TEE A+IYORNEY GENERAL 

OF.TEXAS 

AUETIXN II. TNXAIS 

October 31, 1952 

Hon. Garland A. Smith 

Caqalty Insurance ConnnlBBloaer 

Board of Ineurance, Comm$sslonerB 

Austin lA,, TeF+B. ~. :. @&nlon Np. V-L534 

ke: Authority of the Board 

of Insurance Commlsslonem to suspend or revoke 

,' the' certificates of llaensed workmen's compensation insurers who refuse 

to write this insurance 

Dear Mr. Smith: for eligible applicants. 

Your request for an opinion reads as follows:, 

"Section 7, of Article 8308, Revised 

Statutes of Texas (Employers Liability and 

WorkmenIs Compensation Law) provides, 'Any 

employer of labor in this State who may be 

s!$ject to the, terms .of this 18~ or to the 

'.,term$:~of the Lon@hol'&nen~!s and Harbor Workers' Compensation Act of the United States 

may become a subscriber to the Association:' 

"~Asso~latlon~ 1s the Texas Employers' 

Insurance Association, as provided for In 

Sections 1 through 6, of' Article 8308. 

"The Supreme Court (Co@. of App.) held 

In the case of Texas Em layers' Ins. Ass% 

v. U. S. Torpedo.Co., 2 I!! S.W.2d 1057, that 

the Associstion had no :choice~ aB to Its hub-, 

scribers and.must inBure,eye~ry eligible emplayer who apjilled for compensation lnsurante to the Association.~ 

"Section 2, of Arti&le 8309, provides 

that other companies may Insure subscribers 

and Imay have and exercise all the rights and 

powers conferred by thle law on the assoclatlon created hereby. . . .I 
"The oonrta have held in Harris v. 

Traders' & Oeneral Ins. Co., 82 S.W.2d 

750; Southern Casualty Co. v. Freeman, 

13 S.W.2d 148; Federal Undervrltera Exchange v. Walker, 134 S.X.26 388; and 

Capps v. General Accident, FIri8 & Life 

Assur .Corpi , 92 F.Sup. 227, that such 

other companies also have to vrlte oompensatlon lns~ance for,any eligible 

employer applying for such Insurance. 

"It has been brought to the attention 

of the Board of Insurance Commlssionel'B 

that Texas Employers Insurance Association 

and other oasualtp companies chartered or 

licensed to transact a 1lablllty and accldent business in this state, and with permlts to write Worionenls Compensation lnsur- ' 

ante, have refused, In many Instances, to 

write such lnsnrance for eligible employers. 

"The situation vlth reference to the 

qbtalnlng of Workmen's Compensation lnsurance has become serious, and some employers 

have had to cease operations or to refuse' 

to enter Into certain operations because of 

their Inability to procure such coverage. 

The Board of Insurance Commlesloners arid the 

Industrial Accident Board have had many inquiries from such employers, asking how they 

might obtain the needed Insurance. 

"Article 1.10, of the Texas Insurance 

Code, Section 1, Bets otit that one of the 

duties of the Board Is to 'see that all laws 

respecting Insurance and Insurance companl?,s 

are faithfully executed.' 

"Section 7 of this Article 1.10, providea 

that, 'The Board shall suspend the entire 

business of any company of this State, and the 

business althin this State of any other company, during Its non-compliance vlth any povision of the laws relative to Insurance, or 

vhen Its business is being fraudulently conducted; by suspending or revoking the certlflcate granted by It.' 
Hon. Carland A. Smith, page 3 (V-1534) 

"The Board desires your opinion as to 

whether refusal by a licensed insurer to 

write Workmen's Compensation insurance for 

an eligible applicant constitutes noncompliance with the Insurance laws referred 

,to above; and.vhether the Board, where such 

refusal Is found~bg It after notice, and 

hearlng,~~may suspend the entire business o? 

such refusing company by suspending or revoking the certificate granted to lt'bg 

the,Board." 

