                  THE           A’ITOIRNEY              GENERAL
                                        OF TEXAS
                                       Auslw    m.T-s
 WILL.     WILSON
ATTORNEY     OENERAL


                                               July 11, 1960


           Hon. William A. Harrison                        Opinion No. WW-879
           Commissioner of Insurance
           State Board of Insurance                        Re:   Does the payment of com-
           Austin 14, Texas                                missions for the allowance of
                                                           discounts by “representatives”
                                                           appointed by Title Insurance
                                                           Companies constitute a violation
                                                           of Article 9.22 of the Texas
                                                           Insurance Code and related
                                                           que 8 tions .

           Dear Mr. Harrison:

                  We quote from your request for an opinion as follows:

                         “Article    9.22 of the Texas Insurance Code reads
                  as follows:     ‘No commissions, rebates, discounts, or
                  other device shall be paid, allowed or permitted by any
                  company, domestic or foreign, domg the business pro-
                  vided for in this chapter, relating to title policies or
                  underwriting contracts; provided this shall not prevent
                  any title company from appointing as its representative
                  in any county any person, firm or corporation owning
                  and operating an abstract plant in such county and making
                  such arrangement for division of premiums as may be
                  approved by the Board.’ ‘~’(Emphasis added)
                        ._..
                               . . .

                          “In some instances, in connec’tion with the issuance
                  of title insurance policies, we find that persons, firms,
                  or corporations owning and operating’ an abstract plant
                  who have been appointed as representatives by a title com-
                  pany ‘are paying commissions and allowing discounts to,
                  attorneys or other persons who are not their salaried
                  employees.    The p,ayment of the commissions or the
                  allowance of such,discountsis    from the portion of the
                  premium to which the owner of the abstract plant is
                  entitled under the division of premium approved by the
                  Board. However, in most instances, the title company
                  has knowledge of the payment of such, commissions or
                  the allowance of such discounts.
Hon. William A. Harrison,   page 2 (WW-879)



              “In view of the above mentioned provisions of the
      Texas Insurance Code and in the light of the fact situation
      set out in the preceding paragraph, I request your opinion
      on the following questions: (1) Are the owners of abstract
      plants who have been appointed ‘representatives’ by title
      insurance companies ‘title insurance      agents’ as that term
      is used inArticles    21.09, 21.10, 21.11, 21.12 and21.13 of
      the Texas Insurance Code? (2) If your answer to the above
      question is in the affirmative. must such ‘representatives’
      of title insurance companies secure an agent’s license
      from the State Board of Insurance before issuing or selling
      title insurance policies?    If so, under what statutory pro-
      vision or in what manner are they to be licensed as agents?
      Does the approval of the State Board of Insurance of the
      premium division constitute a licensing of such represen-
      tative as ‘title insurance agent’?    (3) Does the payment of
      commissions or the allowance of discounts by such
      ‘representatives’ constitute a violation of Article 9.22 of
      the Texas ‘Insurance Code on the part of the ‘representatives’
      or the title insurance company or both? ”

       With respect to Question 1, you are advised that owners of ab-
stract plants who have been appointed “representatives”    by title insur-
ance companies are ‘“title insurance agents” as that term is used in
Articles 21.09, 21.10, 21.11, 21.12 and 21.13 of the Texas Insurance
Code.

        Chapter 9 of the Texas Insurance Code deals specifically with
title insurance companies.    The only authorization contained therein
for the appointment of “representatives”     or “agents” is found ln
A~rticle 9.22 as quoted above. The remaining portions of Chapter 9
deal specifically with the regulation of title insurance companies and
title insurance business, as opposed to the “agent” or “representative.”
With the exception of Article 9.22, the only specific reference made to
title insurance “representatives’*   or “agents” are those sections con-
tained in Chapter 2 1 above mentioned, dealing specifically with agents
and agent’s licenses.   The use of the term “agent” ln the pertlnent
articles of Chapter 21, rather than the term “representative”      does not
mean that those persons, firms, or corporations owning and operating
an abstract company, mentioned in Article 9.22, may not be “title insur-
ance agents” as that term is used in Chapter 21. The Legislature of
Texas has used the words “agent” and “representative”        interchangeably
in numerous instances. The courts of Texas have recognized that such :
terms are synonymous. Alexander       v. Barfleld, 6 Tex. 400, 403; Allen v.
Stovall, 63 S.W. 863, 866, 94 Tex. 618; General-Motors Acceptance
Hon. William A. Harrison.    page 3 (WW-879)



