Hon. 12. P. Lockhart O>inion No. O-5940 

Chairman I3e : .Whhethzr the proposed contract subBoard of Insurance mltted by << group of physicians operatCommissioners 

Austin, Texas 

ing.the S,tz.mford Sani.tari:lm is a contract 

01 ln:.:uran;,e, subjecting the issuance of 

sai'd contr:st 20 the supervision of L;t'.,e 

Dear Sir: Bo,z;.sd ofInsurance Commissioners. 

Your ietter o.? March 14, 1%-t, requesting the oplnion 

of this department regarding the above mentioned matter, reads 

as follows: 

'I.4 group of doctors operating Stamford Sanitarium 

have submi.tted the e:lclosed proposed contract to this 

Department for consjderttion. 

"T;;ill you pleass advise me whether the Lnstrume'lt 

constiktes an insul:::nce contract subjecting the issuance of it to the supervision of this Department or 

whether it is merely 1 service contract with which this 

Depzrtment may not properly concern itself." 

The contract under consideration is as follows: 

"STiMFORD MEDIC& AND HOSPITAL SERVICE PLQ 

"This plan provides for MEDIC& .kND HOSPITAL SERVICE 

specified to the extent herein provided. 

"ST:MFOHD MXDICiiL A'ID HOSPITAL SERVICE is comoosed 

of DRS; E. P. BUNKLEY, DALAS SOUTHARD, F. E. HUD&N, 

L. F. MdTZ, J. W. YOL%GBLOOD, I. F. HUDSON and T. ii. 

BUNKLEY, who own and operate STAMFORD SANITARIUM, Stamford, Texas. The same- shall also.include any other 

DOCTOR who may become a participating member with the 

consent of STAMFORD MEDICAL AND HOSPITAL SERVICE. 

tlSTAMFORD MEDICAL AND~HCSPITAL SERVICE hereby agrees 

to furnish andhis or her dependents, 

(hereinafter called 8CONTRACT'HOLDER') SERVICES as hereinafter defined, subject to all provisions and limitations 

herein contained, made necessary by reason of bodily injury sustained, directly and independently of all other 

causes, through accidental means while this contract is in 
Hon. 0. P. Lockhart, page 2 (O-5940) 

effect, (hereinafter called ‘SUCH ACCIDENTS1) and SERVICES 

made necessary by reaaon ‘of dIseasQ or.slckmess contracted 

more than thirty days after the effective date hereof, 

(Hereinafter called ‘SUCH SICENESS’). 

_. . __-* 

I, COpJ s m 

“The consideration for ‘such ‘SERVICES is CONTBQCT HOLDER’S application and the representations contained.there2.n 

and the payment to STkMFORD MEDICAL AND HOSPITAL SERVICE 

OF $ , representing thrge months premiums. The 

same may be renewed with the consent of ST&FORD MEDICQL 

4ND HOSPITAL SERVICE so long as advance payment -of simLlar 

premium is-made In accordance with the terms and provisions 

hereof. 

“No obligation is assumed by STAMFORD MEDICAL AND 

HOSPITBZ, SERVICE for rendering SERVICES by reason of any 

accident occurring or disease or sickness arising prior to 

the date of this contract nor unless CONTRACT HOLDER named 

herein is alive and in sound health at the ,time of delivery 

and acceptance hereof. 

“The conditions and privileges printed on the following pages hereof constitute a part of the contract as fully 

as if they were recited at length over the signature hereto 

affixed. 

“IN WITNESS WHEREOF, STAMFORD MEDICAL AND HOSPITAL 

SERVICE has issued this JONTEACT at its kiEDICAL CENTER in 

Stamford, Texas, on this the day of 

19-g which ts the effective- of this CONTRACT. ’ 

“CONTRACT NO. 

“STAMFORD MEDICAL AND HOSPITAL 

SERVICE 

‘BY 

‘!BY 

!BY 

‘?BY 

?BY 

!‘BY 

!‘BY-’ 

_ 

Ii 

“REGISTRAR 
Hon. 0. P. Lockhart, page 3 (O-5940) 

“PART I. If the Citi?Riil“ti~LD~~ on account of such 

“SERVICES 

accident . or. such sickness , _ shall- require Medical Service 

or be confined as a bed patient within the Medical Center 

Hospital at Stamford, Texas, STAMFORD MEDICAL AND HOSPIT& 

SERVICE will render to the CONTRACT HOLDER the-following 

services, subject to all of the provisions and limitations 

herein set forth: 

“ii. All office calls, including nursing care or 

treatments that the CONTRACT HOLDER shall necessarfly need, 

not exceeding three in ~1;~ one week or ten on account of 

any one accident or any one period of sickness. 

