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
     :lonarable0. P. Lockhart, page 2             O-4764



        any purchase or sale by such cotgpanyof 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:DQSSof the reserm
        value thereof."

              Article 577 * Yena! IYodeof '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 poxvSrof attorney are left to
     individual contreot.

              Chapter 20. Title 75, Vernon's tinnotatedCivil Statutes,
     provides the method for the creation of reciprocal 'rnsuranceex-
     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.

              Viebelieve 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 likearisebelieve Lloyd8 associations
     and reciprocal exchanges are insurance companies within the purview
     of such articles. They are so considered and deal.twj~thby the
     rogu;.atorylaws 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:
-_   . .




     Honorable 0. P. Lockhart, page 3              O-4364



                "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
     Articles 4727 and 577, supra, are insuranae laws within the purview of
     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.

     LA:GOWC                                       Yours very truly
                                                ATTORNEY GENERAL OF TEXAS
     APPROVED FEB. 9, 1942                         By s/Lloyd Armstrong
     s/Grover Sellers                                   Lloyd Armstrong
     FIRST ASSISTANT ATTORNEY GENERAL                         Assistant

     Approved Opinion Committee By 8RB ChairvMI
