THEAVTORNEY GENERAL 

OFTEXAS 

AUSTIN 11. -,?EXaS 

WVILL WILSON 

A-rroBzNEY GENERAL 

August 24, 1960 

Mr. William A. Harrison Opinion No. WW-913 

Commissioner of Insurance 

International Life Building Re: May an insurer who has made a 

Austin 14, Texas deposit with the State Treasurer 

under Article 3.15 of the Code 

elect to have its deposit considered as held under Article 1.10, 

Dear Mr. Harrison: paragraph 17 of the Code. 

Your opinion request recites that prior to May 8, 1959, domestic 

legal reserve life insurance companies were authorized to make deposits 

with the State Treasurer under Articles 3.15 and 3.16 of the Insurance Code 

only. On that date the Commissioner of Insurance and the State Treasurer 

held approximately 56 deposits not having been made under authority of 

either of these articles. You state that such deposits were usually made 

to enable the depositing insurer to enter a foreign state. The records concerning such deposits carried the word “voluntary” in the space provided 

for citing the statute under which the deposit was made. . . 

On May 8. 1959, paragraph 17 of Article 1.10 of the Insurance Code 

became effective. It specifically authorizes voluntary deposits with the 

State Treasurer where necessary to enable a domestic company to do business in a foreign state. Since that time, at the election of the depositors, 

these “voluntary” deposits previously made have been considered as having been made under such Article. 

You state that in addition to these voluntary deposits, the Treasurer 

holds 27 deposits made, at the option of the insurer, under Article 3.15. 

Some of these companies are asserting that these deposits are “voluntary,” 

having been made at their option, and also, that such deposits were made for 

the purpose of gaining admission to another state. 

Consequently, you have asked the following questions: 

” 1) May an insurer whose deposit is held under 

Art. 3.15 of the Code elect to have its deposit considered 

to be held under Par. 17 of Art. 1.10 upon proof that the 

deposit was made for the purpose of gaining admission 

to another state.? 

” 2) If your response to the above ‘question is in 

the affirmative, we then request your advice as to whether 

the depositing company may redesignate the purpose of the 
Hon. William A. Harrison, page 2 (WW-913) 

deposit in accordance with Par. 17(a) of Art. 1.10 and 

withdraw such deposit upon presentation of satisfactory 

evidence that all obligations have been discharged insofar as the class of creditors or policyholders appropriate to the designation is concerned?” 

Article 3.15 reads as follows: 

“Any ‘domestic’ company may, at its option, deposit with the Treasurer of this State, securities in which 

its capital stock is invested, or securities equal in amount 

to its capital stock, of the class in which the law of this 

State permits such insurance companies to invest their 

capital stock, and may, at its option, withdraw the same 

or any part thereof, first having deposited with the Treasurer, 

in lieu thereof, other securities of like class and equal amount and value to those withdrawn. Any such securities, 

before being so originally deposited or substituted, shall be 

approved by the Board of Insurance Commissioners. When 

any such deposit is made, the Treasurer shall execute to 

the company making such deposit a receipt therefor, giving such description of said stock or securities as will identify the same, and stating that the same are held on deposit 

as the capital stock investments of such company; and such 

company shall have the right to advertise such fact or print 

a copy of the Treasurer’s receipt on the policies it inay’ ~. 

issue; and the proper officer or agent of each insurance 

company making such deposit shall be permitted at all 

reasonable times to examine such securities and to detach 

coupons therefrom, and to collect interest thereon, under 

such reasonable rules and regulations as may be prescribed 

by the Treasurer and the Board of Insurance Commissioners. 

The deposit herein provided for, when made by any company, 

shall thereafter be maintained so long as said company shall 

have outstanding any liability to its policyholders in this 

State. For the purpose of state, county, and municipal taxation, the situs of securities deposited with the Treasurer 

by domestic insurance companies shall be in the city amd~ 

county where the principal business office of such company 

is fixed by its charter.” 

It can be seen that the deposit therein made is for the protection of 

its policyholders in this State. Such statutes are generally held to create 

trust funds of the deposits. Texas Fidelity & Bonding Co. v. City of Austin, 

246 S.W. 1026. Additionally, by making a deposit under Article 3.15 an 

insurer obtains the right to advertise the fact of such deposit on its policies, 

Complete protection of the deposit for the policyholders is assured by the 

requirements of Article 3.15, that such deposit may not be withdrawn unless 

other securities of the same class and of equal amount and value are first 
Hon. William A. Harrison, page 3 (WW-913) 

deposited in lieu thereof, and that such deposit must be maintained so long 

as said company shall have outstanding any liability to its policyholders 

in this state. That there are no exceptions to these plain provisions has 

been established by Opinions O-5051 and WW-362. 

