OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

Honorable 0. P. Lookhart 

Beard d Iasumnor Coamieeioners 

Awltill, TBxae. 

Ret 8eetloa 

:. 

n1 

. 
Konoreblr 0. P. Lockhart, Page 8 

EdOn Of Section l? Of Senate ijill 135, Acts 

of the 46th Legislature. . . ." 

Seotion 17, Senate Bill 135, &Lots Forty-sixth 

Legislature, p. 405, provides8 

wPapnnts on Certifioates Already in Foroo. 

Ii tbs payments of the members of any aosooiation ooming within the eoope of this Act, on 

oertifioates issued and in foroe when this Act 

takes effect, or tba reinsuranoe or renewal6 of 

such csrtifloatea, shall prove insufficient to 

pay matured death end dieability olaime in the 

maximum amount 8tatsd in auoh@.liaiis or oertitloetes, and to provide for tlw oreation and 

maintenan0pe of the funds requi&?ed by itb law6, 

such aseooiation may with the approval of the 

Eoard of Ineuranae Gommiesioners and after proper, heari!@ before said 5oa1'$ provide for meeting 

suah deflaian0y by additional, in0reaeed oi 

extra rates of payment, or by reduction in the 

saulmum benefits stated in such ptilioies or oertifioatse then in force, or by both euch~ Inoreaesd 

payments and reduced na%imum bemfite, or t.ho 

members may be given the option of agreeing to 

reduoed maximwa benefita, 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 an aesoaiation, by whatsoe~er~meena the inauranoe may be effeotlve. 

W~Certifioats' shall include any insurance 

policy or aontraot of ineuranoe, oertifioate of 

membership or other dooumokat through 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 The SeOtion then 
Honorable 0. P. Lockhart, Page 3 

stipulates how an association may aot to meet oertain oontingencies arising from ite operations. Thuely: “If the 

payments of the members . . . prove insufficient to pay 

matured d,eath and dlsabillty olsime in the maxlmum amount 

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 maximum beNtits, or the members may be given tno 

ti r agreeing t.a reduoed maximum benefits, or of aakf& zogeesed payment6.“(Undersoorfn$ ourz) 

Seotion 13 of’the same Aot provides: 

“It is the ~riamra DUSDOBB of this riot to 

seoure to the membera of the assooiations and 

their benefiolaries the full and prompt payment 

of all ~olaime aooording to tta maximum benew 

provided in their certifioates. . . .” (Underaoor4~; OUPS) 

The pSOViSiOn8 of Sections 13 and 17 of the Bat 

8eem to constitute an anomaly. ‘Ihe language 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 

members from loss through unwholesome, unsound or fraudulent 

practioes” therefore, an emerrjenoy and an imperative pub110 

neaesaity was deolared to exist. 

The Legislature apparently realized that nat all 

insuranoe companies were finano:ally able to give “full ana 

prompt payment of al.1 olaims according to the maximum benefit provided In their oertifloates.‘~ 

The Legislature, therefoxe, reasoned that there 

must be come provision inoorporated in the Aot whohereby thoee 

oertaln finanoially unsound associations or companies could 

go back into the past and make any neoeesary ohanges with 

regard to its old members and oertifioate holders. They must 

be allowed to put their houses in order. 
Honorable O.P. Lookhart, Page 4 

Consequently Seotfon 17 naa placed in Benate 

Bill 135 80 that the old members of 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 them so a6 to meet any *dotioisnop whioh m%$ht prevent 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,* 

We rind no anomaly between the respective provLelons or the two Deotlone. The Legislature derlrrd and 

Intended that all maabare of en aaeooiation, both @II to 

the mrt am well 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, ax po8t raoto law, 

ntroaativo law, or any law -airing the obligation or oontraots, aball be madorW 

A retroaotiv6 or :~rotr+iapeative statute is one 

whioh reaohos b&ok to impose or attaoh now rlghfe, h*r dutlea, 

now obllgatiolu, end new liabilities on paat truusaotioru or 

oonolderetiona. 2 R. 0.. L,; p. 310, Cooley',~,Oonstitutlo~ 

Limltatlone, p. 771. 

