                 HE    ,*TIJOHNEY           GENEHAL

                              OIFTEXA~




                                February 10, 1958


Hon. William A. Harrison             opinion NO. ~~-363
Commissioner of Insurance
International Life Building          Re: Whether a company subject to
Austin, Texas                             the provisions of Subchapter
                                          A of Chapter 5 of the Insur-
                                          ance Code regulating rates
                                          for motor vehicle cr automo-
                                          bile insurance may declare
                                          dividends to one class of in-
                                          suredB.upon a different per-
                                          centage basis from another
                                          class of insure& under the
                                          provisions of Article 5.08
                                          and Article 5.09of the In-
Dear Sir:                                 surance Code.

            You have asked our opinion as follows:

         "Articles 5.08and 5.09prohibit discrimination or
    distinctions being made in the payment of dividends to
    policyholders. Article 5.08 specifically Bays that 'no
    insurer shall discriminate in any distributions of prof-
    its between insured of a class, and no classes for dis-
    tribution shall b,emade or established except on the ap-
    proval of the Board'. We respectfully request your opin-
    ion as to whether a company subject to the provisions of
    Articles 5.08and 5.09may declare dividends to one class
    of insured6 upon a different percentage basis from another
    class of insureds, with the only significant difference
    between the two classes being that one class has paid pre-
    miums based upon a time period of six months and the other
    has paid premiums based upon a time,period of twelve months
    or longer?" (Emphasis added.)

            The effect of the language that you have quoted from Article
5.08 of the Insurance Code as set out above is to vest the Insurance
Department with authority to approve or disapprove the creation of any
classes for distribution. It is the intent of the Legislature in en-
acting Articles 5.08and 5.09 of the Insurance Code to prevent cliscrimi-
nation in the payment of dividends to policyholders. In exercising the
authority vested in it, th&Board has full authority to determine wheth-
er or not the proposed classes for distribution are justifiable. There-
fore, it is for the Board to determine whether or not there is a significant
Hon. William A. Harrie&,   page 2 (~~-363)



difference between the two classes as outlined in your letter SO as
to warrant approving them 88 separate classes for the payment of divi-
dends.

                                 SUMMARY

               It ia within the authority of the State Board
               of Insurance to determine whether proposed.
               claeee.9of insureda for.dividend purposes are
               justifiable under Article 5.08 of the Insur-
               ance Code.

                                             Yours very truly,

                                             WILL WILSON
                                             Attorney General of Texas


                                             -*
                                                  Fred B. Werkenthin
                                                  Assistant

FBW:l.m

APPROVED:

OPINION COMMITTEE:

Gee. P. Blackburn, Chairman

John H. Minton, Jr.
B. H. TiminS, Jr.
Marietta McGregor Payne

REVIEWED FOR THE ATTORNEY GENERAL
BY:
     W. V. Geppert
