GWd.dC.MSNl
AttorneyGeneral

                                                    January 28, 1939


         Hon. R. L. Daniel
         Chairman of Board of Insurance Commissioners
         Austin, Texas

         Dear Sir:

                             Opinion No. O-101
                             Re: Examination of unlicensed in-
                                 surance organizations.

                     Your request for an opinion on the following ques-
         tion:

                    "Whether Examiners are authorized to examine
              all insurance organizations whether licensed or
              not?

                     "What procedure must be followed in order to
              examine books and records of the Merchants &
              Farmers Life Association of Waco, Texas?"

         has been received by this office.

                     Article 4690b reads in part as follows:

                     "Such examiners and assistants shall, as
              directed by the Chairman of the Board of In-
              surance Commissioners, perform all the duties
              relative to all examinations provided by Law
              to be made by the Board of Insurance Commiss-
              ioners of the State of Texas, and it is the
              purpose of this Act to provide for the ex-
              amination hereunder by the Chairman of the
              Board of Insurance Commissioners of all cor-
              porations, firms or persons engaged in the bus-
              iness of writing insurance of any kind in this
              State whether now subject to the supervision
              of the Insurance Department or not."

                     Article 4690 provides in effect:

                     "That the Commissioner or Commissioner's
              examiner shall have free access to all books
Hon. R. L. Daniel, January 28, 1939, Page 2

     and papers of the company or agents thereof
     relating to the business and affairs of such
     company and shall have power to summon and ex-
     amine under oath, the officers, agents and em-
     ployees of such company and any other person
     within the State relative to the affairs of
     such company."

          Section 5 of Article 4691 provides:

          "He shall also have power to institute
     suits and prosecutions, either by the Attorney
     General or such other attorneys as the Attorney
     General may designate, for any violation of the
     law of this State relating to insurance. No
     action shall be brought or maintained by any
     person other than the commissioner for closing
     up the affairs or to enjoin, restrain or inter-
     fere with the prosecution of the business of any
     such insurance company organized under the laws
     of this State."

          Article 4408 reads as follows:

          "The Attorney General, unless otherwise ex-
     pressly directed by law, whenever sufficient
     cause exists therefor shall seek a judicial for-
     feiture of the charters of private corporations.
     He shall at once take steps to seek such forfeiture
     in any case where satisfactory evidence is laid
     before him that any corporation receiving State
     aid has, by the non-performance of its charter
     conditions or any violation of its charter, or
     by any act or omission, mis-user or non-user,
     forfeited its charter or any rights thereunder."

          Article 6253 provided:

          "If any person shall usurp, intrude into
     or unlawfully hold or execute, or is now intruded
     into, or now unlawfully holds or excutes, any
     office or franchise, or any office in any corpora-
     tion created by the authority of this State, or
     any public officer shall have done or suffered any
     act which by law works a forfeiture of his office,
     or any association of persons shall act within this
     State as a corporation without being legally incor-
     porated, or any corporation does or omits any act
.   I




        Hon. R. L. Daniel, January 28, 1939, Page 3

            which amounts to a surrender or a forfeiture of
            its rights and privileges as such, or exercises
            power not conferred by law; or if any railroad
            company doing business in this State shall charge
            an extortionate rate for the transportation of
            any freight or passengers , or refuse to draw or
            carry the cars of any other railroad company over
            its lines as required by the laws of this State,
            the Attorney General, or district or county attor-
            ney of the proper county or district, either of his
            own accord or at the instance of any individual re-
            lator, may present a petition to the district court
            of the proper county, or any judge thereof in va-
            cation, for leave to file an information in the
            nature of a quo warrant0 in the name of the State
            of Texas.   If such court or judge is satisfied
            that there is probably ground for the proceeding,
            he shall grant such leave and order the information
            to be filed and process to issue."

                 Article 4682a reads as follows:

                 "All the powers, duties and prerogatives here-
            to fore vested in or devolving upon the Commissioner
            of Insurance or the State Insurance Commission or
            any member thereof as now constituted by statute
            shall hereafter be had, enjoyed, and exercised by
            the Board of Insurance Commissioners as herein creat-
            ed. The duties heretofore placed upon and the powers
            and privileges heretofore exercised by the State Fire
            Marshall are now to be placed upon and exercised and
            enjoyed by the Fire Insurance Commissioner."

                 Article 4682, Section 11 and 12 provides:

                 "11. Shall suspend or revoke certificate.--
            He shall suspend the entire business of any company
            of this State, and the business within this State
            of any other company, during its noncompliance with
            any provision of the laws relative to insurance, or
            when its business is being fraudulently conducted,
            by suspending or revoking the certificate granted
            by him. He shall give notice thereof to the Insur-
            ance Commissioner or other similar officer of every
            State, and Shall publish notice thereof. He shall
            give such company at least ten days notice in writ-
            ing of his intention to suspend its right to do
            business or revoke the certificate of authority
Hon. R. L. Daniel, Jan 28, 1939, Page 4

     granted by him, stating specifically the reason
     why he intends such action.

