Court Opinion

ID: 4135642
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:04:35.501994+00
Date Added: 2024-06-11T14:31:41.998591
License: Public Domain

Honorable W1111atn A. Narrlaon
    Commissionerof Insurance
    Austin,&xas
                                     Opinion No. WW-1337-A
                                     Re: Authority of the Insurance
                                         Department to issue original
                                         or renewa& local agents’
                                         lioenses to firms,or part-
                                         nerahlps composed.partly
                                         of individualswho do not
                                         qualify by examinationas
                                         local recordingagents and
                                         who are not actively en-
                                         gaged in writing insurance.
    Dear Mr. Harrison:
           You have reque.s“d tha,tthlso,fflcereconsider its
    opinion e-1337    whl%h$i
                            % volvea the following,Que#.lon&~hlch
    we quote:‘,fram
           .. I    your  letter:::
                             .,                     ,,i
                 111.. Is this D&&me&     authorlz~ed to.issue either
           an orlginal or renew&l of local recording agent’s license
           to a firm or partnership lf’such firm or partnershipIs
           oomposed partly of indivl&u#ls   whi,qualify as local
           recording agents and partly of individualswho do not
           qualify and who are aot active In the writing of insurance
           busfness? In answsrmng ‘thisc&&Won, assume that all
           o,fthe@rsons 1nbWeted       ln such firm are partners.
      ,          “2~. fifth
                         yo.ur
                             ~anawer.to question NG. 1 is in the nega-
          tive, 1s this Departmentauthorized to !ssue”eitheran
          original or reneyal of looal recording agent’8 l~loenseto
      .   a firm or partnershipIf such firm or partnership.is
          composed partly of lndlvldualswho qualify as local,
          recording agents and partly of individualswho have an
          interest on’1 in the ~profltsof such firm and have no’volce
          or author1 + y ln the BOaratIon of such firm? (i.e. the
.         aurvlvlng widow of a partner with such widow’s Interest
          limited by the ‘partnership agreement to an Interest only
          in the p~otlta of the firm with the surviving partners
          to have full authar1ty.W its operation).
Honorable William A. Harrlson, page 2 (WW-1337-A)

           “3.  If your answer to question No. 1 or question
      No. 2 Is In the affirmative, I request your opinion as
      to whether or not this Department should require all
      persons named in the license to me,etthe requirements
      of Section 6 of Article 21.14 (pertainingto written
      examination)before Issuing such license.”
       These questions are directed specificallyto the provi-
sions of Article 21.14 of the Texas Insurance Code, the
relevant portlbna of'wh%oh.readBe;follows:':
            II
             1 . .
                 3.
           ':'Sec.   Application for License; To Whom License
      May be Issued; CorporationaNot to Be Llcensed.-cWhen
      any person or firm shall dealre to engagc In business
      as a local recordlng,agentfor an insurance company or
      insurance carrier, he shall make application for a lfcense
      to the Board of InsuranceCommissioners,in such form as
      the Board may require, which application shall require a
      algned endorsementby General or State or Special Agent of
      a qualified insurance company or Insurance carrier that
      applicant Is a resident of Texas, trustworthy,of good
      characterand good reputation,and la worthy of a license.
      !$heBoard 16 authorize4 to issue licenses to firms or to
      3zndlvldualeengagln&aa partners In the insurancebusiness,
      provlded the nampe,of all 'persons.interestedin,such firm
      are named In the Pioense, and each named as active In the
      business of the partnerahlpqualify, and it be ,established
      that none not aotlve have interest In partnershipprincl-
      pally to have written and be compensatedtherefor for
      Insurance on property controlled through ownership,
      mortgage or sale, family relationship,or employment;and
      provided further, that all licensed agents must be
      reeidents of Texaa . . . The Board shall not Issue a
      license to a corporation.
           “Sec. 4. Acting Without License Forbidden. ‘-:-It
      shall be unlawful for any person or firm or partnership
      to act as a local reoord%ng agent or solicitor In
      procuringbuslnese for any insurance oompany, corporation,
      interinsuranceexchange, miutual,reciprocal,association,
      Lloyd6 or other Insurancecarrier, until he shall have
      In force the license provided for herein.
Honorable William A. Harrison, page ,3 (w-1337-A)

