Honorable W1111atn A. Narrlaon

Commissionerof Insurance Austin,&xas

Dear Mr. Harrison: Opinion No. WW-1337-A
Re: Authority of the Insurance Department to issue original or renewa& local agents’ lioenses to firms,

or partnerahlps composed.

partly of individuals

who do not qualify by examination as local recordingagents and who are not actively engaged in writing insurance.

You have reque.s“d tha,t thlso,fflcereconsider its % opinion e-1337 whl%h$i volvea we quote:‘,fram

your letter:: : the following, Que#.lon&~hlch

,

.

. . ., . I 111.. ,,i

Is this D&&me& authorlz~ed to. issue either an orlginal or renew&l of local recordingagent’s license to a firm or partnership lf’ such firm or partnershipIs oomposed partly of indivl&u#ls whi, qualify as local recording agents and partly of individuals who do not qualify and who are aot active In the writing of insurance busfness? In answsrmng ‘this c&&Won, assume that all o,f the@rsons 1nbWeted ln such firm are partners. “2~. fifth

yo.ur ~anawer.

to questionNG. 1 is in the negative, 1s this Departmentauthorized to !ssue”either an original or reneyal of looal recording agent’8 l~loense to a firm or partnershipIf such firm or partnership .is composedpartly of lndlvlduals who qualify as local, recordingagents and partly of individuals who have an interest on’1 in the~proflts of such firm and have no’volce or author1 y ln the BOaratIonof such firm? (i.e. the

+ aurvlvlngwidow of a partner with such widow’s Interest limited by the ‘partnership agreement to an Interestonly in the p~otlta of the firm with the survivingpartners to have full authar1ty.W its operation).HonorableWilliam A. Harrlson,page 2 (WW-1337-A)

“3. If your answer to question No. 1 or question No. 2 Is In the affirmative,I requestyour opinion as to whether or not this Department should require all personsnamed in the license to me,et the requirements of Section 6 of Article 21.14 (pertaining to written examination)

before Issuing such license.” These questionsare directed specifically to the provisions of Article 21.14 of the Texas InsuranceCode, the relevant portlbna of'wh%oh.read Be;follows:'

: II 1

. . ':'Sec. 3. Applicationfor License; To Whom License May be Issued; Corporationa Not to Be Llcensed.-cWhen any person or firm shall dealre to engagc In business as a local recordlng,agent for an insurance company or insurancecarrier,he shall make application for a lfcense to the Board of InsuranceCommissioners, in such form as the Board may require, which applicationshall require a algned endorsement by General or State or Special Agent of a qualified insurancecompany or Insurance carrier that applicant Is a resident of Texas, trustworthy, of good characterand good reputation, and la worthy of a license. !$he Board 16 authorize4to issue licenses to firms or to 3zndlvlduale

ngagln&aa partners In the insurancebusiness, provlded the nampe, of all 'persons

.interested

in, such firm are named In the Pioense,and each named as active In the business of the partnerahlpqualify,and it be ,established that none not aotlve have interest In partnershipprinclpally to have written and be compensatedtherefor for Insuranceon property controlledthrough ownership, mortgage or sale, family relationship, or employment;and provided further, that all licensed agents must be reeidentsof Texaa
. . . The Board shall not Issue a license to a corporation.
“Sec. 4. Acting Without License Forbidden. ‘-:-It shall be unlawful for any person or firm or partnership to act as a local reoord%ngagent or solicitor In procuringbuslnese for any insuranceoompany, corporation, interinsurance

exchange,miutual,

reciprocal,association, Lloyd6 or other Insurancecarrier, until he shall have In force the license provided for herein.HonorableWilliam A. Harrison,page ,3 (w-1337-A)

“Sec. 5. Active Agents or SolicitorsOnly to Be Licensed:

--No license shall be granted to any person, firm or partnership,either as a local recordingagent or solicitor, for the purpose of writing any form of insurance,unless it is found by the Board of Insurance Commissioners

that such,personor firm Is, or Intends to be, actively engaged in the solicitingor writing

, of Insurance from the public generally; that each person or lndivldualof a firm Is a resident of Texas, of good characterand good reputation, worthy of a license, and Is to be actively engaged In good faith in the business of Insurance,and that application is not being made %n order to evade the laws against rebating and discrimination either for the applicant or for some other person. Nothing herein contained shall prohibithis insuringhis own property or properties In which heXhas an interest; but it is the Intent of this section ta prohibit coercion of insuranceand to preserve to each citizen the right to choose his own agent or Insurancecarrier,and to prohibit the licensingof an individualor firm to engage in the insurancebusiness principallyto handle business which he controls only through ownership, mortgage or sale, family relationshipor employment,..'..

