OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN

Honorable 0. P. Lookhart Beard d Iasumnor Coamieeioners Awltill, TBxae.



### Ret8eetloa :. 

## n1

.Konoreblr 0. P. Lockhart, Page 8

EdOn OfSection l? OfSenate ijill 135, Acts of the 46th Legislature.

. . ." Seotion 17, Senate Bill 135, &LotsForty-sixth Legislature, p. 405, provides8

wPapnnts on Certifioates Already in Foroo. Ii tbs payments of the membersof any aosooiation ooming within the eoope of this Act, on oertifioates issued and in foroe whenthis Act takes effect, or tba reinsuranoe or renewal6 of such csrtifloatea, shall prove insufficient to paymatured death end dieability olaime **in** the maximumamount 8tatsd in auoh@.liaiis or oertitloetes, and to **provide** for tlw oreation **and** maintenan0peof the funds requi&?edby **itb law6,**  such aseooiation maywith the approval of the Eoard of Ineuranae Gommiesioners and after prop**er, heari!@**  before said 5oa1'$provide for meeting suah deflaian0y by additional, in0reaeed oi extra rates of payment, or by reduction in the saulmumbenefits stated in such ptilioies or oertifioatse then in force, or by both euch~Inoreaesd payments and reduced na%imum bemfite, or t.ho membersmaybe given the option of agreeing to reduoed maximwabenefita, or of making horeared payments." Seation. S of said enactment gives the followi~ definitions of certain terms used therein:

"'Xembsr' aball inolude policyholders or any persons irpured by anaesoaiation, by whatsoe~er~meena the inauranoe maybe effeotlve. W~Certifioats' shall include any insurance policy or aontraot of ineuranoe, oertifioate of membership or other dooumokatthrough whioh iaaurenoe is l

ffeotod 

### or evidenaod. v*hsso0iation' shall refer to and inolude all types 'of organizations, oorpor~tions, Pinas, asaooiati0ns, or groups eubjeot to the provisiona o? th&s &et," Its-is observed that Motion 17 is oaptioaed vj&- ment **on**CWtifi6tat6# Already in For0e.v TheSeOtion thenHonorable 0. P. Lockhart, Page 3

stipulates howan association mayaot to meet oertain oontingencies arising from ite operations. Thuely: “If the payments of the members

. . . prove insufficient to pay matured d,eath anddlsabillty olsime in the maxlmumamount e&ted in such policies or certificates*’ then the assooiation, with the approval of the Ineuranoe Board,~may “provide for meeting arch detiaienoy by additional, inorcased. or extra rats8 of (premiumj payment, or by reduotion in the maximum

benefits etated in suoh polioies or oertifioates then in foroe, or by both such gnoreaeed payments end reauoed maximumbeNtits, or the membersmaybe given tno ti r agreeing t.a reduoed maximum benefits, or of aakf& zogeesed payment6.“(Undersoorfn$ ourz)

Seotion 13 of

’the sameAot provides:

“It is the ~riamra DUSDOBB of this riot to seoure to thememberaof the assooiations and their benefiolaries the full andprompt payment of all ~olaime aooording to tta maximum benew provided in their certifioates.

. . .” (Underaoor4~; OUPS) ThepSOViSiOn8 of Sections 13 and 17 of the Bat 8eemto constitute an anomaly. ‘Ihelanguage of each rootion soems in aireot varlanoe with that o? the other. This, however, oan be explained.

Seotion 36 of the Aot, the emergency olause, states that thevpresent laws governing life, health and accident asaesament insurance,

. . . do not adequately proteot the membersfrom loss through unwholesome, unsound or fraudulent practioes” therefore, an emerrjenoyand an imperative pub110 neaesaity was deolared to exist.

TheLegislature apparently realized that nat all insuranoe 

### companieswere finano:ally able togive “full ana prompt payment of al.1 olaims according to themaximumbenefit provided In their oertifloates.‘~

TheLegislature, therefoxe,reasoned that there must be come provision inoorporated in the Aot whohereby thoee oertalnfinanoially unsound associations or companies could go back into the past andmakeany neoeesary ohanges with regard to its old membersand oertifioate holders. Theymust be allowed to put their houses in order.Honorable O.P. Lookhart, Page 4
Consequently Seotfon 17naa placed in Benate Bill 135 80that the old membersof any assooiation within the soope or the Aot oould be proteotsd also from *loss through unwholea~me, unsound or fraudulent praatioes~ by havine: now, *additional, lnoreaesd, or sxtra rate8 of payment, or by reduotion in the mexlmum benefits.

