TEXEATETORNEYGENERAL OF TEXAS
Honorable0. P. Lockhart Eoami of hmranoe Comissioaerw Austin, Texan
Dear Sir: CpfnionHoc,O-5765.3. Rer Reconsiderationof Opinion Mo. of Senate grill136, dots 46th Legislrtws.
On the 4th day of August, 1941, this deparhent rendered OpinionMe. O-3763 in responseto your requestfor our opinionupon the constitutionalityof Section,17of Senate ail1 136, Aots of the 46th Legislainu-e, wit&outreferenoeto any particularmutual insuranoecontract or mutual insuranoeaasooiation. In deferenoeto the requestof aertain assooiations,the attorneysof which hare submittedbriefs upon the ques- tion involved,we have carefullyreoonsideredthis opinion0
The correotnessof our originalopinionhas been assailedupon variouspropositionsexpressedin differentkriefa as followsa
"Sinoethe personsinsuredare also the insurersof themselvesand others in the (organizationand under the policiesinvolvedin this discussion,the mutual :insuranceorganizations under consideration had the legal right, power and duty tc reasonablyinarsaserates or revisebenefits,when neoee- sarg, tnfore and efter &e enaotientof Senate Bill 135."
"Beforethe passageof Senate Bill 136, it had been uniformlyheld in this and other jurisdiotionsthat a mutual asaooirtion,has the inherentpower te increaseits assessmentrateswheneverit is rsasonablyneoessaryto en- able It to pey its losses. This right is inherentin tirevery nature ef suoh assooiations,beoause have no capitalstook,and the only souroe tit;hey from which they derivefunds with which to pay benefits is from assessments upon the members. Consequently,if the assessmentsare not sufficientte pay the losses and benefitsprovidedunder poliaies,it is obviousthat the losses oannotbe paid unless the assessmentsprs increased. Furthermore, the history of such lssooiationshas shown that with the Passingof year8 ae the members grow older, there ia a naturalinoreasein the number of deathswhich ultimatelyresultsin eitherdeoreased'benefits or increased assessments."
sConseq,uently, 'beforethe passageof &snots BLll 135, the members of the : assooiationaffeoteddid not have a oontraotwith the assooiationeither that theirrats shouldremain suoh or that the mudmum amount shouldbe Hon. 0. P. Lookhart,page 2 (O-3763-A)
shouldbe paid, and under the law prior to the passageof Senate Bill 135, mutual associationsoould not make a oontraotto pay a definiteamount, regardlessof the amountrealizedfromassessments."
"Whileother sectionsof Artiole 5066-lmey be unoonstitutional for the very reason8given and under the authoritiesset out in the opinionof your depart ment, it would mean that Seotion17 is not subjectto the objectionwhichis of suoh opinionbeeauso it makes no substsntialohange in the eon- the batsi.8 tractswhich CcwnissionerLeokharb inquiresabout so as to have a retroactive effectupon the rights of the partiesthereunder. Such Seotion17 and Seo- tions 11,and 32 of tie Aotmerely make it mandatoryupon the assooiationto do what they were alreadyauthoriredby their members and the then existingstat- utory law to do prior to the enaotmentof Article 5068-1~s
If the premiseof those oontentionsis that any mutual insur- ance asslooiationmay validly,under the law in Texas, both raise rates and reduoe benefits,it is inoorreot. lf, on the other hand, the premiseis that the particularoontraotsof a particularmutual insuranceassooiationexprass- ly, by contraot,authorleethe assooiationeitherto raise rates or to reduce benefits,it is quite obviousthat such contracts would be unaffeotodby Sem- ate Bill 135 and would not require'choauthoritygrantedin Seotion17 of Senate Bill 135 to affect such ohanges. As to the latter contracts,if such do exist, the holdingin our opinionFiat Seotion17:of Senate Bill 135 is unoonstititional would have no signifioanoe.
Our originalopinionFloeO-3763did no.trelate to any specif- lo contractor assooiationand, in