It is unquestionable that some of the insurers making deposits under 

Article 3.15 were motivated, to some extent at least, by a desire to qualify 

to do business in other states. Opinion O-3855 invites such a course of 

action. (That opinion speaks of Article 4739 which, together with Article 4777, 

was the predecessor of Article 3.15) However, the opinion is quite plain that 

the deposit is subject to all the provisions of such Article. As stated therein: 

.1 

. . .We think that the above mentioned company 

has the right to make the above mentioned deposit provided 

said deposit does not exceed the capital stock of said cornpany, and, as above stated, the Treasurer is authorized to 

receive and accept the same. Whether or not this deposit 

fulfills or meets the requirements of the Illinois law is a 

matter on which we express no opinion. In other words, we 

think that the deposit can be made under Article 4739, supra, 

if all the conditions of said statute are complied with regardless of the motive of the company which prompts the tender 

and deposit. Of course, when said deposit 1s made It 1s subject - to a 

Paragraph 17 of Article 1.10 was passed in 1959 by the 56th Legislature. 

Subparagraph (a) thereof provides for deposits to be made with the State 

Treasurer where necessary in order for a domestic company to engage in 

business in a foreign state. The company making the deposit has two alternatives. It may designate whether such deposit is made “for the protection of 

all policyholders or creditors of the company wherever they may be located” 

or “for the protection of the policyholders and creditors of a particular state, 

country or province.” 

If made with the latter designation, the deposit may be withdrawn 

upon filing with the Insurance Commissioner evidence satisfactory to him 

that the company has withdrawn from business and has no unsecured liabilities outstanding or potential policyholder liabilities, or obligations in such 

other state, country or province. If made for the protection of all policyholders, such deposit may be withdrawn after filing with the Insurance Commissioner evidence satisfactory to him that the company has no unsecured 

liabilities outstanding or potential policy liabilities or obligations anywhere. 

Subparagraph (b) provides: 

“(b) Any voluntary deposit now held by the State 

Treasurer or State Board of Insurance heretofore made 

by any insurance company in this State, and which deposit 

was made for the purpose of gaining admission to another 

I 

, 

,, 
i . . 

Hon. William A. Harrison, page 4 (WW-913) 

state, may be considered, at the option of such company, 

to be hereinafter held under the provisions of this Act.” 

The companies of which you speak in your opinion request are seeking 

to bring themselves within the purview of the above quoted paragraph in spite 

of the fact that their deposits were made under Art. 3.15. This they cannot do. 

By the use of the term “voluntary deposit” the Legislature undoubtedly had 

in mind the numerous deposits made under no specific statutory authority and 

labeled as “voluntary” in the records of the Insurance Department* Proponents of a contrary interpretation have pointed to the legislative history 

of Paragraph 17 of Article 1.10. As originally introduced, subparagraph (b) 

thereof prohibited the switching of any deposit “made under the authority of 

any statute which requires the holding of such deposit for the benefit of the 

policyholders of this state,” obviously referring to Article 3.15. As finally 

enacted, this qualification was omitted. We do not believe such argument to 

be persuasive. To allow a redesignation tif 3.15 deposits, at least under the 

second alternative of Paragraph 17, would unquestionably abi-idge the vested 

rights of policyholders of this State who purchased policies during the time 

the deposit was held under Article 3.15. Cochrane v. Pacific State Life Insurance Company, 27 P.2d 196. This is so because when made under 3.15, 

regardless of motive (Opinion O-3855) the deposit is by the words of the 

Article for the protection of Texas policyholders. When redesignated for 

the protection of policyholders or creditors of a particular foreign jurisdiction the Texas policyholders would lose their rights thereto. We cannot 

read such an intention into Article 1.10, particularly when its wording shows 

zealous protection of the beneficiaries of the deposits made thereunder in 

that such deposits may not be withdrawn except under the stated conditions. 

Our conclusion is reitifbrced by Section 2 of Chapter 157, Acts 56th Leg., 

1959, page 281, which provides: 

“Sec. 2. The provisions of this Act shall be cumulative of all other provisions of the Texas Insurance Code, 

and shall not affect in any manner any other deposit requirement or provlsion of the Texas Insurance Code.” (hmphass 

supphed) 

Accordingly, in regard to deposits made under Art. 3.15, we answer your 

first question in the negative, rendering unnecessary an answer to your second 

question. 

Turning now to deposits made under the last paragraph of Article 8.05, 

we see that such deposits by the plairrwording of the statute have no other 

purpose than the gaining of admission to another state, and can be withdrawn 

if the company ceases to do business in such other state and has no outstanding 

unsecured liabilities therein. These provisions are to the same effect as 

paragraph 17 of Article 1.1.0 and hence, no vested rights could be affected by 

allowing a redesignation. They would, therefore, come within paragraph 17, 

Article 1.10, sub-paragraph (b). 
Hon. William A. Harrison, page 5 (WW-913) 

SUMMARY 

Deposits heretofore made under Art. 

3.15 of the Insurance Code may not be redesignated as having been made under paragraph 

17 of Art. 1.10. Such a redesignation. my .b@ 

made of deposits heretofore made under Art. 

8.05. 

Respectfully submitted, 

RVL/pe 

APPROVED: 

OPINION COMMITTEE: 

W. V. Geppert, Chairman 

Phocion S. Park, III 

W. 0. Schultz 

Ben Harrison 

WILL WILSON 

Attorney General of Texas 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: 

Leonard Passmore