                               AITOECNEY                      GENERAL
                                         OFTEXAS




The Honorable    Sam Kelley                                      Opinion   No.   H-   709
Consumer    Credit    Commissioner
P. 0.   Box 2107                                                 Re:   Whether    an automobile
Austin,  Texas     78767                                         insurance   policy    may be financed
                                                                 in a motor    vehicle   installment
                                                                 sales  contract.

Dear   Commissioner           Kelley:

      You have requested    our opinion               concerning    whether   the premium     for a
mechanical    breakdown   policy  may be               financed   as part of an installment     sales
contract   under article  5069-7.  06(Z),             V. T. C. S.    A mechanical     breakdown    policy
provides   reimbursement     for repairs              to automobiles     necessitated    by the failure
of certain  mechanical   parts.

       Article   5069-7.      06(2)     provides:

                                 A seller  or holder     may;    in addition,    request    or
                           require    a buyer to insure       tangible   personal     property
                           involved    in such a contract,       made under authority          of
                           this Chapter,     and include      the cost of such insurance
                           as a separate      charge    in such contract.       Such insurance
                           and the premiums         or charges     therefrom      shall bear a
                           reasonable     relationship     to the amount,      term and con-
                           ditions   of the contract,      the existing    hazards     or risk of
                           loss,   damage     or destruction,      and shall not provide        for
                           unusual    or exceptional      risks   or coverages       which are
                           not ordinarily      included   in policies    issued    to the general
                           public.

      Thus a seller     may request        or require    insurance    for tangible  personal
property    involved   in a sales    contract,      but such insurance      may “not provide
for unusual     or exceptional    risks     or coverages     which are not ordinarily      included
in policies    issued  to the general       public,  ” and any such insurance       must relate    to
the sales    contract.    In addition,      if an insurance    policy   may be included     in a sales
contract    under article    5069-7.06(2),        it may be required      by the seller.




                                                    p. 3058
The    Honorable    Sam    Kelley    - page    two    (H-709)




       Damage    from mechanical          breakdowns      is expressly       excluded    from the
coverage    of a general      automobile      insurance     policy.     See Automobile       Series      No.
130, October      20,   1941,   Board     of Insurance     Commissioners.            We have been in-
formed    that few,    if any, mechanical         breakdown      policies     have been written        in Texas.
Assuming     this to be true,     we believe       you would ‘be required         to find such protection
presently    would constitute       II[ coverage]     not ordinarily      included    in policies     issued    to
the general    public,   ” and therefore        may not be included         in an installment       sales    con-
tract.    Of course     a purchaser       is free to obtain mechanical           breakdown      insurance
independently     of the sales     contract.

                                        SUMMARY

                             If mechanical      breakdown       insurance     is
                        coverage     not ordinarily      included     in policies
                        issued   to the general       public,    such insurance
                        may not be required          or financed     in an auto-
                        mobile    installment      sales   contract     under
                        article   5069-7.     06(2),V.   T. C. S.

                                                  Xery     truly     yours,




                                                     Attorney      General    of Texas




Opinion    Committee

jad:




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