- . . 

THEA~ORNEY GENERAL 

OFTEXAS 

AUESTIN ~~.TExas 

WIJi WILSON ‘! 

AlTORNEYGENERAL July 8, 1960 

Honorable Robert S. Calvert 

Comptroller of Public Accounts 

Capitol Station 

Austin, Texas 

Dear Mr. Calvert: 

tax on insurance adjusters, levied by 

Article X9-01, Section 3, 

Title 122A, TaxationGeneral to Independent 

local recording agents. 

As your recent letter 

the referenced subject contains 

quote it In full, as follows: 

requesting our opinion upon 

a detailed fact situation, we 

“Section (3) of Article lg.01 of 

Opinion No. ~~-875 

Re: Application of occupation 

Title 122A, Taxation-General, being RRll, 

56th Leg. 1959, 3rd C.S., Ch. 1, p. 187, 

,levles an occupation tax on Insurance 

Adjusters. 

"A'question has arisen whether the tax 

is due from independent Local Recording Agents 

having limited authority to pay small claims, 

and who participate to a limited extent in an 

advisory capacity in the disposition of other 

insurance claims on policies written through 

their agencies, all as incidents of their 

primary occupation as independent Local 

Recording Agents. 

“Mr. Forest S. Pearson, acting for himself 

and other independent Local Recording Agents 

similarly situated, presents the typical 

situation. 

“Mr. Pearson’s business is that of an 

independent Local Recording Agent repreaentlng 

several different companies and *groups’. HIS 

primary activity is the solicitation of Insurance 

business, the writing and issuance of insurance 

policies, and the collection of premiums, all of 

which, insofar as it pertains to his insurance 

business, consumes the-.:major portion of his time 
Honorable Robert S. Calvert, Page 2 Opinion No. ~1-875 

and effort. His compensation from his 

insurance business is by way of commissions 

directly proportionate to the volume of 

premiums written through his agency. 

“Mr. Pearson pays small losses which 

require no independent investigation, the 

liability and amount involved being without 

question. He also acts frequently in an 

advisory capacity and to a limited degree 

In the negotiation of settlements upon 

request of either the insured or the 

adjuster. Practically all losses on 

policies written through his agency are :.~ ..: 

first reported to him by the insured. If 

the reported loss is of a type that has 

any Investigation or adjustment problems, 

the company or its assigned Insurance 

Adjuster is immediately notified, at which 

point his responsibility for investigation, 

negotiation, or reporting thereon ends. 

Losses involving substantial sums or substantial questions of liability fall within 

the latter category. If the loss does not 

fall within such category, Mr,. Pearson pays 

it and Is reimbursed by the company. We 

receives no’~addltiona1 or special pay for 

any service rendered on losses. 

“Mr. Pearson does not maintain a claims 

department; he does not employ a ClaimF 

adjuster; he does not hold himself out to 

Insurance companies, other agents, or the 

public as an Insurance Adjuster; he is not 

an expert In the techniques of investigation, 

negotiation, appraisal, or ascertainment of 

liability, characteristic of the profession 

of Insurance Adjusters or claim agents; and 

the only losses which Mr. Perrmn has anything 

to do with are those which arise out of 

policies written through his agency. He never 

participates in a responsible capacity in the 

handling of any loss which arises out of a 

policy written through another agency. His 

activities in the field of losses are necessary 

incidents of his primary occupation as an 

independent Local Recording Agent, being 

limited to such aa is necessary to efficiently 

serve his clients. 
Honorable Robert S. Calvert, Page 3 Opinion No. WW-875 

“Mr. Pearson’s business Is in the 

nature of an independent business rather than 

that of a branch office of a particular company 

or group of companies. His clientele hold him 

responsible for the selection of companies 

which most adequately and appropriately meet 

the Insurance requirements of his clients. He 

is free to restrict his activity to the primary 

occupation of soliciting and writing of 

insurance policies and the collection of premiums. 

In these respecte his ‘independent’ agency Is 

different from a ‘direct writing1 agency, where 

the agent is an employee or under the direct 

control of the principal company or ‘group’, 

and may be directed to perform on behalf of 

the employer any duties assigned to him, including those duties normally perforled by professlona.1 Insurance Adjusters. The ‘direct 

writing’ agent has no choice of companies. 

“Kindly advise whether, under these facts, 

the tax applies to Mr. Pearson.. A brief on 

behalf of Mr. Pearson, prepared by O’Quinn, 

McDaniel & Randle, Attorneys at Law, 422 

Perry-Brooks ,Bulldlng, Austin, Texas, is 

enclosed herewith. The attorneys represent 

Mr. Pearson and the Texas Association of 

Insurance Agents whose membership Is vitally 

Interested In the question presented.” 

