Honorable Garland A. Smith 

Casualty Insurance Commissioner 

Board of Insurance Commissioners 

Austin, Texas 

Dear Sir: 

Opinion No; S;35 

Re: The necessity that automobile deakrs who are 

attorneys-in-fact for 

Lloyds be licensed as insurance agents. 

Your request for an opinion reads: 

“During the’past few years several Lloyds have operated under a pkn permitting credit dealers, .principally 

in the automobile field, to write insurance in connection 

with the credit transactions. The general plan was that 

the dealers have been appointed ‘attorneys-in-fact’ of the 

Lloyds and have agreed that the dealers Would reimburse 

their Lloyd6 on losses written through their dealerships 

up to a specified.percentage of the premtums received, 

normally about 80%: it the losses ‘were .-less ~than the 

agreed percentage of the premiums the difference would 

be retained by the deakr. The funds over the agreed percentage.. of course.~ would be. paid to the Lloyds. 

*Usually the powers oft attorney convey to the dealers full power and authority to act for the underwriters $n 

all inatters.,except to receive .service~of~.citatiod. -in .the 

operation of the Lloyds, most~of the statuto&y duties and 

privileges of the attorney- or attorneys-in-fact are re+ 

served and exercised by the managmg official or officials 

of the Lloyds, named by power of attorney from+he undcrwriters as provided in Article 18.03. For instance, the 

dealer attorneys-in-fact ares not s,ignatories to the original 

application .to transact.business mentioned in Article l8.03, 

nor to the renewal applications from year to year..descrihed 

in Article ,18.04,; and no license.~of any hind isever ~k+sued:, 

to them. They .ara not a party t,o the joint co&o1 ~agreemeut 

required by Article, 18.10, nor do they participate iri the filing of the annual statement~piescribed ,in Article 18.12 Citation served on tbe,Chairman ,of the Board as alternate agent ,’ 

for service set ,out in Article .l8.17 is, never,forwarded.-to 

‘.. 
Hon. Garland A. Smith, page 2 (S-35) 

them; nor does the Board treat with them in the giving 

of notice required by the Board in Artic.le 18.18. 

“The dealer attorneys-in-fact have claimed exemption from the Solicitors and Recording Agenta Act, 

Article 21.14, by virtue of Paragraph (e), Section 20 of 

the Article, which exempts ‘the actual attorney in fact 

for any Lloyds.’ Many, if not the majority, of the dealer attorneys-in-fact are not actively engaged in the soliciting or writing of insurance from the public generally, and, in many .cases, less than 25% of thir tdtal volume of premiums is derived from persons other than 

themselves and from property other than that on which 

they control the placing of insurance through ownership 

of mortgage, sale, family relationship or employment. 

‘Your Department had before it the related question concerning deputy attorneys-in-fact, and issued 

opinion approved June 27, 1939 by Mr. Gerald C. Mann, 

Attorney General of Texas, written by Mr. Ardell williams. Assistant Attorney General, to Mr. Marvin I%& 

Fire Insurance Commissioner. At that timi Article 

5062a. Section 12, Paragraph (e). exempted from A.&- 

title ,5062a ‘the attorney-in-fact for any Lloydn.’ In 

1941 present Article 21.14 was enacted, similar In 

wny respects to Article 5062a, and in thelatter the 

corresponding exemption is set out in .&ction 20. Paragraph (e) to ‘the actual attorney in fatit fork any Lloyds.’ 

(Underlining addec 

“There is considerable question in the m&s of 

the Board as to whether the dealer attorneys-in-fact 

are. in the circumstances, exempt from $he provisions 

and requirements of Article 21.14. Our information is 

that the dealer attorneys-in-fact are performing substantially the same duties as insurance agents. Employment of the wqrd “actual” in Section 20 (e) which 

did not appear in the corresponding exemption in Artitle 5062a. is persuasive that the L-e&l&tire intended 

to restrict the e%emption to the attorney- or attorneysin-fact whose privileges and obligations are actually 

exercised in the manner set out in Articles 18.03. 18.04, 

18.10, 18.12. 18.17 and 18.18. 

