Case Information
*1 ~inirm .No; 0452o Mr. 0. P. Lockhart Chairman Authority of a Ll0yaS Board of Insurance Commissioners COi&WlJ' t0 Write &WOFOSed Austin, Texas bond submitted. Dear Sir: of iru:ust 9th, 1943, you submitted
In your letter a copy of the i:rtlcles of Agreement of the South Texas Lloyds of &MU, Texas, together with what is designated a “Guar:?nty payment Bond,” which that company proposes to sell, and asked our opinion whether under ‘Chapter 19, Title oP the Revised Civil Statutes Texas, the company is authorized to write
such insurance. Under date of August 2jrd, you submitted a n~ew form of Articles of Agreement which the underwriters subject Lloyds intend to execute and file with your department. We shall, therefore, confine our opinion to the legality of the bond under the proposed amended articles. Under the terms of the llGuaranty Payment Bond,”
Llnydc Cr.m>;rioy n:.:ert.- <c. II to (2) guarantee payment of a describ- ed promisory ~19% secured by ch&tel mortgage upon default by (2) p?y an; direct loss occas:oned by the the maker of the note; znd (3) pay any direct Porgery of t.he maker’s signature; loss due to the maker having defe:tlve title.
Article VernonIs Annota.ted Civil Statutes, reads: or associations of lndi- ~~Indlvidusls, partnerships, vlduals, hereby desZgnate.1 ‘underwriters,’ to make &ny insurance, Ilfe insurance, of agreement on the Lloyd’s Plan by executing articles expressing their ‘purpose ao xo do and complying with set forth in this chapter.”
titlcle 5015, Vernon’s annotated Civil Statutes, specf- fles the kinds of insurance attorneys at Lloyds may effect as:
sl.-, Fire insurance, which term shall be construed include tornado, hai2, crop and floater “2. Automobile insurance, which term shall be con- property strued to Include fire damage, colllalon llabillty
Mr. 0. P. Ldshart, (04526)
"3. Liability lnsuranae.
4. Harlne insurance g
“5. Accident and health insurance.
"6. Burglary and plate glass insurance.
L7. Fidelity lind surety bonds insurance. "8. &y other kinds of insurance not above specified, the m&ing.of which is not otherwise unlawful in this State, life
The underwriters In question under the amended 4rtlcles
of Agreement propose term shall be construed to writes (1) automobile insurance, .whfch
to include-fire,
roperty damage, collision liability 2) fide~fty and surety bon& insurance, and (3) accident an ‘z i _ he olth
h%fle lt is thus plain that under the Lloyd’s Plan any lawful insurance, other than life insurance, may be written, is important to classify eaah kind written the appropriate designation given in 5015 for the reason that Article
net assets of $lO,OOO-above initial specified It la also clear the proposed “Guaranty payment BoaiYN is not eautomobile insuranceI@ nor it-eaccldent and health lnsu~nce.” The third kind of Insurance proposed to be written sffdelity and surety bon2 insurance.”
The term ~~fldallt:: and surety bond insurance” is used both $015 :&d in %he amended Articles Our problem 1s to determine whether that-term comprehends the klnd of contract represented by the “Guaranty Payment Bond.”
Wa are ir.clined to the view that in using term Vi- dsllty and surety bond insurance I( the Legislature had la mlnd.the SUM kinds of contract fldellty,.guaranty and surst companies to write under Chapter 16 of Title 7 il of the Revis- Article 4969 of that Chapter authorizes such ed Civil Statutes. to act as follows8 *3 page 3 Mr. 0. P. Lockhart,
The language ol’ this statute is found in describing the kinds of contracts these companies are authorlaed tc? write.
They may “guarantee any contract or undertaking.” This, in our opinion, would fully empower fidelity, guaranty and. surety com- panies to write the “Guaranty Payment Bond” submitted. The Leg- islature, in our oplnlon ‘haa ‘the same. class o’f‘ ‘Dus’lness ‘In mind in authorizing Lloyis companies to wrLte fidelity and sur- ety bond insurance.
Me therefore advise you that the IfGuaranty Payment
Bond” submitted with your request 1s ‘:fidellty and surety bond the meanin& of’ Article Vernon’s insurance” within tine- tated Civil Statutes, and the underwriters st South Texas Lloyds may write such insurance under the amended titicles
We advert the second question. contained in your letter of August Yth, wherein you askt
“If your answer to the preceding inquiry in the af- firmative, will you please advise me whether the Lloyds’ obligation the policy Is such as to require to- treat the unpaid balances of such notes as llabfl2tles and to maintain equivalent to such liabilities.” poInted out, Article 5017 requires As we have previously that each Lloyds have net assets, the guaranty fund included, of at lerst #60,000, with an additional in net assets for to be written. ls, If two kinds of insurance are to be effected there.mus G be net xsets 5017b, Vernon’s Annotated Civil of at least $73,000. Statutes, states that;.
II*** Underwriters at a Lioydls shall ‘be deemed solvent when the net assets on hand shall.meet of this Chapter after deducting from its gross assets all out- standing liabilities, including liabilities, and reserve when the contributed guaranty fund at least to the minimum required herein shall be unimpaired. . _._
In our opinion, the answer to your ‘question is covered in Brticle 5017~. Under that article underwriters are required to oompute reserve liabilities e upon the same basis required for stock insurance companies doing In Texas. We have pre- came classes and character or business viously determined that Chapter 16 of Title 7% Revised Civil Statutes the applicable chapter for stock and Brtlcle of that
doing td same character buslness Chapter requires stock companies to set up as liabilities a prem- ium reserve at the rate of 50% of the current
This statute also requires the amount of liabllltles *4 . Hr. O. P. Lockhart,
unearned ortion of such undertakings to be estimated rate of 0% of the current ?
'.'lhis policy of the LegLslature translated to apply a Lloyds writrug the kind of guaranty paymant bond previously described would require the attorney to set up as llabilltles one-half of the premium on each undertaking, which portion must remain ln the premium reserve as a liability until the obliga- The only requirement as to the mainten- tion has beaome void.
ance of assets, however, is that oontalned 5017 and 5017b; the.former requiring in-net the first net assets tlon writing kind of insurance written and an additional $10 000 In
for each addltlonal kind written. The Lloyds In quas- three’klnds of insurance will be required to msln- t.lln net assets of at least $80,000.
With the explanation given, we auswer your second question in the negative.
Yours very truly ATTORNEY GENERAL OF TEXAG E$ /s/ Jas. D. ‘gmullen Jas. D. .5mullen, Assistant . .
APPROVED SEP 14, 1943
[s/ Grover Seller8
FIRST AS618TART ATTORNEY GENERAL ‘_’
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