                  THE      ATTQEWEY                    GENERAL
                                 O,P    TEXAS

                                 Arrwrmi    11. TEXAS
PRICE  DANIEL
ATTORNEYGENERAL

                             December      9,   1948


     Hon. George B. Butler, Chairman
     Board of Insurance  Commissioners
     Austin, Texas                 Opinion               No. V-729.

                                            Re:    The legality     of a
                                                   County Mutual Insur-
                                                   ance Company, under
                                                   Article   4860a-20,
                                                   Vernon's   Civil    Stat-
                                                   utes, wrlting      insur-
                                                   ance outside     of Texas.

     Dear Mr. Butler:

                 Your letter       of October      25,    1948, asks    our opln-
     ion   on the following       question:

                  “Please advise me whether a County Mu-
           tual Insurance        Compan        organized   and oper-
           ating under Article           4 8'60a-20,   Vernon’s   Stat-
           utes, may write Insurance              outside   of Texas,
           If its reserve        fund, or pollcyhoXders          con-
           tingent    llablllty,       or both such reserve         fund
           and contingent        llablllty       taken together,      ex-
           ceeds the sum of Fifty             Thousand Dollars
           ($50,000) . ”

                   Article 4860a-20,       Vernon’s Clvll   Statutes,   con-
      ‘%alns only two Sections       specifically   limiting    the terrl-
       tory in which County Mutual Insurance          Companies may enter
     ‘~‘into insurance    contracts.
    .‘~’
                   Section    15 provides:

                   “A County Mutual Insurance             Company may
            write insurance      (a) in any County adjoining
            the County in and for which it is organized,
            or (b) In any County in which no County Mu-
            tual Insurance      Company has been organized,           or
            (c) anywhere,     if Its reserve         fund, or pollcy-
            holders   contingent     liability,        or both such re-
           ,serve fund and contingent           llabillty     taken to-
              ether,  exceeds    the   sum   of   Fifty    Thousand
            ? $~O,OOO.OO) Dollars."          (Emphasis supplied)
Hon. George     B. Butler,     Page 2,     v-729.



             Section    20 provides,      in part:

             “County Mutual Insurance   Companies may
      reinsure   any or all of their risks against
      any or all hazards which they are permitted
      to insure against    with any other company or
      companies.

             “They shall have power and authority         to
      make and enter into mutual or reclprocai           re-
      insurance     contracts   with other Companies on
      the mutual or cooperative        plan; provided    that
      no County Mutual shall write or assume the
      relnsurance      on any other property     than the
      property    it is permitted     to Insure,   or on
      property    situated    outside  of the State
      Texas;   . . . I’ (Emphasis supplied)

              Having expressly       limited     the authority    to assume
the
  .  reinsurance       of  property    to  that   situated   in Texas,
tnere arlses      an lmpllcatlon       that the Legislature      did not
intend to so limit         the assumption       of primary Insurance     to
property    situated      In the State,      except as limited     by Sec-
tion 15 where the company’s reserve               fund or policyholders
contingent     llablllty,      or both,    is $50,000.00     or less.

               There 1s nothing essentially          different     in the
scheme of organization          of “County Mutuals” from the scheme
of any other type of mutual or reciprocal                 Insurance    organ-
ization.       Many types of companies are restricted              In var-
ious ways unless         the capital,    reserves or surplus        exceed
stipulated      amounts, or unless certain         excess coverages
are reinsured.         No other type of insurance          company, nor,
for that matter,         other type of business       corporation,        is
ordinarily      restricted     to operations     within the terrltor-
la1 limits ‘of the State of Texas,            other than by operation
of laws in other States governing             the territory      outside
of Texas.       The flat authority       granted by Section        15 to
operate      “anywhere” if the reserve        or contingent      llabll-
lties    ,of members exceed the stipulated           amount, when con-
sidered      in the light     of the absence of territorial           re-
strlctlons       on corporations      and individuals      generally,       ln-
dicates’the       absence of any intent       on the part of the Legis-
lature     to impose the suggested        llmltatlon,      and you are so
advised.

           Of course, the fact that under Texas law these
companies may operate beyond ,the borders of the State,
does not mean that the laws of other States permit such
operation.
Hon. George   B. Butler,    Page 3,     v-729.



                           SUMMARY

            County Mutual Insurance        Companies
     with a reserve      fund or policyholders
     contingent    liability,      or both taken to-
     gether,    in excess     of $50,000.00,   may
     write insurance       outside   of Texas.   Art-
     icle   486Oa-20,    Section    15, Vernon's
     Civil .Statutes.

                                Yours   very     truly

                           ATTORNEYGENERALOF TEXAS



                           By    $&&kLQei&
                                        Ned McDaniel
                                           Assistant



                           APPROVED:



                                 T ASSISTANT
                                ORNEYGENERAL.

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