“Will you please advise me whether the dealer 

atttirneyslin-fact as above described should be licensed 

by this Department as insurance agents as prescribed 

by Article 2 1.14. or whether they qualify under the exemption oft Section 20. Paragraph (e) of Article 21.14 
Hon. Garland A. Smith, page 3 (S-35) 

and are thus relievbd of the necessity of being licensed 

as insurance agents 7‘ 

Your specific question is whether such “dealers’, principally automobile dealers, are exempt frpm the license requirement 

of Article 21.14 of the Insurance Code [Article 5062b, V.C.S.]l in 

view of the express exemption in Section 20 (Id.] of “+&e actual attorney in fact for any Lloydb.” 

Article 21.14 (Article 5062b] provides in part: 

“SfC. 1. &EEeS Of Agents. - Insurance Agents, 

as that term is defined in the laws of this State, shall 

for the purpose of this article be divided into t+vo classes: Local Recording Agents and Solicitors. 

-Sec. 2.;Definitions; Certain Orders, Societies. 

or AsEociationE Not Affected. - By the term ‘Local 

Recording Agent’ is meant a person or firm engaged 

in soliciting and writing insurance, being authorized 

by an insurance company or insurance.carrier. including fidelity and surety companies, to solicit business 

and to write, sign, execttte, and deliver policies of insurance, and to bind companies on insurance risks, 

and who maintain an office and a record of such business and the transactions which are involved, who collect premiums on such business and otherwise perform 

the customary duties of a local recording agent representing an insurance carrier in’its relation with the public; 

or a person or firm engaged in soliciting and writing insurance, being .authori!zed by an insurance company or 

insurance carrier, includir:g fidelity and surety companies, 

to solicit business’, and to forward applications for insurance to the home office of the insurance companies and 

insurance carriers, where the insurance company’s and 

insurance carrier’s general plan of operation in this State 

provides for the appointment and compensation of agents 

r 

Statutory references in this opinion are to the “Insurance Code“ 

enacted as Senate Bill 236, Acts 52nd Leg., 1951, unless otherwise indicated. Corresponding references to Vernon’s Civil Statutes in effect 

prior to the effective date of Senate Bill 236, and corresponding to the 

statutory references in your request, are noted where practicable .in 

brackets following such references. Section 2 of Senate Bill 236 provides: 

“Substantial Law Preserved. - Nothing contained in this 

Act shall be held or construed to effect any EUk+3bmtii’e change, 1 

in the laws existing prior to the passage~of this Act + ‘. t * 
Hon. Garland A. Smith, page 4 (S-35) 

for insurance and for the execution of policies of insurance by the home office of the ins’urance company 

or insurance carrier, or by a supervisoryoffice of 

such insurance company or insurance carrier, and 

who maintain.an office and a record of such business 

and then transactions which are involved, and who callect premiums on such business and otherwise qualify and perform the customary duties of a Local recording agent representing dn insurance carrier in its relation with the public. 

Y 

. . . 

“Where reference is made in this article to 

‘Company’ or ‘Ca:rrier’ such reference means any 

insurance company, corporation, inter-insurance 

exchange, mutual, reciprocal, association, Lloydsl 

or other insurance carrier licensed to transact 

business in the State of Texas other than as excepkd 

herein. 

Y 

. * . 

“Sec. 4. Acting Without License Fokbidded. - 

It shall be unlawful for any person or firm or partnership to act as a local recording agent or solicitor 

in procuring businers for any insurance company, 

corporation, interinsurance e3~chk@e~ mutual, raciprocal, association, Lloyde or other insurance carrier, until he shall haveice the license provided 

for herein. 

“Sec. 5. Active Agents or Solicitors Only to Be 

Licensed. - No license shali be granted to any person,. 

firm or partnership, either aBr‘a local recording agent 

or solicitor, for the purpose OrE writing any form of insurance, unlesd it is-found by the E?oard~d~~fxhtrance 

Commisnioners that such person or firm is, or intends 

to be, actively engaged in the s~ulicitin~ or writing of 

insurance from the public generally; that each person 

or individual of a ,firm is a reside& of Texas. of good 

character and good reputation, wo~thay of a license, and 

is to be actively engaged in good faith in ,the business 

of insurance, and that application is not being made in 

order to evade the laws Bgainst rebating and diecrimination either for the applicant or for some other person. 

