Ioner, Paga 5 

be lesr than thlrtr (30) per oentum of the pnaIum8 altten during #rob 8uoh year1 and 

'(0) fil othor pXWi8IOn8 Of thi8 Aot 8hall 

b8 oomplled with; and 

*(a) xr 8uah reoIprooal rail8 to Inenare 

it8 8Pirp1U8 in aOOOrd8UOO with thi8 8Ub8OOtfOA, 

8uOh r8OfprOOal ehall b 8ttbJeot to the minImum 

8urplus a8 above-arntfonod, or dI8oontInue exohanging polio188 without oontlnent UabIlIt~. 

I) . . . . 

(I 

The brie? aooompanfing hour letter 8llttao8 to the 

Df86riOt hurt Oa88 O? Wrist 2iora-0~ Reoelver, f8. Trinity 

Portland Cement 00.. 0 t al, No. 51,& on the docket of the 

126th Df8triOt oourt a? TraYi Oounty, 'hxa8. The jml@nent 

br the a0m in thi8 OO80 WO8 entered x8r 1, 1933, and I8 or 

reoord In the 01~11 mlnutrr of said Court In Volume 50, page 

1. Thi8 @a88 oOntaln@d an frrua Involving a 8tatatorT porI8ion 8imilar to those oontainod In the 8bon uoted 8tatute 

8aId provlllon being Sootion 16a of Artlole 8308 of the Work-’ 

men'8 Oomp4nratIon L8w Aotr or 1917 a8 amen404 by the 42na 

Legi8latPre in 1939 whioh $8 a8 fOilOwN 

4300. 16a. Whonwu the ti8ooIatIon 8hcll 

h a lo l o eumula ted, at the end of any oalrndar fur, 

an admitted rurpla8 In 8x0088 or Inourred 108808, 

l xpen8e8 and unearned prmtdwm or other liabllltie8 amountin(l to tho 8UE or Two Hundred Thoaraad 

DO11U8 (#ZOO,OOO.OO) or EON* tho lIablllt~ of 

_ it8 member8 fO~a8808M#~t tttkd,r &'tiOlO 8308, 800. 

tfon 15 rha11 b8 rurpea(lod, and it 8hall b8 author&d t0 188U8 pOliOi UOt 8UbjeOt 60 688088. 

met&. It 8hall be the autr 08 the Board or Xn8tiran00 Qoamiulonus to 6*texain* promptly aftor the 

riling or tho annual Statement of thr AWooIation, 

whether or not '8aoh an amount of rurplur l xirtr 

@Ad if it find8 that it 6008, it rhall 80 8tat0 in 

a aertI?Ioate. Suoh oortifioato rhall remain in 

full for00 and a006 for one (1) fur or until 

8uoh the a8 a lator report to or l x88iaatIon bf 

the De rtxmnt of fn8uranro 8hall 8how the~8urplu8 

to be r 088 than Two HttndMd thourand ($200,000.00) 

Doll~r8, whennpon the Board or Sn8uranoe Ootdrdonor8 ahall oattool and nroko iraoh cwtI?loat@ 
Honorable f. P. ~ibb8,'ConmIs8Ioner, Page 6 

and requlro the A8soeIatIon to 18~ QOiiOf88 utbjsot to l 88088lUWt uttaer Art1010 8308, Seatlon 15, 

a8 ther were prior to the time when 8uoh 8urpla8 

of Two mta0a Thousand (r)2OO,OOO.OQ) bollar8 or' 

more war first aooumUlate4.~ 

prOvi8fOA, 

Purporting to aot In aoaordanre dth thlr 8tatutorr 

the hnbexz%ent8 Reolprooal A88OOiatlon of Rou8$,ton, 

Texa8, In 1929 8nd again Ih 1930 l ttaohed an endorsement to 

oontraot8 188UOd during ruoh year prwiaing for ‘8U8p@A8iOn Of 

liabilitr t0 I88b8W@tlt, rubrtantially a8 fOllOW8t 

"By tirtru of thr,aoo~mulatIon bf the Iclroelation at the end of the year iamedIately pro00aing the year of i88U8 of this oontraot of a 

aa5ittra 8arplae In 0x0088 or lnourrea 108808, 

oxpmwr and unerrnrd premiums amounting to more 

than #200,000.00 in aooordanoe wlth Seotlon 1641 

of put 3 and Sootion 2 of part 4 of Chapter 179, 

A&r of 194, Stat8 of Tex88, and/or a4 d8mamemtr thereof, and by virtue of authority of thb 

