Case Information
*1 Honorable 0. P. Lockhart, thairman
Board of Insurance Conmissioners
Austin, Texas
Dear Sir: Opinion No. O-4364
Re: Articles 4727, Vernon's Anno- tated Civil Statutes, and 577, Penal Code of Texas, applied to officers of Lloyd8 associations and reciprooal exchanges.
Your request for an opinion of this department reads: "In an opinion dated September 2'7, 1937, your Department held that Artiole 4727, Chapter 3, Title 78, Revised Civil Statutes of Texas, applied to of- fioers and direotors of Fire and Wsualty insuranoe oompanies as wll as Life insurance owpanies. Will you pleasqnolr advise your opinion as to whether or not Article 4727 is applicable to Attorneys-in-Fact for a lloyds organization and a reoiprooal exizhange; in other words, do the provisions of Article 4727 prevent a lloyds or a reciprocal exchange from making a loan to the Attorneys-in-Fact, or from purohasing securities fromthe Attorneys-in-pact, or from in- vesting its.funds inthe securities of a corporation owned .or controlled by the Attorneys-in-Fact.”
The opinion to whiah you refer his dated September 17, 1937, and appears in Volume 378, Latter Opinions of the Attorney General, page 312. Such opinion held that Article 4727, Vernon's Annotated Civil Statutes, and Ax-Mole 577 of the Penal Code of Texas applies to offiaers and direotors of fire and casualty companies, even though Article 4727 appears in Chapter 3, Title 78, Vernon's Annotated Civil Statutes, the ohapter providing for the creation and operation of stock life insuranoe companies, and does not appear in the chapters dealing with fire and casualty oompanies.
Artiole 4727, Vernon's Annotated Civil Statutes, reads; "No director or officer of any insuranoe oompany transacting business in or organized under the laws of this State, shall receive any money or valuable thing for negotiating, procuring, rscomnending or aiding in *2 :lonarable 0. P. Lockhart, page 2
any purchase or sale by such cotgpany of any property, or any loan from such oompaoy, nor be pecuniarily in- terested, either as principal, co-principal, agent or beneficiary in any such purchasn, sn?e or 1or.r;. ;;‘o- thing in this article shall prevent s life insurance corporation from making a loan upon a policy held therein, by the borrower , zct in BT:DQSS of the reserm value thereof."
Article 577 * Yena! IYode of '2exr.s. reads: "NO director or officer of any insurance corrpa-y transacting business in this ctnte, or organized urder the ,laws of this State, shall receive any money or valuable thing for negotiating, procuring, reaommending or aid- ing in any purchase or Sale by such company of any proper- ty or any loa,: from such company, uor be pecuniarily interested either as principal, co-principal, *gent or beneficiary, in any such purchase. sale or lonn. ;itJ- thing oontained in this article shall prevent a life insuranoe dorporation from making a loan upon a policy held therein, by the borrowr not in excess of the reServe value thereof. any person violating any pro- vision of this article shall be fired not less than three hundred nor more than one thousand dollars." Chapter 19, 'i'itle 78, Vernon's Annotated Civil Statutes, . . provides the method for the creation of Uoyds j:;si:ranae associations. Article 5014 thereof provides for the designation of an attorney-in- fact. lhe provisions and'scope of the poxvSr of attorney are left to individual contreot.
Chapter 20. Title 75, Vernon's tinnotated Civil Statutes, provides the method for the creation of reciprocal 'rnsurance ex- changes. Article 5025 thereof provides for the cppointment of an attorney-in-faot to aot for the subscribers and the contents and provisions of the power of attorney are left to individual contract.
Vie believe the attorneys-in-fact provided for in Chapters 19 and 20, supra, to he officers within the ourview of .P.rticle 4727 and Artiale 577, Supra. Vie likearise believe Lloyd8 associations and reciprocal exchanges are insurance companies within the purview of such articles. They are so considered and deal.t wj~th by the rogu;.atory laws of this State.
Je believe there would be no diffioulty in snswerjog your question if it were not for Article 5023 , conta!ned in !baptcr 19, and Article 6033. oontained in Gapter 20.
.b,rticle 5023 reads:
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Honorable 0. P. Lockhart, page 3
"Except as herein provided, no other insurance law of this State shall apply to insurmce on the Lloyd's plan unless it is speoifioally so provided in such other law that the same shall be applicable."
Article 5033 reads:
"Except as herein provided, no insurance law of this State shall apply to the exchange of such indemnity contracts unless they are specifically mentioned."
Thus it becomes neaessary for us to determine whether or not 4727 and 577, supra, are insuranae laws within the purview of Articles the last quoted statutes.
Our opinion No. O-1586, conference opinion No. 3097, fully considered and discussed Articles 4727 and 577. supra, as applied to 8 given fact situation. It was therein stated:
"At the outset we call your attention to the fact that Article 4727 and Article 577 do not prohibit a life insurauce company from doing anything.
"The two statutes, civil and criminal, do contain an express prohibition, but it is direoted at the directors and officers of insuranae companies, and in no manner oan it be construed as a restraint upon the Rower and authority of in- suranoe companies to make valid lo&s."
In view of the reasoning conWined in such opinion, ws hold that Artioles 4727 and 577 are not insurance statutes within the meaning of Articles 5023 and 5033. It is our opinion therefore that Articles 4727 and 577
apply to the officers of Lloyd6 associations and reciprocal ex- changes as fully as if they were offiaers of a stock life insurance company.
We cannot, due to the laok of sufficient facts before us, oategorically answer the speaific questions propounded by you, but believe the holding herein made, taken in oonjunotion with our con- ferenae opinion No. 3097 the original of which is in your files, will enable you to properly dispose of the issues presented. Yours very truly
LA:GOWC ATTORNEY GENERAL OF TEXAS By s/Lloyd Armstrong APPROVED FEB. 9, 1942 Lloyd Armstrong s/Grover Sellers Assistant FIRST ASSISTANT ATTORNEY GENERAL Approved Opinion Committee By 8RB ChairvMI