Emphasis ours throughout t-his opinion. 
Hon. Garland A. Smith. page 5 (S-35) 

Nothing herein contained ahall prohibit hia ineuring 

his own property or properties in which he has an 

Mere& but it is the ‘intent of this section to prohibit coercion of inauraace and to preserve to each 

citizen W right to chooee hi8 owwagent or u3ance 

carrier, and to prohibit th& licensing of an a ividual 

or firm to engage in the insurance burineaa principally to handlo bWneaa which ,b controls only thr~ough 

ownershtp; mortgago or sale. family relationship or, 

employment, which shall be taken to mean that an applicant who is maWag an original application for license shall show the Board of Irmoraace Commissioners 

that he has a boaa fide intenti~ to engage ia business 

in which at leaet tvmitpfive .(25$).per cent of the total 

volume of prcmfwnu mbll be derived from persons 

other than hiimelf and from ptoparty other than that 

on which the ipplicant l hall~control the p 

!ir 

ing of insuraaca through wrship. mortgage. ma , family relationehip or employment: and which shall be taken to 

mean, iu the case 4t application for renewal of license, 

that at lea& iwenty-five (25%) per cent of qpplicafrt’s 

total vohum d pnmkme, dwekrg the year preceding 

.such application foF P enewal, ehll have been derived 

from pmon8 other than Mmsdf and from rj&OpQFty 

other than that on which the applicant contaomd the 

placing Oa inaura~e thr@u&h ownership, mortgage, 

sale, faamUy PelatiasaSh4p 03 employment. 

2340; 20. Life, Health a&d Accident bodarance, 

TaxQpMcable Ws O&W ExcaptSoaa. - No prtieions of 

thie as&&a &all apply to the Life, Health l aad AWLdent hsosarms bua6nawe or the Life. Health and A&ident De Btmont of Mm compamtem engaged therein, 

rfm eha c 1 it 8pply t0 any Of the foll@wimgs 33aap4ly: 
Hon. Garland A. Smith, page 6 (S-35) 

Under the definition of ‘Company’ or “Carrier” in Section 2, and under the terms of Section 4. a person who shall “act as a 

Local Recording Agent or Solicitor in procuring business.for any . . . 

Lloyds’ is required to have a license under Article 21.14. Since thesame statute, in Section 20.. expressly exempts from its requirements 

“the actual attorney in fact for any Ll6w.’ the statute obviously contemplates a distinction between such Ag’ent or Solicitors and such “attorney in fact.” The fact that the tigidnture expressly exempts such 

“attorney in facts also impliedly recognizee that the attorney in fact 

may function in some respec+,.as a Local Recording Agent or Solicitor. and, except for the exem@on, would be required to obtain a license 

under Article 21.14. The late Chief Justice Alexander, while sitting on 

the Waco Court of ,Civil Appeals, wrote in 1931. “under the law. all 

agents of an insurance company are required to procure a license from 

the Insurance Commissioner regardless of the extent of thkir authoritv.” 

Great American Casualty Comp&y vs. Eichelberger.,. 37.SiW.2d ,105O ’ 

ex. Clv. App, 1931 s error re . . 

After studying S+ion 2. it is sufficiently clear. as to what 

are the characteristic functiona and authority of a Local Recording 

Agent or Solicitor. His status, under the siatute, is determined not’ 

only by the authority granted him by the Company or Carrier, but also 

by what he actually does. Jn this regard, Section 4 does not in terms 

prohibit the appoimment of an unRcen+d person as, an Agent or Solicitor. To “act”~as a Local Recording Agent or Solicitor without a 

license “in procuring businessa is prohibited. The policy thus indicated 

is significant since consistency dictates that only an “attorney in fact” 

who.+cts or functions as such is intended to be exempt. 

it’ia t,o be presumed that the Legislature created the ,exemption in the light of existing stat.utes regulating the ,functions of Lloyd6 

organizations. especially where the functions and duties of attorneys in 

fact are specifically treated, regulated and recognized. 

In McBride vi Clayton, 140 Tex. 71, 166 S.W.Zd 125 (1942). 

the court quoted the following language from 59 C.J., p. 1038, 0~616: 

“AR statutes are presumed~ to be or&ted by the 

LegisAature with full hnowledge of the existing condition 

of the law and with re,ference to it. They are therefore 

t.o be construed in connection and in harmony with the existing Law. and as a part of a general and uniform .system 

of jurisprudence, and their meaning and effect is to be determined in connection. not only with the common law and 

the constitution, but. also with reference to other statutes 

and the decisions of the courts.* 

Article 21.14 [ was enacted in 1941. At that,time 

Articles 18.01 through 18.24 [ 501 through 5023a] comprised most of 
. . 