‘,I “Sec. 6. Examination Required; Exceptions.--Ifappllcant for a local recordingagent's license has not prior to date of such a.pplfcation, been licensed as'a, local reoordingagent; or If the.appllcantfor a solicitor's license has not been licensed as a local recordingagent or as a solicitorprior to date of such application,the Board of InsuranceCommissioners shall require such applicant to submit to a written examinationcovering all kinds of Insuranceor contracts,which license if granted, will permit the applicationto solicit. Any applicant for local recordingagent's license who has prior to the date of auah applicationbeen licensed as a local recordingagent, shall be entitled to a local recordingagent's license without examination,provided the other requirementsof this article are meet. Any applloant for solicitor'slicense who has been licensed as a local reoordingagent or as a solicitorprior to date of such application,shall be entitled to a solicitor's license without an examination, provided the other requirementsof this article are met," You have informedua that at various times there have been different and conflicting administrative

constructions

of this statute by the InsuranceCommlsslon. One construction attempted to harmonize the provisionsof the section. For a long period..,~ 1

.r

.

. Honorable William A. Herrleon, page 4 (WW-1337-A)

of time, the administrative construction

was that the provision8 were in direct conflict and the exceptionwas ignored,and everyone partiaipatlngin an Insuranceagency was required to hav.e a license.
In contdaering your first questicn, It is apparent that we are faced with a matter of statutory construction, as there appears to be a basic repugnancy in the provisionsof Section.3 ,ana Section 5. The language of Section 3 authoris& the Boar d to issue licenses to firms or to individuals engagtng as partner8

l~ In the insurancebusiness and, by inferenceat least, indicates that some of the members o?,,the partnership

may be.activeand other8 not active if ‘it.,.59

. . . establishesthat none not active have interest In .Qartnership principallyto have written and be comQet&sated therefor f@r insuranceon property controlled through ownership,’

. . . s Cn the other hand, Sectian 5 specifically provides that no licensee shall be granted to any person, firm or partnershipunless the Board of InsuranceCommissionem first fMa that ” , . . LIoch person or firm is, or intends to be, actively engaged in the eolicltlng or writing of insurance from the public generally; that each person or individual of a firm 16 a xW!Jiflent of Texas, of good character and good reputation,northy of.a license, and is to be actively engaged Tn good faith in the business of insurance,

. : :’

WeJeare aware that a fundamentalrule of statutory construction requ ,res

i that a statute be construedas a whole and that all of it “parts be harnonited, if possible, so as to give effect. to this entire act acoorUlng to the evident intentionof tha Legislature.39 Teat. Jur. 209, Sec. 113. In the instant case, however, ,we

do not believe that the general ana somewhat ambiguous language of Sectlon3 can be harmonizedwith the plain an&specific provisionsof Section 5. Unaer such circumstances it is an equally fundamental rule of statutory construction that in case of a conflictbetween a general Qrovisionand a special provisiondealing with the same subject, or between general language and specific language, the special or specific provisionwill control. 33 Tex. Jr. 212, Sec. 114; City of San Antonio v. Toepperwein;10 Tex. 43, 133 SW 416. One of the spedific Qurposes of this act, as expressed
~ in Section 5, is to prohibit the licensingof an individualto engage in the insurancebusiness principallyto handle business which he controls through ownership,mortgage or sale, family relationshipor emplbyment. If we construe Section 3 a8 creating an exception for those partners who are not active, the contraaictoryeffect of such construction would result in the statute providing, in effect, that no license shall be granted to a firm unless all members are active, except in a case whereHonorableWilliam A. Harrison, page 5 (WW-1337-A) '

one or more members are inactive. The previously quoted specific language of Section 5, that each person or individualof a firm is to be actively engaged in the business of insurance, would therebybe nullified and one of the central purposes of the statute would thereby be frustrated.

