Case Information

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THE ATTORNEY GENERAL OF TEXAS AUSTIN 1% TEXAR GlmAm c. MANN

ATFGRNRY GENERAL

Honorable R. C. Waters

Casualty Insurance Conmissioner

Austin, Texas

Dear Sir: Attention: Mr. T. Jay Foster

Opinion No. O-1307 Re: Is a motor company or its employees subject to prosecution under Art. 570, 571 or 572 of Vernon's Penal Code, under facts stated?

We are pleased to reply to your letter of November 8, .1939.

We quote from parts of your letter:

"Mr. Blank made arrangements with X Company to buy a new car. He then called his personal insurance agent who handled all his insurance and asked him to write policies to cover fire, theft, bodily injury, property damage, etc., lncurance on it and went by with his agent to get the motor number and other data for the agent and vat3 told that hi6 automobile insurance policies would have to be written by X Motor Company's agent or company or the whole deal wlllbe called off.

n . . *

"Article 5055 (R. C. S.) declares that, 'It shall be unlawful for any person to act within this State, as agent or otherwise, in soliciting or receiving applications for .lssurance of any kind whatever, or in any manner. to aid in the transaction 6f the business any insurance company incorporated ip'thls State, or out of it, without first procuring a oWtificate of authority from the Commissioner'. The followi&g article, 5056, declaree, 'Who are Agents', and it is clear that the action6 of X Motor Company's employees come within the definition there laid down.

. . . "I have examined the penal code and find that there is no penalty set out specifically applicable to a violation of Article 5055, unless Article 572, P. C. was meant to apply *2 Hoa. R. 0. Waterr, pag8 2 (O-1307)

by raying that, 'Whoever for direct or Indirect eompeQ8atlou rolicltr lnnlrsncr in b&elf of anj inmramce cw of w kind or chamctrr, or trmnmitr for a perron otbr tha m- 8elf an applicatiolr a po&iey of inrur&ncr to or from luch company, or almmed to act la aqotlatlnn of bruxwm wlbh- out a certlflc8te of suthor$ty to 8ct 8a age& or rolieltor ruch co@pauy, af'trr ruch certificate of authority @hall haw be- cancelled or revoked, l kelZ be fined not gore than OM huudred dolkrr.' However, l care wo+ld be very bard to make under that article for the rearon'that it YO&( be 8ec- kary to prove that the Company nr ro~lcIting Idi- rect indirect compenratlou, I and if at al& porrlble, prore- cutlonr rhoyld be rtarted,under rome othar article.

" . . . 570, P. C. rayr thst, Whoerer #ha&J do per- “Artlele fory any of the actr or thlngr mentioned In th8 flrrt &tic&e of this chapter for 8ny inrurancc com~aay referred to in aald article without such company hay&g firti complied with the requirements of the lawn of thlr State, rh8;& bsftied 8ot lem t& five hundved uov more thau one thourand d@.lav8.1 .Article 568, the 'first artlc4 of this chapter' referred to in Article 570, declaren Who Are Inmrance.Agent~,~ and lt la quite clear-frolp this descrlptioq that X Motor Compauy or ita employeea are acting am agents or ro~lcltorn. But Arti- cl8 570 says, 'Without much company havlug first coqrplled rith the require?pentr of the IawE of thi8 State' 10 it ap- pears th8t thil article was meant t0 cover 8 case where au agent had started rollcLUng o? wrltisg lurumnqe before the company he purported to repremnt had 'fir8t complled with the requirement8 of the law8 of thir State' and not to 8 came like the present where the company has colllplled with thq Jaw8 the State but the Motor Company or its employees are roXlcit- lng Insurance without a Jlcense from the Cos&rQlomr.

