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# The Attorney General of Texas
December 31, 1982 MARK WHITE Attorney General

SuDreme Court Building P.0. Box 12548 Austin. TX. 78711.2548 5121475-2501 Telex 91OlS74-1367 Telecopier 512l4750266

IS07 Main St..Suite 14M) Dallas. TX. 752064709 214/742%944

4824 Alberta Ave..Suite 160 El Paso.TX. 79905.2793 9156333484

220 Dallas Ave..Suitex)2 Houston. TX. 770026936713m806 Broadway. Suite312 LubboctC.TX. 79401.3479 SOM47.5238
43M)N.Tenth. Suite B McAllen. TX. 78501-1685 51216824547

200 Main Plaza, Suite400 San Antonio, TX. 78205-2797 512m5-4191

An Equal Opportunity/ Aftirmative Action Employer Hr. William P. Daves Chairman State Board of Insurance 1110 San Jacinto Austin, Texas 78786 Opinion NO. Mw-564 Re: Solicitation of insurance

Dear Mr. Daves:
You ask whether any of three sample letters from lending institutions to borrowers reminding them to renew their hazard insurancepolicy constitutes solicitationof insurance in violationof articles 21.02, 21.02-l. 21.14, section 4 and 21.48A. section 2(c) of theTexas InsuranceCode.
A summary of the factual context in which these letters are written is helpful. It is our understanding that it is common practice for a lending institution to require that a borrower obtain and maintain hazard insurance coverageon the collateral for a loanas a term of the written loan agreement. Such an insurance contract is generally negotiated for a one-year term while the loan agreement is generally for a term of fifteen, twenty or thirty years. We understand further that the borrower is required to provide the lending institutionwith a copy of the hazard insur,ancecontract and that the lending institution generally sends out letters to the borrower to remind him to renew his hazard insurance coverage to insure continuous coverage as requiredby the loan agreement. We are advised that insurance agenciesmay be owned and operated by the same, or substantially the same, individualswho own and operate the lending institution that sends out such letter. Your inquiry relates to the specific language used in these letters reminding the borrower to renew his'hazard insurance coverage. In particular, you ask whether certain language used in three sample letters violate provisions of the Texas Insurance Code which prohibit solicitation of insurance without a license.
At the outset,we shouldnote that a financial institution cannot be licensed as an insurance agent because it is not "actively engaged in the soliciting or writing of insurance from the public generally" as requiredby section 5 of article 21.14 of the Texas InsuranceCode. Thus, a lending institution is prohibited from engaging in acts of an insuranceagent, such as solicitinginsurance.

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. . Mr. William P. Dave6 - Page 2 (MW-564)

Various provisions of the Texas Insurance Code prohibit the solicitation of insurance on behalf of any insurance company without the proper licensefrom the State Board of Insurance. Ins. Code arts. 21.02; 21.02-l; 21.14. However, the code does not define the term ~solicitation." Article 21.48A of the code, entitled "Prohibiting Certain Practices Relating to Insurance of Real or Personal Property," is directed to landerswho require insuranceon real orpersonal property constitutingcollateralfor loans. Section 2(c) states:

(c) No Lender shall~use or permit the use of any of the information taken from a policy of insurance insuring the property of a Borrower for the purpose of soliciting insurancebusiness from the Borrower, or make any of such information available to any other person for any purpose, unless such Lender has first been furnished specific written authority from the Borrower permitting or directing such particular use or disclosure; provided, however, this paragraph shallnot preventa Lenderwho is a licensed local recording agent from selling insurance to a Borrower.
We would note that the proviso about local recordingagents does not apply to lendinginstitutions. Section 1 of article 21.48A of the code defines "lender" as "any person, partnership, corporation, association, or other entity, or any agent, loan agent, servicing agent, or any loan or mortgage broker." Thus, while a lending institution is a "lender," it nonetheless is disqualified as an insuranceagent,which includes local recordingagent, for the reasons discussedabove. The Texas Insurance Code does not define the word "solicit". Words that are not defined in a statute are given their ordinary sinnificanceunless thev are words of art or words connected with a paiticular subjectmat&r. V.T.C.S. art. 10;National Life Companyv. Stegall. 169 S.W.2d 155, 157 (Tex. 1943);Willingham v. Hagerte, 553 S.W.Zd 137. 139 (Tex.Civ. App. - Amarillo 1977,no writ). The word "solicit" is one of c-on usage and its meaning is simple and not subject to any peculiar usage. Coutlakisv. State, 268 S.W.2d 192. 198 (Tex.Grim.App. 1954);Page v. State, 492 S.W.Zd 573 (Tex. Grim. App. 1972). In Attorney General Opinion VW-551 (1959), this office addressed theauthorityof the State Board of Horticians to promulgate rules governing solicitation, and related questions. There it was stated:

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Mr. William P. Daves - Page 3 (MW-564)