. As previouslysuggested,the language In Section 3 that. might be construedas authorizing inactivemembers of a partnership and as exempting them from the licensing requirementsof Article 21.14 Is somewhat ambiguous. We think the provision in Section 3 providing that the names, of all persons Interested in the firm be named in the license,and that "each named as active in the business of the partnershipqualify" means.nothlng more than that there shall be no hidden or silent partners and that each person who is named as a partner shall qualify as an insuranceagent under the licensingrequirementsof Article 21.14. The language providing that it must be established "that none not active have interest In partnership principallyto have written and be compensatedtherefor for insuranceon property controlled through ownership,mortgage or sale, family relationship, or employment"does pose more difficulty.Consideringthe overall purposes of thisstatute, we believe the true meaning of this language is simply that it must be establishedthat there are no inactivepersons In the partnershipprincipallyto write controlledbusiness.
As previously indicated, we believe that the clear and specific language of Section 5 must control and that the general and ambiguous language of Section 3 must yield In the event of a conflict. This construction of the statute is strengthened by the fact that Article 21.14 contains specific exceptions from the.licensing

requirementsin Section 2 and Section .20, and specific exceptions from the examinationrequirementsin Section 6 and 6a. Had the Legislature intended to authorize inactivepartners and exempt them from either the licensingor, examination requirements,it ia only logical that It would have done so clearly and explScit3.y as in the case of the other exceptions. While not controllingof the conclusions we have reached, there are certain questions that might arise under a contrary cans%ruction

of this statute. For example, Article' 21.11 prohibitsany agent from paying, directly dr~-Ind~$tiectly,"any oom,mission

to any person.or firm. not duly licensedby the,board as an insuranceagent. Would,an active dUCy licensed partner violate this provisionby sharinghis profits with an inactive~ non-licensedpartner, or In other words, is this indirectly paying a commissionto a person not 

### duly licensed?., I.,, , l,.

.

HonorableWilliam A. Harrison, page 6 (WW-1337-A)
L I Additionally,

this Office in OpinionsNo. o-2453 and O-2453A issued ln 1940, concluded that limited partnerships were prohibited from engaging in the business of insurance agents. in this State. This ruling was based on the provision of ~Artlcle 6110, V.C.S., which prohibitsa llmltea. partnership from carrying on any banking or insurancebusiness,and this same provision is contained In the Texas Uniform Limited Partnership Act. Article 6132a, Section 4. A so-called “Inactive” partner could thus not be a llmltea partner but would be a general partner, who ordinarily la an agent of the partnership for the purpose of its ,,buslnesa. In this situation, however, he would have no authority to act for the partnerehipln Its insurancebusiness.
For all of the forgoing reasons, we conclude that your first question should be answered.inthe negative.

.Tiour second question asks, In effect, whether an exception could be made if the inactivepartner has an Interest only in the profits of such Plrm and has no voice or authority In the operation of the firm. We find no basis In the statutes for any such exception,and accordinglyanswer your second question in the negative.
Cur answer to the first and second questionsmake an answer to your third question unnecessary.

. Opinion No. W-1337, as originallywrltten,.lstherefore withdrawnand this opinion substitutedtherefor. SUMMARY The’provialb’ns

of Secglon 5 of ArtZclei21,14;of the Texas InsuranceCode prchiblt the Insurance. Department from issuinga local recoralngagent’s llcense,toa firm or partnerahlpunless each individualor member of

~ the partnership is to be actively engaged in good faith In the business of insurance and meets all of the other quallficatlons

requlrea for such license.

Sincerelyyours, WILL WILSON Attorney General of Texas

‘%YRobert Flowers AssistantHonorableWilllam A. Harrison I, pdge ,.7, (W-1337-A)

APPROVED: OPINION COMMITTEE Cecil Rbtsch Llnwara Shivers

REVIEWED FOR THE ATTORNEX GENERAL
BY: Leonard Passmore

.