Ieruranoe Department of the State of T8z11, the 

home 0??1oo 8tato O? thI8 A88OOiatfOA, the llabllitr t0 a88e88WUt oi the 8UbsOribrr ttW@d in thin8 

oontraot 18 8U8QbAd@d attag the warrant oalendar 

par 8d for ruoh further period a8 tho A88ooiatlon rhall oontlnue to m8InteIn uaImpaIrod ruoh 

l rplue of more than $2OO,OOO.O0. 

=ROthiA& horeln ootttain@d 8hl11 be hold to 

waive, vary, altar or 8Xhnd any or the term8 l ud 

oondit3onr 0r thl8 oaatraat 8xoept 88 art.4 Iboi-8. 

WAttaohod to ma,r0rring a part 0r 00ntraot 

Ho. , f88U8d by the 8UbsOrib8r8 8t LMkr- 

~n~~~rooal A88oolatIon, Of 80U8tOnt Teu8, 

to 

a4 

, da;:& at Bowton, Texa8, th18 

The Lumbermbnt8 Reolprooal A88ooiation beoame in8olten.t. the Court’8 detemInatIon or the begin&kg a? In8olrenof being July 1, 1929 and the noolru n8 a polated 

J'u 31, 1930. Whbroupon, &he noeiter brought rui i in oau8e 

No. 51,667 mentioned above against the polI8fhold@r mombrr 

or the a88ooIation for juagmbnt levying l 8808umnt8 against 

8uoh meakr8 to m8k8 Up the de$iOit in th8.a8800iatiOZlt8 

?UAdl In order that the debt8 and ola¶.m8 l g a In8t it miight 
. . : 84.3 

Honorable J. P. Gibbs, ~OIUU&88IOMr, Page 7 

be paid. Some of the 40rendant8 plenara the above voted 

l ndor8ement 88 a d@ ?@ A8l gaIn8t 0 rtoorery or 8,uoh a88088meAt. 

It w88 found by the Court after hearing the Ql@naiAg8, oridenoe, and arguments, that euoh l ndor8emont we8 no bar to 

reooruy of l a8esaments by the reoelver In that partioular 

oaext, a8 rtatea in your brie?. The Court aid not a0netrao 

the 8tatute Or pa88 upon the effeot the endoreemont may hare 

had I? It h8d been validly l ttaahed to the pollo~ at a time 

when the re re8entatIon8 waited In 8uoh snaoreement rotaa 

hare re$lso t ed the true faot8 a8 to the amount or surplu8, 

but be886 It8 tIndIng that tho endornemontwa8 of no for08 

and l ??eo t upon eVid8S4J0 that ruoh endor8ement \W8 r0~40a 

UpOn ?a188 and~t~anaulent representations made by tho oompanr, 

the 8UlFplUs olaIined therein being, In faot, non-•ri8tont. 

Thii ?IudUg, even if we dieregard the faat that a 

‘Motrlot Court juaiplsnt alone, (there having been no appeal 

taken fran thir ti-ial) 18 wlthout'foroe a8 a preoedent and 

18 not bIndIng en any other oourt, renders this oa8e,- and 

other 0~8~8.arI8In~ out or thi8 oa86, 8u h 8 Southern orilnmental Irh work8 fni sorrow; 101 %W. h!a!. 936 and xorrou 

~8. Y&&hq Bkriaett .?brnIttuo Company, Ino., Sup. at. or. Ap. 

or Virginia, 4 S, Wtr, (26) 399, this last montlonrd 8a80 b8- 

ing One O?,the Oa888 Oft06 %Li your brie? (both Of th.Oe Oa808 

having held in eiroat that the queetlon o?,the valIdlty of 

the l zidorsement wad re8 aajuaio&*a in the trial oourt) o?' 