Hon. Garland A. Smith. page 7 (S-35: 

the statutes on tke subject of Lloyds Plan insurance, most of which 

articles were carried forward, as amended, from Ckapter 19, of Title 

78. Revised Civil Statutes of 1925, headed “Lloyds Plan.” These atatutes, upon careful study, contain provisions which ahoW tke nature of 

Lloyd8 Plan insurance and tke functions of tke attorney in fact in connection therewith as authorized in Texas. 

The’tarm *Lloyda* or ‘“LLloyds Plan” as used in tke statutes ia generally descriptive of an authorized metkod by which individuals acting collectively may underwrite large numbers of insurance 

risks and at the same time each may limit kis individual liability to 

tke insured6 and to tke otbdr undeaw%ecrs to a designated sum. Tke 

individual underwriter, like a stocltkoldar in a corporationl may venture 

only tke ampunt to which he iadividually subscribes. He mey limit kis 

total liability to tke persons insured tc tke proportionrt4 prt of any loss 

which kis part of a guaranty fund baars to tka total guaranty fnnd contributed by the eeveral underwritesrz. A&&de 18.13. Tke term “Lloyds” 

is also sometimes used to designata tka place at which tke business is 

to be conducted apd sqmatimaa as descriptive of the insurance concern 

organized and doing business on the Lloyds Plan. 

In order to effect Insurance Q~B the Llo9ds Plan tke statute& require tke undemifcrs to executa opticles d 8greement expressing their purpose to do LO and ta c0mpl9 with t&a reqnirements of the 

statutes governing Lloyds’ ar.ganizatinno, Articla 18.01. Article lg.02 

authorizes pclicies of insurance tz be axa~~~@da 

DL 

. . . by an ottcrney or by attzrneyz in fact 

or otker representative. hereby de6ifpatd ‘ato 

torneye . e em 

on.behaif of tke underwriters undar a pz~ar cf attcrnsy. 

A license is raqufaad by Art&lea lg.85 and fg.(M Whi6h 

may be renzwed annually ug~la a akcwing by tka undorwritsrs ob CQRXW 

pliance with .the law. Tke licenao is8 kcwavar~ issued tc tke attorney 

in fact whose appRcati@z is required to zat f0ztk cr include: 

“(a) Thi -me a8 tke attwmy ati the title 

undarwkick the business is tu be emu&tad 0 0 0 

“(d) A copy of each b&m @4? @Jr CEaatract by WI&E oxxok &%e?Mans~e 8s ti bQ effeeti. 
Hon. Garland A. Smith. page 8 (S-35) 

“(e) A copy of the form of power of attorney 

by virtue of which the attorney is to act for and bind 

the several underwriters and a copy of tke articles 

of agreement entered into between the underwriters 

themselves and the attorney. 

“(f) The names and addrasser:of all underwriters, whose number shall be not less than ten. 

“(g) A financial statement showing in detail the assets contributed or accumulated in the 

hands of the attorneys in fact, .coinmittee of underwriters, trustees and/or other officers of such 

underwriters at Lloyd’s, together with the liabilities incurred and outstanding and the income received and disbursements made by tke attorney 

for the underwriters. 

“(k) An instrument executed by each and 

all of tko underwriters specially empowering tke 

attorney to accept services of process for each 

underwriter inany action on any policy or contract of insurance and an instrument fro@ the attorney to suck Board delegating tke attorney’s 

powers in this respect. to suck Board.” 

Aswe construe tkese statutes, permission to operate on 

the Lloyds Pia~n may only be obtained by and througk an attorney in fact 

who holis tke necessary power of attorney from the required group of 

underwriters, and who meets tke other requirements for tke operation 

of a Lloyds. We construe such an attorney in fact to be specifically the 

attorney in fact who makes the initia: filing for a group desiring to operate a Lloyds and who obtains tke license as such attorney in fact, and 

that he is tube only %ctual attorney in fact” for a Lloyds witb,in tke maaning of Article 21.14. 

Tke application and license are primarily for the benefit 

of the comzern. No provision is xnade for additional licens,eo as to the 

same concern in order to enable additional attorneys in fact. to act for 

the same concern at tke same place of business since tke statute is not 

intended to authorize a merely personal license to an attorney in fact. 