          "12. Report to Attorney General---He shall
     report promptly and in detail to the Attorney
     General any violation of law relative to insurance
     companies or the business of insurance."

          Articles 4875a-2 reads as follows:

          "Any person or persons desiring to organize
     a local mutual aid association to be operated up-
     on the assessment as needed or similar plan shall
     be permitted to do so upon the terms and conditions
     hereinafter set forth. No person , firm or corpor-
     ation shall hereafter operate in this State any
     sort of a locak mutual aid society or association
     paying a death benefit or other benefits and pro-
     viding its fund by assessments as needed, except
     under the provisions hereof, or under other speci-
     fic provisions of the laws of this State."

          Articles   4875a-22 provides:

          "The Board shall not revoke the right of any
     association to do business in this State except
     upon the judgement of a court of competent juris-
     diction or upon the filing of Articles of dissolu-
     tion by the members of said association or the
     officers for them or upon a statement being filed
     with said Board showing that said membership had been
     merged and taken over by another society or associa-
     tion."

          Article 4875a-23 reads as follows:

          "Any local mutual aid association now doing
     business in this State may avail itself of the
     provision of this Action by filing its articles of
     Incorporation, its constitution, by-laws and form
     of certificates with the Board of Insurance Commis-
     sioners of Texas, together with an application for
     authority to continue business as such, and if such
     documents, when submitted, are in conformity with
     the law, the Board shall file the same and issue
     certificates of authority.   Such application must
     be made by associations now in existence not later
     than six months after effective date of this Act.
.   .



        Hon. R. L. Daniel, January 28, 1939, Page 5

            Any association which fails to take advantage
            of the provisions of this Act shall immediately
            begin winding up its affairs and shall dissolve
            itself not later than six months after the Act
            takes effect,"

                  Article 4875a-27 provides:

                  "If any association heretofore or hereafter
             doing a local mutual aid business as herein de-
             fined shall cease to operate, or shall fall below
             the requirements of this Act, or shall undertake
             to operate without a permit or certificate of
             authority, or shall fail or refuse to make the
             reports as and when herein required, or shall re-
             fuse to submit to examination or pay the cost
             thereof, or shall conduct its business in a frau-
             dulent, illegal or dishonest manner, or shall vio-
             late any of the terms of this Act, shall, in addi-
             tion to any other penalties imposed on it or on
             its members or officers, subject itself to for-
             feiture of its right to do business and to disso-
             lution: and the Attorney General shall at the re-
             quest of the Board of Insurance Commissioners file
             such suit as may be necessary to wind up the af-
             fairs of such association and if necessary have a
             receiver appointed for that purpose, the venue of all
             of which suits shall be laid in Travis County, Texas."

                  The case of State vs. Dilbeck, 297 SW 1049, holds
        among other things:

                  "The state has a vital intereat in the il-
             legal or unauthorized use of the franchise to
             exercise corporate rights, and we know of no
             authority which holds that the right to forfeit
             the charter which constitutes the only authority
             under which the corporation may act as such is
             not peculiarly a matter of state interest.   The
             state alone may institute a proceeding for that
             purpose, and the authority of the Attorney Gen-
             eral would clearly exist independent of statute,
             but he is given the express authority by arti-
             cles 4408, 6253, R. S."

                  In view of the foregoing authorities, it is the
        opinion of this Department and you are respectfully advised
        that the insurance commissioner has authority to examine
        all corporations, firms or persons engaged in the business
                                                                .   .

Hon. R. L. Daniel, January 28, 1839, Page 6

of writing   insurance of any kind in this State, whether now
subject to the supervision of the Insurance Department or
not, and upon the failure of any corporation, firm or per-
son engaged in writing insurance of any kind to submit to
any of the rules or regulations provided by law or shall vio-
late any terms of the insurance law shall, in addition to
other penalties imposed on it or its members or officers,
subject itself to forfeiture of its right to do business
and to dissolution and the Attorney General shall, at the
request of the Board of Insurance Commissioners, file such
suit as may be necessary to wind up the affairs of such
association.

            Trusting that the foregoing answers your inquiry,
I remain

                                     Very truly yours

                                ATTORNEY GENERAL OF TEXAS

                                /s/ Ardell William

                                            Assistant

AW:AW

APPROVED:



/s/GERALD C. MANN
ATTORNEY GENERAL OF TEXAS
