August 12. 1959

Honorable William A Harrison Opinion No. WW-684 Commissioner of Insurance State Board ofInsurance Re: Must accident and health Austin, Texas insurance policies issued by mutual insurance companies subject tothe provisions of Chapter 11. Texas Insurance Code, be ona parDear Commissioner Harrison: ticipating dividend basis.

We quote from your letter as follows:

“As legal reserve mutual life insurance companies were given the authority in 1947towrite accident and health insurance policies ‘subject tothe provisions ofthis chapter’ ,it appears tous that such accident and health insurance policies must be onaparticipating dividend basis in accordance with Articles 11.11, 11.12, ‘and 11.13 ofthe Code. However, we find that the departmental practice since 1947,has been not to require accident and health insurance policies issued **by** legal reserve mutual life insurance companies tocontain participating dividend provisions. -We. therefore. respectfully request your opinion as towhether a legal reserve mutual life insurance company may issue accident and health insurance policies which do not contain participating divided provisions in accordance’with Chapter 11.Texas Insurance Code, or must all such policies issued by a legal reserve mutual life insurance company within this State contain participating dividend provisions 7n You are hereby advised that all policies issued by a legal reserve mutual life insurance **company subject**  tothe provisions of Chapter 11(which we have held in WW-682 to mean domestic mutuals only), whether they be combined **or separately.**  life, health and accident insurance policies, must contain participating dividend provisions.

As originally passed. what is now Chapter 11ofthe Texas Insurance Code, authorized domestic mutual insurance companies to transact only a life insurance business.Commissioner William A. Harrison, page 2 (WW-684)

In 1947the Legislature by the passage ofS.B. 293, Acts 1947. 59th Leg., **p.** 532. ch. 312. 8 1,authorized domestic legal reserve mutual companies towrite health and accident insurance for the first time. The caption ofthat Act stated: “An Act amending Article 4800, Revised Civil Statutes ofTexas. 1925. so as toauthorize a mutual life insurance company toalso issue, combined **or separately,**  life, health, and accident insurance policies;.

. .” Section 1ofS.B. 293 contained among other things the following language: Y

. . .and any such company, heretofore or

hereafter created, may issue, combined or separately, lzfe, health. and accident insurance policies. subject to theprovisions ofthis chapter.

. .” (Emphasis added) This language is now set forth in Section 1ofArticle 11.01. Texas Insurance Code. What is now Article 11.13. which was in existence at the time of the passage ofS.B. 293 and is without question one ofthe “provisions of this chapter” mentioned inArticle 11.01, reads as follows: “Mutual life insurance companies are authorized totransact business throughout this State and other states towhich they may be admitted; they may issue no policy except upon the participating plan with dividends payable annually as provided in this chapter;.

. .I Inreading the entirety of Chapter 11ofthe Insurance Code, and doing so in conjunction with the historical background ofthe various enumerated provisions, it is apparent that the Legislature in authorizing domestic life insurance companies towrite accident and health insurance policies desired these companies to issue nopolicy other than those providing for participating dividends. Had the Legislature desired to **exempt** the health and accident policies from the provisions ofArticle 11.13 ofthe Texas Insurance Code, they could.have easily done 80. Not having done so. the 

### requiremat therein contained must be controlling.

We note from your opinion request that you make reference to certain departmental construction which is atvariance with the conclusions reached herein. You are advised that since the language of Chapter 11isCommissioner William A. Harrison, page 3 (WW-684)

unambiguous in its requirements. the above mentioned departmental construction is not controiling. Jones v. Marrs. 114Tex. 62. 263 SW. 570; State v. Texas Mutual Life Insurance Corn1 sny (Tex. Civ.App.) 51S,W.Zd 405. reversed IComm. AnnI 58SW 2 .-.~ -I ‘

. d37: Br (Tex. Civ.App.) 180S.W.654. error ref. myown v. City ofAmarillo,

Itis noted inpassing that Article 11.19 ofthe Texas Insurance Code provides as follows: “The provisions of Chapter 3ofthis Code, when not in conflict with the Articles ofthis Chapter, shall apply toand govern mutual life insurance companies organized under the provisions ofthis Chapter; provided, however, that when any mutual life insurance company organized under the provisions ofthis Chapter has a surplus equal to or greater than the minimum of capital and surplus required ofcapital stock companies under the provisions ofArticle 3.02 of Chapter 3, Insurance Code ofthe State ofTexas, Revised Civil Statutes of Texas of 1925. the following provisions of Chapter 11 only shall apply to such mutual companies: 11.01, 11.02, 11.03. 11.04. 11.05, 11.~06.11.07. 11.09. 11.10. 11.11. 11.12. 11.14. 11.16, 11.17. 11.18 and 11.19. Onall other matters the provisions ofsaid Chapter shall apply to and govern such mutual life insurance companies. As amended Acts 1955, 54th Leg., p. 546. ch. 171. $ 1.’ In reading Article 11.19 it is noted that any reference toArticle 11.13 is omitted therein; thus, indicating that the Legislature did not intend to restrict those mutuals. which can qualify under the proviso ofArticle 11.19 tothe requirements ofArticle 11.13. Consequently, a domestic mutual life insurance company which has been organized under the provisions of Chapter 11butwhich has a surplus equal to or greater than the minimum ofcapital and surplus required ofcapital stock companies under the provisions ofArticle 3.02 of Chapter 3 ofthe Insurance Code, need not comply with the participating dividend plans payable annually as required under Article 11.13. This caveat has been prompted bythe language ofyour opinion request wherein you ask if all policies issued by a legal reserve mutual life insurance company within **& State**  of Texas **must** contain a participating dividend provision. You are advised that Article 11.19would operate ‘as an exception totbe general requirement ofArticle 11.13.Commissioner William A. Harrison. page 4 (WW-684)

CDD:jg SI3M.MAR Y Accident and health insurance policies issued by domestic mutual insurance companies subject tothe provisions of Chapter 11, Texas Insurance Code, must be onaparticipating basis unless they come within the exception of Article 11.19. Yours very truly, WILL WILSON

’C. Dean Davis Assistant Attorney General

APPROVED: OPINION COMMITTEE: Geo. P. Blackburn. Chairman Linward Shivers W. 0. Schultz James P. Ryan REVIEWEDFOR THEATTORNEYGENERAL BY: W. V. Geppert