"There la a poeslbillty, however, that ArtlcJe P. C. may apply to ths present caee even though it was Spp8rentb in- ten&d for anot@erfipurpore. section 7 'Regul8tiorla ior the LicaneLng Agentr' (Article 5062a, R. C#S.) provi#er that, 'When any Loca@ecordlug Agent who has been appointed by an Iamuancg Car$er having a permft to do burinere In thf* State l kal& desireto employ a Sollcltor in the operation hi8 burlmss, he and 8 comp8uy joidLy r&all lpake application for 8 llcenre-for euch Solicitor to the Board of Innvance Coqle- alomrm....~ Ia the.prerent case the Local Recording ASeat and 8 colpa&y have not $oint4 iOr 8 liceMe nude 8ppliC8tiOn iOr the X Rotor Campsay or any of itr egp&oyecr and it say be raid that X Motor CaqpP8uy or~lte rOprQscutative8 arQ 8CtiQg 81 i

Hon. R. 0. W&err, pap 3 (04307)

8ollcltorr for Iany lnmmm CI company referred to In raid article without 8uch c-any h8vl8g conplied with the n- qulrementr of th8 law8 of thlr State' 88&r Article 570.

"If the lnrurance comp8ny which X C!@tp8ny 18 8ollcltlng 18 a foreign corporation, it ha8 not 'corn- plied with the requirenentr the law8 of thlr State' be- cause Article 5065 (R. C. S.) provides th8t each foreign ineurance company shall deslgu8te em officer or agent who ir ompouered to employ it8 agents or rolicltors ln thin State, end ruch officer or agent rha&l promptly no- tify the Cosmtlssloner in writing of the n8me, title, and addreer each person so appointed or employed. Xo of- ficer or agent har 'promptly notified the Cos&rrioner ln writing of the name, title, and addresa of any employee or representative of X Motor Cor~any a6 8 solicitor or agent.

I . . .

"I would appreciate your opinion as to whether X Motor Colqpany, under the fact8 an stated, lo subject to prorecu- tion apecifica&ly under Article 570 or under 572 as affix- ing the penalty for violation of Article 5055 or if neither apply and prosecution lrhould be under the Article 571."

At the outset, we call attention to the fact that you refer to the "X. Motor Capany." By mch reference, we aso- that the a&or company 10 a f lrm or a corpor8tica. The great weight of authority today is that a corporation may be criminally liable where the punlshnent for the offense committed 1~ 8 fine and not lmprlsonrpent. 13 Tex. I&a Rev. 252; 272 R. c. L. 765~ 33 A. L. R. 1211. Thin line of authority 18 not followed, however, by the Court of Criminal Appeals of Texas as is shown by the case of Judge Lynch International Book 8 Publishing Co. VP. State, (Ct. Crlm. App. lglg), 208 S. W. 526.

In this case, the company wa8 indicted twig Actr, 35th Leglr- lature (Third Called Session), c. 36, Sec. 6, appearing on page To8 of the.printed larrs of said Called Session, which provided in substance that "any person" engaged in the business emigrant agent without first hav- ing obtained a llcense~ shall be guilty of a mieden&ano,r and upon convlc- tlon shall be fined not &era than $100.00. In holding that the indict- ment was bad, the C,purt said, through Judge Lattlmorer

"No mqtion to quash upon any proper ground eras made, but, 8s etated by the A8sirtant Attorney General, there Is no provirion law in this &ate under which 8 firm or corporation ten be indicted or tried under the cris!lnal lawr, 86 menu tdhare been the effort here.

Hea. R. Q. Waterr, pago 4 (0-m)

Eon. Il. 0. Watorr, page 5 (04307)

The motor company and its ~loyeor are agent*, so you stata, within the deflnltfoa of Article 566, and they ham ao llceqrer, there- fore they are mbject to prorecutlolr t@er Article 572. point out that it would bc diffl-