little or no~help~io~o~an8truin 

b0OoU80 lt~l@av~8.illlan8we~d t tz 

-the law on your qw8tIon~ 

e qae8t$on a8 to whet the @?- ,. 

root or the l ador8emont would hare beon had the wwmtad 

o~mplIaiiso with the'8tdtute been regular ana without fraad, 

~O&.&eitlo~.a8 we ooneoIre It EJ be 8tdtOd~ a8 

?ollowr~ If a .h~taa&~lnruranoo oempanf or a reolprooal or 

InterIn8aranor'~eroha~~ l88UO8 po1lole8 providing for nona88688ment or no p0ntI 

Y 

en6 lla'bIllt~, at a time when 8uOh 

oaganf, noIprooal- or nto*ln8uranoe l xohange ha8 in truth 

and In fa8t th~~trro,rurplw requirua to meet the QrO~i8fOn8 '. 

O? the 8t8tU~8~~‘WOU16 the holbr8 Of 8uoh pOsIOi88 be liable 

for a88088mont Or for *ontIngent addItIonal proaim In the 

want the oompanf. nofproaal or OXOhWig8,k@~e8 in8Olrent 

4rUIAg 6h0 ii?0 04 8UOh pOiiOi@8? 

we deem It tondaqtontal that QIXW%~~OSW often In8urattoe o'ontraot le a~osltrlot with rtatutor 

to 8uoh aontraot l ra lqtalla and munt n 

POW i 8iOA8 aQQlfin&J 

r e a to the pr0vl8loa8 

Of the 8tatUtb. xtt thi8 @OAA@OtiOtI pUW at6eAtiOtt 18 direOt@d 
Eonorablr t. P. Qlbb8, Ooamiaalonu, Pam 8 

to the following authority: 

Wtipplld4ona in a oontraot of inauranoo in 

oonfllat with, or re 

l lona, wh%oh l o l pp P 

u&mat 

ioablo 

to, l t~tutory,prorito anal fora a part oi 

the ooatraot, mat field to the atatuto, and arm 

lmalld, miner oontraota oaauot ohan@ l datin& 

rtatutorF lnn,w -Aamrioen latioaal Inaurmoa Conpany fee Tabor, 230 S. W, 397; Quoon Iaouranoo 

Oollgaay tar Jarter#on foe O-any, 64 Tox. 578. 

Sin60 tho uordlng of Artlol~ 4860a-10 dsallog with 

mutual lnauranoa oosupanioa la oubatantlall 

Artlolr 5026 Aoallq with reolprooala and L 

dlrrrrrnt from 

tor-lnaurano~ 

l o h a ng a a auoh , Artlolea will be treated aoparatolt la thir 

oplnlonr 

Thara are threa possible oonetruotlona of Art1018 

486Oa-10 am tar am l amo l pplloa to the oontlaipnt llabllltf 

0r poii0*0ia8r8~ The rb8t or thO80 00n8truotion8 wad 

hare the l tatato meaa that wh6n Oh& l rplua roaohaa the roqalred amouat aat forth lo the atatoto, no polloyhol~r, 

whefhor him pollrf k laauod prior to, or after tha time 

l uoh rurplaa lr roaohod, ahall be liable for any tarthrr 

aa~oramrntaj avan ir the 2-0pha l ur p fue baoma aired 

arrriq the tlm ror whioh the polioloa are iraw& iî% 

oplnioa thla lntm-protatlon la inoomot l lnao the itat:: 

rakoa no pro+lalon.rer roaovl~ the oocflnfpnt 1labllitJ 

l ttaohlng to pollrirr lraued ~rlor to the tiso that tho r6 

q r a lrl urplu d la naohrdi Morootu tha etatuto oontlaqoa 

l e r0u0r:' 

?fr at ray tlmo tha ablttod l aaota are laar 

than tho~anoarnod 

%%o last quoted pretlaion l peoiiylmg polLoloa with 

a oontlagent pramlam olouly lndloatea that thora Wy k outl tandiry fro olaaaea 0r polloleaj oao olaaa boaring a Oontingant llabllitr aad one olaaa without a ~ontlIle~~~~~;~iablllt~; 7, 

thit thi pol "tr o 

i00n4 00ti8tru0ti0n +0uld hm th0 aSmWe man 

ma laaud without eontin@nt llablkltr oarrf 
lfonorabla J. P. Gibbs, Oomaiaaloa~r~ Pago 9 

