Hon. 0. P. Lgckhart OpinionNo. 0-4986-A Chairman Fle: Is the Cass County Rural Health Board of Insurance Service engaged in the InsurancebuslCommlssloners ness, and, If so, Is the service subState of Texas ject to the. supervision.

of the State Austin,Texas InsuranceDepartment,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 summarizethe following statement of facts as the basis for this opinion:

The Cass County Rural Health Service is a domestic corporation, charteredunder Section 2 of Article 1302, Vernon's Annotated Civil Statutes, as a "charitable and benevolent"association. It is organizedfor the effectuation of several objects. It is lncorporated for the purpose of promotingthe general health of the members by the preventionof disease. The officers and directors of the Service receiveno remuneration, and the organizationitself is cooperative,

with no possibilityof profits accruing to anyone. Membership In the Service is confinedto members of Cass County families, whose Income is derived principallyfrom farming and allied pursuits. The Service executes a form of contractwith the members by the terms of which the members pay to the Service a membership fee. In return for this membership fee the Service undertakeswithout 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 associationhas entered into an agreementwith the various hospitals, physicians,dentists and drug stores,whereby the latter parties agree to render stipulatedservicesto the members of the Service at agreed and standardized fees, etc. A member who requires any of the stipulatedservices, or merchandise,or goods is free to obtain same from any of the contractingphysicians,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 contractingparty 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 practitioneror the one who furnishes the services or drugs other than by the payment of the membership fee to the Health Service.

ArticleVIII, 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 guaranteethat any hospital, physician,surgeon,dentist or druggistwith whom it may enter into agreement to render services will perform such services,and its only obligationln the event of the breach of such agreement shall be to use Its best efforts to obtnln the needed services from another source.@8 AlthoughtheService is a domestic corporationand Its officers and directorspresumablyare resldents of Cass County, Texas, it was rosteredby a branch of the Federal Departmentof Agriculture, and that departmentfurnished the organizersto establishthe Service, formulatedIts inner organization, the membershipfees. and has paid a great propprtlonof The Service has compliedwith 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).whetherthe operationof the service is ul.tra

vlres; (c) whether the Board of InsuranceCommissloners has any ated; and (d

3 urisdictionover the society as now constituted and operwhether the business otherwise Is lawful.
In order to determinewhether or not the business conducted by the Cass County Rural Health Service is Insuranceit is necessary to test and measure the said businessby the Texas statutorydeflnltlon 0S insurance.

Article4716 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 Involvingthe payment of money or other thing of value conditionedon the continuanceor cessationof human llf e, or Involvingan lnsurance guaranty, oontract b or endowmentsor aunuit ies

. pledge, for the payment of

accident insurancecompany shall be deemed to be a oorporatlondoing business under any charter involvingthe payment of any amount of money or other. thing of value conditionedupon loss by reason of liability due to sickness or 111 health. A health insurance company shall be deemed to be a corporationdoing btisiness under any ohartsr involving the payment of any amount of money, or other thing of value, oondltlonedupon loss by reason of dlsability due to slokness or ill health.

. . .‘I
We know of no Texas decisionwhich answers the question as to whether or not the business of the Cass County Rural Health Association is Insurancebusiness,and in the absence of such Texas deoislonwe must have reoourse to the dsoisiona of other jurlsdlotlons.

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

Section 1 of the Insurance C. 49, defines Insuranceas followsrCode, Laws of Washington, 1911,

“Insuranceis a contractwhereby one party, called the Insurer, for a consideration undertakes to pay money or its equivalentor to do an act valuable to another party called the insured or his beneficiaryupon 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 Washingtonthe Universal Service Agency was conductinga business essentiallythe same as that conductedby the Cass County Rural Health Service ln Texas. The contractsmade 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 Agencywas Institutedin 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 complainedof was that the UniversalService Qgencywas engaged in the Insurancebuslness in the State of Washington without complyingwith the statutes

. regulating the doing of such business.

The Supreme Court of Washingtondecided that the business conducted by the Universal Service Agency was not the business-oflnsurance

. 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 businessanalogous to that of the Cass County Health Service and made substantially the same contractswith 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, transactingbusiness in the District of Columbia,which collects payments, dues or assessments from its members as holders of its certlflcatesor 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.‘” (Section653, D.C. Code, 1926, Title 5, par. 179.) The statutorydefinition 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 contendedas against the Group Health Associationthat 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 Appealsfor the District .ofColumbia decided that the Group Health Association

was not engaged ln the business of insurance. (Jordanv. Group Health Association,107 P.(2d) 239)

Upon the strength of the cases above quotedwe are of the opinion that the Cass County Health Service is not engaged in the insurancebusiness.

Insomuch as the Cass County Rural Health Service is not engaged In the insurancebusiness you are advised that It is not subject to the supervisionof the &ate InsuranceDepartment.

In our opinion there Is nothing disclosed in your letter or ln the accompanyingdocumentswhich Indicate that the business of the Cass County Rural Health Service is either ultra vlres or unlawful,

NE trust we have fully answeredyour questions.
Yours very truly ATTOFlNEY

GENERAL OF T&X88 By /s/ Geo. P
. Blackburn George P. Blaokburn, Assistant
APPROVEDMAR 25, 1943 /s/ Grover Sellers FIRST ASSISTANT ATTORNEYGENWAL Thi.a oplnlm consideredand approved In limited oonferenoe. GF’Ba AlWwb