              “Sec. 5. Active Agents or Solicitors Only to Be
         Licensed:--No license shall be granted to any person,
         firm or partnership,either as a local recording agent
         or solicitor, for the purpose of writing any form of
         insurance,unless it is found by the Board of Insurance
         Commissionersthat such,personor firm Is, or Intends
         to be, actively engaged in the solicitingor writing
  ,      of Insurance from the public generally; that each person
         or lndivldualof a firm Is a resident of Texas, of good
         character and good reputation,worthy of a license, and
         Is to be actively engaged In good faith in the business
         of Insurance,and that application is not being made %n
         order to evade the laws against rebating and discrimina-
         tion either for the applicant or for some other person.
         Nothing herein contained shall prohibit his insuring his
         own property or properties In which heXhas an interest;
         but it is the Intent of this section ta prohibit coercion
         of insuranceand to preserve to each citizen the right
         to choose his own agent or Insurance carrier, and to
         prohibit the licensing of an individualor firm to
         engage in the insurancebusiness principallyto handle
         business which he controls only through ownership,
         mortgage or sale, family relationshipor employment,..'..
              “Sec. 6. ExaminationRequired; Exceptions.--Ifappll-
         cant for a local recording agent's license has not prior
         to date of such a.pplfcation,been licensed as'a,local
         reoording agent; or If the.appllcantfor a solicitor's
         license has not been licensed as a local recording agent
         or as a solicitor prior to date of such application,the
         Board of Insurance Commissionersshall require such
         applicant to submit to a written examinationcovering
         all kinds of Insuranceor contracts,which license if
         granted, will permit the application to solicit. Any
   ‘,I   applicant for local recording agent's license who has
         prior to the date of auah applicationbeen licensed as a
         local recording agent, shall be entitled to a local
         recording agent's license without examination,provided
         the other requirementsof this article are meet. Any
         applloant for solicitor'slicense who has been licensed
         as a local reoording agent or as a solicitor prior to
         date of such application,shall be entitled to a soli-
         citor's license without an examination,provided the other
         requirementsof this article are met,"
         You have informed ua that at various times there have been
different and conflictingadministrativeconstructionsof this
statute by the Insurance Commlsslon. One constructionattempted
to harmonize the provisions of the section. For a long period
                                                            ..,~       1
      .r

                                                                   .

                                          .

    Honorable William A. Herrleon,   page 4 (WW-1337-A)

    of time, the administrativeconstructionwas that the provision8
    were in direct conflict and the exception was ignored, and
    everyone partiaipatlngin an Insuranceagency was required to
    hav.ea license.
          In contdaeringyour first questicn, It is apparent that
 we are faced with a matter of statutory construction,as there
 appears to be a basic repugnancy in the provisionsof Section.3
 ,ana Section 5. The language of Section 3 authoris& the Board
  to issue licenses to firms or to individualsengagtng as partner8
~ In the insurancebusiness and, by inferenceat least, indicates
l

 that some of the members o?,,thepartnershipmay be.active and
 other8 not active if ‘it.,.59 . . . establishesthat none not
 active have interest In .Qartnershipprincipallyto have written
 and be comQet&sated therefor f@r insurance on property controlled
  through ownership,’. . .s Cn the other hand, Sectian 5 speci-
  fically provides that no licensee shall be granted to any
  person, firm or partnershipunless the Board of Insurance Commission-
 em first fMa that ” , . . LIoch person or firm is, or intends
  to be, actively engaged in the eolicltlng  or writing of
  insurance from the public generally; that each person or indivi-
 dual of a firm 16 a xW!Jiflent of Texas, of good character and good
 reputation,northy of.a license,    and is to be actively engaged
 Tn good faith in the business of insurance, . : :’
           WeJeare aware that a fundamentalrule of statutory construc-
    tion requ ,resthat a statute be construedas a whole and that
    all of iti“parts be harnonited,  if possible, so as to give
    effect.to thisentire act acoorUlng to the evident intention of
    tha Legislature.39 Teat.Jur. 209, Sec. 113. In the instant
    case, however, ,wedo not believe that the general ana somewhat
    ambiguous language of Sectlon3 can be harmonized with the plain
    an&specific provisionsof Section 5. Unaer such circumstances
    it is an equally fundamentalrule of statutory construction
    that in case of a conflict between a general Qrovision and a
    special provision dealing with the same subject, or between
    general language and specific language, the special or specific
    provision will control. 3 Tex. Jr. 212, Sec. 114; City of San
    Antonio v. Toepperwein;103 Tex. 43, 133 S.W. 416.
         One of the spedific Qurposes of this act, as expressed
~ in Section 5, is to prohibit the licensing of an individualto
  engage in the insurancebusiness principallyto handle business
  which he controls through ownership, mortgage or sale, family
  relationshipor emplbyment. If we construe Section 3 a8 creating
  an exception for those partners who are not active, the con-
  traaictory effect of such constructionwould result in the
  statute providing, in effect, that no license shall be granted
  to a firm unless all members are active, except in a case where
Honorable William A. Harrison, page 5 (WW-1337-A)   '