BUOh l xrmpf~lion for o!ilr ao long am the requlrad atwplua reaialaa Bnlmpalraa, thtta making tho l x o mp tltram o a ooating0ot 

l.s.tty dopoad upon the oontlauad l xlateaoo of the roqulrad 

The atatuta may8 la l iteot that the oaapaay~y 

la a ue l *poJlo* without a oontln4pot proadum whllo but onlf 

whll8, W nqulrad aurplua oxlata. It doom not ;a, that the 

l romptlon irem oontlngoat llablllt~ ehall oantlarrr whllo, but 

odlf whllo, tho nqulrad aurplua oxlata. It doom not apoolry 

any tlm6 whoa the l xoarptioa from oontlagoat llabllity ahall 

oaaaa, but apoolrlea only th& tlaw dIUlIIg whioh the oompany 

nar laaue pollolea without a oontlageat prenilua. In erdor to 

a do pthla t l oooad oonatruotloa it would be aeoeaaar~ to read 

into the atatuqd 'a prorlaloa that the l xomptloa rrau oontlagent llabllltf ahould oeaao wba the required l urplua beoomra 

lapaired. Suoh a oonatruotloa would do rlolenoo to the term 

o? thr atatutar 

The third #OtI8t?uOtlOA whloh we bellova to be in a+ 

oordanoa with the 

l tatuto mean that 

gin haulag polloloa with go oontiiuont .llabilltr or mny kl@d, 

and that ii at a later data, it beoame nooraiart to make fia 

l aaeaamont, auoh ~aaraaaoat oould not,ba mad6 on thoao polXolo8 

sly raaohod tho roqulrwl Jnlma l urplua 

on that auoh pollof la ~~O?oo aubjeot to 

Or oouraa, the oompaa~~a rl6ht to laauo 

auoh pollolra oeaaoa, at tha momat it8 l arploa’~~falla below the 

mpoir0a rinimr. 

Ii I&, ,thoiororo our oplnloa thaf &fs pxwlslona 

tprnirhaa by JOO ior prlnt~ late m&ual pollof ooatnotr 

should %a l moadod in part am tallon that’ .pmtlon of the 

rovlalon 

P 

ma4ingmao pollo~olaor in thla l ompaq laoura qr 

lablllty other lib&n tho 4opoalt proaium or proniua Raid” 

ahoula road l ubatantiall~ a8 tollowal atho holder of thla 

polioy l,aeura no llablllty other than the dapO8it g?OnirU or 

premium paid.* 

It la not anoommon ror a rutma oaapanr to urlta 

inauranao on the oaab plan am wall am on tha l raoaamoat plm. 

oooloy@a &lore on Xaauraaoo, 2nd M.,Vol. 2, PO 1576 reaA* 

la part am r0siorrt 

@mmra a oorpany la l uthorlud to do buainoaa 

0p1 the oa& plan am roll am on the mutual pla 
Honorable J. P. Qlbba, Ooamlaaloaer, Page 10 

846 

promlum notea siren by mmbora laaurlng on the 

latter plan aaf be l a a ea a to ed pay loaaea muatalaed on pollolea written.oa tho eaah plan.’ 

The thlra oonatruotioi above adopted la rupported 

by the oaae of Lewis we. Indepeqdeat Sohool Dlatrlot of Auatla 

deolded by the Oourt of Old1 bp&ala at Beaumont and reported 

in 147 S. W. (26) 298, s&loh oaae warn revereed b tho Supreme 

Oourt or Pexaa by oplnloa reported in 161 8. W.:.2d) I 450. The 

Lewla oaae warn a taxpa~r'a *ait to enJoin thr roh(ro1 dlatrlot 

m buyln6 a pollor la the Hlller* mutual Xnrurasoo Gompany 

OLL tho grountl t&t tho prorlaloa la Artlola 486Oa~~:~@itlae the 

l ohool dlatriot l xpreaa authorltf to do 80 warn la ~i~olatlan ot 

Seotlon 3, Artlole XI of the Texas Oonatltution roatllng am foll-1 

(avo oountJ, olty, or othrr mualolpal oat-poqtlon ahall hereafter broom* a l ubaorlber to the 

