Court Opinion

ID: 9608805
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:17:53.559781+00
Date Added: 2024-06-11T12:09:05.655585
License: Public Domain

Dissenting opinion by OWEN, Justice,
in which PHILLIPS, Chief Justice, GONZALES and HECHT, Justices, join.
I respectfully dissent. In this original proceeding, Mid-American Indemnity Insurance Company seeks to require the trial court to reinstate its pleadings. The trial court struck all of Mid-American’s pleadings and entered default judgment when it failed to post a $1,000,000 bond pursuant to article 1.36 of the Insurance Code. Because I believe the statute as written does not apply to Mid-American, I would grant the writ of mandamus.
The issue in this case is whether an unauthorized insurer which was an “eligible” surplus lines insurer under former article 1.14-2, section 8 of the Insurance Code at the time it issued the applicable coverage is exempted under article 1.36, section 11(d) of the Insurance Code from posting a bond before filing any pleading in a court action against it, even though the insurer no longer qualifies as an “eligible” insurer under the 1993 amendments to article 1.14-2.
I
Article 1.36 of the Texas Insurance Code, modeled after the Uniform Unauthorized Insurance Process Act, was adopted by the Legislature in 1987.1 Acts 1987, 70th Leg., ch. 46, § 2, 1987 Tex.Gen.Laws 79. Section 11(a) of article 1.36, which has never been amended, provides:
Before an unauthorized person or insurer files or has filed any pleading in any court action, suit, or proceeding or in an administrative proceeding before the State Board of Insurance instituted against that person or insurer through service of process, notice, order, demand, or pleading under Section 7 or 8 of this article, that person must ... deposit with the clerk of the court ... cash or securities or a bond with good and sufficient sureties to be approved by the court in an amount to be determined by the court sufficient to secure the payment of any final judgment....
Tex.Ins.Code art. 1.36, § 11(a). In 1993, the Legislature added a new provision to section 11 of article 1.36 which is pivotal to the resolution of this case. Section 11(d) provides:
This section [section 11] does not apply to surplus lines insurers which were deemed eligible surplus lines insurers pursuant to Article 1.14-2 of this code at the date applicable coverage was issued.
Acts 1993, 73rd Leg., R.S., ch. 999, § 23, 1993 Tex.Gen.Laws 4381 (codified at Tex. Ins.Code art. 1.36, § 11(d)).
It is undisputed that Mid-American was an “eligible” surplus lines insurer as of the date it issued the policy in question to Lopez-Gloria. Mid-American continued to be an eligible surplus lines insurer at *329least through November 9, 1993. (The February 1994 order of the Commissioner of Insurance includes a specific finding that Mid-American was an eligible surplus lines insurer as of November 9, 1993.) The Court concludes that section 11(d) does not exempt an unauthorized insurer who was an eligible surplus lines insurer at the time the coverage was issued, but was not an “eligible” insurer at the time the trial court considered the requirement of a bond.
No provision comparable to the exemption in section 11(d) appears in the Uniform Unauthorized Insurance Process Act. Accordingly, there is little guidance from that source or from other jurisdictions as to the proper construction of this subsection.
The search for the intent of the Texas Legislature begins with the definition of “surplus lines insurers” in the Insurance Code. That definition is found in article 1.14-2, section 2(b), and is as follows: “‘Surplus lines insurer’ means an unlicensed insurer deemed eligible pursuant to Section 8 of this Article in which an insurance coverage is placed or may be placed under this article.” Tex.Ins.Code art. 1.14-2, § 2(b). Section 8 of article 1.14-2 sets out the requirements which must be met in order for a surplus lines insurer to qualify as an eligible insurer and includes the requirement that the insurer have a minimum capital and surplus of $15,000,-000. Tex.Ins.Code art. 1.14-2, § 8(b).
Read literally, the definition of the term “surplus fines insurer” is synonymous with “eligible surplus fines insurer.” The Court construes section 11(d) of article 1.36 in this manner, so that in essence the statute would say:
This section does not apply to [eligible] surplus fines insurers which were also deemed eligible surplus fines insurers pursuant to Article 1.14-2 of this code at the date applicable coverage was issued.
The Court contends that the statute should be construed in this manner to give the broadest possible protection to Texas policyholders who have procured insurance from surplus fines insurers. At first blush, this is a compelling argument. I agree that the purpose of article 1.36 and other statutes regulating the insurance industry is to provide protection to the public and to insure a viable insurance industry. However, a recitation of these broad principles does not end the inquiry into the meaning of section 11(d). We must examine the specific language in the statute and apply well-settled principles of statutory construction.
The most troublesome aspect of the Court’s approach is that its construction of the statute gives little meaning to the Legislature’s specific use of “the date applicable coverage was issued.” Tex.Ins.Code art. 1.36, § 11(d). The Legislature clearly chose the date of the issuance of the policy as a pertinent point in time. In construing a statute, we must strive to give meaning to all of its provisions. Chevron Corp. v. Redmon, 745 S.W.2d 314, 316 (Tex.1987). If “surplus fines insurers” means “eligible surplus fines insurers” in section 11(d) of article 1.36, the Legislature could simply have limited the exemption to “surplus fines insurers” or to “eligible surplus fines insurers.” The additional requirement that the insurer was an “eligible” surplus fines insurer at the time the coverage was issued adds little substance to the statute.
