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                                        The Attorney             General of Texas
                                                         December 31, 1982

    MARK WHITE
    Attorney General

                                      Hr. William P. Daves                   Opinion   NO.   Mw-564
    SuDreme Court Building
                                      Chairman
    P. 0. Box 12548
    Austin. TX. 78711.2548
                                      State Board of Insurance               Re:   Solicitation of insurance
    5121475-2501                      1110 San Jacinto
    Telex 91OlS74-1367                Austin, Texas    78786
    Telecopier 512l4750266
                                      Dear Mr. Daves:
    IS07 Main St.. Suite 14M)
    Dallas. TX. 752064709                  You ask whether any of three sample letters from lending
    214/742%944                       institutions to borrowers reminding them to renew their hazard
                                      insurance policy constitutes solicitation of insurance in violation of
                                      articles 21.02, 21.02-l. 21.14, section 4 and 21.48A. section 2(c) of
    4824 Alberta Ave.. Suite 160
    El Paso. TX. 79905.2793           the Texas Insurance Code.
    9156333484
                                           A summary of the factual context in which these letters are
                                      written is helpful.     It is our understanding that it is common
    220 Dallas Ave.. Suite x)2
                                      practice for a lending institution to require that a borrower obtain
    Houston. TX. 770026936
    713m-                             and maintain hazard insurance coverage on the collateral for a loan as
                                      a term of the written loan agreement. Such an insurance contract is
                                      generally negotiated for a one-year term while the loan agreement is
    806 Broadway. Suite 312           generally for a term of fifteen, twenty        or thirty years.     We
    LubboctC.TX. 79401.3479
                                      understand further that the borrower is required to provide the
    SOM47.5238
                                      lending institution with a copy of the hazard insur,ancecontract and
                                      that the lending institution generally sends out letters to the
    43M) N. Tenth. Suite B            borrower to remind him to renew his hazard insurance coverage to
    McAllen. TX. 78501-1685           insure continuous coverage as required by the loan agreement. We are
    51216824547
                                      advised that insurance agencies may be owned and operated by the same,
                                      or substantially the same, individuals who own and operate the lending
        200 Main Plaza, Suite 400     institution that sends out such letter. Your inquiry relates to the
        San Antonio, TX. 78205-2797   specific language used in these letters reminding the borrower to
        512m5-4191                    renew his'hazard insurance coverage. In particular, you ask whether
                                      certain language used in three sample letters violate provisions of
        An Equal Opportunity/         the Texas Insurance Code which prohibit solicitation of insurance
        Aftirmative Action Employer   without a license.

                                           At the outset, we should note that a financial institution cannot
                                      be licensed as an insurance agent because it is not "actively engaged
                                      in the soliciting or writing of insurance from the public generally"
                                      as required by section 5 of article 21.14 of the Texas Insurance Code.
                                      Thus, a lending institution is prohibited from engaging in acts of an
                                      insurance agent, such as soliciting insurance.




                                                                   p. 2073
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.   .   Mr. William P. Dave6 - Page 2   (MW-564)




             Various provisions of the Texas Insurance Code prohibit the
        solicitation of insurance on behalf of any insurance company without
        the proper license from the State Board of Insurance. Ins. Code arts.
        21.02; 21.02-l; 21.14. However, the code does not define the term
        ~solicitation."

             Article 21.48A of the code, entitled "Prohibiting Certain
        Practices Relating to Insurance of Real or Personal Property," is
        directed to landers who require insurance on real or personal property
        constituting collateral for loans. Section 2(c) states:

                  (c) No Lender shall~use or permit the use of any
                  of the information taken from a policy of
                  insurance insuring the property of a Borrower for
                  the purpose of soliciting insurance business from
                  the Borrower, or make any of such information
                  available to any other person for any purpose,
                  unless such Lender has first been furnished
                  specific written authority from the Borrower
                  permitting or directing such particular use or
                  disclosure; provided, however, this paragraph
                  shall not prevent a Lender who is a licensed local
                  recording agent from selling insurance to a
                  Borrower.

             We would note that the proviso about local recording agents does
        not apply to lending institutions. Section 1 of article 21.48A of the
        code defines "lender" as "any person, partnership, corporation,
        association, or other entity, or any agent, loan agent, servicing
        agent, or any loan or mortgage      broker." Thus, while a lending
        institution is a "lender,"    it  nonetheless is disqualified as an
        insurance agent, which includes local recording agent, for the reasons
        discussed above.

             The Texas Insurance Code does not define the word "solicit".
        Words that are not defined in a statute are given their ordinary
        sinnificance unless thev are words of art or words connected with a
        paiticular subject mat&r.   V.T.C.S. art. 10; National Life Company v.
        Stegall. 169 S.W.2d 155, 157 (Tex. 1943); Willingham v. Hagerte, 553
        S.W.Zd 137. 139 (Tex. Civ. App. - Amarillo 1977, no writ). The word
        "solicit" is one of c-on     usage and its meaning is simple and not
        subject to any peculiar usage. Coutlakis v. State, 268 S.W.2d 192.
        198 (Tex. Grim. App. 1954); Page v. State, 492 S.W.Zd 573 (Tex. Grim.
        App. 1972). In Attorney General Opinion VW-551 (1959), this office
        addressed the authority of the State Board of Horticians to promulgate
        rules governing solicitation, and related questions. There it was
        stated:




                                          p. 2074
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            Mr. William P. Daves - Page 3   (MW-564)
.       .




