Court Opinion

ID: 4135605
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:04:11.120597+00
Date Added: 2024-06-11T14:34:32.739071
License: Public Domain

Hon. William A. Harrison                  Opinion No.       WW- 1374
Commissioner    of Insurance
State Board of Insurance                  Re:    Whether the Mooney Aircraft,
Austin 14, Texas                                 Inc.,  %faintenance   Warranty”
                                                 is a contract of insurance witb-
                                                 in the meaning of the Texas
                                                 Insurance Code.

Dear Mr.   Harrison:

        you have submitted a copy of a “Maintenance    Warranty”     issued
by Mooney Aircraft,  Inc.,  in connection with the sale of its aircraft
and have requested  our opinion as to whether it constitutes   a policy of
insurance under the provisions   of the Texas Insurance Code.

        The maintenance    warranty   provides   in part:

              “Mooney Aircraft,    Inc., herein called ‘Mooney’.
        agrees to furnish all parts and labor in excess of
        $1, 000. 00 for each occurrence    for maintenance  and
        repair sufficient to restore to airworthy condition
        aircraft  [described]   and all equipment installed
        therein by Mooney.

             “This warranty is applicable only in the event the
       maintenance    and repair is done by Mooney or with the
       prior written approval of Mooney.        The aircraft is to
       be delivered   for such maintenance     or repair to a place
       designated   by Mooney,    free of cost to Mooney.    If in
       the opinion of Mooney the aircraft is damaged beyond
       repair or lost, Mooney will, upon receipt of said sum
       of $l,bOO. 00 and proof of loss,    replace the aircraft
       with an airworthy aircraft of like kind and quality.      . . ,
       and this warranty shall thereafter be applicable to
       such replacement     aircraft.  All salvage shall be the
       property   of Mooney.
Hon.   William   A.   Harrison,   page 2   (WW-1374)

             “This warranty is valid for one (1) year from
        the date hereof and so long thereafter  as the fee of
        $1.000.00  is paid annually in advance.  . . I0

          In connection with the sale of goods or services    the seller fre-
quently makes written or oral representations       to the purchaser    con-
cerning the component quality, method of manufacture,          process   of
installation,   or application of the goods or services   sold, or of their
fitness for certain specified purposes.      Such representations    or
warranties     may arise by implication   as a mere incident of the transac-
tion.   A seller’s   undertaking to stand behind such a warranty does not
put him in the insurance business within the meaning of state regulatory
statutes controlling the sale of insurance.

        Where the subject of the sale is services      this office has held that
a representation    of the results to be expected and a guarantee that
such results will be forthcoming      does not constitute the issuance of a
policy of insurance.      In WW-920.   it was held that a ‘termite  control
bond’ which guaranteed against “any damage to property caused by sub-
terranean termites      during the period of this contract” was not a con-
tract of insurance,     since “the primary   inducement to this contract is
the extermination    of termites through the treatment afforded by the
issuing company.      . . ”

         “The principal purpose of the Contract in question is the service
of eradicating termites,  not the indemnity for damages caused in the event
they recur. I’

         With respect to the sale of goods, however,    the same rule does not
obtain.   Although there is no Texas authority directly in point, cases
from other jurisdictions   and secondary   authorities agree that where rep-
resentations   cease being mere warranties    and become agreements    of in-
surance; when the representations     run beyond inherent weakness in the
goods sold, the contract is one of insurance.
                     .I

         However,     we find the following   statermnt   in Texas   Jurisprudence:

               **By definition a warranty is an agreement,     collateral
         to a contract of sale, or to its main object, by which the
         seller undertakes to vouch for the condition, quality, quantity
         or title of the thing sold. ” (Emphasis   supplied)
         37A Texas Jurisprudence       305. Sales, Sec.   139.
    I
             -   .._   _.

.       --

                            Hon.   William   A.   Harrison,   page 3     (WW-1374)

                                           “Whether a warranty amounts to insurance depends
                                     upon its terms.     A warranty or guaranty issued to a pur-
                                     chaser in connection with the sale of goods containing an
                                     agreement to indemnify against loss or damage resulting
                                    from perils outside of and unrelated to inherent weak-
                                    nesses in the goods themselves,             constitutes    a contract sub-
                                     stantially amounting to insurance within the purview of a
                                     statute regulating the right of a foreign corporation to do
                                    business in the state.        State ex rel. Herbert v. Standard
                                    Oil Co.,    138 Ohio St. 376, 20 Ohio Op. 460, 35 N.E.2d
437 (1941).     Similarly,     a contract by which the vendor
                                    of automobile tires undertakes           to guarantee the tires sold
                                    against defects in material          or workmanship       without limit
                                    as to time, mileage,        or service,      and further expressly
                                    guarantees them for a specified period against ‘blow outs,
                                    cuts, bruises,     rim cuts, underinflation,          wheels out of
                                    alignment,    faulty brakes or other road hazards that may
                                    render the tire unfit for further service            (except fire or
                                    theft), ’ or contracts     to indemnify the purchaser,           ‘should   .
                                    the tire fail within the replacement           period’ specified,
                                    without limitation    as to cause of such ‘failure, ’ is a con-
                                                                      ‘.
                                    tract ‘substantially    amountmg to insurance’ within the
                                    provision of a statute which requires            such guarantor or
                                    insurer to comply with the laws of the state authorizing
                                    and regulating the business          of insurance.      estate ex rel.
                                    Duffy v. Western Auto~Supply Co.,              134 Ohio St. 163,
                                    11 Ohio Op. 583, 16 N.E.Zd             256, 119 A.L.R. 1236.”
                                    Couch, Cyclopedia       of Insurance Law (2nd Edition,             1959).
                                     g 1:15.

                                     The Mooney “Maintenance      Warranty”   is an indemnity contract
                            cwering    perils of whatever nature, whether related or unrelated to
                            deficiencies   of manufacture  of the aircraft covered.     The Mooney~
                            Aircraft   Company is apparently    engaged principally   in the business   of
                            selling aircraft,  and the service   and maintenance thereof is a mere
                            incident to the sale of such goods.     The maintenance warranty,is,      there-
                            fore, a contract of insurance    within the meaning of the Texas Insurance
                            Code.
Hon.   William   A.   Harrison,   page 4     (WW-1374)

                                    SUMMARY

                          The “Maintenance     Warranty”.  issued
                       by Mooney Aircraft,     Inc., is a policy
                       of insurance.

                                              Yours   very   truly.

                                              WILL WILSON
                                              Attorney General        of .Texas

                                              BY
                                                   Coleman Gay.        III.   r
                                                   Assistant

CG:lmc

APPROVED:

OPINION COMMITTEE:
W. V. Geppert,  Chairman
Dudley D. McCalla
Howard Mayes
Winston Crowder
J. C. Davis

REVDXWED FOR THE ATTORNEY                  GENERAL
BY: Leonard Passmore