Hon. 12.P. Lockhart O>inionNo. 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 of Insurance 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 adviseme whether the Lnstrume'lt constiktes an insul:::nce contract subjecting the issuance of it to the supervisionof this Department or whether it is merely 1 service contractwith which this Depzrtment may not properly concern itself." The contract under consideration is as follows: "STiMFORDMEDIC& ANDHOSPITAL SERVICE PLQ "This plan provides for MEDIC& .kND HOSPITAL SERVICE specified to the extent herein provided. "ST:MFOHDMXDICiiLA'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 participatingmember with the consent of STAMFORDMEDICAL ANDHOSPITAL SERVICE. tlSTAMFORD

MEDICAL AND~HCSPITALSERVICE 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 accidentalmeans while this contract is in

### Hon. 0. P. Lockhart, page 2 (O-5940)

effect, (hereinafter called ‘SUCHACCIDENTS1)and SERVICES made necessary by reaaon ‘of dIseasQ or.slckmess contracted more than thirty days after the effective date hereof, (Hereinafter called ‘SUCHSICENESS’).

_. . __-* I, COpJ s m “The consideration for ‘such ‘SERVICESis CONTBQCTHOLDER’S application and the representations contained.there2.n and the payment to STkMFORD MEDICALAND

HOSPITALSERVICE OF $ , representing thrge months premiums. The same may be renewed with the consent of ST&FORDMEDICQL 4NDHOSPITALSERVICEso long as advance payment -of simLlar premium is-made In accordance with the terms and provisions hereof.“No obligation is assumed by STAMFORD MEDICALAND HOSPITBZ,SERVICEfor rendering SERVICESby 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 WITNESSWHEREOF, STAMFORD

MEDICALAND

HOSPITAL SERVICEhas issued this JONTEACTat its kiEDICALCENTER in Stamford, Texas, on this the day of 

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

“CONTRACT

NO. “STAMFORD MEDICALAND

HOSPITAL SERVICE

‘BY
‘!BY !BY
‘?BY ?BY !‘BY !‘BY-’

_ 

### Ii

“REGISTRARHon. 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, STAMFORDMEDICAL ANDHOSPIT& SERVICEwill render to the CONTRACT HOLDER the-following services, subject to all of the provisions and limitations herein set forth: “ii. All office calls, includingnursing care or treatments that the CONTRACT HOLDER shall necessarflyneed, 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 shallbe 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 generalnu,rsingcare and hospital care. “8a ill services of professional .snd non-professional emp?,oyees

of hospital,
“F” Use of operatf.ng roomwhen a bed patient in hospit41 for major or minor operations.
“G. Ul services of :Inetheslst if employedby 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 immediatelyprior to such hospital confinement.
“PART II. The services as provided herein are to be rendered at the Medical Center Hospital at Stamford, Texas, by STU4FORDMEDIC.% AND HOSPITAL SERVICE.Hon. 0. P. Lockhart, page 4 (O-5940)



### “V *

. . . _ Ml. This CONTRACT includes the endorsements, if any, and together with.. the-applicationfor same, shall constitute the entire CONTRACT. No reduction .shallbe made in any provision ,hereofby.reason of change of occupation of the CONTRACT HOLDER. “2. ‘No statementmade by the application for services not includedherein shall void the CONTRACT or be used in any legal proceedingshereunder. No change in this CONTRACT shall be valid unless approved by STAMFORD MRDICAL ANDHOSPITAL 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 shallbe optionalwith STAMFORDMEDICAL ANDHOSPITAL 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 servicesprovided in this CONTRACT shall be ;arAd or renderedby STAMPORDMEDICAL ANDHOSPITAL

. : ,-


### “5

. STAMFORDMEDICAL ANDHOSPITAL SERVICE may cancel this CONTRACT at any time-upon ten dayswritten notice, delivered to the CONTRACT HOLDER or mailed to the CONTRACT HOLDER at his or her last address as shown by the records of STAMFORDMEDICAL ANDHOSPITAL SERVICE, togetherwith cash or STAMF’ORD

MEDICAL ANDHOSPITAL SERVICE check for the unearnedportion of the premiums actually paid by the CONTRACT HOLDER. Such cancellation shall be without prejudice to any claim originatingprior thereto.

”A. This CONTRACT does-not cover drugs or supplies or seryices for incurable cases, ambulatorypatients, 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 reinstatementhereof. 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 sufficienthospital
.._sp;lceshou1.d

not be avdil;i?~le

clue to an -1ct

of God or .in

&piemic, the liabilitv !ofSTi’W ’C~HD MEDICJ, 2iDHOSP1T.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 thi5 contr

a(: t, indthe q.plication signedby the CONTRZT HCLXA is i conition precedent to recovery hereon, dnd an:; f .ilur,in this respect shall forfeit to the ST&FORD MZDI- ;.LLii j HOSPIT& SERVICE all right to any services.”
In order to determinewhether the proposed contract is .t:\ in5ur2ice contract, it is necessary to test and measure the cnntr....,,.

thy tl;e

Texas Statutory definition of Itinsurance.” .izticle

4716, Vernon’s AnnotatedCivil Statutes, provides, in &rt:

‘I***:&accident insurance company shall be deemed to be ilcorporationdoing 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 shallbe deemed to be a corporation doing business under any charter involving the payment of any amount of money, or other thing of value, conditionedupon loss by r,eason of disability due to sickness or ill health. ***‘I ‘de know of no Texas decisionwhich answers the question as to ;qhetherthe contract under consideration is a contract of insurance.Hon. 0. P. Lockhart, page 

### 6 (O-5940)

After carefully consideringthe 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 associationswhere 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, ,whenthe Stamford Medical and Hospital Service cancels the contract at any time upon ten days written notice, delivered to the contractholder or mailed to the contractholder 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 contractholder 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 subjectby specified perils; in other words, an undertakingby 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 insurancebenefits and that the proposed contract is a contract of insurance. It is our further opinion that the StamfordHospital is not authorized to issue any form of insurance contracts or policies.

The Insurance Department of this State is authorized to make investigationsto determinewhether the insurance laws are being violated and to see that no company does an insurance businesswithout authority of law. The Insurance Department can make such investigation as is proper and take such steps and make such recommendationsas may be necessary pertaining toHon. 0. Pa Lockhart, page 7 (O-5940)

the enforcement of the insurance laws and require a compliance therewith. htSS.) (SeeArticle 4682, Vernonls Annotated Civil Stat- * . Yours very truly
LTTORNEYGENERAL OF TEXAS