Court Opinion

ID: 4136532
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:14:43.998187+00
Date Added: 2024-06-11T14:35:10.007559
License: Public Domain

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  WIILL WIlLSOnl                     June 11,    1958
AT-x-GRNEY      GENERAL

   Hon. Zollle    Steakley                              Opinion   No. WW-447
   Secretary   of State
   Austin,   Texas                                      Re:   Whether a domestic       OP.
                                                              foreign   corporation     may
   Hon. William A. Harrison                                   qualify   in Texas to act
   Commissioner   of Insurance                                as the general      agent of
   Austin,  Texas                                             an, insurance   company
                                                              other than a life       lnsur-
   Gent 1 emen:                                               ante company.

          You have each submitted        requests    for the opinion        of this
   office   as to whether a domestic         or foreign     corporation      may~quallfy
   in Texas to act as the general ~a,gent of an insurance                 company other
   than a life     Insurance   company.     The Secretary       of State has also
   submit ted two purpose’ c,lauses       of proposed corporations           which
   desire   to do business     in Texas as such general          agents;      We have
   also received,    and carefully.consldered         briefs    of attorneys      repre-
   senting   corporations    ,havlng an interest        in the     question    involved.

             The basic    question   to be determined         is as follows:

         “Under the .provlslons   of the Texas Business   Corporation
     Act, may a corpo’ratlon    be formed or may a foreign    corpora-
     tion be admitted    to do business    in Texas to act as the
     general agent for an insurance      company other than a life
     insurance  company?”

          The opinion        request   of the Commissioner        of Insurance       refers
   to certain       opinions     by prior Attorneys       General,    specifically
   referring      to Opinion No. O-1931 dated February 14, 1940, by
   Honorable Gerald C. Mann, and Opinions                 No. 063250 dated May 14,
   1941, and O-7302 dated August 19, 1946, by Honorable                      Grover
   Sellers,     all of the oplnlbns          being addressed       to Honorable     Marvin
   Hall,    Flre’lnsurance        Commlsjloner     of the. Board of Insurance
   Commissioners.         All of these opinions         specifically      hold that a
   general agent’s         license    could not be granted by the Board of
   Insurance      Commissioners       to a corpcratlon       on account     of the
   statutory      provlalons      then in force     and dffect,      and which are still
   in force and effect,           being Article      2105, and Section        3, Article
   21.14,    Texas Insurance         Code.    Attorney    General’s    Opinions      Nos.
   O-3250 and O-7302 also held that absent the provisions                        prohlblt-
   lng a corporation          to act as agent for an insurance            company,
   including      a life     insurance     company, there was no statutory
   provlsl,on     in the general       corporation     laws of Texas which would
   permit the creation           of a domestic     corporation      to act as general
Hon. Zollle  Steakley
Hon. William A. Harrison,           page 2. (WW-447)

agent for an insurance       company of any description,          or for’ a
foreign   corporation    to secure a permit to do business             in Texas
for that purpose.       All of ttie opinions      of the Attorneys        General
were rendered prior      to the effective.      Dante of the Texas Business
Corporation    Act, and therefore       if the provisions      of the Texas
Business Corporztlon       Act did not enlarge        the purposes    for which
such a corporation      could be formed,       or for which a foreign
corporatlop    might receive     a certificate      of authority     to conduct
such business     in Texas,    then, of necessity,        the holdings     of the
prior Attorneys      General   in the opinions      above referred       to should
be followed.

       Article   2.OI-B(1)  of the Business    Corpcratlon    Act speclfl-
tally   provides    that no corporation   may adopt or be organized
under or obtain authority       to transact   business    in this State under
the act if any one or more of.lts        purposes    for the transaction   of
business     in this State is expressly     prohibited   by any law of this
State.