The cases aivlna effect to the rule announced In 

Texas &sployers'~InsT As& v. United States Torpedo Co., 

26 S.W.26 1057 (T~zx.COQIUI.A~~. 1930, affirming 8 S.W.2d 266), 

clearly estabilsh a,duty on-the part of any insnrer licensed 

to write workmen's compensation Insurance to give protection 

to all aoolicsnts vha are ellnlble for vorlcmen's comnensatlon coverage. Southern Casualty Co. v. Free.man,~l3-SiW.2d 

148, 150 (Tex.Clv.App.1928~afflrmed~Com.AppJ 24 S.W.26 370); 

Harris v.~l'raders' .% General Ins. Co., 82 S.W.2d 750 (Tex. 

Clv.App. 1935,~~erroref.); Federa i?Jndervrlters tixchenge v. 

Walker, 134 S.W.26 388 (Tex.mp 

CCLDDS 

1.1939,erro; 

rv.~Qenm1 Accident Fire % Life Assur 

;lsm.by agr.); 

o Da,92 F.Sup. 

227 (S.D.Tex.1950). See also Yoselovltz v. Peoples Bakery, 

277 R.W.221 (Mlnn.Sup.1938); California State Automobile 

Ass'n Inter-Insurance Bureau v. Dovnev. 21b P.2d 882 (Cal. 

Dlst.Ct.of App.,1950,afflrmed 341 -iiTi05j. The applicant 

for such Insurance must, of course, also comply vlth any 

legal conditions oreCede& to nerfectlnn the duty of the 

insurer tom afford-the protection. Texas EmDlOyeh3 Ins. 

AssIn V. Russell, 127 Tex. 230, 91 S.w.2d 317 (193b) ; Pose- __ 

lowits v. Peonies Bakery, suvra. 

Your question Is whether an Insurer vho refuses 

to Issue a proper policy to any employer ~vho has perfected 

his right thereto Is guilty of such "non-compli?nce with 

any provlslon of the laws rel%tLve to InSuIanCe as to authorize the Board of Insurance Commissioners to suspend or 

revoke the Insurer's oertlflcate of authority to engage In 

the Insurance business within the meaning of Section 7 of 

Article 1.10 of the Insurance Code (Vol. 14, V.C.S.). 

Section 7 of Article 1.10 Is derived from S.B. 291, 

Acts 31st Leg.,R.S.1909,ch.lOS,p.lY2. The Act provided for 

regulation of the Insurance business generally. We conclude 

that Section 7 applies to any type of insurance company or 

Insurance business In the absence of Inconsistent specific 
Hon. Oarland A. Smith, page 4 (V-1534) 

prwlaloaa applloable to a particular type of company 

er to a particular portion of the laws relative to 

insurance. 

Her do WC have any doubt that Section 7 Is 

applicable to then votienls compensation laws and to companies engaged In vrltlng vorknmnfs compensation lnsurance, in the absenoe of particular provisions of the 

vorkmenls compensation statutes at variance with the provisions of Section 7. Workmen8s compensation Is unquestionably a type of Insurance. The original WorloDn's 

Compensation Act so treated the subject. S.B.ll, Acts 

33rd"Leg.,R.S. 1913, oh. 179,p.429. Subsequent acts dealing with workmeals compensation are of the same tenor. See, 

Acts 35th Leg 1917, ch.103 p.269, 

:;i ~~p:~i,Si:ts2;~ih bg.,R.S. 19ij,~h.l&',p.406. 

Specific provisions govern many phases. of regulation of workmen's compensation Insurers and admlnlstratlon of many phases of the workmen's compensation system. 

100 such specific provision deals with the enforcement of 

the i-nsurerl~s duty to Insure an employer. There being DO 

such specific provision Inconsistent therewith, Section 

7 applies If the refusal Is otherwise within Its terms. 

The question is thus narroued to whether such 

a refusal to Insure Is otherwise within the scope of Section 7. 

The duty of the Insurer arises under the aorkmen's compensation statutes. Texas EmDloyersl Ins. Ass'n. 

v. U. S. Torpedo Co., supra. While the duty Is not literally expressed In the statute, "that which Is Implied In a 

statute Is as much a part of It as what Is expressed." 39 

Tex. Jur. 186, Statutes, Sec. 99. The duty Is, therefore, 

a ~proirl$lon" of the laws relative to Insurance and a refusal 

would be literally a "non-compliance." 