“B . Hospital confineme:~~t, including general nursing 

care and Hospi~tal. Service for the period the CONTRACT 

HOLDER shall be necessarily confined therein, not exceeding twenty-one (21) days Hospital Service on any one period 

of sickness or accident in one twelve months period following the date of this CONTRACT. 

“C. Private room or bed service, based on a $5.00 per 

day rate. 

“2. All general nu,rsing care and hospital care. 

“8 a ill services of professional .snd non-professional 

emp?,oyees of hospital, 

“F ” Use of operatf.ng room when a bed patient in hospit41 for major or minor operations. 

“G. Ul services of :Inetheslst if employed by hospitas. 

“H . Maternity: dil services under part one of this 

CONTRACT for a m.:x?i:lum of five (5) days, including nursery 

care of newborn of CONTRACT HOLDER has kept this CONTRACT 

in continuous force for one year or more immediately prior 

to such hospital confinement. 

“PART II. The services as provided herein are to be 

rendered at the Medical Center Hospital at Stamford, Texas, 

by STU4FORD MEDIC.% AND HOSPITAL SERVICE. 
Hon. 0. P. Lockhart, page 4 (O-5940) 

“V * . . . _ 

Ml. This CONTRACT includes the endorsements, if any, 

and together with.. the -application for same, shall constitute the entire CONTRACT. No reduction .shall be made in 

any provision ,hereof by. reason of change of occupation of 

the CONTRACT HOLDER. 

“2. ‘No statement made by the application for services not included herein shall void the CONTRACT or be 

used in any legal proceedings hereunder. No change in 

this CONTRACT shall be valid unless approved by STAMFORD 

MRDICAL AND HOSPITAL SERVICE and such approval be endorsed 

hereon. ~_ . _. 

“3. If default be made in payment of the agreed premium for this CONTRACT and such default continue for a 

period of ten days, the subsequent acceptance of the premium shall be optional with STAMFORD MEDICAL AND HOSPITAL 

SERVICE, and if accepted shall reinstate the CONTRACT but 

only to cover accidental injury thereafter sustained and 

such sickness as may begin more than thirty days after the 

/’ date of such acceptance. 

“4. All services provided in this CONTRACT shall be 

;arAd or rendered by STAMPORD MEDICAL AND HOSPITAL 

. : ,- 

“5 . STAMFORD MEDICAL AND HOSPITAL SERVICE may cancel 

this CONTRACT at any time-upon ten days written notice, 

delivered to the CONTRACT HOLDER or mailed to the CONTRACT 

HOLDER at his or her last address as shown by the records 

of STAMFORD MEDICAL AND HOSPITAL SERVICE, together with 

cash or STAMF’ORD MEDICAL AND HOSPITAL SERVICE check for 

the unearnedportion of the premiums actually paid by the 

CONTRACT HOLDER. Such cancellation shall be without prejudice to any claim originating prior thereto. 

” A. This CONTRACT does-not cover drugs or supplies 

or seryices for incurable cases, ambulatory patients, semiInvalidism, self destructlon or attempt thereat, or losses 

sustained in violation of the law, or cases coming under 

Hospitalization Insurance, or under provisions of any Workmen’s Compensation or Employers Liability Insurance. This 

CONTRACT does not cover abortion, syphilis or complications arising therefrom, virulent or contagious diseases, 

rest cures or mental or nervous disorders, veneral diseases or tuberculosis. 
Ron. 0. 2. Lockhart, page 5 (o-5940) 

!‘~y ailment requiring a surgical operation s);all be 

covered only if cause~of same originates after this CONTR.CT has been in continuous force for thirty lays Prom 

d&e of issue or reinstatement hereof. In th$ case of a 

tonsillectomy the waiting period shall be ninety days. 

