Hon. 0. P. Lgckhart Opinion No. 0-4986-A 

Chairman Fle: Is the Cass County Rural Health 

Board of Insurance Service engaged in the Insurance buslCommlssloners ness, and, If so, Is the service subState of Texas ject to the. supervision. of the State 

Austin, Texas Insurance Department, and related 

questions. (Thls,oplnlon overrules 

Dear Slrr Opinion #O-4986) 

This is in answer to your request for opinion dated November 23, 1942, and its accompanying documents. From your communication we summarize the following statement of facts as the basis for 

this opinion: 

The Cass County Rural Health Service is a domestic corporation, chartered under Section 2 of Article 1302, Vernon's Annotated 

Civil Statutes, as a "charitable and benevolent" association. It is 

organized for the effectuation of several objects. It is lncorporated for the purpose of promoting the general health of the members 

by the prevention of disease. The officers and directors of the 

Service receive no remuneration, and the organization itself is cooperative, with no possibility of profits accruing to anyone. Membership In the Service is confined to members of Cass County families, 

whose Income is derived principally from farming and allied pursuits. 

The Service executes a form of contract with the members by the terms 

of which the members pay to the Service a membership fee. In return 

for this membership fee the Service undertakes without profit to ltself to provide dental care, medical care, drugs, etc. 

i 

for the members and their familles.~ In order to furnish its serv ces the association has entered into an agreement with the various hospitals, 

physicians, dentists and drug stores, whereby the latter parties 

agree to render stipulated services to the members of the Service at 

agreed and standardized fees, etc. A member who requires any of the 

stipulated services, or merchandise, or goods is free to obtain same 

from any of the contracting physicians, dentists, drug stores, etc., 

but the member Is not allowed to obtain said services from Parties 

not bound to the Service by contract, unless some contracting party 

refers the member to the noncontracting practitioner. When the said 

services are performed or the said medicines are furnished, the Service then reimburses the practitioner; the member does not pay the 

practitioner or the one who furnishes the services or drugs other 

than by the payment of the membership fee to the Health Service. 

Article VIII, Section 3(a), of the By-laws of the Health 

County Health Service, provides that: 
Hon. 0. P. Lockhart, page 2 (O-4986-P) 

"This association does not guarantee that any hospital, physician, surgeon, dentist or druggist with whom 

it may enter into agreement to render services will perform such services, and its only obligation ln the event 

of the breach of such agreement shall be to use Its best 

efforts to obtnln the needed services from another source.@8 

Althoughthe Service is a domestic corporation and Its officers and directors presumably are resldents of Cass County, Texas, 

it was rostered by a branch of the Federal Department of Agriculture, 

and that department furnished the organizers to establish the Service, 

formulated Its inner organization, 

the membership fees. 

and has paid a great propprtlon of 

The Service has complied with none of the statutes of Texas relating to health and accident insurance companies. 

Your letter Inquires (a> whether the soclety8s business 

constitutes an insurance business; (b) .whether the operation of the 

service is ul.tra vlres; (c) whether the Board of Insurance Commissloners has any 

ated; and (d 3 

urisdiction over the society as now constituted and operwhether the business otherwise Is lawful. 

In order to determine whether or not the business conducted 

by the Cass County Rural Health Service is Insurance it is necessary 

to test and measure the said business by the Texas statutory deflnltlon 0S insurance. 

Article 4716 of Vernon’s Revlsed Texas Civil Statutes reads 

as follows: 

“A life Insurance company shall be deemed to be a 

corporation doing business under any charter Involving the 

payment of money or other thing of value conditioned on the 

continuance or cessation of human llf e, or Involving an lnsurance guaranty, oontract 

b 

or 

endowments or aunuit ies . 

pledge, for the payment of 

accident insurance company shall 

be deemed to be a oorporatlon doing business under any charter involving the payment of any amount of money or other. 

thing of value conditioned upon loss by reason of liability 

due to sickness or 111 health. A health insurance company 

shall be deemed to be a corporation doing btisiness under any 

ohartsr involving the payment of any amount of money, or 

other thing of value, oondltloned upon loss by reason of dlsability due to slokness or ill health. . . .‘I 

We know of no Texas decision which answers the question as to 

whether or not the business of the Cass County Rural Health Association 

is Insurance business, and in the absence of such Texas deoislon we 

must have reoourse to the dsoisiona of other jurlsdlotlons. 