. . or by both

. . ." levied agalnet themso a6 to meet any *dotioisnop whioh m%$htprevent their aeeooiation from nttcrinlng the ultimate aia or being rinenoially able to meet Its valid obligations in the future by giving "full and prompt payment 

### or all alaim43,*

Werind no anomaly between the respective provLelons or the two Deotlone. TheLegislature derlrrd and Intended that all maabare of en aaeooiation, both @IIto the mrt amwell as 

### the future, 6hould benefit by t& provitaionn of senate Bill 126.

m0tion 16, astic I, (mli or Rights) or tma Texar Constitution, providea that:

Wo bill 

### 0r attainlor, 

### axpo8t raoto law, ntroaativo law, 

### orany law -airing the obligation or oontraots, aball be madorW Aretroaotiv6 or :~rotr+iapeative statute is one whioh 

### reaohos b&okto impose or attaoh nowrlghfe, h*r dutlea, nowobllgatiolu, 

### endnewliabilities on

### paattruusaotioru or oonolderetiona. 2R. 0.. L,; p. 310, Cooley',~,Oonstitutlo~ Limltatlone, p. 771.

Theoourt LnTurbevills v. %vidy, 

### (C.C.A.) 272 S. ~34'. 559. stated: ='Aretroaotire lawi In the aanae or the C&A8tltution

. . . wtioh prohibita auoh aota, la one madethat afieota aota or rfghte aaoruing bst020 it oam into roroo. a rtatute im retroaotive which ta?&eeawayor l!apalrs rested rlght8 aoquired under existing law, or ore&toe a new obligation, **iapof~8s**a newduty, or edopta a

### MW disability in reepect to tran&sotions or co&U&deratlone alreqdy pa8sedrw St is awell-aettlod rule of statutory oonrttuotioa that 8tatutee are to be treated as operating prOOpeOtirely unlsae the contrary is apparent 

### fromthe leng~~a OfHonorablo 0. P. Lookhart, Pago 5

the statute. 330 Ine. 00. v. Ray, 50 Tax. 511, at p. 6191 1 Couchon Insuranoe, p. SOS, Cooley’s Constltutionel Limnitat10ns, p. 772.

Thelanguage or Seotion 19, Senate Bill 135, plalnly reveala the legislative intent that the provisions ot said section should operate retroepeotirely. Asr *oertitioatse iesued and in foroe when thio Aot tekea efteat” shall ba eubjeot 

### to %norsasod, or extra ratoe of peyment, or by reduotion in the maximumbenefits stated in such poliolee or oertlrioates then in foroe.” (Undeieoorilrg ours) MrJustloe Phillips in the ease of Coxv., poblson, 105 Tex.. (Se,, at page 487, said:

“Hadthe authors of thir provision (of the Texas Constitution) intended it to have aprospeotite operatlon and efioot they oould, and it fr 

### fair to assume that thoy wouI&,~have used terms whoso undoubted commonuse andmeaningwould. have ma&a that Intention plaln,~ instead of a term whoa6‘usual rrignifiaanoa ‘ie not proepeative,, and to whioh wa mast attaoh a use it does not ordinarily have and Impart ameaning it doe8 not oommonlybear, in ordir to give the provision a’prospootire interpretation.* (Parenthetfoal insertion’ our(l) The statement by Mr. yustioe Phlllipa 18 applioable to our situation., ltmre apgwma a olear legislatire intention that the provisions of Seetlon II should operateretroepeotlvely.

In the oaso of Gemtring P. Sovereign Camp, W.O.W., 278 6. Ww.

310, Chief ~Uatiee yly oi’the Court Orcivil Appeals, states that:

ì. l ë?all lawa retroactive in their nature do aoh oomounder the-~oonstitutlonal. cow devnnationl” ’ Theichier Juetioe then prooeeded to quote with apparent approval the following sxtraot from Oooley*a Oonstitutional Li.mitationst

*,@Where a rtatute is expressly rstroaoti76, and the objeot and sireet 

### 0r It ia to oorreot an i~oo~nt mlstdro, remedy amlrohhief exeout~ethe Intention or the parties, +d promote 3ustioe~ then* both a8 amatter ,OrHsht &d of publieHonorable 0. P. Lookhart, Page 6

poliap tm00ting the pea00 and mirar9 or the oommunity, the law should be ~)~staineQ.'" Weshall a&so quote raw Oooley*s Treatise on Oonlltitlltional LlaIit&iOM, pp. 179~7%;

“

. . . %brO i# **n0** doubt of the right of the legislature **ta pane**  **nbatutes** uhioh **naoh** baok to and ahange or moaiif the ;r?eot or prior

Mr, CooLey then prooeeds to enumerate oertala oxoeptional aitustlone where retmspeotlro etatutes hare been held valid. They rolla:

*Aretn,epeatira statute ouring defeat6 in legal prooao8iage where they are in their nature irregularitiae only, and do not extend
to 