Corporation v. Lee, Tex.Civ.App., 120 S.W.Zd 622, 625; Talle v.
%asta Oil Company, Tex.Civ.App.,   146 S.W.Zd 802,805; &wer
k Light Company v. Adamson, Tex.Civ.App..    203 S.W.Zd 275, 276.      The
Adamson case, supra, contains the most concise statement:

             ” It is sometimes difficult to distinguish be-
      tween an agent or representative and a servant or employee.
      Anyone who does the slightest act for another might be
      the representative of such person for the performance of
      that limited service if we give the term its broadest mean-
      ing. In legal contemplation, however, ‘representative’ im-
      plies something more than that. It connotes the use of at
      least some discretionary authority: taking the place of the
      principal, and acting in the furtherance of his business; the
      power to bind the principal in a contractual sense. As used
      in the statute under consideration, we think the terms ‘agent’
      and ‘representative’ are interchangeable. . .”

       Your Question 2;is predicated on an affirmative answer to Question
1, which 1s given. You are advised with regard to the first part of Question
2 that the ‘“representatives”   of title insurance companies need not secure
an agent’s license from the State Board of Insurance before issuing ‘or
selling title insurance policies.   Article 9.27 of the Texas Insurance Code
provides as follows:

              “‘Unless title insurance companies or the business
      of title insurance is especially mentioned, no provision of
      this code, except as contained in this chapter, shall be
      applicable to corporations incorporated or doing business
      exclusively under this chapter, or to title insurance busi-
      ness conducted by corporations created under Subdivision
      57, Article 13.02 of the Revised Civil Statutes of 1925, or
      under Chapter 8 of this code, or under any other law, and
      no law hereafter enacted shall apply to such title insurance
      companies or to such title insurance business unless such
      subsequent act expressly states that it shall so apply.”

      Although title insurance companies and the business of title insur-
ance is specifically referred to inArticles  21.09, 21.10, 21.11, 21.12 and
21.13 of the Code, Article 21.14, dealing with the licensln     of local record-
ing agents and solicitors, contains no mention. of d
                                                   e              insurance
companies. title insurance business, or title insurance agents. Absent such
express reference, Article 9.27 quoted above would preclude the insurance
department from licensing the “‘representatives”     of title insurance compan-
ies mentioned in Article 9.22.
Hon. William A. Harrison,   page 4 (WW-879)



       In 1954 the Supreme Court of Texas had occasion to interpret
the effect of Article 9.27 when if was contended that the title insurance
companies and title insurance business were subject to the regulation
of Article 1.19 of the Insurance Code. Speaking for the Court, Judge
Hickman stated:

             “We agree with the holding of the Court of Civil
      Appeals that that article (Article I .1~9) has no appllca-
      tion because Article 9.27, Chapter 9, of the Insurance
      Code, relating to title insurance ccmpanies provides
      that no provision of the Insurance Code, except Chapter
      9. shall apply to title insurance companies or business
      unless expressly mentioned, and we find no such men-
      tion in Article i-19.”     Board of Insurance Commiss,ion-
      ers. et al, v. Title Insurance Association of Texas, et al,
            Tex.,         (1954),z5JrsBL .s 2d 95 .

       We find nothing in Article 21.14 of the Insurance Code, dealing
with agents and agent’s licenses, that would indicate that such article
is any more applicable to titIe companies or business than was Article
1.19 ln the Title Insurance Association of Texas case, supra., Indeed,
when it is noted that Section 3 of Article 21.14 expressly prohibits a
corporation from being licensed, while Article 9.22 provides that cor-
porations may be appointed as ‘“representatives”,~of title insurance com-
panies, the conclusion is inescapable that the Board may not require
such “representatlveuu to be licensed. The long standing administrative
interpretation by your Department 1s consistent with this conclusion.

