Opinion ID: 9029
Heading Depth: 3
Heading Rank: 2

Heading: illegal assignment

Text: 53 Palma contends that the assignment agreement entered into between City Federal and Verex was illegal because it violated art. 21.21A of the Texas Insurance Code, which provides, in part: 54 Section 1. No insurer ... may make any contract of insurance or agreement as to such contract other than as expressed in the policy issued thereon.... 55 Section 3. If any person violates any of the provisions of this Article, the person shall, in addition to any other penalty specifically provided, be guilty of a Class A misdemeanor. 56 Section 4. The commissioner, upon giving 10 days' notice of hearing by certified mail, and upon hearing, may suspend or cancel the certificate, charter, permit, or license to engage in the business of insurance of any society, association, corporation, or person violating the provisions of this Article. 57 The agreement entered into between Verex and City Federal clearly violated the original contract for insurance. The assignment agreement gave Verex the right to pursue Palma for the entire amount of the deficiency balance. This amount included the amount which Verex had paid to City Federal in insurance proceeds, which, as previously stated, violated Condition 15's limitation on Verex's subrogation rights. Under art. 21.21A the agreement was other than as expressed in the policy and was therefore illegal. It is a familiar law of contracts that an illegal agreement is unenforceable. DiFrancesco v. Houston Gen. Ins. Co., 858 S.W.2d 595, 598 (Tex.App--Texarkana 1993, no writ). The illegality of the agreement giving Verex the right to pursue Palma for the deficiency provides an independent ground for reversing the judgment of the trial court.