In otker words, the license provided for is granted tkrou h the attorney 

in fact to tke organization. The license c~ontinues m -----% opera xon witk ih,e 

continuing existence of the organization regardless of ckanges in tb~e 

personnel of the individual underwriters or tke attorney in fact. Unless 

the aitorney in fact be so named and designated in the original license, : 

it is essentaa> that ~authority to act as an attorney in fact for the organization be found elsewhere in tke statutes. 
Hon, Garland A. Smith, page 9 (S-35) 

Article 18.14 piovides: 

” 

. . C .tke acts of the duly appointed deputy 

or substitute attorney of any attorney licensed 

under this chapter accepting powers of attorney 

from underwriters and in making and issuing policies bnd contracts of insurance and in doing any 

additional acts incident thereto shall be deemed 

authorized by the license issued to the original, 

attomey.m 

By expressly authorizing “deputy” and “Substitute’ attorneys to act 

under the authority granted to the ‘original” attorney, the statute impliedly forbids any but a “deputy” or “substitute’ to act as an “attorney 

in fact*‘under tke license granted to the “originalW attorney. This is 

especially true since these statutes are so designed as to place tesponsi. 

bility on a single “attorney” for the general operation of a Lloyds. The 

capacity of a ‘deputy. attorney in fact is not identical to “the attorxiey in 

fact.- The design&ion as “deputy- implies d capacity to act for and under the authority of a superiwr 26 C. J.S. 978. In Attorney General 

Opinion No. O-1010, approved June 27, 1939, it was held that such ‘deputies” performing tke duties of Local Recording Agents did not come 

witkin an exemplion of “The Attorn 

Y 

-in-Fact for any Lloyds” under the 

comparable statute then applicable. 

Provision’for a %ubstitutea attorney in fact is the only 

other provision for an attorney in fact not named in the license to act 

as such under the license. A ‘substitute’ attorney in fact, as we understand Article 18.14 is the attorney in fact. who replaces the “original 

attorney” and thereupon becomes ‘Yhcactual attorney in fact* upon vacation of that position and capac~ity by tke predecessor. 60 C. J. 980. 

Under such circumstances tke ‘substitutem would be exempt from tke 

requirements of Article 2 1.14. 

In view of tke considerations discussed, we are convinced 

that a lawfully organized Lloyds kas only one attorney in fact through 

whom the autkority $f tke concern to operate icl derived. No other arrangement fits the scheme of regulation and organization set up by the 

Lloyds statutes. Such attorney in f&t is “the’ attorney in fact as that 

designation is used in the Lloyds statutes as well as in Article 21.14. 

be therefore, conclude that any ‘dealerW who does not fill 

the position of “the attorney in fact’ for a Lloyds as that position is 

contemplated by the statutes is not exempt from the license requirement 

of Article 21.14~ 4 5062b]. 

Acts 42nd Leg., 1931, ck. 96, p0 150 [5062a) 
.3ion. ~Garlanu A. Smith, page 10 (S-35) 

Anautomobile or finance “dealer” may not act 

,for a Lloyifg insurance concernas a *Local Record? 

ing Agent or Solicitore as defined in Article ‘2 1.14 of 

. the Insurance Code, Without obtaining a,aLocal Recording Agent’s or Solicitor% license, u&es such ‘dealer0 

is the “attorney in fact. named in the Lloyd6 permit or 

a “substitute6 succeeding to the poeition of such eattorney in fact. upon hi6 vacation of that position. 

APPROVED: 

Rudy G. Ric.e 

State Affair6 Division 

Willis E. Gresham 

Reviewer 

Your6 very truly, 

JOHN. BEN SHEPPERD 

Agcjrney Gem-T? !. 

Robert S. Trotti ., 

First Assistant 

John Ben Shepperd 

Attorney General 

VFT:cm 

NOTE: 

Our attention:has been called to the pa6t administrative 

practice by the Board of in6urance:Commi6sioners in 

permitting the operation of dealer6 and deprrty-attorneys 

without a Bc~ense; we have been favored tiith brief6 by 

able counsel that would favor continuance of that practice. and pointing out the haM&ipa which will necessarily follow our ruling. It appe&+that some’bardships will 

folhnv. add we therefore recommend that a,reasouable 

time be ~given by the Board fork e deaLer6,. and other6 affected to mahe application and necessary adjustments. 

This recommendation, however, shuuld not be construed 

to alter the holding of our opinion.