The oourt Ln Turbevills v. %vidy, (C.C.A.) 272 

S. ~34'. 559. stated: 

='A retroaotire lawi In the aanae or the C&A8tltution . . . wtioh prohibita auoh aota, la 

one made that afieota aota or rfghte aaoruing 

bst020 it oam into roroo. a rtatute im retroaotive which ta?&ee away or l!apalrs rested rlght8 

aoquired under existing law, or ore&toe a new 

obligation, iapof~8s a new duty, or edopta a MW 

disability in reepect to tran&sotions or co&U&deratlone alreqdy pa8sedrw 

St is a well-aettlod rule of statutory oonrttuotioa that 8tatutee are to be treated as operating prOOpeOtirely unlsae the contrary is apparent from the leng~~a Of 
Honorablo 0. P. Lookhart, Pago 5 

the statute. 330 Ine. 00. v. Ray, 50 Tax. 511, at p. 6191 

1 Couch on Insuranoe, p. SOS, Cooley’s Constltutionel Limnitat10ns, p. 772. 

The language 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 

maximum benefits stated in such poliolee or oertlrioates then 

in foroe.” (Undeieoorilrg ours) 

Mr Justloe Phillips in the ease of Cox v., poblson, 

105 Tex.. (Se,, at page 487, said: 

“Had the authors of thir provision (of the Texas 

Constitution) intended it to have a prospeotite 

operatlon and efioot they oould, and it fr fair 

to assume that thoy wouI&,~ have used terms whoso 

undoubted common use and meaning would. 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 a meaning it doe8 not oommonly bear, 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 operate retroepeotlvely. 

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

278 6. Ww. 310, Chief ~Uatiee yly oi’the Court Or civil Appeals, 

states that: 

ì. l ë? all lawa retroactive in their nature do aoh oomo under 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 a mlrohhief exeout~e the 

Intention or the parties, +d promote 3ustioe~ 

then* both a8 a matter ,Or Hsht &d of publie 
Honorable 0. P. Lookhart, Page 6 

poliap tm00ting the pea00 and mirar9 or the 

oommunity, the law should be ~)~staineQ.'" 

We shall 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: 

*A retn,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 irrsguleritles 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 .a statutory power hae 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 @r wh%oh railed to be don*, 

and whioh oonstitutae the defeat in the prooFedlnga, is aomothi~ the neoer8lty for which the 

legislature might hare dinppsneed with by prior 

statute, then it is not beyond the power of th0 
Honorable 0. P. Lockhert, Page 7 

legislature to dispense with it by subsequent 

statute. md if the irregularity conslets in 

doing some act, or in the mode or menuer of doing come eot, which the legislature might here 

made immaterial by prior law, it is equally oompeter& to make the 6eme tieterlel by e eubsaquent law." (pp. 774-776) 

' 'Ihe situation oonfrontlng ua doee 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 new obligation upon the old msrbbrrr of 

derh4a lneuranos~ae8oaiatlonr. Upon them* it lerl.8 new 

and dnerpected lie8ilitie8; It impoeer new &ties, end attacher new di8abilltie8i end all relative to pa8t t+nn8aethan8 and oonoidoraticn8. The provinion 18 intenllrd to attoot rd;ghtswhioh aoorued betOr it became operative. 

The paer whioh it saokr to bs8tor upon the 

:f~iatio" is quite bsyond the 800~6 or leg&l legi8la- 

~e'grenteb power in it8 prctririon8 eavor8 rtroagly 0) the power tc arsato new contraate between the l 8eo o ia - 

tion end its old manb8r8 and that without the latter'8 

oonemt. The Legirlature cannot give it* sanction to 

aote whioh will impair existing contraote. 

The orfieial rim of thi8 department plainly 

show the 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 premium pepente 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 premium peymente end out beuafite. Thue theee 

"bed rlekeW were VMzen-ofi* the eesooiationel membership 

list. To those puople who could not meet the new, dra8tio. 

and even prohlbitiva demende, end, ee a coneequenee, loet 

their inaurenoe, the effect was cataetrophic beosuaes;W, 

as a whole, 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 no longer eu?- 

rioient, Their calculation8 made at the time they firat 

became members were upset. The praotioel result was wide 

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. 

The good motive of the ~giDlatur4 in enacting 

thin hw is not to be qub8tiOn.d. The honest aOt8 Of th8 

legitimate ineuranoe OperatOSD 88ektng 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 are eaviaea 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 ATTORNBEY GENERAL OF TEXAS 

- . I.- 

Wm. J. Fanning 

- AasiGuOi