### 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 defenseexpenses may be paid out of the mortuary or relief funds, subjectto the approval of the Roara of Insurance Commissioners. Your recent requestfor an opinionof this department on the question

as herein ateted

has been received. We now quote from your letteras follows: "In view of the Pact that Article 14.25 provides that payments

out of the mortuaryfund 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 arisIngout of the defense, settlement

or peym9ntof contested

clalme'." Article 14.25 of the Insurance Code of Texas providesin 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 limitedextent the costs of defending contested

claims,

and nothing else; and the other fund shallbe the expensefund from which e-es may be &mid.
. -"I "Suchassociations

shall provide in its by-laws for the portionof its assessments to be allocated

to the mortuary

or relief fund and may providefor the paymentout of said mortuary or relief fund of attorneys' fees and necessary emees arisingout of the defense,settlement or paymentof contested claims.Hon. John Osorio,pge 2 

### (~~-164) _., -

Any such pymant out of the mortuary or relief fund for other than claimsahall be subjectto the approval

of the Board of Insurance Conunissionera. 4, Article 

### 14.30

providesin pert as follows: "It shall not be unlawfulfor an association to contestclaims 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 deniedon any claim, the association is hereby required

to notify the claimant within sixty 

### 160) days after due proofs are received that the claimwill 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 

### 46thLegislature, Regular Sessior,



### 1939; and we believethe legislative intentrequires

them to be construed together. The wording of the first paragraph of Article 14-25makes it clear that only one class of claims is unconditionally payableout 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 nothingelse."

This limitedextent to which the costs of defendingcontested claimsapplies is defined more zlearly

by the subseWent language of this statute,

whfch providesthat,
. . . and may providefor the peymant out of 

### said mortuary or relief

### funa of attorneys' fees and necessary expenses

arisingout of the defense, settlement

or paymentof contested claims." It therefore appearsthat the Legislature intended

to limit the use of the mortuary



### funds to those attorneys ' fees and the necessaryexpanses only relatingto the actual contested defense,

or actual settlement or paymentof the eontested claims. A further indication that this procedure was to be followedin the unusualdefensesituation and not as a regular

procedure

was given

when the Legislature went furtherand provided that, "Any such paymentout 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 certainthat the Legislature, in allowing certain

costs to be taken out of the mortuaryor 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 shouldretain tight