       Article     ,21.02 of the Insurance         Code provides        that ,any person
who solicits        insurance     on behalf    of any lnsur,ance company or who
takes or transmits           other than for himself         any application         for
insurance      to.or    from such company, or who shall             receive      or
deliver    a policy       of insurance      of any such’ company, or who shall
examine or inspect           any risk or receive       or collect       or transmit
any premium of insurance,             or make or forward any diagram of any
building     or buildings,        or do or perform any other Let in the
making or consummating of any contract                  of insurance       for or with
such insurance        company, or who shall          examine. into or adjust           any
loss for any such insurance              company, whether any of such acts
shall be done at the request               or by the employment of such lnsur-
ante company; shall            be held ‘to be the agent of the company for
which the act is done.             Article    21.05 provides       that    no corpora-
tion shall be licensed            or granted a certificate           of auth~orlty ads
the agent or representative              of any life      insurance     company who in
any manner places           life ~insurance, poIlc,ies       or contracts       in Texas.
Article    21.14;      Section    1, provides     that “Insurance         agents,     as
that term is defined, in the .laws of this State,                    shall    for the
purpose of this article            be divided     into two classes:           Local
Recording Agents and Sollcltors.w.                Section     3, Article      21.14,
provides     specifically        that *‘Th.e Board shall       not issue a license
to a corporation.”

The Texas Insurance        Code does not specifically           define   the term,
“general   agent”,     nor are any references        to a general       agent to
be found therein       except   lnSe&lon      20(d),    Article.    21.14,   which
provides   that    “any General Agent or State Agent or Branch Manager
representing     an admitted     and licensed     insurance      company or
carrier,   or insurance. c’ompanles or carriers,             in a, supervisory
capactty”    shall    be exempt from all provisions           of Article     21.14.
It,may~be noted that although          the duties      of a general      agent are
not specifically       defined,   neverthele.ss,     the -words,“representlng
Hon. Zollle      Steakley
Hon. Wllllim      A. Harrison,         page   3, (W-447)
an admitted and licensed    insurance  company:’ or carrier.  . .
in a supervisory  capactty”   would definitely   limit the authority
of such general  agent to act for the insurance      company or
carrier  in tge supervision    of the insurer’s  activities.

        Article     21.14 lncorpa’ates          by reference        the provisions         of
Article     21.02,     slrce    it specifically         refer& to the term 'finsUrItnCe
agents,     as that term is defined              in the law of this State”.                Art lcle
21.14 provides         generally      for the licensing          of ,a,11 insurance        agents
representing        lnsurance~companles           or carriers       other than life
insurance       companies,      and, Section      20 exempts certain           classes     of
persons who perform certain                of ,the functions         of an lnsur&nce agent
as defined        in Article      21.02 from obtaining           such license.          In
addition      to exempting a general            agent or State agent or branch
manager representing            an insurance        company in a supervisory             capa-
city,    it is not necessary            for an actual       full-time       home office       or
salaried      traveling      representative         of an insurance         company licensed
to do business         in Texas to have a license.                 Any attorney-in-fact
or traveling        salaried      representative        of a reciprocal          or lnter-
insurance       exchange doing buslness?ln              Texas is also exempt from the
necessity       of obtaining       ‘a license,      as are adjusters          of losses
and inspectors         of risks,      and attorneys        in fact      for an organization
doing an insurance           business      under .the Iloyds         Plan.     Sub-division
(f) of Sect ion 20, however,               specifically       exemptsall         incorporated
and unincorporated           mutual insurance          compan.lss and their          agents or
representatives          operating       under the authority           of Chapters      16 and
17 of the Insurance Code, and sub-division                        (g) exempts,        in toto,
all members, agents,            employees,       or representatives           of any county
or farm mutual insurance              company exempted under Chapters                  16 and
17 of the Cdde.           The conclusion        must therefore          be drawn that the
omission      of the word “corporation             ” from the exemption from obtaln-
 lng an insurance         agent’s      license     under the provisions            of Article
21.14,     which is extended to a general                 agent,     special     agent,    or
branch manager, acting              in a supervisory         capacity      for an insurance
carrier,      does not necessarily            constitute       a legislative        authorlza-
tlon~ or permission          for such general          agent,    special      agent,    or
branch manager to be a corporation.