AE regarda Article 572;& cu&t to prove that colapanrtlop 1s balng racelw4 fo r th e l rvicra ran- derkld. & order for the employeea of the motor company to be held guilty rollcltlng lqrurtmce tithont a lieeuro, rnder this Mlcle, It would be necereary that compenratlon we recolred euch rollciting. However, it lr our opinion that the prorlrlon, “for ~lreat or indirect conpeneation,* ar wed in Article 572, only relater to roliclting inmranor. In other wordr, it in our oplhloh that, under thlr rtatyte, anyam who “tranrgltr for .a perron other thah hlmaelf, an application for a policy fnrurance to or eom such conpany . . . without a certificate of authority to act 4s agent solicitor for ruch company,” anyone *a0 “amume4 to act dn negotiation of insurance without a certificate of authority to act as agentor sollcltor such company,” lr rubjeet to prosecution under Article supra, regardlera whether he did did not so act “far

irect or indlmct compematlon.” It lr our aplnlen that thlr conclu8lon 4 s correct under the rulea of statutory constructlonj however, by virtue of the decision in the case of Jones vs. State, (Ct. Crlm. App., 19231, 265 S. W. 577, it is not neceesary to rest our opinion on construction.

In that case, prosecution was based upon Section 49, Chapter 1138, Acts, Thirty-first Legislature, which 1s substantially the sane as Article 572, supra. The only dffference lathe Act6 am: iirrt, the words “of any kind and character" were ealttea $n Sectloa 49, Chapter 108, Actr, Thirty-flrmt Leglrlatum; ~ecomlly, the flnr Jmw ken c@gad from “not lerrt~ oue hundreddollarr”to “not nom than one hundred dollarr.” The lnformatlon in this case, 88 1s shown oa pags 3 of ths tranecrik$, mtated ln part that the defendant “did then and there u@awfully for di- rect and~indirect compensation solicit inrrurance la belralf of Protective Life Insurance Company, a@ did then and them tmsnlt for a person other than himself, to wit, for Sam Kruger, an application for a policy in- surance to said Protective Life Inmrance Compmy, and did then and there assume to act in negotiation of insurance without a certificate ef 4uthority to act as agent and solicitor for said Protective Life Insurance Conp4nyj said Protective Life Insurance Company then and there being aa inEUI’B~C0 kompany against the peace and dignity of the State.”

The defenvt requested the following charge, as is shown on page 8 of the transuript:

“You 4re charged at the request of the defendant that before you can find the defendant guilty ia this case you must find and believe from the evidence beyond a reasonable doubt that said Xmmet A. Jones, the defend& herein, re- ceived directly or indirectly eompensstion for such appli- cation the insurance policy.”

Hon. R. 0. vaterr, page 6 (0-407)

The lower court r&pad thlr charge. The defendmt arrlgaed euch refural aa error. In holdlag the refuul of the requerted charge proper, the court, through Judga Rawkim, (*cbredr the jury “Appellant requested tb court te lnrtruct

that, unlerr appellant biroetly or inUmctly received com~nratien for hlr awvlcrr, thy wmd.1 acquit him. Thir char&b vaa properly refured becqrre it l@uwed on- part of thr imfomatlon uhlch alleged that tlrelythat he had trammftted for a perron other them hlmaelf an appllcatien for a policy ef inrurum, md had arrumed to act in negotlatlan for inruraacr without the cartl- flcate of authority to a0 do.* In vlev of our above oplnloa, to the effect the employeon that

of the X Company are eubject to prorecutlon rpaclflcally under Artl- cle 572, l upra, we deem it unnecerrary to conrlder Artlcler 570 or 571, Vemmn~s Penal Code, 19251 however, we direct your attention to reveral matterr ln connection wlth the lart two mentioned Artlcler of the Pena code.

Article 570, Vernontr Penal Code, 1925, pro~ldem Whoever l hall do or perfom eny of the acta or thlnge mentioned in the firrt article of thir chapter any lnrurance company referred to ln aaid article without mch company having fir& eml$ed vlth the requirementa the 14~1 of this State, rhaJ1 be fined not lens than five hundred nor more than one thoumud dollam.*

ArtJcle 568, l upra, im the “flrrt article” which ie referred to in Article eupra, and lr an fol&owe:

“Whoever nolicltr lnmrance on behalf of any in- aurance company, whether incorporated under the lawn of’thirr or any other State, or foreign goveNt, or who take* traacrmltr other then hlaeelf, any ap- plication for lnoul;ance, or any policy inrurance, to or from such company, or who advertises or other- wise given not+ t&at he will receive or tranemit the a-1 or ri@l.,.+eceive or deliver a policy inour- ance of any a&h company, or who ahall examine or ln- spect any Sink, or receive or collect or tranmit any premium of lnrurance, forward any diagram -kc or of any building or do any other act in the making or coneummatlng of any contract lneuraace for or with any such inqrance company other than hl@seJ.f, or who rhall examine into, adjurt or aid in edjuetlng *7 Eon. R. 0. Watera, page 7 (O-1307)

any lorr for or on brhrlf of any ruch inrurace company, whether any of such rctr rhallbr don. et the Lnnrtancr, by tha employment #uch krrurum cs, or by say brokar othw! perron, rhll be held to be tha agant of the company for which tha act lr done or the rlrk in taken, an far an relater to all the requlre+entr and penaltlcr herein ret forth. Actr C. 8. 1879, p. 32."

In your letter you lt8tb that there 18 Bome doubt 86 to whether the inrurance company has complied with the l.aw# of this State aa required by Article 5062a, Vernon'8 Civil Statutes, 1925, or Article Vemon'e Civil statUte6, 1925. In thir connection we direct your attention to Article 5062 which providen:

"Whenever the Commiraioner &all have or receive no- tice or informetion of any violation of any provlnion of thla law, he Ohall immediately invertlgate, or came to be invertlgated, ouch violation, and if a fire, fire and marine, marine; tornado, rent, accident, casualty, lla- bility, health, elevator, diaablllty, plate glara, bur- glary, bondlng, title, Burety or fidelity insurance com- psny hea violated any of rruch provieiona, he rhall tie- diate3.y revoke fta licenre for not lens than three months .a nor more than 6ix month6 for the first offenre, and, for each offense thereafter, for not leea than one year; and, if any person, agent, firm or corporation licensed by eucb Commlasioner 81-a fire, fire a+marlne, marine, tornado, rent, accident, casualty, liability, health, elevator, dirabllity, plate glare, burglary, bonding, title, nurety or fidelity inruraqce agent &al& violate or caue.0 to be violated any provl&n of thin law, he,ehall, for the fir8t offenre, have hlr licenre revoked for all campanics for which he ham been licensed, not leas than three months, and for the second offense he &all have hi6 li- Con60 revoked all companies for which he il llcenred and ahall not thereafter be licenned for any company for one year from date ruch revocation."

With referencp to Article 571, Vernon'8 Penal Code, 1925, pro- vidlnu. 'Whoever vlolater anv urovirlon of the lawn of thin State reps.- latinzthe buslneno f life,.fire or marine inmurence, nhal&, where the punirhment la not 4? o$ erwine provided for, be fined not lerr than five hundred,not (nor).tiore than one thousand dollara," (italics ours), we call attention to that portion which 8ay8, "where the punishment 16 not otherwire provaded for." In accord with our above rtated opinion, the penalty unlawfuUy noliciting inrurance, tranrmitting policiee, or acting in negotiation of lnrurance i6 6pecificall.y provided for fn Arti- cle 572, wma.

i- *8 Eon. R. 0. Watern, page 8 (o-1307)

It 16 our opinion that the X Motor Company, 88 nuch, would not be eubJect to peqal prosecution, but, the indivldunl who did the prohibited act 18 eubject to proeecutlon under Article 572, eupra. It la=our further oplnlon that the phraee "for direct or lndlmct compeneatlon," in Article 572, relate6 only to the act of rollcltlng lnrurence.

Toum very truly Nl’ORXEXQElVEMLOFTEXM By /I/ Walter R. Koch Ualter R. Koch Aeelrtnnt By /a/ Ran-y Bhuford Iarry dhuford EB:pbp:.lm

APPROVED DEC 23, 1939

/a;/ Gerald C. Mann

A!rroRNRY(IERERAL OF TEXAg

APPROVED OPINION C-RE

BY /a/ BUB CBAIFMAIi