It is our opinion that a Local Recording Agent, as 

illustrated in your letter, is not liable for the occupation 

tax on insurance adjusters. 

Chapter 19, Title 122A, Taxation-General (H.B.ll, 

56th Leg., 3rd C.S.) levies miscellaneous occupation taxes. 

Article lg.01 (3) reads as follows: 

“Insurance Adjusters. From every person 

engaged In the occupation of adjusting 

insurance losses in this State, there shall 

be collected an annual tax of Ten Dollars 

($10.00). 

“For the purpose of this Subsection, a 

person shall be deemed to be engaged In the 

occupation of adjusting Insurance losses when 

he investigates or ascertains the liability 

or amount of damage, or negotiates the adjustment 
Honorable Robert S. Calvert, Page 4 Opinion No. ~~-875 

of Insurance claims or losses, or reports 

thereon; whether employed by an Insurance 

c ommw, or companies, or the Insured, or is 

a member of a firm, association of persons, or 

an employee, or representative, or officer of 

such firm, association of persons, or an employee, 

or representative, or officer of such firm, association, or of a corporation, when such firm, 

association, or corporation is engaged in adjusting 

Insurance losses.” 

This language Is a partial verbatim re-enacg;nie;f 

the previously existing Article 7047-10 (a), R.C.S. 

in this re-enactment by the 56th Legislature was an exemption 

clause which read as follows: 

“Provided that this tax shall not apply to any 

local, recording, soliciting or special 

agents of any Insurance company, nor to any 

person regularly employed on a salary by any 

insurance company, who may adjust Insurance 

losses only for a company represented by him, 

such person not charging or being paid for his 

services as an insurance adjuster on a fee basis.” 

Thus, under the previously existing Article 

7047-10 (a), no tax liability was incurred by a “local, 

recording, soliciting or special” agent, or by a salaried adjuster of any Insurance company. Though the agent might be 

handling the duties of an adjuster, his agent’s status provided an exemption. The obvious intent of the 56th Legislature 

in deleting tNs exemption provision from the present Article 

19.01 (3), Title 122A, was to extend the coverage of this tax 

to every person pursuing the occupation of insurance adjuster, 

notwithstanding his title or method of compensation. 

Therefore, in determining whether or not the present 

provision was intended to include “independent local recording 

,agents”, it is necessary to determine with particularity the 

nature of the services performed by such agents, then to decide 

whether or not those services are sufficient to classify them 

as “insurance adjusters” within the statutory definition. 

The tax here involved is an occupation tax. See 

Hurt v. Cooper, 130 Tex. 433, 100 S.W.2d 896 (1937); See also 

State v. Galveston, H & S A Ry. Co., 210 U.S. 217, 28 S. Ct:. 

b36, reversing 100 Tex. 153, 97 S.W. 71, (1906); Attorney 

General’s Opinion No. o-2120. Its incidence is upon every 

person embraced within the statutory definition. However, such 

definition was Intended to delineate the occupation being 
- .” 

Honorable Robert S. Calvert, Page 5 Opinion No. ~~-875 

taxed; mere performance of an act or acts specified in the 

definition cannot create liability for the tax if done incidentally to the pursuit of another occupation. Johnson v. 

State 1.36 S.W.2d 837, (Tex.Crim.App. 1940); Bailey, State Tax 

&tor v. Southern Bell Telephone Company & Telegraph 

We view the acts done by Mr. Pearson In paying 

small, undisputed claims, and in an advisory capacity during 

negotiation, as incidental to his occupation as an independent local recording agent, and as such, insufficient to 

bring him and others similarly situated into the statutorily 

defined class upon which the tax is levied. 

It should be understood, of course, that this 

opinion Is limited to the fact situation which you set forth 

in your letter as typical of independent local recording 

agent 9. Any Increased exercise of discretion or granting 

of authority in the adjustment of losses might compel a 

different result. 

- 

SUMMARY 

Independent local recording agents, performing 

described duties, are not within the scope of 

Art. 19.01(s), Title 122A, Taxation-General, 

and not subject to the occupation tax on 

insurance adjusters. 

Yours very truly, 

WILL WILSON 

Attorney General?&@ Texas 

JRI: jp 

APPROVED: 

OPINION COMMITTEE: 

Gordon C. Cass, Chairman 

Marietta Payne 

John Stelnberger 

Donald Benard 

Virgil Pulliam 

%vIRw~D FOR THE ATTORNEY 

GENERAL BY: Leonard Passmore