AUUTXN ~,.TICXAS 

JdBN BEN SX$RPPEMD 

Ar-roxaNmY "~rmrr,. October 11, 1954 

.’ 

Hon. Garland A. Smith, Chairman 

Board of Insurance Commissioners 

Internat ional Life Building 

Austin, Texas 

Opinion Nob S-143 

Re: Legality and rffaot of various 

provlslanr In a tarm lift3 insurance policy lesued under the 

whole sale plan. 

Dear Mr. Smith: 

The pertinent parts of your request for our opinion read as follows: 

“From time to time life insurance cdmp~les 

submit policy forms to this Department for flling which are to be issued under what is known as 

the Wholesale Life Insurance Plan (sometimes 

called Employee Life Insuranoe Plan) e This plan 

has been In use in Texas for some years and wa.6,. 

evolved to extend administrative expense savingg, . 

possible in group coverage, to individual policies issued under individual underwriting standards to groups of employees too small to be ellgible for group coverage under Code Article 3.500. 

“In our review of such wholesale life insurance forms submitted to this department for filing, 

certain questions have .arisen that need to be resolved, and we respectfully request that you give 

us your opinion on these questions which ‘are set 

forth as follows: 

“lo Must an individual term life insurance 

policy provide coverage for .a definite time period 

by specifying a number of years, months weeks or 

days, or may the term of the insurance b e geared to 

and measured by the term of the insured’s employment with a specified employer? 

“2 . If an Individual term life insurance policy may provide coverage for an indefinite, term’ 
- 

Hon. Garland A. Smith, page 2 (S-143) 

conditioned upon cessation of employment, 

should such a policy provide that the insured’s 

coverage will terminate at the next premium 

due date subsequent to termination of employment, or may such a policy provide that coverage will cease immediately upon termination of 

employment? 

"3 * If an individual term life insurance 

policy is issued on the one year renewable 

term plan, or on the one month renewable term 

plan, may it provide that it is renewable only 

at the option of the insurance company, or must 

it be renewable during a specified period of 

time following its date of issue at the option 

.of the insured only? 

"4. May an individual term life insurance 

policy be issued that provides for the payment 

of premiums only by the employer or some other 

specified person or firm, or must the policy 

provide for payment, of premiums without speclfying the person or firm that will make the payments. 

II 

c 0~ ‘ Obviously our concern in this matter grows out of our understanding of Article 

3.50 of the Texas Insurance Code which was considered by the Court in Board of Insurance Commissioners:~~ Great Southern Life Insurance 

Company, 239 S,W.2d 803,~ There has been no established ,departmental practice with respect to 

the inquiries enumerated above, but it does seem 

that, the intent of Article 3‘50 would be substantially defeated if all the elements of group 

insurance can be embodied in individual policies’ 

sold under a @whole sale plan. rll 

In answering the four specific questions above 9 we 

are assuming you are dealing with a “Wholesale Life Insurance 

Plan” which Is not in violation of any of the provisions of 

the Texas Insurance Code. 

Individual life insurance policies are required to 

contain certain specific provisions enumerated in Article 3.44 

of the Insurance Code, and are also required to exclude certain 

provisions enumerated in Article 3>45 of the Code, Group life 

insurance policies are required to conform to certain standards 
Hon. Garland A. Smith, ,page 3 (S-143) 

outlined in Article 3.50. Individual contracts of life 

insurance may contain provisions and conditions agreed 

upon between the parties to the contract and which are not 

in conflict with the law. Hatch v. Ta 145 Tax. 17, 

192 S;W.2d 668 (1946); v . Metrooo itan Life mau e omwax 77 S.W.2d 

cticut Eeneral Li 

Tex%iv.App. 

!ex%i;.App. 

Insurance omuu 

1936, eri& ref .I. 

Our answers to your questions in the four propo- 1 

sitions above are not in conflice with Articles 3.44 and 

3.45, supra and it is our opinion 

as an indivjdual life insurance po i 

therefore, that insofar 

icy Is concerned under a 

valid “Wholesale Plan”, the answers are: 

1. Ordinarily an individual life insurance 

policy provides coverage for a definite time 

period by specifying a number of years, months, 

weeks or days, but it may provide a term of insurance geared to and measured by the term of the 

insured’s employment with a specif led employer. 

2. If an individual term life insurance policy provides coverage for an indefinite term conditioned upon cessation of employment, such policy 

may provide either that coverage will terminate at 

the next premium due date subsequent to termination 

of employment, z, that coverage wi.11 cease immediately upon termination of employment. 

3. An individual term life Insurance policy 

issued on a one year or on a one month renewable 

term plan may provide either that it is renewable 

only at the opt ion of the insurance company Q& 

that it is renewable during a specified per 1 od of 

time following its date of issue at the option of 

the insured only. 

4. An individual term life insurance policy 

may be issued that provides for the payment of 

premiums’.only by the employer or some other speclfied person or f lrm, or it may provide for payment 

of premiums without specifying, the person or firm 

that will make the payments. 

tde, is titled: 

and provides: 
Hon. Garland Aa Smith, page 4 (S-143) 

“Except as may be provided in this kticle,. 

it shall be m to make a contract of life 

insurance covering a group in this State- . * .@I 

(Emphasis supplied.) 

; . 

It is apparent that the Legislature direoted its 1-r< 

prohibitions against any plan, scheme or system of life 

insurance which covers a group of persons in any manner WIder policy provisions not in harmony with Article 3a5Q9 as 

amended o supra o 

Paragraph (3) of Section 1, Article 3.50’ subchap- ’ 

ter I?, of Senate Bill No. 236, Chapter 491, Acts 0% the 52nd 

Legislature R. S 

ture;,. R,S, f953, EL, 

19513 was amended by Acts .53rd Legisla345, p., 853, and this amendment reduced 

the ‘number of insureds necessary to be eligible for the 

‘“group plan” from a minimum of 25 to a minimum of 15 

4 

and it 

also allowed incorporated cities, towns or villages o participate in a “group plan.” 

In determining whether or not a Wholesale Life Insurance Plan” is not in fact a “Group Plan” as defined in 

characteristic of group insurance is the willingnessof the 

insurance company to waive its right to select who shall be 

“.., 

insured for a “spread of risk” which it receives through a’ 

guarantee that a certain percentage of one class of persons 

would be covered, 

, 

4 Individual life insurance p’olicias may 

“-,,provide for a term of insurance to end either 

at a specified date or at termination of 

’ specified employmen$ or at due date of next 

+~ premium subsequent to termination of such em- 

.&.iloyment , etc 0, and an individual one year ; 

‘” ,term life policy may provide for renewal .at “’ 

option of the insurer, and such policy may 

specify who is to pay the premiumso In deter-’ 

mining whether OP not a Wholesale Life Insupance Plan” is not in fact a “Group Plan” as, 

. . 
, 

*. . 

Hon. Garland A. Smfth, page 5 (S-143) 

set out In Article 3.50, as amended you may 

ge guided by the opIni;;ein Board oh rp;iur - . 

ners ve at Sou- 

:Insurance Cornoat& 150 Tex. ~58~ 239 S&2d 

;.803 (1951.1. 

APPRbvq: Yours very truly, 

Phillip Robinson 

Reviewer 

JOHN BFiN SRFiPPEBD 

J. C. Davis, Jr. 

Bevlewer 

Robert S. Trotti 

First Assistant 

BGR:wb