Mr. William A. Harrison Opinion No. WW-397 

Commissioner of Insurance 

International Life Bldg. Re: Whether a corporation which 

Austin, Texas does not meet the requirements 

of Article 1513a, V.C.S., may 

continue to act as an attorneyin-fact for a ~reciprocal or 

inter-insurance exchange under 

the provisions of Chapter 19, 

Dear Mr. Harrison: Texas Insurance Code.~ 

You have requested our opinion in answer to five questions concerning the licensing of corporations to act as agent 

for a reciprocal or inter-insurance exchange. Your first question is as follows: 

"Immediately prior 'to the enactment of Article 1513a, V.C.S. was the Board of Insurance Cornmissioners authorized by law to license a corporation organised under the laws of this State to act 

as an attorney-in-fact for the subscribers at a 

reciprocal or inter-insurance exchange?" 

Prior to the enactment of Article 1513a, Vernon's Civil 

Statutes; there was no provision under the law governing corporations in Texas which would permit the creation of a domestic 

corporation or the issuance of a permit to a foreign corporation 

for the purpose .of acting as an attorney-in-fact for the .subscribers of a reciprocal or inter-insurance exchange. It has 

been a well established rule of law in Texas that, prior to the 

enactment of the Texas Business Corporation Act, which became 

effective in 1955, no domestic corpora~tion in Texas could be 

created, and no foreign corporation could obtain a permit for a 

purpose not authorized by statute. Prior to the enactment of 

Article 1513a there was no statutory provision authorizing a 

corporation to be formed for the 'purpose of acting as agent or 

attorney-in-fact for a reciprocal or inter-insurance exchange. 

Bowever, sub-division 49, Article 130.2, and Article 

1303b, Vernon's Civil Statutes, did provide that corporations 

might be created nto act as trustee under any lawful express 
. ’ 

I,?. William A. Raarrison, page 2 (15%397) 

trust committed to them by contract and as acent for the nerformance of anv lawful act*',* and thereafter various domestic 

corporations were sought to be created, and foreign corporations sought to obtain permits to act as general agents for 

various insurance companies, including reciprocal or inter-insurance exchanges by the use of the purpose clause above set 

forth. This department has held, commencing with an opinion by 

Honorable William M&raw dated September 22, 1938, addressed to 

Wr. George Van Fleet, Actuary for the Roard of Insurance Commissioners, and in subsequent opinions b 

being Opinion No. o-3250, dated May 1 c 

Honorable Gerald C. &nn, 

, 1941, addressed to Honorable Earvin Rail? Fire Insurance Commissioner, by Honorable 

Grover Sellers, being Opinion NO. o-7302, dated August 9, 1946, 

addressed to Honorable E'arvin Rail, Fire Insurance Commissioner, 

that corporations so formed could not act as agents for various 

types of insurers,,including reciprocal or inter-insurance exchanges, for tho reason, among others, that such corporations 

E Fbject to,the provisions of Section 1, Article 1524a, 

which provides that corporations having the purposes 

a%e'aescribed cannot "carry on the business of another." 

-' Article'l524a, V.C.S ., was not repealed by the passage of the Texas Business Corporation Act (Article 9.PjB) and, 

in addition, Article 2,01B(4)(d) of the Business Corporation 

Act provides that no corporation may adopt, or be organized, or 

obtain authority to transact business in Texas under the act if 

any one or more of its purposes is to operate as %orporate 

attorneys-in-fact for reciprocal or inter-insurance exchanges. I' 

Chapter 388 Acts 55th Leg. R.S. 1957, 

(codified as Article 1513a, Vernon's &vi1 ktatutes P' p%fded 

that trust companies may be created, and any corporation however created may amend its charter or a foreign corporation 

may obtain a certificate of authority to do business in Texas 

for the following purpose, II. . . to act as attorney-in-fact 

for a reciprocal or inter-insurance exchange." Ssc. 5, Art. 

15l3a, provides that such corporationmust have a fully paid in 

capital of ,j500,000.00. 

It is the opinion of this office that prior to the 

enactment of Article 1513a, Vernon's Civil Statutes, since no 

domestic corporation could be created nor a permitbe issued to 

a foreign corporation for the purpose of acting as agent or 

attorney-in-fact for a reciprocal or inter-insurance exchange, 

the Board of Insurance Commissioners was without power or authority to issue a license to such corporations for the purpose 

of acting in that capacity, and the answer to your first question is therefore %o". 