one or more members are inactive. The previously quoted
specific language of Section 5, that each person or individualof
a firm is to be actively engaged in the business of insurance,
would thereby be nullified and one of the central purposes of
the statute would thereby be frustrated.
                          .
       As previously suggested,the language In Section 3 that.
might be construed as authorizing inactive members of a partner-
ship and as exempting them from the licensing requirementsof
Article 21.14 Is somewhat ambiguous. We think the provision in
Section 3 providing that the names,of all persons Interested in
the firm be named in the license, and that "each named as active
in the business of the partnershipqualify" means.nothlngmore
than that there shall be no hidden or silent partners and that
each person who is named as a partner shall qualify as an
insuranceagent under the licensing requirementsof Article 21.14.
The language providing that it must be established"that none not
active have interest In partnershipprincipallyto have written
and be compensatedtherefor for insuranceon property controlled
through ownership, mortgage or sale, family relationship,or
employment"does pose more difficulty. Consideringthe overall
purposes of thisstatute,we believe the true meaning of this
language is simply that it must be establishedthat there are
no inactivepersons In the partnershipprincipallyto write
controlledbusiness.
       As previously indicated,we believe that the clear and
specific language of Section 5 must control and that the general
and ambiguous language of Section 3 must yield In the event of
a conflict. This construction   of the statute is strengthened
by the fact that Article 21.14 contains specific exceptions from
the.licensingrequirementsin Section 2 and Section.20,and speci-
fic exceptions from the examinationrequirementsin Section 6
and 6a. Had the Legislature intended to authorize inactive part-
ners and exempt them from either the licensing or,examination
requirements,it ia only logical that It would have done so
clearly and explScit3.y as in the case of the other exceptions.
       While not controllingof the conclusionswe have reached,
there are certain questions that might arise under a contrary
cans%ructionof this statute. For example, Article'21.11
prohibits any agent from paying, directly dr~-Ind~$tiectly,"any
oom,missionto any person.or firm.not duly licensed by the,board
as an insuranceagent. Would,an active dUCy licensed partner
violate this provision by sharing his profits with an inactive~
non-licensedpartner, or In other words, is this indirectly
paying a commissionto a person not duly licensed?
                .,   I.,,    ,   l,.   .

Honorable William A. Harrison, page 6 (WW-1337-A)

                                                           L      I
        Additionally,this Office in Opinions No. o-2453 and
O-2453A issued ln 1940, concluded that limited partnerships
were prohibited from engaging in the business of insurance
agents.in this State. This ruling was based on the provision
of ~Artlcle 6110, V.C.S., which prohibits a llmltea. partnership
from carrying on any banking or insurancebusiness, and this
same provision is contained In the Texas Uniform Limited Part-
nership Act. Article 6132a, Section 4. A so-called “Inactive”
partner could thus not be a llmltea partner but would be a
general partner, who ordinarily la an agent of the partnership
for the purpose of its ,,buslnesa.In this situation,however,
he would have no authority to act for the partnerehipln Its
insurancebusiness.
       For all of the forgoing reasons, we conclude that your
first question should be answered.inthe negative.
      .Tiour second question asks, In effect, whether an excep-
tion could be made if the inactive partner has an Interest only
in the profits of such Plrm and has no voice or authority In
the operation of the firm. We find no basis In the statutes
for any such exception,and accordinglyanswer your second
question in the negative.
       Cur answer to the first and second questions make an
answer to your third question unnecessary.
  .   Opinion No. W-1337,   as originallywrltten,.lstherefore
withdrawn and this opinion substitutedtherefor.
                            SUMMARY
            The’provialb’nsof Secglon 5 of ArtZclei21,14;ofthe
       Texas Insurance Code prchiblt the Insurance.Department
       from issuing a local recoralng agent’s llcense,toa
       firm or partnerahlpunless each individualor member of
     ~ the partnership is to be actively engaged in good faith
       In the business of insuranceand meets all of the other
       quallficatlonsrequlrea for such license.
                                           Sincerelyyours,
                                           WILL WILSON
                                           Attorney General of Texas

                                           ‘%Y
                                                 Robert Flowers
                                                 Assistant
Honorable Willlam A. HarrisonI, pdge ,.7, (W-1337-A)

APPROVED:
OPINION COMMITTEE
Cecil Rbtsch
Llnwara Shivers

REVIEWED FOR THE ATTORNEX GENERAL
BY: Leonard Passmore

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