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‘Solicit’ is defined as: ‘To ask for with earnestness; to make petition to; to endeavor to obtain; tomake or exciteto action; to appeal to; or to invite.’ Black’s Law Dictionary, 1248 (5thed. 1979). Applying these definitions to the solicitation of insurance, we conclude that any person, including a financial institution, who requests, asks or appeals to or recommends or entices a borrower to renew his hazard insurancepolicywith a particular insurance company would be soliciting insuranceandwould be held to be an agent of that company under article 21.02 and 21.02-l of the Texas Insurance Code. Although the letters of the lending institutions recommend an insurance agency rather than an insurance company,articles 21.02 and 21.02-l apply under the express terms of the statuteswhich provide that any person who does or performs any other act or thing in the making of any contract of insurance for or with any such insurance company other than for himself shall be held to be the agent of the company. The act of recommendingan insuranceagency is an act in the making of an insurance contract. Moreover, an insurancecompany.as a corporate body, can act only through its agents, and it expressly authorizesand appoints its agents to enter into insurancecontracts. Turning now to the specific letters aboutwhich you inquired,we believe that part of Trample 1 is permissible, hut Examples 2 and 3 are prohibitedby the Texas InsuranceCode. The pertinent languageof Example 1 is:
We fully recognizeyour right,of choice of agent or carrier in selectinghazard insurance on your dwelling. However, since there is a common interest between yourself and our firm in seeing thatyour hazard insuranceis in a proper form and sufficient in an amount to cover your valuable home in the event of loss,we would be pleased to assistyou in obtainingthis insurancecoverage. Ifyou desire thatwe procurehazard Insurancefor your dwelling or have quotations provided to you for such insurance. it will be necessary for you to consent to our releasing the informationwhich we have in your insurance file. This consent can be given by signing the appropriate space below and returning this letter in the enclosed self-addressedenvelope.

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. 1 Hr.William P. Daves - Page 4 @iW-364)

We believe the second paragraph of Example 1, if sent alone, would be permissible in light of article 21.48A. section 2(c), which allows the lender to use information taken from an insurance policy for the purpose of soliciting insurance business after obtaining written authority from the borrower-policyholder. This statutory provision clearly envisions and expresslyprovides for coannunications such.as this. However, we believe the second sentence of paragraph one constitutes an invitation to assist the borrower in securing coverage and thus constitutes the solicitation of insurance. We cannot determine from the information presented whether this solicitationis made on behalf of an insurancecompany. If, however, this solicitation is in factmade to benefitan insurance company, the lenderwill violate the InsuranceCode provisionsunder discussion. The pertinent languageof Example 2 is:
For your renewalwe recommendyou contact [nameof insuranceagency]. Inmany cases, this agency can offer you more coverage for lesspremium than you are now paying. Please call [name of insurance agency] during office hours, 8:30A.M. until 5:30 P.M; at [phone number of insurance agency]. Ask for [name of agent] or [nameof agent].
We believe Example’2 is prohibitedby articles 21.02 and 21.02-l of the Texas Insurance Code because it recommends that the borrower renew his hazard insurance policy through a particular agency. which sells insurance on behalf of 

### an insurancecompany. It also entices a borrower.bystating that the agency can offer “more coverage for less premium.” This language treats the insuranceagency as an insurance company because only a company 

### can provide coverage. Moreover, Example 2 asks the borrower to call the insuranceagency, and directs him to particular agents within the agency. Also, Example 2 can be consideredto be “perform[ing]any otheract or thing in themaking or consummatingof any contractof insurance.” The pertinentlanguage of Example 3 is:
It is our reconrmendationthat you use [name of insuranceagency) asyour insuranceagent. It has been found that in many instances insurance coverage can be purchased for less money than you are paying now. [nameof insuranceagency] can be contacted during office hours at [phonenumber of insurance agency]. Their address is [address of insuranceagency].

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I :: Mr. William P. Dave6 - Page 5 (MW-5841

Example 3 constitutesa solicitationof insurance in violation of articles.21.02 and 21.02-l for the same reasons discussed relating to Example 2.
SUMMARY

Articles 21.02, 21.02-l. 21.14. and 21.48A. section 2(c) of the Texas Insurance Code prohibit a lending institution from soliciting insurance which includes requesting,asking or appealing to or recommending or enticing a borrower to renew his hazard insurance policy with a particular insurance company or egency. On the other hand, article 21.48A. section 2(c) allows a lending institution to requestwritten authorization from a borrower to release information from the borrower's file to an insurance agency for the purpose of solicitinginsurance. Very trulyyours.

MARK WHITE Attorney General of Texas JOHN W. FAINTER,JR. FirstAssistantAttorneyGeneral
RICHARD E. GRAY III ExecutiveAssistan:AttorneyGeneral Preparedby YolandaMcKeeman AssistantAttorney General
APPROVED: OPINION COMMITTEE
SusanL. Garrison,Chairman Jon Bible . . Rick Gilpin PatriciaHinojosa YolandaMcKeeman Jim Moellinger BruceYoungblood

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