* Emphases throughout are supplied. 
Mr. William A. Harrison, page 3 (WW-397) 

Your second question is as follows: 

"Immediately prior to the enactment of Article 1513a, V.C.S. was the Board of Insurance 

Commissioners authorized by law to license a reciprocal or inter-insurance exchange and its 

attorney-in-fact if the attorney-in-fact was a 

foreign corporation?" 

It is also a well settled rule of law in Texas that 

a foreign corporation is restricted to the purposes and powers 

which may be exercised lawfully by corporations chartered under 

the laws of Texas, and the rule of comity would not permit a 

foreign corporation to obtain a permit to do business in Texas 

for a purpose not authorized or exercise powers which.could not 

be lawfully exercised under the laws of Texas, even though the 

purpose for which such corporation was formed and the powers 

'sought to be exercised thereunder were lawful in the State 

where the foreign corporation was chartered. Western Service 

C . v. Neharz. Secretarv f State 116 Tex. 193 197, 288 S.W. 

&'tl (1926); Ii-A, Tex. .I$., SectIon 7%-k, p. 176. 

Since the Secretary of State .was not authorizedtunder 

;,the laws of Texas to issue'a. permitto a foreigncorporation 

~to act.as agent or attorney-in-fact for a'reciprocal or interinsurance exchange prior'to the enactment of Article 1513a, 

V.C.S., the Board of Insurance Commissioners was without au- 

'thority to issue a license to such corporation to act in that 

capacity, and the answer to your second question is “no". 

Your third and fifth questions are as follows: 

"If your answer to either of the first two 

questions is in the negative may the present 

State Board of Insurance con E inue to license such 

reciprocal or inter-insurance exchange with a 

corporate attorney-in-fact if the corporate attorney-in-fact does not meet the requirements of 

Article 1513a?" 

'%ay a reciprocal or inter-insurance exchange 

now be admitted and licensed to do business in this 

State when its attorney-in-fact is a foreign car-' 

poration which does not meet the requirements of 

Article 1513a, V.C.S.?" 

Your third and fifth questions have been considered 

and will be answered together. Since it is our opinion that 

prior to the enactment of Article lsl3a, V.C.S., the Secretary 

of State was without authority to issue a charter to a domestic 
r - 

I@ . William A. 'Harrison, page 

corporation or grant a permit 

purpose of acting as agent or 

to a foreign corporation for the 

attorney-in-fact for a reciprocal 

or mter-insurance excnange, any license heretofore granted by 

you or your predecessor Boards of Insurance Commissioners to 

such corporation was without legal authority. However, where a 

domestic corporation has amended its charter, or a foreign corporation has received a certificate of authority under the provisions of Section 2, Article 1513a, from the Secretary of State 

which authorizes such corporation to act as attorney-in-fact 

for a reciprocal or inter-insurance exchange, you would have the 

legal authority to issue a license to such corporation to act as 

attorney-in-fact for a reciprocal or inter-insurance exchange, 

provided such attorney-in-fact for the reciprocal or interinsurance exchange has fully complied with the provisions of 

the Insurance Code, and particularly the provisions of Chapter 

19 thereof. If such domestic or foreign corporation does not 

meet the requirements of Article 15'13a, V.C.S.6, the Secretary 

of State would be without authority to either grant or amend a 

charter of a domestic corporation or issue a certificate of authority to a foreign corporation thereunder, and hence you would 

be without authority to issue a license to such corporation 

since it would be doing business in Texas in violation of law. 

Your fourth question is predicated upon an affirmative answer to either questions 1 or 2, and since both of these 

questions have been answered in the negative no discussion 

thereof is deemed necessary. 

suMMARY 

Prior to the enactment of Article 15;13a, V.C.S., 

no.domestic corporation could be chartered, and no 

foreign corporation could receive a permit to act as 

agent or attorney-in-fact for reciprocal or interinsurance exchanges, The Commissioner of Insurance 

may legally issue a license to act as attorney-infact for a reciprocal or inter-insurance exchange to 

any domestic or foreign corporation which has been 

qualified by the Secretary of State under the provisions of Section 2, Article 15lja, V.C.S. 

Yours very truly, 

WILL WILSON 

Attorney Gene,ral of Texas 
Mr. William A. Harrison , page 5 ON-397) 

APPROVED: 

OPINION COMMITTEE 

Geo. P. Blackburn, Chairman 

Wallace Finfrock 

Morgan Nesbitt 

Richard B. Stone 

REVIXWEDFOB THEATTOBNEYGENEFUL 

BY: W. V. Geppert