      One of the purpose clauses                submitted   to the Secretary of State
as part of the proposed    articles              of incorporation   of a domestic
corporation  is as foIl&ss

        “To exercise    a general   supervision      or control    over the
-.zbCsiness, of one:or     more insurance      companies .(excludlng        life
   insurance    companies)    in this State      (but not to operate
   insurance    companies   as such)     and to maintain        a supervisory
   office   or offices,    with the authority        to appoint    local    agents
   or special    agents and, in the case of fire,            marine and
   casualty    insurance   companles,to     receive,     record,   inspect,
   underwrit.e and flle     the dally    reports     from local    agents of
   the business      done by such local     agents.
 Hon. Zollle  Steakley
 Hon. William A. Harrison,          page 4 (WW-447)

     “In general,     to carry out any other business     in connection
     with the foregoing      and to have and execute   all the powers
     conferred     by the laws..of  the State of Texas upon corpora-
     tions formed under the Texas Business       Corporation    Act and
     to do any and all things hereinabove       set forth    to the same
     extent    that natural   persons might or could do (except      that
     it may not act as, nor perform the functions         of, a llocal
     recording     agent’ as the latter ,term is defined     in the
     Insurance Code) .‘I

Another purpose clause    which has been submitted    to the Secretary
of State by a foreign   corporation    requesting  the issuance  of
a Certificate  of Authority    to transactbusiness    in Texas is as
folIows:

     “To act    as General Agent for admitted and licensed
     insurance    companies,       in a supervisory         capacity,     lnclud-
     lng the right       to exercise     a general       supervision      and con-
     trol over the business          of one or more such insurance
     companies     in this State,       and maintain a supervisory              office
     or offices,      with the authority          to appoint     local    agents or
     special    agents;     to receive,       record,-inspect,        undeiwrlte
     and file    the dally     reports~ from local          agents of the business
     done by such local        agent,     it being expressly          provided,
     however,    that    such corporation         shall have no authority           to
     act in any event for an insurance                 company or carrier        author-
     lsed__ to transact      a life    insurance       business.      Such corporation
     shall   have such authority,           if any, as may lawfully           be extended
     to it under the provisions            of Article       21.38 of the Insurance
     Code of Texas.”

It will be noted that the proposed            purposes     above set forth are,
with certain     exceptions     hereinafter     noted,   almost identical.         If
the -purpoSe. cfahses:ln~      quest&on?!wer’e’ttmited       tom the...phrase, :,“To.
act Lasiganerab agent:f,er       onenpermbeergdmd~ted;$nd           licensed
insurance    companies    or carriers      in a supervisory        capacity”,    there
would be no question        that such purpose would be a lawful purpose
within the meaning of Article           2.01A of the Business          Cor oration
Act since the provisions         of Section     20(d),   Artlc,le     21.1 e Texas
Insurance Code, specifically          except a general        agent reprisentlng
an admitted and licensed         insurance    company or carrier          or insurance
companies or carriers         in a supervisory      capacity     from the prohl-
bltlon   contained    in Section     3, Article     21.14,    that the Board shall
not issue a license       to a corporation.

Therefore   it is necessary   to analyze   the phraseology    of each of
the foregoing    purpose clauses   in order to ascertain     whether all
or any part thereof     would authorize   a corporation    to do or per-
form any of the. functions    connected   with the issuance     of an
insurance   POIicy which are specifically      described   in Article
21.03, supra.     While the words,    “to act as general    agent”,   do not
.   ’

    Hon. Zollle  Steakley
    Hon. William A. Harrison,         page 5 (WW-447)

    appear in the purpose clause            of the proposed   domest lc corporation,
    nevertheless,       this purpose clause,       when construed     in its entirety,
    clearly     authorlees     a corporation     to act as a general     agent for an
    insurance     carrier     or carriers,    not   only in a  supervisory    capacity,
    but also to perform certain            of the functions    of such insurance
    carrier,     which is manifested        by the use of the word, “control”,
    and therefore       the parenthetical      phrase (“but not to operate
    insurance     companies     as such) ” does not negative       the broad power
    of the general        agent to exercise      control  over the functions
    specifically       referred    to later   on in the purpose clause.

    The purpose clause          of the proposed    domestic    corporation    author-
    izes a corporate         general    agent “to carry out any other business
    in connection       with the foregoing,      and to have and execute         all of
    the powers conferred          by the laws of the State of Texas upon
    corporations       formed under the Texas Business           Corporation   Act,
    and to do any and all things hereinabove               .set forth    to the same’
    extent    that natural       persons might or could do, . . .I’ with the
    exception      that it could not perform any of the functions               of a
    local    recording      agent as that term is defined         in the Insurance
    Code.     The foregoing       does not constitute       a statement    of the
    purpose for which the corporation             1s~ being formed,      but 1s a dec-
    laration     or restatement       of the powers granted to any corporation
    under Article        2.02 of the Business      Corpcratlon     Act.    Therefore,
    the quoted paragraph does not constitute                a part of the purpose
    clause    of the proposed        corporation   since    the powers set forth
    therein     are possessed      by the corporation       as a matter of law upon
    the granting       of its charter.

