# ~TIXF,ATJTOFCNEY GENERAL OFTEXAS
AV~TXN 1,. WEXA~ March 25, 1960

Judge Penn J. Jackson, Chalrmaa State Board of 

### Insurance InternationaI Life Building **Austh 14,** **Texas** 

### Opinion No. VW-817
Re: Increase inpremium 

### rates of sMb-wide mutual asSesameat eompan&s and local mutual aid as~ociatlons. 

### Dear Sir,:

We have considered 

### your ~pinlon request ofDecember 16, 1959, which read6 inpart as follows:

6.

. . .We make this 

### general inquiry 

### aa to the powers and duttes of stats-wtde mutual assessment associations organised and operating under the provisions of Chapters 13and 14

### ofthe Texas hnsnrancc code. “h&y such mutual assessment assoclatlons 

### increase premiums on outstanding policy contracte without the prior 

### or subsequent approval of the State Board ofInsurance?
“Under a long-established practice, such mutual assessment 

### associations make application to the State Board ofInsurance for 

### psrmlssion to increase premiums< The applicants cite 

### Art. **14.23 of**  **the bmar**  anca Code as the Board’s authority for granting or 

### ordering these requested **increases.** The present Board has contlnwd tofollow 

### tbLsdepartmsntal practice lna few cases.” i,.

It Is also the understandihg of this office tit you have limited your request to those **mutual** companies which collect 

### re ular and f psriodlc assossmsnts Laaccordance with Artlcb’l4.23 o, the Texas Insursnco Code. ,, :

. ,: Mutual assessment 

### insurance companies inTexas have the right to increase 

### their rats6 tothe extent that they are r.easonabb and hecrssary+. 

### SeeAttorney General OpinionO-3367, 

### pp.5 (1941). Ia the absence of a controlling statute, 

### lncroasos in

### asses6mento by mutual Insurancci companies 1sa matter which 1sgoverned by the company’s i~i 

### charter,, by-laws 

### or theinsurance contract. See 

### American Jnris., Vol. 29, Set; 571, pp. 8,71.Judge 

### Penn J. Jackson, page 2 (WW-817 )

Chapters 13

### and 14

### ofthe 

### Texas Insurance Cads governs mutual **assessment** companies, and Article 14.23 of the Code 

### pertains 

### toassessments and rate 

### q chedsles: 

### “Each asaociatlon shall levy 

### regular aad periodical assessments by whatever name they may be called. These assessments must be insuch amounts and at such proper intervals ,aswill meet the reasonable operating expenses of the association, and pay infull the claims arising 

### under Its certificates. When or if in the 

### course of operation itshall be apparent that the claims cannot be met infull from current assessmtnts and funds w hati the amount must be Lncreastd nntil they are adeq& tomeet such claims. and the Board sbab so order.
When any association shall refuse **to** comply with ths Board’s recommendations or reqairemuto respecting rates of

### assessment.s, itshall be treated 

### as involve& and shall be dealt with as is hereinafter provided.
“Each association operating under the provisions of this chapter shall file Its rats scbsduies with the Board ofInsurance Commissioners.” (Emphasis Added).
On examination, **Article** 14.23 reveals the State Board 

### ofInsur- .:. ante hasjurisdiction toorder an increase in assessment by an assoclation 

### ody in the situation where thepresent assessment aad the

### fundson hand are inadequate topay tho reasonable expenses and claims infull. The only 

### criteria set out by **Art.** 14.23 as to the required amount of assessment is that itbo sufficient tomeet reasonable expenses and pay tho

### ciaitns infull, and to realize this end the Board 

### shall ordor the association,to iacrease 

### theassossmoat. The 

### association is 

### tobo 

### regarded as insolvent in the event the association rofbses tocomply 

### with the order of the Board. Thus, if the association takes the initiative by iacreuing the assessment, the Board is not required to pass 

### onthepropriety of this action since the onIyjurisdtctlon given the Board is to order the association to

### lncrehse the assessment under the particular 

### clrcnuastaucos set out in 14.23.

This interprotttion of 14.23 is strelrgthened by the fact 

### thatthe prtmary purpose 

### ofChapter 14,

### as revealed 

### by**Article 14.29,**  **was to**  **socuro to** **the**

### members of the mutual rompanbs, the 

### their claims. Prior to theenactment of thiiJudge Penn J. Jackson, page 3 (WW- 817 )

assessment associations were able topay only a percentage of the face value of their policies because the respective assessments were not adequate. To make certain that sufficient funds would be available. the Board was directed toorder increases in assessments by the association when it was determined that thefunds would be insufficient to pay the claims 

### Infull.

In 

### reaching this conclusion, we are not unmindful of the past departmental construction ofArticle 14.23, but we are of the opinion that Article 14.23 is not doubtful or ambiguous, and in the absence of ambiguity or uncertainty, contrary departmental construction of a statute is not deemed controlling. See 39 Tex. Jur. Sec. 126, pp. 235.

Chapters 13ore14do not control the raising of assessment rates except insofar as Article 14.23 directs theStats Board of Insur

### ance to order an assessment increase when the current assessment and funds onhand 

### are inadequate topay the reasonable expenses and claims. It is ollry in this situation thatArticle 14.23 confers the responsibility 

### onthe State Board of Insurance toorder an association to raise its assessments. Otherwise, it is the responsibility of the management 

### ofthe mutual assessment associations tomako ,rate ln

### creases subject tothe provisions of their respective charters, by-laws and 

### insurance contracts. 

### SUEJIMARY

The State Board of Insurance has jurisdiction under Article 14.23 to order a mutual assessment association tomake an assessment increase only where it determines that the proceeds from the current assessment and funds onhand 

### are inadequate topay reasonable ex

### penses and claims; otherwise, mutual assessment associations 

### may make assessment increases subject to their respective charters, by-laws and insurance contracts. Very truly 

### yours, WILL WILSON Attorney 

### Goneral of Texas



### BY Bob E. Shannon Assistant **Attorney** 

### GomaralJudge Penn J. Jackson, page 4 (WV-817)

APPROVED: 

### OPINION COMMITTEE:
W. V. 

### Gappert, Chairman ~William T. Blackburn 

### Fred B. Werkenthh Bob Rowland 

### Larry liargrove
REVIEWED FOR THE ATTORNEY GENERAL
BY: Leonard 

### Passmore ..