                                                   April   14, 1939


Honorable Tom C. King                                        opinion lo. 0-W
State Auditor                                                Rtr Examination of dome&k and
AmtIn,  Texar                                                      foreign ~i.nNranCC companiccl.

Dear Sir:

             Your letter      of January 13, 1939, hertlnafter               set out,    ha6 received
the   careful attention       of this Department.

            We acknowledge with thanka the aesietanct rendered UII through numerous
convtraatlons   with Mr. T. M. Markham of your Department.   In thin connection,
we have also received hlpful    information from the Honorable R. L. Daniel,
former Chairnum of the Board of Insurance Conunisniontr6 and members of him
department.

              Your letter     it     as follows:

             “Articles 4690, &OS,   46gOb and 46gOc provide for the: exami-
       nation of inmrenct   comptnlttchartered in, or doing bu6lntss In,
       the State of Texa8, and for appointment, qualification,  compensa-
       tion etc. of examiner8 therefor.

             “Your opinion          ir rtrpectfully        requeatsd   regarding   the fol-
       lowlng:

              (1)   The authority of the Chahmn     of the Board of murance
                    Comirrlonerr   of Texar to accept t6aminat.i~   report6
                    from sxamintrr not comiraioned    by him in writing.

              (2)   The authorit   of actuaries or examiner8 to accept com-
                    pensation (tither  per diem or othtiwltt),gratuity,  or
                    refund6 of txpenrer incurred by them from any lnouranct
                    company, while connaisrloned by the Chairman of the Board
                    of InturanctCommirrlontr6 of Tent.

              (3) In   caw         of violation  of authorlty          In No. 2 above,    what
                    penalty        la provided.”

              The first rcntence of Article 4690, Revised Civil Gtatutel,   1925,
as ended       by Chapter 152, Actr Regular Gession, knd Leglrlature,    1931, reads
a6 follows:
        Hon. Tom C. King, Page 2 (O-144)



               or by one or more examiners commireloned by him in writing, visit
               each company organized under the laws of this State and examine its
               financial   condition and its ability   to meet its liabilitiee,  as well
               a8 it6 compliance with the law6 of Texan afftctlng the conduct of
               itr burinear) and he mx rimilarly,      In ptrron or by one or more can-
               miariontd txamintr8, visit and examine, tither alone or jointly       with
               representatives     of the insurance rupervlring  department6 of other
               States, each insurance company not organized under the law8 of this
               State but authorized to tranoact buainesr in this State . . .”

                   Article  46906 provides that the expenses of all Euch examinatlonr
        &all   be borne by the insurance coxpenles exanined and that the eums received
        for such purposes shall be deposited in the Insurance Examinstion Fund of the
        State Treamry.     From such Fund, it ir, prescribed    that the salaries  and expense6
        of all ntcesssry   actuarier    and~examinerr, of the department rhall be paid.   Thlr
        statute also authorizes     joint examinations between repreBentative6    of the State
        of Texas Insurance Department, and eimilar department8 of other States.
I
                   Article k6gOb authorize.8 the appointment     of certain   actuaries   and
        examiners and prescribes  the maximumealariee that       each ahall   receive.    The
        last paragraph of thi6 Article   reads as followa:

                     “Neither the actuary to the Board of Insurance Commissioners
          l    nor any examiner or assistant  shall continue to serve ab such if,
               while hold;rig such position, he shall, directly  or indirectly, ac-
               cept from &!y insurance rompany, any employment or pay or compen-
               sation or gratuity on account of any service rendered or to be
               rendered or on any accouc$ whatsoever.”

                  Article  4690~ provides that examiners and assistant   examiner6 shall
        take an oath of office  and file a bond conditioned as prescribed by aaid Article.

                   We call your special attention to the difference in the requirement
        of Article  4690, as amended, in regard to examination of insurance companies
        organized under the law8 of this state and the examination of ether companies
        organized under laws of other States but having pernits to do business in Texas.
        It is our' opinion th$ the requirements of the statute in regard to examination6
        of domestic companies at leant once every two years are mandatory.   It is equally
        apparent that the examination of foreign companies with permits to do business
        in Texas is not mandatory, but may be made by the Chaiman of the Board of
        Insurance Commissioners, or hie representative,  if, in hie judgment, such exami-
        nation shouldbt   made.

                   Since the statutes prescribe that the mandatory examinations must
        be made by examiners commissioned by the Chairman in writing,   it is our opin-
        ion that the acceptance by the Chal-      of reports from examiners not commis-
        sioned by him in writing would not be a proper and sufficient   compliance with
        these requirements of the statutes.    By this w& do not mean that it is improper
        for said chairmau to receive and have among the papers and files   of his office
    .
     Hon. Tom C. Kiug, Page 3 (O-144)



     report-t made by non-comaisrimed examinera, but it ir our opinion that the
     acceptance of such report8 doe8 not constitute a compliance with the mandatory
     provirionr  of there articler.

                   It ir,   therefore,    our opiuieu   that   qutatiou   lo.   1 should be mowered
     ar followr:

                 At lea6t one txaminatlon  every two yearn of each inmrance corpora-
     tleu orgauized under the laws of the State of Texan muat be made by the Chair-
     man of the Board of Insurance Comainsionerm or his examiners,     duly commissioned
     in writing.    While said chairman may accept reports from non-commissioned ex-
     ami.nerB for the benefit of such information 80 they may contain, yet such re-
     portr and 6uch examinationa would not satlafy the mandatory provisions      of the
     statute.    In regard to insurance corporationr   not organized under the laws of
     the state ofTexam but operating in Texas under permits to do business in Texas,
     it is our further opinion that no mandatory examination of ruch companies is
     required by Iltatute.    If, however, said Chairmen determines that such examine-
     tlon should be xkde, the 6ax~ must be made by a duly commissioned examiner,
     which commission must be in writing.      If, on the other hand, said Chairman de-
     termines that such examination of forelgu companlea la not necessary,      there
     la, in our opinion, no statutory objection     to his receiving reports from non-
     commissioned examiners for such information as they xay contain.

                In anmfer to question lo. 2, it is clear from the above quoted por-
     tion of Article  46pOb that actuaries,  examiners and aseistant   examiners of
     the Board of Insurance Commissioners cannot continue to serve as such if, while
     holding such position,  they shall directly  or indirectly  receive or accept
     from any insurance company any employment or pay'or compensation or gratuity
     en account of any service rendered or to be rendered or on any account what-
     soever.

                 In answer to question Ro. 3, the etatute doea not prescribe         a penalty
     for a violation    of the prohibited   act except to disqualify    such employees from
     further continuing to represent the State in aaid capacities.           In our opinion
     the penalty should be the removal of 8uch employees from the positions            they
     hold, unleaa their acceptance of such consideration       constitutes    a violation
     of 8ptciflc   criminal statutes,    in which event, the penalties     prescribed by
     such statute6 could also be inflicted.

                We trust      that thin   ia the information      you desire.

     vwB:R:IM                                                                   Yours very truly
                                                                           ATTORREY(;ERwAL OFTRXAS
     APPROVRD:                                                             By (Signed) Victor W. Bouldin
                                                                                    Victor W. Bouldin
     (Mened)    Gerald C. Warm                                                              Assistant
!’
     ATT=       OBIWUL OF TRXAS