### tatt0rrr or jurlrdlction, 18 not void OD bonstitutional gr0und8, ~nluss expresoly rorblddon. 02 this alas8 are the etatube to 

### oure **irrsgu** leritles in the arrsaunent at property for t-atlon end the lory of taxes thereon Itles in the organization or eleot 1 Irregularona of aorporationsi lrregulerftiee ia the vote8 or other a&ion by mlraioipal oorporation#, or the like, where .astatutory 

### powerhae i&lea or due QM raguler exeoution through the oarelesansre of oifioere, or other aausesi Irregular procrebings in oourt, sto. The rule epplloable to aaaes of this do60ription ie rubatantially tha 

### r0ii0dng: xr the thing wanting @rwh%ohrailed to be don*, and whioh oonstitutae the defeat in the prooFedlnga, is aomothi~ the neoer8lty for which the legislature might hare dinppsneedwith by prior statute, then it is not beyond the power of th0Honorable 0. P. Lockhert, Page 7

legislature to dispense with it by subsequent statute. md if the irregularity conslets in doing someact, or in the modeor menuer of **do** ing come eot, which the legislature might here madeimmaterial by prior law, it is equally oompeter& to makethe 6emetieterlel by e eubsaquent law." (pp. 774-776) ' 'Ihe situation oonfrontlng uadoee not fall withIn any of the wed eroeptlona to the general rule. Moreover, the Texas Constitution forbid8 retroactive lawa s nomin*

. Seotion 17, Senete 3111 133, by its eqwe88 $erm8, seeke to direct a newobligation upon the old **msrbbrrr of**  **derh4a** lneuranos~ae8oaiatlonr. Uponthem* it lerl.8 new and dnerpected lie8ilitie8; It impoeer new&ties, end 

### attacher newdi8abilltie8i end all relative to pa8t t+nn8aethan8 and oonoidoraticn8. Theprovinion 18 intenllrd to attoot rd;ghtswhioh aoorued betOr it became operative.

Thepaer whioh it saokr to bs8tor uponthe :f~iatio" is quite bsyond the 800~6or leg&l legi8la-

~e'grenteb power in it8 prctririon8 eavor8 rtroagly 0) the power tc arsato newcontraate between the l8eo oia- tion end its old 

### manb8r8 andthat without the latter'8 oonemt. TheLegirlature cannot give it* sanction to aote whioh will impair existing contraote.

The orfieial rim of thi8 department plainly showthe latent evil in the provirlone of Seotlon 17, Senate Bill 135; Unoonsoionablo and unsorupuloue operator8 were quick to recognize and subsequently utilize Its 

### po8- aibilitiet3. People,who, beoa98s of tlmeir age, could bv oleeeeb as "bed risks" received notice8 that henceforth their premiumpepente would be doubled, trebled, or better, or that the benerite provided lo-their oertlfioatee or paliolee w&to be cut to a relatively nominal figure or both increased premiumpeymente end out beuafite. Thuetheee "bed rlekeW were VMzen-ofi* the eesooiationel membership list. Tothose puople whocould not meet the new, dra8tio. andeven prohlbitiva demende, end, ee a coneequenee, loet their inaurenoe, the effect was cataetrophic beosuaes;W, as awhole, were of a olase not readily insurable. - stential equities were adversely effected.Honorable 0. P. Lockhart, Page 8

Such practloealere not of neoessity ooniined to thoee people alone. Others Pelt the effects. heny found that the ineuranoe item in their budget was nolonger eu?- rioient, Their calculation8 madeat the time they firat becamememberswere upset. Thepraotioel result waswide epreed lapsing or Insurance contraate.

Thle seetion tir Senate Bill 135 cannot be deemed to be in furtherance or oqulty and good morals or to pmmote Justioe, remedy a mieohiei, nor a8 one sxeoutlng the Intention of the pertiee.

Thegood motive of the ~giDlatur4 in enacting thin hw is not to be qub8tiOn.d. Thehonest aOt8 Ofth8 legitimate ineuranoe OperatOSD88ektng to abide the law ti oortainly not 

### to be que8tione6.

hTeverthe~888, Section 17, Senate Bill 

### ~8;00m88 within the con8tftutionel oondemnatioh 

### 0r 8eoti4n 16,Atti8le I, at the Peran Bill ot Bighto, a8 being s'retroaotive law and one impairing the obligation of contracts,.

Seotlon SO, iuWcl8 I, hxaa Constitution, (Bill 0r Right*) providesr

Qcoguerd again8t tran8gre88ton0 or the

Aoaordlnglp you 

### areeaviaea that Section 17, of sonat Ml1 136 or the Acts or the Borty-sixth Legislature, is void end of no roroe or errsot. Yours very

### truly

‘*l ATTORNBEYGENERAL OF 

### TEXAS

- . I.-

Wm.J. Fanning

- AasiGuOi