      In light of our answer to the first part of your   Question 2. the
remaining portions thereof becozne moot.

       ,With respect to your Question 3, you are advised that the pay-
ment of commissions and the allowance of dtscounts by “representa-
tives” appointed by title insurance companies constitutes a violation
of Article 9.22 of the Texas Insurance Code both on the part of the title
insurance company and the appointed ‘brepresentative.”     We again quote
Article 9.22 ln order that here it may be conveniently analyned:

             “No commissions,     rebates, discounts, or other
      device shall be paid, allowed or permitted by any‘com-
      pany, domestic or foreign, doing the business provided
      for in this chapter, relating to tiSle policies or under-
      writ&g contracts; provided this shall not prevent any
      title company from appointkig as its representative in
      any county any person, firm or corporation owning and
Hon. William A. Harrison,   page 5 (WW-879)



      operating an abstract plant in such county and making
      such arrangements for division of premiums as may be
      approved by the Board.”

       Article 9.22 contains provisions which are common to statutory
regulations of other lines of insurance, prohibiting the granting of com-
missions, rebates, discounts, and other concessions to insurance buyers
considered to constitute detrimental and unfair competition, and which
lead to discrimination by the company as between insureds and the cost
of insurance.

       The proviso in Article 9.22 effects an exception to the prohibi-
tion against commissions,   rebates and discounts. It provides, in effect,
that the appointment by a title insurance company of a person, firm or
corporation owning and operating an abstract plant as its representa-
tive, with compensation to the representative on a division of premium
basis, shall not constitute a violation of the rule against discrimination
and unfair competition where such arrangement is subject to supervision
by the State Board of Insurance. In such cases, it makes lawful that
which otherwise might be unlawful. An analys,ls of such statutes is
contained in Couch. on Insurance, Vol. 3, Sec. 584, page 1872:

             “The object or intent of statutes aimed against
      discrimination and rebates is that uniform rates shall
      be established and maintained, so as to secure to all
      persons equality as to burdens imposed, as well as to
      benefits derived, by preventing discrimination by insur-
      ers in favor of individuals of the same class, either as
      to premiums charged or dividends allowed, or, as it has
      been stated, in order that prospective insurants of the
      same class shall not be unfairly treated or discriminated
      against, by inducements being given to one of such class.
      which are not available to all therein.”

        In construing the purpose of the Texas statute, we cite with ap-
proval Attorney General”6 Opinion No. V-280, January 30, 1947, under
a prior Attorney General. Contained therein is a discussion of the leg-
islative intent of Article 9.22:

              . . .Our interpretation of the scope and purpose of
      Section 21 is supported by the language of the caption of
      the Act in that it describes Section 21 as ‘prohibiting com-
      missions, rebates and discounts by corporations doing
      business under this Act.’ This is the only language con-
      tained in the caption specifically descriptive of Section 21.
Hon. William A. Harrison,   page 6 (WW-879)



      The only subject contained in this clause of the caption
      is ‘commissions,   rebates and discounts’ and nothing
      is contained in this language to indicate the purpose of
      Section 21 to be otherwise. Considerations of constitu-
      tionality impel us to construe the body of the Act in a
      manner consis,tent ,with the stated purpose of the Act,
      as contained in the caption, The caption is, of course,
      always considered as valid evidence of the legislative
      intent.

             “We must th.erefo,re assume that the proviso was
      intended to preserve a practice in existence at the time
      of the passage of the Act, and was designed to protect
      the companies from a possible interpretation which
      would prohibit a division of premiums as payment for
      legitimate underwriting services performed by abstrac-
      ters, and at the same time ‘to: aff,ord supervision by the
      Board of such division in order ‘to prevent abuses of the
      rule against rebates, etc. Given this interpretation, any
      uncertainty in the language @Section 2 1 is minimized.
      The purpose of the proviso is clear, consistent with the
      caption, consistent, with the usual regulation of other
      fields of insurance activityand consistent with the neg-
      ative language used in theproviso.”