oapltal 0r aaf prltate 0orpoMtloa or aaaoottloa, 

or make any a miprlatlon or donatloa’to’the 8am, 

~0~ ln l ny wlPE a oan e lta’oredlt~ bat thla ahall not 

be ocaatrued to in l 4way afieot any obll(Wloa 

heretofore auidortakea pursueat to law." 

And la violation or S+otlon 52 ot A&isle IfI of auoh Oonatltutlon reading am follow81 

Vho kglalature &all hare no war to authorlao any oouty, olt 

oorporatloa or aubdlrir 

, 

f 

tom or ot r er polltloal 

on of tho State to Iend 

lta oredlt or to grant pub110 rone~ or thing et 

value in aid ~of, or to ray lndlrlaual, aaioolatlen 

or oorporatfon whtaoevor’l or to kooue a atookholder & auoh o.orporatlon, raaoolatloa or oompaay.w 

The Court or 01~11 Appn r&a held ‘that the purohaaa of the polloy war not a leadlag of the l oQo1 alatrlot~a orodlt and the?&- 

by, nsooaaarll~, hold that, the poUoy involved warn ioroter 

non-•ar*a*abl*. 'The Oourt l xpreaal~ adopted the tellowlILg 

l tateae~t fr o l m ppell*o*a brlett 

WThla polloy of laauraaoe la non-a8aeaaabla. 

lie rurtlxm pa-& oan ba l xaoted.* 
Honorable J. P. Olbba, Oommiaaloner, Paem 11 

And tho Oourt ta mthel aldt ? 

“In the pollo)r at laaui betorb am both on 

the law and on the taota, tho aohool dlatrlot 

oould aevu hare been oalled on to? say additional 

pa-at *a 

The ,Supreme Oourt rev*raed the Lowla *am* on the 

ground that tho polloyholdor waa la l rtoqt a atookholder but 

the court erld*atl~ agreed with tho Oourt 0r 01~11 Appaala 

am to the non-•aaoaaablllt~ of the pallor involved alnoe .the 

Oourt l Ipnaal~ #al&~ 

*It la true that the By-iawa provide that 

the llablllt~ o? eaoh pollo~older la limited 00 

ad detem.laed to be the armouat of depoalt QPOmlpr apoolrled in tho pollor laaued to auoh polloy holdarr.~ 

It la our oplnioa, themtore, thet tho holder or a 

polloy la a mutual inauranoe oompaay whioh polloy pro-f1468 

that lt ahall bear no ooatlaigeut liability and diloh warn lasued at a time whoa the oompaay had in truth and la iaot the 

?ree aurplua reqalrod by the l ta tutala , not llablo ror aareaaaont or to? oontlngeat addltloaal prerahm, even thotlgh 

the mutual oompaay beoomea laaolreat durlag tha life of t;Be 

QOllO~. 

Suoh an laterpretatloa mafaeem at firat bluah to 

ba tmfdlr to thorn. pollo~ldera whore pollolea were laaued 

prior to the attalmeat~o? the mqulred a= lo8 and whoao 

polleloa thonroro bear a ooatlageat llabll~t~. On tho other 

hand, tho mtrU1 oompaay’a l blllty to aell lnapraaoe without 

oontinpgnt llablllt~ might gtsatly aid la the 8816 o? l$a 

olleiea 

1 

end the growth ot the oanpanf and thus benetlt the 

oldera of l aaoraable pollolea by reduoiagth~ ohaaoea that 

their mntlnpnt lleblllt~ would over be bA?O?OO& 

Artlola 5026, aupra, dealing with later-laauraaoe 

exohaagaa and reolprooala l peolrloa the length ot flue durl.4 

whloh the l xemptloa troxn ooatlngent llablllty th*reln provi464 ior ahall oxlat. The statute ram la eiioot that the 

p r a a +m or p r a m& depoalt ta m M J by l @-aeamt, b e made the o a - 

tlra llabilltq o? the aubaorlkr, while, but only w&ile, the 

free aurplua of the roolprooal or inter-lnaurame l xohaa@e 18 
. 

