Court Opinion

ID: 4134412
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:49:59.35369+00
Date Added: 2024-06-11T14:35:04.655278
License: Public Domain

Honorable Clay Cotten                      Opinion No. M-255
Commissioner of Insurance
State Board of Insurance                   Re:   Authority of the In-
1110 San Jacinto                                 surance Commissioner,
Austin, Texas 78701                              as a bond obligee under
                                                 Article 6.09, Insurance
                                                 Code of'Texas to re-
                                                 lease a surety bond
Dear Mr. Cotten:                                 under stated conditions
         You request the opinion of this office as to whether
the Commissioner of Insurance, as named obligee on 'a surety
bond heretofore filed under the provisions of former Article
6.09 of the Insurance Code of Texas, has authority to exe-
cute an effective release of such bond. You state that "(1)
the foreign insurer (principal on the bond) is in receiver-
ship under the provisions of Article 21.28 of the Insurance
Code of Texas; (2) more than one year has passed from the
time specified by the court order for the filing of claims
against the insurer's receivership estate; (3) all known
claims against and obligations of the insurer arising from
policies issued during the period covered by the bond have
been fully satisfied and paid; and (4) the court in which the
delinquency proceedings are pending has authorized the re-
ceiver to execute a release of the bond on behalf of the
principal."
         Article 6.09 of the Insurance Code requires a fire
insurance company, not organized under the laws of Texas, to
guarantee its lawful obligation to citizens of Texas by de-
positing a bond with the Insurance Board or securities with
the State Treasurer. It further provides that when a bond
is deposited, it "shall be kept in force until all claims of
such citizens arising out of obligations of said company have
been fully satisfied , . ." (Art. 6.09, Texas ~InsuranceCode).
                     r
         Assuming that the receiver has complied with all
statutory prerequisites,all claims of Texas citizens against
the company must be deemed fully satisfied as to the receiver

                            -   1237   -
                                                       ..   .-

Honorable Clay Cotten, page 2              M- 255

when all known claims have been presented to and paid by the
receiver and the time for filing claims has passed. --
                                                     Froof
of claims against the company may in "no event" be filed
"later than one (1) year a                   he court's
order specifying the time
which are not filed within the expiration of such one-ye:zr
p~,"~tec~~~~~c~PaAt~tfn2~n~~d~s~S~~~~~~             ;ofdih;f
Texas (Emphasis added.)
         After the security deposit has served its intended
purpose of protecting Texas policyholders to the extent
allowed by statute, the Insurance Commissioner no longer
has the authority to withhold such deposits from its right-
ful owner,
         For many years, it has been the consistent pr,zctice
of the Insurance Commissioner to release securities deposited
with the Board in accord with Art. 610, Texas Insurance Code,
when sufficient evidence is presented to the State Board of
Insurance that all liabilities under the policies issued ,::.~r-
ing the particular years for which the deposit has been made
were extinguished.
         Former Insurance Commissioners have consistently r?,:-
hered to the policy of taking affidavits from fire insurance
companies as to the existence of possible future liabilities
and considering these affidavits as sufficient evidence for
them to execute such a release.
         As a rule of statutory construction, courts are in-
clined to accept an administrative interpretation of a
statute if such interpretation has been accepted without
challenge over a long period of time, Texas Employers' In-
surance Ass'n. v. Holmes, 145 Tex. 158, 196 S .W .2d 390,--%$.2.
         The only difference between the facts of former
administrative practice and those of the present inquiry is
that instead of the companv acting for itself, it is here re-
presented by an Ancillary Receiver and instead of a deposit
of securities, there is a DOnd fully secured by government
bonds as collateral.
         The last sentence of former Art. 6.09 indicates a
clear legislative intent that a deposit of securities and a
giving of a bond should be treated in the same manner and as
accomplishing the same effect:

                            -   1238   -
Honorable Clay Cotten, page 3              M-255

              "Any company desiring to do so may, at
         its option, in lieu of giving bond required
         by this article, deposit securitSes of any
         kind in which it may lawfully invest its funds
         with the State Treasurer upon such terms and
         conditions as will~in all respects afford the
         same protection and indemnity as herein pro-
         vided for to be afforded by said bond."
         The only reason for the requirements of Articles 6.09
and 6.10 is to guarantee the faithful performance of the
company's obligations to the citizens of Texas.
         If the Insurance Commissioner can perform his duty in
administering the provisions of the Insurance Code by re-
leasing a securities deposit upon receipt of affidavits from
the company that all known claims have been paid and the
statutory time has expired for presentation of any other
claims, then reason, statutory construction, and legal ana-
logy all dictate that he has the same authority to perform
an equivalent act to implement an identical purpose. Thus,
the Insurance Commissioner must of necessity have the im-
plied authority to execute a release of a surety bond upon
being satisfied that no further valid claims exist against the
surety bond as an asset of the receivership estate. It is our
opinion that in this connection he may rely upon an affidavit
of full performance by the liquidator-receiver. The Insurance
Commissioner is not vested with any authority to withhold such
security from its rightful owner once the liquidators receiver
attests to the fact of faithful performance in compliance with
the applicable statute.
         The requirements of Article 6.09 having been fully
satisfied, the Insurance Commissioner as obligee, has the
authority and the duty to join the Ancillary Receiver in ex-
ecuting a release so that collateral guaranteeing the surety
bond may be released to the receiver for the purpose of paying
off other creditors in the receivership estate.
                        SUMMARY
                        -------
         The Insurance Commissioner, as a bond obligee
         under Article 6.09, Texas Insurance Code, has
         authority to release a surety bond on an in-
         surance company in receivership when he is
         satisfied that no valid claims exist against
         such bond as an asset of the receivership es-
         tate and the receiver by affidavit shows that

                            -   1239   -
Honorable Clay Cotten, page 4            M-255

         al.1claims have been fully satisfied and that
         the one year statutory time limit contained
         in Article 21.28 8 3, Texas Insurance Code,
         has expired.

Prepared by Charles T. Rose
Assistant Attorney General
APPRCVED;
OPINION COMMITTEE
Hawthorne Phillips, Chairmsn
Kerns Taylor, Co-Chairman
John Grace
Harold Kennedy
Ch,ariesBardwell
John Fainter
A. J. Carubbi, Jr.
Executive Assistant Attorney General

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