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Honorable Wm. Hunter McLean Opinion No. C- 167 

Chairman, State Board of Insurance 

1110 San Jacinto Re: Reconsideration of 

Austin 14, Texas Opinion S-179 

Dear Mr. McLean: 

Your recent opinion request states that the State Board of Insurance now has under consideration insertion of the following 

rule in the Texas General Basis Schedules: 

"DEFERRED PAYMENT OF PREMIUMS. Unless otherwise specifically provided in the General Basis 

Schedules, interest of 6s per annum shall apply 

to all premium payments deferred to an agreed 

stipulated date. This provision, however, is 

not intended to affect the usual customary open 

accounts." 

On October 22, 1955, the then Attorney General issued Opinion 

No. S-179, summarized as follows: 

"The Board of Insurance Commissioners of the 

State of Texas does not have the authority to 

regulate'the rate of Interest charged on deferred 

premiums." 

Opinion No. S-179 is based upon those portions of Articles 

5.25 and 5.42, Texas Insurance Code, quoted as follows: 

"Art. 5.25. Board Shall Fix Rates 

The Board of Insurance Commissioners shall 

have the sole and exclusive power and authority 

and it shall be its duty to prescribe, fix, determine and promulgate the-rates of premiums to be 

charged and collected by Sire insurance comoanles 

transacting business in-this State. Said Board 

shall also have authority to alter or amend any 

and all such rates of premiums so fixed and determined and adopted by it, and 70 raise. or lower 

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Hon. Wm. Hunter McLean, Page 2 (C- 167 ) 

the same, 

vided." 

or any part thereof, as herein pro- 

(Emphasis supplied) 

"Art. 5.42. Not Retroactive 

The provisions of this subchapter shall 

not deal with the collection of premiums, but 

each company shall be permitted to make such 

roles and regulations as it may deem just between the company, its agents, and its policyholders; and no bona fide extension of credit 

shall be construed as a discrimination, or in 

violation of the provisions of this subchapter." 

This opinion concludes by holding that the Board "does not have the 

authority to regulate the rate of interest charged by companies on 

deferred premiums, as the amount of interest charged is not a part 

of the policy premium determined by the Board, but constitutes a 

charge separate and apart from the pollcg~ premium. . .' 

We are not directed to any statute purporting to give the 

State Board of Insurance authority to regulate the rate of interest 

to be charged on deferred premiums on fire insurance, On the contrary, Articles 5.25 and 5.26, Texas Insurance Code, ive the Board 

authority to regulate premium rates, while Article 5. 8 2 constitutes 

express legislative permission for the deferment of premium payments and the adoption of regulations by each insurance company 

concerning the collection of such premiums. 

In the case of Commercial Standard Insurance Company v. Board 

of Insurance Cornmissloners, 34 Y W . 2a 343 (Cl ~.APP. 1930 

The i 

error ref.), 

ssue before the Court was whether or not the Board Lad authority to promulgate an order fixing the amount of commissions which 

fire insurance companies night pay to their local agents. The 

Court noted the statutes controlling the regulation of fire insurante (now subchapter C of Chapter 5 of the Insurance Code) and 

stated that: 

"The statutes vest in said Board very extensive and exclusive powers over premium rates 

and provide for securing information on which 

to fix, alter, amend, or modify sane.” 

This is still true of these statutes. In the course of its 

opinion denying the Board's authority to fix the amount of commission, the Court went on to hold as follows: 

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. . 

Hon. Wn, Hunter McLean, Page 3 (~C- 167 ,) 

"In all instances, however, such powers relate to fixing maximum emium-rates;. and. nowhere is anv exoress oritv given bv law to 

regulate or"contro1 any of the items, elements, 

or charges, entering into or going to make up 

the aggregate premium rate. 

,I 

. . . 

11 

. . .these statutes, having undertaken in 

considerable detail to prescribe the powers 

and duties of the Board relative to such maximum rate only, without giving authority t-em 

tofix or regulate the different elements of 

expense entering into that rate, must be construed as a legislative denial of such power." 

The Court further held: 

"The Board can exercise only the authority 

conferred upon it by law 'in clear and unnistakable terms, and will not be deemed to be 

given by implication, nor can it be extended by 

inference, but must be strictly construed.' 51 

C.J. 56. State v. Robinson (Tex.Sup.), 30 S.W.2d 

297." IEmphasis supplied) 

Had the Legislature desired to confer authority upon the Board 

to regulate or specify interest rates charged upon deferred premiums, 

it easily could have done so. Instead, Article 5.42 has not been 

amended since the release of Opinion No. S-179, some eight years 

ago. 

In view of the foregoing authorities and in the absence of any 

language of the Insurance Code purporting to give the Board authority 

to regulate rates of interest upon deferred premiums, we affirm the 

holding of Opinion No. S-179 and respectfully advise you that the 

State Board of Insurance does not have the authority to promulgate 

the order set out in your opinion request. 

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Hon. Wm. Hunter McLean, Page 4 (C- 167 ) 

SUMMARY 

The StateBoard of Insurance does not 

have the authority to regulate the rate of 

Interest charges on deferred premium payments. Opinion No, S-179 is affirmed. 

Yours very truly, 

WAGGONER CARR 

Attorney General of Texas 

B 

DDM/snd 

APPROVED: 

Opinion Committee 

W. V. Geppert, Chairman 

Joe R. Long 

C. L. Snow, Jr. 

Howard Fender 

Gordon Appleman 

APPROVED FOR THE ATTORNEY GENERAL 

BY: Stanton Stone 

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