In the State of Washington the statutory definition of lnsurante is substantially the same as that which obtains in Texas. 
Hon. 0. P. Lockhart, page 3 (O-4986-A) 

Section 1 of the Insurance 

C. 49, defines Insurance as followsr 

Code, Laws of Washington, 1911, 

“Insurance is a contract whereby one party, called 

the Insurer, for a consideration undertakes to pay money 

or its equivalent or to do an act valuable to another party 

called the insured or his beneficiary upon the happening 

of the hazard or peril insured against, whereby the party 

Injured or his beneficiary suffers loss or Injury." .i :_ 

In the State of Washington the Universal Service Agency was 

conducting a business essentially the same as that conducted by the 

Cass County Rural Health Service ln Texas. The contracts made bythe 

Universal Service Agency appeared to be substantially the same, with 

its members, as those made by.the Cass County Rural Health Service 

with its members. An action against the Universal Service Agency was 

Instituted in the state courts of Washington, on the relation of the 

insurance commissioner of that state; this action was brought seeking 

to forfeit the corporate franchise and to wind up the affairs of the 

Universal Service Agency. The special grievance complained of was 

that the Universal Service Qgency was engaged in the Insurance buslness in the State of Washington without complying with the statutes 

. regulating the doing of such business. 

The Supreme Court of Washington decided that the business 

conducted by the Universal Service Agency was not the business-of lnsurance . The case referred to.ls State ex rel Fishbach, Insurance CommLssloner, v. Universal Service Agency, 151 P. 768. 

The case referred to is cited as authority on this subject ln 

29 Am.Jur., par. 12, on page 54, and in Ann.Cas. 1916C, page 1017. 

In the District of Columbia the Group Health Association conducted a business analogous to that of the Cass County Health Service 

and made substantially the same contracts with Its members as were 

made by the Cass County Health Service. 

I 

The applicable statute of the District of Columbia reads as 

followst 

"Every corporation, joint stock company, or association 

not exempt herein, transacting business in the District of 

Columbia, which collects payments, dues or assessments from 

its members as holders of its certlflcates or pollcles, and 

which provide for the payment of indemnity on account of slckness or accident 

as 'health, d 

or benefit In case of death, shall be known 

accl ent and life insurance company or assoclatlon.‘” (Section 653, D.C. Code, 1926, Title 5, par. 179.) 

The statutory definition of Insurance of the District of 

Columbia, above quoted, Is substantially the same as that of Texas. 
Hon. 0. P. Lockhart pi page 4 (O-4986* A) 

In the case of Jordan v. tiroup Health Association it was 

contended as against the Group Health Association that it was a 

“health, accident and life insurance company or assoclatlon11 as defined in the foregoing quoted District of Columbia Code. 

In passing upon this question the United States Court of 

Appeals for the District .of Columbia decided that the Group Health 

Association was not engaged ln the business of insurance. (Jordan v. 

Group Health Association, 107 P.(2d) 239) 

Upon the strength of the cases above quoted we are of the 

opinion that the Cass County Health Service is not engaged in the insurance business. 

Insomuch as the Cass County Rural Health Service is not engaged In the insurance business you are advised that It is not subject to the supervision of the &ate Insurance Department. 

In our opinion there Is nothing disclosed in your letter or 

ln the accompanying documents which Indicate that the business of the 

Cass County Rural Health Service is either ultra vlres or unlawful, 

NE trust we have fully answered your questions. 

Yours very truly 

ATTOFlNEY GENERAL OF T&X88 

By /s/ Geo. P . Blackburn 

George P. Blaokburn, Assistant 

APPROVED MAR 25, 1943 

/s/ Grover Sellers 

FIRST ASSISTANT ATTORNEY GENWAL 

Thi.a oplnlm considered and approved In limited oonferenoe. 

GF’Ba AlWwb