TEE ATTORNEY GENERAL OFTEXA~
Mr. John Oeorio,Chairnma opinionmo. ww-164 Board of InsuranceCoxmniasioners InternationalLifeBuilding Re: Constructionof Article 14.25 Austin, Texas of the InsuranceCoda af Texas as to what attorneye'fees and other defenseexpensesmay be paid out of the mortuaryor re- lief funds, subjectto the ap- proval of the Roara of Insurance Deer Mr. Osorio: Commissioners.
Your recent requestfor an opinionof this departmenton the questionas herein atetedhas been received.
We now quote from your letteras follows:
"In view of the Pact that Article 14.25 provides that paymentsout of the mortuaryfund for other than claimsshall be subjectto approvalby the Board of In- suranceCommissioners, we respectfullyrecluest yam opinionas to what is-meantby the statutein using the Language'attorneys' fees and necessaryexpenees arisIngout of the defense,settlementor peym9ntof contestedclalme'."
Article 14.25 of the InsuranceCode of Texas providesin pert as follars:
"Assessments, when collected,shall be dividedinto at least two (2) funds. One (1) of these ehall be the Blortueryor relieffund, by whatevername it mey be called in the differentassociations,from which claims uader certificateshall be paid, and to .alimitedextent the costs of defendingcontestedclaims,and nothing else; and the other fund shall be the expensefund from which e-es may be &mid. . -"I
"Suchassociationsshall provide in its by-laws for the portionof its assessmentsto be allocatedto the mortuaryor relief fund and may providefor the paymentout of said mortuaryor relief fund of attor- neys' fees and necessaryemees arisingout of the defense,settlementor paymentof contestedclaims. _., -
Hon. John Osorio,pge 2 (~~-164)
Any such pymant out of the mortuaryor relief fund for other than claimsahall be subjectto the approvalof the Board of InsuranceConunissionera. 4,
Article 14.30providesin pert as follows:
"It shall not be unlawfulfor an association to contestclaimsfor valid reasons;but claimsmay not be contestedfor delay only or for capricious or inconsequential reasons,or to force settlement at less than full payment. Therefore,if liability is to ba deniedon any claim,the associationis hereby requiredto notify the claimantwithin sixty 160) days after due proofs are receivedthat the claim will not be paid, and failingto do so, it will be presumedas a mstter of law that liability has been accepted."
These two Articleswere formerlySectionsI2 and 14 of Senate Bill No. 135 of the 46thLegislature,RegularSessior,1939;and we believethe legislativeintentrequiresthem to be construedtogether.
The wording of the first paragraphof Article 14-25 makes it clear that only one class of claims is unconditionallypayableout of the mortuaryfund, and that is "claimsunder certificates".
The statuteprovj.d.es furtherthat, 'To a limitedextent the costs of defendingcontestedclaims . . .(Imay be paid out of such fund, and the sta.tutegoes on to emphasizethis limitationby adding, "and nothingelse."
This limitedextentto which the costs of defendingcon- tested claimsapplies is definedmore zlearlyby the subseWent language of this statute,whfch providesthat, . . . and may providefor the pey- mant out of said mortuaryor relief funa of attorneys'fees and necessary expensesarisingout of the defense,settlementor paymentof contested claims." It thereforeappearsthat the Legislatureintendedto limit the use of the mortuaryfunds to those attorneys' fees and the necessaryex- panses only relatingto the actual contesteddefense,or actual settlement or paymentof the eontestedclaims. A further indicationthat this pro- cedurewas to be followedin the unusualdefensesituationand not