“B . The term of this CONTRACT begins 

nocn, 3 an.dard Time , on ddte stated on the 

CONTRACT dS to Services.re@ired by reason 

cident 2nd on the thirtieth dky thereafter 

re:luirei.. by re,son of such Sikness or any 

and ends It 12::iO o(clock noon on the date 

due. 

at l2:33 o’clock 

face of this 

of ,Liy SUCh hCas to 3e.rvices 

such Disease 

dny renewul is 

“C. In the event sufficient hospital .._ sp;lce shou1.d not 

be avdil;i?~le clue to an -1ct of God or .in &piemic, the liabilitv !of STi’W’C~HD MEDIC J, 2iD HOSP1T.L SERVICE shal.1 be 

limited to-6 return of the ‘unearned ,lortion of cu”re!lt 

premiun, gaid ind such return shall rslieve the STAMFORD 

MEDIC:1 <ND HOSPIT SERVICE from all liability un?er this 

CONTFMT. 

“;;i, Strict compliance on the T,:irt of the GONTRACT 

HO&X% &d 3ependent.s cdith ~j.1 the terms and provisions of 

thi 5 contr a(: t, ind the q.plication signed by the CONTRZT 

HCLXA is i conition precedent to recovery hereon, dnd an:; 

f .ilur, in this respect shall forfeit to the ST&FORD MZDI- 

;.LL ii j HOSPIT& SERVICE all right to any services.” 

In order to determine whether the proposed contract is 

.t:\ in5ur2ice contract, it is necessary to test and measure the 

cnntr....,,. t hy tl;e Texas Statutory definition of Itinsurance.” 

.izticle 4716, Vernon’s Annotated Civil Statutes, provides, in &rt: 

‘I***:& accident insurance company shall be deemed to 

be il corporation doing business under any charter involving 

the i!ayment of any amount of money or other thing of value 

condi.tioned upon loss by reason of li’ability due to sickness or ill health. 6; health insurance company shall be 

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

thing of value, conditioned upon loss by r,eason of disability due to sickness or ill health. ***‘I 

‘de know of no Texas decision which answers the question as to ;qhether the contract under consideration is a contract of insurance. 
Hon. 0. P. Lockhart, page 6 (O-5940) 

After carefully considering the foregoing contract, 

it is apparent that the essence of the above mentioned contract 

is to indemnify, in part, the members against excessive cost of 

hospitalization contingencies. &.z in the case of burial associations where the funeral benefits are contracted to be furnished in kind and not paid in cash, the benefits here are unconditionally contracted to be either furnished in kind through 

hospital services and accommodations, or, in the alternative, 

,when the Stamford Medical and Hospital Service cancels the contract at any time upon ten days written notice, delivered to the 

contract holder or mailed to the contract holder at his or her 

last address as shown by the records of Stamford Medical and 

Hospital Service, the unearned portion of the premiums actually 

paid by the contract holder are to be refunded. 

The word “insurancel’ is defined in Texas Jurisprudence, 

Vol. 24, page 650, as follows: 

“‘Insurance’ is a word of comprehensive and varied 

meaning. In a general sense, the term signifies an agreement, for a consideration, to pay a sum of money upon the 

happening of a particular event or contingency, or indemnifying for loss in respect of a specified subject by 

specified perils; in other words, an undertaking by one 

party, usually called the insurer, to protect the other 

party, generally designated as the insured or the assured, from loss arising from named risks, for the consideration and upon the terms and under the conditions 

recited.” 

It is our opinion, that the benefits offered by the 

Stamford Medical and Hospital Service plan as set forth in the 

proposed contract under consideration, are insurance benefits 

and that the proposed contract is a contract of insurance. It 

is our further opinion that the Stamford Hospital is not authorized to issue any form of insurance contracts or policies. 

The Insurance Department of this State is authorized 

to make investigations to determine whether the insurance laws 

are being violated and to see that no company does an insurance 

business without authority of law. The Insurance Department 

can make such investigation as is proper and take such steps 

and make such recommendations as may be necessary pertaining to 
Hon. 0. Pa Lockhart, page 7 (O-5940) 

the enforcement of the insurance laws and require a compliance 

therewith. 

htSS.) 

(See Article 4682, Vernonls Annotated Civil Stat- 

* . 

Yours very truly 

LTTORNEY GENERAL OF TEXAS