Court Opinion

ID: 4130546
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:05:36.633946+00
Date Added: 2024-06-11T14:31:39.343691
License: Public Domain

June 24, 1988

Honorable David H. Cain           Opinion No.   JM-923
Chairman
Committee on Transportation       Re:     Whether an unincor-
Texas House of Representatives    porated association   insur-
P. 0. Box 12068                   ante   carrier     organized
Austin, Texas 78769               under the Texas      Lloyd's
                                  plan may serve as a l'corp-
                                  orate surety" under article
                                  5160.A, V.T.C.S. (RQ-1308)

Dear Representative   Cain:

     You ask whether an unincorporated association insurance
carrier organized under the Texas Lloyd's Plan, Insurance
Code, article  18.01 et sea., can serve as a "corporate
surety" in providing a performance   and a payment bond when
required by article 5160.A, V.T.C.S. We conclude not.

     Article 5160.A provides as follows (emphasis added):

           Any person or persons, firm, or corpora-
        tion, hereinafter     referred to as      "prime
        contractor," entering into a formal contract
        in excess of $25,000 with this State, any
        department, board or agency thereof; or any
        county of this State, department, board or
        agency thereof; or any municipality of this
        State, department, board or agency thereof:
        or any school district in this State, common
        or independent,    or subdivision   thereof; or
        any other governmental or quasi-governmental
        authority whether    specifically named herein
        or not, authorized under any law of this
        State, general     or local, to enter       into
        contractual agreements for the construction,
        alteration or repair of any public building
        or the prosecution      or completion    of any
        public work,      shall be     required   before
        commencing   such work to execute to         the
        aforementioned    governmental    authority
        authorities,   as    the case     may be,    t::

                              P. 4630
Honorable David H. Cain - Page 2   (JM-923)

        statutory bonds as hereinafter     prescribed,
        but no governmental   authority may require a
        bond if the contract does not exceed the sum
        of $25,000. Each such bond shall be executed
        bv a coroorate   suretv or coroorate   sureties
        dulv authorized to do business in this State.
        In the case of contracts of the State or a
        department, board, or agency thereof,       the
        aforesaid bonds shall be payable to the State
        and shall be approved by the Attorney General
        as to form. In case ~of all other contracts
        subject to this Act, the bonds shall be
        payable    to  the    governmental     awarding
        authority concerned, and shall be approved by
        it as to form.     Any bond furnished by any
        prime contractor in an attempted     compliance
        with this Act shall be treated and construed
        as in conformity    with the requirements    of
        this Act as to rights created,      limitations
        thereon, and remedies provided.

            (a) A Performance  Bond in the amount of
        the contract conditioned upon the faithful
        performance of the work     in accordance  with
        the plans,     specifications,   and   contract
        documents.   Said bond shall be solely for the
        protection of the State or the governmental
        authority awarding the contract, as the case
        may be.

            (b) A Payment Bond, in the amount of the
        contract, solely for the protection of all
        claimants supplying   labor and material   as
        hereinafter defined,   in the prosecution  of
        the work provided for in said contract,   for
        the use of each such claimant.

By its terms, as set forth     in the underscored sentence,
article  5160.A requires a     bond to be executed   by   a
"corporate" surety.

     Article 18.01 of the Insurance Code, however,    provides
as follows (emphasis added):

           Individuals, partnerships or associations
        of individuals,   hereby designated   "under-
        writers," are authorized  to make any insur-
        ance, except life insurance, on the Lloyd's
        plan, by executing    articles of agreement
        expressing their purpose   so to do and com-

                              P. 4631
    Honorable David H. Cain - Page 3       (JM-923)
,

            plying with the       requirements set    forth    in
            this chapter.

    Article 18.03 of the Insurance Code delineates the          meaning
    of "any insurance" by providing (emphasis added):

               The attorney shall file with the Board of
            insurance Commissioners   a verified  applica-
            tion   for   license    setting   forth    and
            accompanied by:

               .    .   .   .

                (c) The kinds of insurance to be effected,
            which kinds of insurance may be as follows:

               . , . .

               7.       Fidelity and suretv bonds insurance.

               .    .   .   .

    Thus, by its terms, the Insurance Code authorizes a Lloyd‘s
    company to write "fidelity and surety bonds insurance."

         Article 5160.A and the Insurance Code are in apparent
    conflict.  In the case of an apparent conflict between      a
    general provision and a special provision, the statutes must
    be read together and harmonized if possible.      Halsell v.
    Texas Water Commission, 380 S.W.2d 1, 15'(Tex. Civ. App.~ -
    Austin 1964, writ ref'd n.r.e.).    In doing so, the general
    provision is controlled or limited by the special provision.
    See Trinitv Universal Ins. Co. v. McLauahlin, 373 S.W.2d 66,
    69 (Tex. Civ. App. - Austin), reh'a denied, 374 S.W.2d 350
    (1963). As between article 5160.A and the Insurance     Code,
    the special requirement    of a corporate   surety therefore
    controls or limits the general authorization    of a Lloyd's
    company to write   fidelity and surety bond insurance.    Put
    another way:     Although  the legislature has     authorized
    Lloyd's companies    to write    fidelity~ and surety    bond
    insurance, the legislature requires a corporate surety when
    public work is concerned.

         This conclusion is supported by the date of enactment
    of each statute. The provision for Lloyd's companies     to
    write "fidelity and surety bond insurance" became law in
    1921. Acts 1921, 37th Leg., ch. 127, 55 1 & 3, at 238. The
    requirement that a "corporate surety" stand behind both a
    performance  bond and a payment bond on behalf       of   a
    contractor doing public work became law in 1959. Acts 1959,
    56th Leg., ch. 93, 5 1, at 155. The legislature is presumed

                                     p. 4632
Honorable David H. Cain - Page 4     (JM-923)

to have known when it required a corporate surety that it
had earlier authorized Lloyd's companies to write     fidelity
and surety bond insurance.     See Garner v. Lumberton    Ind.
Sch. Dist., 430 S.w.2d 418, 423 (Tex. Civ. APP. - Austin
1968, no writ).   The legislature is also presumed to have
intended to use the word    "corporate" for a purpose.     See
Cameron v. Terre1 & Garrett. Inc., 618 S.W.2d 535, 540 (Tex.
1981).   Thus we can     only conclude that the        special
requirement of 1959 for a corporate surety for public works
controls over the general     authorization   in 1921 for a
Lloyd's company to write fidelity and surety bond insurance.
See State v. Easlev     404 S.W.2d 296      300  (Tex. 1966):
Halsell v. Texas Watei Commission, su&, 380 S.W.2d at 15.

                        SUMMARY

           The requirement  in article 5160.A of 'a
        bond executed by a "corporate surety" author-
        ized to do business in Texas is not satisfied
        by surety bond insurance issued by a Lloyd's
        company authorized to do business in Texas.

                                   ,z[z&
                                             MATTOX
                                     Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman,. Opinion Committee

Prepared by F. Scott McCown
Assistant Attorney General

                               P. 4633