    ‘In the purpose clause      proposed  by the foreign  corporation
     reqrrkstlng   thk issuance   of a cert,lflcate  of authority    there           appears
     the following    sentence:

         “Such corporation     shall have such authority,   if any, as
         may lawfully    be extended  to it under the provisions    of
         Article  21.38 of the Insurance    Code of Texas.”

         Article     21.38 contains       seven’sectlons       which regulate      the
         writing     of insurance      by insuring       insurance    companies    or
         carriers      which. are not authorlied          to do business     in Texas,
         and is too long to be restated              here.     Section   2 of .the Act
         provides,      generally,     for the licensing        of agents    thereunder,
         and provides        that such license       may issue “to an agent who
         is regularly        commissioned      to represent     one (1) or more
         fire,    fire   and marina,      i nland,   casualty     or surety    insurance
         companies,       licensed    to do business        in this State,     . . . .e.
         It is clear        that insofar     as delegable      duties   of an
         insurance      company are concerned,           that Article    21.38 princl-
         pally    regulates      the issuance      of policies     by an insurance
         company not licensed          to do business        in the State by local
         recording      agents     to the general      public,    such loca.1 recording
.. -
   Hon. Zollle  Steakley
   Hon. William A. Harrison,        page 6 (WW-l&7)-

    agents being licensed        under Artlcle,21.@      of the Texas
   -Insurance    Code.   As previously     discussed,    h corporation     may not,
    act as a local     reco.rdlng   agent.     In view of’ the nature of Article
    21.38,   it is the opinion      of this office     that the above quoted
    purpose clause     is deceptive     and amounts to less than a full
    statement    of the corporate      purpose intended    to’be   pursued by
    virtue   thereof   and% therefore      vlolat lve of Article      2.01A of the
    Business   Corporation     Act.

         It is the opinion     of this office       that a charter      may be
   granted to a domestic       corporation     and a certificate        of authority
   be issued to a foreign       corporation      by the Secretary       of State con-
   taining    a purpose clause,       ‘to act as general      agent for one or
   more admitted or licensed         insurance    companies     br carriers,    other
   than life    insurance   companies     or carriers,     in a supervisory
   capacity;    provided   that it may not act as a local            recording   agent
   or solicitor     as such terms are defined          in Section    2, Article
   21.14 of the Texas Insurance          Code; and the Commissioner          of
   Insurance    may thereafter     lawfully    issue a certificate        of author-
   ity or permit to such corporation           in accordance      with the provisions
   of the Texas Insurance       Code.

                                    SUMMARY

   A charter    may be granted to a~dqmestlc          corporation       and a certl-
   flcate    of authority    be issued to a foreign         cdrporatlon        by the
   Secretary    of State containing       a purpose klause,        “to act as
   general agent for one or more admitted and licensed                     insurance
   companies or carriers,        other than life       insurance     companies or
   carriers,     in a supervisory     capacity,,    provided    that     it may not act
   as a local     recording   agent or solicitor        as such terms are defined
    in Section    2, Article   21.14 of the Texas Insurance             Code”, and the
   Commissioner      of Insurance    may thereafter       lawfully     issue a certl-
   flcate    of authority    or permit to such corporation            for such purpose
    in acc,otidance with the provisions          of the Texas Insurance          Code.

                                                Yours   ve?y   truly,

                                                Will Wilson
                                                Attorney  General       of Texas

                                                s/   Fred’ B. Werkenthln

       FBW:lm                                   BY
                                                     Fred B.. We’rkenthln
       APPROVED:                                     Assistant
       OPINION CC%UTTEE:
       C. K. Richards.   Chairman
       J. Mark McLaughlin                   Reviewed for the.Attorney         General
       Llnward. ‘Shivers                    By:   W. V. Geppert