However, we are of the opinion that the broad 

language of Section 7 Is not Intended to apply lndlscrlmlnately to every failure or refusal to perform an obligation 

under the "lavs relative to Insurance" which Is not the 

subject of more specific provisions of the statutes as to 

enforcement. 

Only such "non-compliance" as threatens to undermine the rights of the public generally and policyholders 

as 8 class should be appropriately recognized by the Board. 

See North Brltlsh % Mercantile Co. v. CralR, 62 S.W. 155, 
Hon. Garland A. Smith, p8ge 5 (V-1534) 

159 (Term. Sup. 1901), vhtreln a slmllar statuk vi-. ~5-3. 

appllca~le to matters which 'go to the general irte&:ity 

of the Insurance business, and affect 811 policyhoLders 

In the same way." 

Individual disputes, not of that nature, m8y 

be settled through the norm81 processes of the courts. 

Thus, where individual disputes arise between an Insurer 

and a member of the public, though based on a contention 

that the Insurer has failed to fulfll an obligation arlsin& under provfslons of the Insurance laws, the Board does 

not normally have jurisdiction to revoke or suspend the 

lnsurerls permit. It Is a different matter, however, when 

the obligation on the part of the Insurer Is one In which 

policyholders or other members of the public, as a class, 

have a common Interest. Thus, where the question between 

the company,and a member of the public or a policyholder 

1s peculiar to the individual controversy, the Board, In 

the absence of specific authority, would not be authorized 

to act until the matter Is settled by judicial process. 

Where, however, the policyholder or member of the public 

has 8 clear rSgbt under the Insurance 18~s because of membership in a class In whom the right Is clearly established, 

such right is within the scope of the Board's authority under Section 7. We conclude that the duty to insure an eligible employer Is of the latter type. 

The obligation to Insure employers who have 

properly qualified Is a sufflclently settled question to 

m8ke a refusal, In our opinion, such a "non-compliance" as 

to give the Board jurisdlctlon for action In the premises. 

If upon the hearing required before a determination Is 

finally made to revoke or suspend a permit, It appears that 

the employer's right to Insurance Is clear, the Board's duty 

Is to enforce compliance. An opportunity to comply with the 

obllgatlon should be given the Insurer after a hearing at 

which It is confronted vith the full facts which impose the 

obligation upon It. 

The authority and duty of the Board to effect compliance with the laws respecting Insurance Is fully dlscussed and supported by appropriate citations In Butler v. 

American Nat. Ins. Cc., 235 S.W.2d 185 (Tex.Civ.App. 1950, 

error ref.). It Is suggested that, when an allegation of 

such refusal Is brought to the attention of the Board, a 

hearing should be conducted, after proper notice is given 

the Insurer, to determine whether the insurer's duty to 

Insure Is clearly established and to determine whether the 

Insurer's permit should be suspended or revoked. Upon such 
eon. garland II. Smith, page 6 N-1534) 

hearing, then Board 

establlshe6, order 

order a revocation 

cate. 

may, If tha duty to insure is clearly 

compliance, and upon failure to comply, 

or suepen13ion of the insurer~s certlfiSUMMARY 

The Board of Insurance Commlssloners has the duty, under Section 

7 of Article 1.10 of the Insurance 

Code (Vol. 14, V.C.S.), to revoke 

or suspend the certificate of authority of an insurance company operating 

under a permit to write workmen's compensation insurance if, after notice 

and hearing, the insurer refuses to 

comply with an order of the Board directlng it to Insure an employer who 

Is eligible under the workmen's compensation laws. 

APPROVED: 

Mary K. Wall 

Reviewing Assistant 

Charles S. Mathews 

First Assistant 

NMc/rt 

Yours very truly, 

PRICE DANIEL 

Attorney General 

Bykh%rJ& 

Ned McDaniel 

Assistant 

. ,