The meaning of section 11(d) of article 1.36 is unmistakable when section 1.36 is considered in its entirety. The provisions of the Insurance Code which are at issue address several different categories of insurers, including domestic insurers that have been approved to operate in this state, foreign and alien insurance companies, unauthorized insurers, and surplus fines insurers. See, e.g., Tex.Ins.Code art. 1.36, § 3. There are different substantive provisions as well as procedural provisions applicable to each. Provisions which afford the fewest rights clearly apply to unauthorized insurers which have never become eligible to write insurance in this *330state. The Court concludes that companies in the position of Mid-American, which were at one time eligible but who have been unable to meet the increased financial requirements, should be placed in the same category as wholly unauthorized insurers who have never met the eligibility requirements. The statute does not bear this out.
The critical provisions are in sections 3, 7, 8 and 11. Section 3 provides a procedure for obtaining service of process on virtually all insurers: domestic approved insurers, foreign and alien companies, unauthorized insurers (which the Court recognizes would include Mid-American), and surplus lines insurers (which does not include Mid-American because it is no longer an eligible surplus lines insurer). Sections 7 and 8 provide additional procedures for obtaining service of process, but only on “unauthorized insurers,” through service on the commissioner of insurance in section 7 and on the secretary of state in section 8. Neither section 7 or section 8 is applicable to eligible surplus lines insurers. These sections only apply to unauthorized insurers. Eligible surplus lines insurers are not “unauthorized insurers.”2 See Tex.Ins.Code art. 1.14-2, § 2(b). Yet, the same language which is at issue in section 11(d) of article 1.36 also appears in sections 7 and 8 of that article. Each of these sections states:
This section does not apply to surplus lines insurers which were deemed eligible surplus lines insurers pursuant to Article 1.14-2 of this code at the date the applicable coverage was issued.
See Tex.Ins.Code art. 1.36, §§ 7(c) and 8(b). This language is entirely unnecessary if it means only eligible surplus lines insurers. They are not covered by either section 7 or 8 in any event. The Legislature obviously intended to carve out from sections 7(c) and 8(b), as well as 11(d), surplus lines insurers who were eligible at the time the policy was issued, but who could not meet the increased financial requirements.
In sections 7, 8, and 11 of article 1.36, the Legislature has drawn a distinction between surplus lines insurers who were eligible to write insurance in this state at the time the policy was issued and unauthorized insurers which never met the eligibility requirements at any point in time.
The Court concludes that if eligibility were not required at the time the policy issued and at the present, the state would be encouraging ineligible insurers to issue policies and to postpone meeting eligibility requirements. This reasoning does not withstand scrutiny. It is highly unlikely that imposing a bond requirement in litigation would offer any kind of “incentive” for companies to meet to the capital and surplus requirements. Either they have the financial wherewithal, or they do not. It is also doubtful that requiring a bond after litigation ensues over a policy provides any disincentive to a company who has already violated the law by writing unlawful coverage. A person or insurer who conducts unauthorized insurance business is subject to civil penalties of up to $10,000 for each violation and for each day of violation, and may be enjoined from continuing the violation or threat of violation. Tex.Ins.Code art. 1.14-1, §§ 3(d) & (e).
The Court infers that because Mid-American no longer meets the financial requirements under article 1.14-2 and therefore is no longer an eligible surplus lines insurer, that it must be teetering on the edge of insolvency, and that the bond or other security requirements in article 1.36 were viewed as necessary by the Legislature to protect policyholders. Such an inference does not automatically flow in light of the history of section 1.14-2 of the Insurance Code. Prior to 1987, *331there were general requirements set out in section 1.14-2 for “eligible” surplus lines insurers. In 1987, that section was amended, and for the first time, it included specific capital and surplus requirements which increased over time. Under the statute, the capital and surplus requirement for surplus lines insurers was $2,500,000 in 1987, gradually increasing over the years to $3,500,000, then $4,500,-000, and up to $6,000,000 on and after December 31, 1992. The 1993 amendments implemented a further, very substantial increase to $15,000,000. The fact that Mid-American does not meet the $15,000,000 threshold does not mean that in the judgment of the Legislature, companies in its position border on insolvency and should be required to post a bond before they are permitted to defend themselves in the courts of this state.
The trial court abused its discretion in requiring Mid-American to post a bond and in imposing what amounted to a death penalty on Mid-American for its failure to do so. Mid-American is entitled to mandamus relief.

. The Uniform Unauthorized Insurance Process Act has been adopted in forty-one states.

. Under the amendments to the definition of "surplus lines insurer," an eligible surplus lines insurer is no longer an "unauthorized insurer,” as it was under the former statute. It is now an "unlicensed insurer” deemed eligible in which to place coverage. See Tex. Ins.Code art. 1.14-2, § 2(b).