                      ‘Solicit’ is defined as:       ‘To ask for with
                      earnestness; to make petition to; to endeavor to
                      obtain; to make or excite to action; to appeal to;
                      or to invite.’

            Black’s Law Dictionary, 1248 (5th ed. 1979).

                 Applying these definitions to the solicitation of insurance, we
            conclude that any person, including a financial institution, who
            requests, asks or appeals to or recommends or entices a borrower to
            renew his hazard insurance policy with a particular insurance company
            would be soliciting insurance and would be held to be an agent of that
            company under article 21.02 and 21.02-l of the Texas Insurance Code.
            Although the letters of the lending institutions recommend an
            insurance agency rather than an insurance company, articles 21.02 and
            21.02-l apply under the express terms of the statutes which provide
            that any person who does or performs any other act or thing in the
            making of any contract of insurance for or with any such insurance
            company other than for himself shall be held to be the agent of the
            company. The act of recommending an insurance agency is an act in the
            making of an insurance contract. Moreover, an insurance company. as a
            corporate body, can act only through its agents, and it expressly
            authorizes and appoints its agents to enter into insurance contracts.

                 Turning now to the specific letters about which you inquired, we
            believe that part of Trample 1 is permissible, hut Examples 2 and 3
            are prohibited by the Texas Insurance Code.

                 The pertinent language of Example 1 is:

                      We fully recognize your right,of choice of agent
                      or carrier in selecting hazard insurance on your
                      dwelling.   However, since there is a common
                      interest between yourself and our firm in seeing
                      that your hazard insurance is in a proper form and
                      sufficient in an amount to cover your valuable
                      home in the event of loss, we would be pleased to
                      assist you in obtaining this insurance coverage.

                      If you desire that we procure hazard Insurance for
                      your dwelling or have quotations provided to you
                      for such insurance. it will be necessary for you
                      to consent to our releasing the information which
                      we have in your insurance file. This consent can
                      be given by signing the appropriate space below
                      and returning this letter in the enclosed
                      self-addressed envelope.




                                              p. 2075
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.   1   Hr. William P. Daves - Page 4   @iW-364)




             We believe the second paragraph of Example 1, if sent alone,
        would be permissible in light of article 21.48A. section 2(c), which
        allows the lender to use information taken from an insurance policy
        for the purpose of soliciting insurance business after obtaining
        written authority from the borrower-policyholder. This statutory
        provision clearly envisions and expressly provides for coannunications
        such.as this. However, we believe the second sentence of paragraph
        one constitutes an invitation to assist the borrower in securing
        coverage and thus constitutes the solicitation of insurance. We
        cannot determine from     the information presented whether this
        solicitation is made on behalf of an insurance company. If, however,
        this solicitation is in fact made to benefit an insurance company, the
        lender will violate the Insurance Code provisions under discussion.

             The pertinent language of Example 2 is:

                  For your renewal we recommend you contact [name of
                  insurance agency]. In many cases, this agency can
                  offer you more coverage for less premium than you
                  are now paying.

                 Please call [name of insurance agency] during
                 office hours, 8:30 A.M. until 5:30 P.M; at [phone
                 number of insurance agency]. Ask for [name of
                 agent] or [name of agent].

             We believe Example’2 is prohibited by articles 21.02 and 21.02-l
        of the Texas Insurance Code because it recommends that the borrower
        renew his hazard insurance policy through a particular agency.which
        sells insurance on behalf of an insurance company. It also entices a
        borrower .by stating that the agency can offer “more coverage for less
        premium.” This language treats the insurance agency as an insurance
        company because only a company can provide coverage. Moreover,
        Example 2 asks the borrower to call the insurance agency, and directs
        him to particular agents within the agency. Also, Example 2 can be
        considered to be “perform[ing] any other act or thing in the making or
        consummating of any contract of insurance.”

             The pertinentlanguage of Example 3 is:

                  It is our reconrmendationthat you use [name of
                  insurance agency) as your insurance agent. It has
                  been found that in many instances insurance
                  coverage can be purchased for less money than you
                  are paying now.  [name of insurance agency] can be
                  contacted during office hours at [phone number of
                  insurance agency]. Their address is [address of
                  insurance agency].




                                         p. 2076
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I
             Mr. William P. Dave6 - Page 5     (MW-5841
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                  Example 3 constitutes a solicitation of insurance in violation of
             articles.21.02 and 21.02-l for the same reasons discussed relating to
             Example 2.

                                             SUMMARY

                          Articles 21.02, 21.02-l. 21.14. and 21.48A.
                       section 2(c) of the Texas Insurance Code prohibit
                       a lending institution from soliciting insurance
                       which includes requesting, asking or appealing to
                       or recommending or enticing a borrower to renew
                       his hazard insurance policy with a particular
                       insurance company or egency. On the other hand,
                       article 21.48A. section 2(c) allows a lending
                       institution to request written authorization from
                       a borrower to release information from the
                       borrower's file to an insurance agency for the
                       purpose of soliciting insurance.

                                                       Very truly yours.



                                                       MARK      WHITE
                                                       Attorney General of Texas

             JOHN W. FAINTER, JR.
             First Assistant Attorney General

             RICHARD E. GRAY III
             Executive Assistan: Attorney General

             Prepared by Yolanda McKeeman
             Assistant Attorney General

             APPROVED:
             OPINION COMMITTEE

             Susan L. Garrison, .Chairman
                                 .
             Jon Bible
             Rick Gilpin
             Patricia Hinojosa
             Yolanda McKeeman
             Jim Moellinger
             Bruce Youngblood




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