‘* Hoaorablo S. P. Olbba, Oommlial~aer, Page 12 

f-348 

0 aal to 4200,000.OO. 

1 e 

Thus the exemption rrom oontlageat 

l blllty 1. l xpreaal~ arde to depead upon the l oatlauan** 

or the required aurplum. 

The olause met out in ~our.letter whloh la preaorlbod br Jour department for use in tho poll*lea or reolprooal ad inter-laaunnoo exohangea ahould thare?*re be 

altered or supplemented to ahow that the l xerptlon from eontln@nt liability oeaaea whoa the re 

irpalrad. r 

lrea marplum beoomea 

We au&&eat that auoh pror aloa would be more aabl taatlall~ la l ooordaaoe with the atatuto li a olauae to the 

tallowing offoot be added thereto: 

9ut tho exe8ptlon ?rom oontlngrat llablllt~ 

heroin proridod for ahall oontlauo only l o lon( 

am tbia exohaage maint*lna the rreo awplua required br the maid Artlola 5026.* 

Xt ad&it be Bald that aaoh a oonatruotlon or Artl016 5026 leatea the exemption from *aatlagat llablllty or 

no praotloal kaeilt to the polloyholder alnoe the l remptlon 

ooatlau*a only 80 loag am a r-0 aurplue 0r $200,000.00 la 

melntalaod end aIaoe am a praotloal matter no~~oooealoa oould 

l rl.. during auoh tlma whloh wuld require the la+ 

r” 

got . 

an aaseaament again& the ~enbera o? the reolprooL ,?or laterlaauranoe exohaw, and thus ths l xemptloa la la ioroe only 

P 

urlng a t&e when it la not aooded b tho 

t la true that Arti*l* 11 o? the Rev I P 

olloyholdera. 

aed 0 rlt Statubea may8 

*A trmapoaltlon 0r worde and olauae* mar be 

peaortea to tien the l enteaoe or olaiae la ulthout mea nlng,it a r l taad&w 

Art1010 11 la a ~neral rule ot atatutorr oonatruotloa lald.dam la the geaoral protlaloaa of the Roti..& 01~11 

Statuter. 

We are unable to mar that the wordlag o? Art1010 

5028 18 without meaalang beoawo th0 WOrdb u8bd ooaver a dbflalto idea or latentloa o? the Legislature, even thbugh auoh 

oxpnaaod intention or rule ham little or no Q~O8iOel of-. 

root. We do not foal authorlred to resort to a traa8poaiti~a 

of word8 la order to give tho statute more praofloal l ??eo8. 

Iu l ooordaaoe with thla holdlng pu are ulrleed am 

?ollowt 

1. The owner oj n polloy lasued by a @ml oompanf 

providing ror ma exemptimfkan oontlngeat liability and properly 
Eoaorable J. P, Gibbs, Uoxmlaaloaer , Pa,ge lj 

Iaaued under t&e term&i ot brtlol@ 486Oa-10 note? booomer 

liable ?or the ooatiageat promiua eet out in auoh Artlola. 

2, Tho holder o? any polloy in a roolprooal or 

later-laeuraaoe l xohang ta liable for the oontlngent preQ~~EI provided in drtlole 5026 at any time tho au-plum or 

auoh reolprooal or laterlaaunnoe oxohaap dorm not moot 

the rrinlmum requlrementa am met out la auoh Artiole. 

3. The prorlalona of aw polloy governed by Artlale 5026 ar+ArtIole 4860a-10 that are In oon?Uot with and 

repwaat,to auoh ArtIoloa are Iawlld ad not blqlng da 

otther perty to the Iasuraao* oontraot. 

We trust this opinion la a aurrloleat anewer to 

hour problem. 

Your8 very tmly 

A’lTORWRX (BoQ1LRAL orT5AB 

Asalatant