        There is no doubt but that the title insurance company could
not make arrangement for division of premiums with those persons
described in your request as the “lawyers and other persons who
are not their salaried employees.”     This is the clear import of that
portion of Article 9.22 preceding the proviso clause. It is difficult
to see how a “representative”     who is permitted a division of pre-
miums as the only exception to the general rule against allowance of
commissions, rebates, discounts, etc., would be permitted, with
knowledge of the title company, to accomplish that which the title
insurance company itself is prohibited f,rom accomplishing.     That
this would b,e the attitude of the Supreme Court of Texas may be
reasonably implied from their holding in Board of Insurance Corn-
missioners v. Title Insurance Association of Texas, supra. Th,ere,
it is stated:

             “It is argued that responde,nts have no right to
      prevent competition in their business.    That would be
      a correct proposition in the transaction of ordinary
      business enterprises if the competition is not illegal,
      but, as well stated in the opinion of the Court of Civil
      Appeals [ 264 S.W.2d 1321
.    .   -




    Hon. William A. Harrison,      page 7 (WW-879)



                   *’ ‘The business of title insurance is one effected
             by public use, insof public Merest and is subject to
             reasonable legislative control. Daniel v.
             Investment Company, 227 Tex. 213. 93 8.

                     ” ‘In the exercise of this control the Legislature
             has provided that a title company representative in a
             coun,ty must own and operate an abstract plant in such
             county.   Any representative lacking this qualification
             is an illegal representative and any permit authorining
             such illegal representative to act for his principal and
             to divide premiums is invalid and operation thereunder
             is, in our opinion, an unlawful invasion of a competitors
             property rights.’ ”

            The court explicitly recogniies that those persons acting as
    “representatives”    of a, title insurance company under the provisions
    of 9.22 must strictly comply with the requirements contained therein.
    The court implicitly recogitises that any deviation from these require-
    ments would operate to encourage and promote, those things ,which
    Article  9.22 seeks to condemn, iid,.; unfair competition resulting from
    payment of commissions,       rebates’; etc. It does not matter that in the
    situation here presented this division of premium is done indirectly rather
    than directly. The duty to supervise such division of premiums placed
    on the Board is by no means lessened.

        It is to be noted that in answer to your third question, we have
advised you that the sanction contained in the statute operates both
against the title insurance company and ths appointed “representative.”
The Board, in ikscrdiny        of arrangements for division of premiums,
may withhold or withdraw its approval where there is evidence to in-
dicate premiums are being divided and rebates allowed to persons not
qualified under the provisions of Article 9.22&

           In addition thereto, the Board has available to it the provisions
    of Article 9.21. Insurance Code, dealing with revocation of certificates
    of authority of “any corporation, domestic or foreign,*’ who “shall
    fail or refuse to comply with any of the provisions or requirements of
    this Chapter.”

           This opinion is not to be construed as meaning that the contrac-
    tual relationship between such “representatives”   and attorneys who per-
    form title searches and other legal services for such, representatives is
    to be impaired to any extent,
                                                                       f   .




Hon. William A. Harrison,   page 8 (WW-879)



                             SUMMARY

                Owners   of abstract plants who have been
            appointed “representatives”    by title insur-
            ance companies are “title insurance agents”
            aB that term is used in Articles  21.89. 21.18,
            21.11, 21.12 and 21.13.

                Such “representative”  need not secure an-
            agent’s license from the Stats Board of Insur-
            ante before issuing and selling title insurance
            policie 8.

                 The payment of commissions or the allow-
            ance of discounts by such “representative”     con-
            stitutes a violation of Article 9.22 of the Texas
            Insurance Code on the part of both the “repre-
            sentative“ and the title insurance company.


                                        Respectfully      submitted,




                                              Assistant    Attorney General

CDD:lmc

APPROVED:

OPINION COMMITTEE:

W. V. Geppert, Chairman
W. IL Scruggs
Haward Mays
Leon Pesek

REVIEWED FOR THE ATTORNEY           GENERAL
BY: Leonard Passmore
