Opinion ID: 66467
Heading Depth: 2
Heading Rank: 2

Heading: The USAA Bylaws, Subscriber Agreements, and Insurance Policies

Text: The USAA bylaws state that USAA is a reciprocal interinsurance exchange, and that [t]he purpose of USAA is to provide insurance coverages and other financial products and services and engage in other activities for the benefit of its members, associates and their families as shall be determined by the board of directors. The bylaws provide that members are entitled to voting rights that may be exercised to elect members of the board of directors at the USAA annual meeting, and that: [t]he business management and affairs of USAA shall be under the discretion and control of the board of directors ... and the board of directors shall have authority to authorize contracts, incur liabilities, expend or invest funds, and such other matters and things connected with the conduct of USAA as they may determine, subject always, however, to the right of the members to modify, alter or withdraw the powers of the board of directors.... Article XII of the bylaws specifically addresses the issue of surplus funds. Under the section heading Statutory and Financial Requirements, the bylaws state that [t]he surplus accruing from the operation of USAA shall be allocated and/or segregated in the Surplus Account as required by regulatory authorities and as the board of directors may determine. Under the section heading Distribution to Members, the bylaws state that [t]he Surplus in excess of that required by regulatory authorities or for the financial stability of USAA as determined by the board of directors shall be returned to members under the rules formulated by the board of directors. Under the bylaws, each subscriber is required to execute a power of attorney, also known as a subscriber agreement, to the attorney in fact designated by the board of directors. The subscriber agreement is entitled Power of Attorney, and states that the subscriber: agrees with other subscribers ... to obtain ... benefits by the exchange of private contracts of indemnity, and to that end I ... appoint ... [the person designated by the board of directors]... my attorney ... [t]o exchange with other subscribers ... indemnity to the extent determined by the Exchange, and to subscribe and deliver all proper contracts to do and perform every other thing that I could do in respect to such contracts so exchanged.... However, the power vested in the attorney in fact is to be exercised only in accordance with the decisions of the Board of Directors. The subscriber agreement contains a provision stating that I hereby adopt as part hereof the By-Laws of the Exchange now hereafter effective. It also contains a provision limiting a subscriber's right to recover on any judgment against the board of directors: I agree that no right of recovery shall ever exist in my favor under the policy contracts applied for or hereafter applied for, or otherwise arising out of my subscribership, against any subscriber, officer, director or agent of the Association and that I will look solely to the assets of the Exchange for payment of any sum owing me, whether before or after final judgment. The reverse side of the subscriber agreement contains An Explanation of the Power of Attorney, stating that: [t]he Association is that form of an insurance concern known as a reciprocal exchange. The members act collectively through attorneys-in-fact, insuring each of the members. The power of attorney is the legal device whereby the contracts may be executed thus eliminating the necessity of all the members signing each contract. The insurance policies issued by USAA also discuss the rights and liabilities of USAA subscribers. The policies state that [by] purchasing this policy you are a member of USAA and are subject to its bylaws. The policies specifically discuss the allocation of surplus funds: The USAA Board of Directors may annually allocate a portion of USAA's surplus to Subscriber's Savings Accounts. Amounts allocated to such accounts remain a part of USAA's surplus and may be used as necessary to support the operations of the Association. A member shall have no right to any balance in the member's account except until following termination of membership, as provided in the bylaws.