                      OFFICE OF THE ATTORNEY           GENERAL        OF   TEXAS

                                             AUSTIN
eRumo.yM~
--

      lionorablsJ. P. Olbbr, Comdseioner
      Caaualtf fnruranoo Cd8si0n
      Board     of     fn8lIranor   Commirdon~r8
      h8tin,          T8X88

      -8r      sirs                        opinion    100.   O-4593




                                                                 88   br   lf.ibl8   for   a8-




                                                      ty vfth the pmirionr
                                                       CiYfl StabIt   Of




                                               IPATIOEI  DLADSE
                                                        WITHOUT 00%
                                                Ho Oontfngent
                                                        Lirbillt~,
                        l?opoliayhol&r in this oorrganrina-8 anr
                        U8bllit othor than the DfJporft Promiu8 or
                        Prombun $aidi the ooqanp harlng roo@mulrted,
Honorable f. P. Ulbbr, CommI88Ion~r, Paga 2


             and n0w hating intaot, 8 rr00 rurplu8 equal
             to tho 0apital stoak r8quIrod of a daaostlo
             8tOok ill8IW8llO8 OOlnpaAftraA8oOtiAg the 8ame.
             klxulof lnsurano8.    Thl8   I8 In oooordanoo
             with the ocmpany'8 By-LaW8 and tha prod-
             8iOA8 Of the  MUtUd   Ill8UT8UO8  tit Q88806 by
             th0  a3st LO(Ci8latU~. 1929,    Fi'irrt
                                                  0811.d &W-
             810~~. Pa&8 90, Chapter 40,    S0otIon 10.
             “‘MtMal.   Pal'tiOIpCitIOnt  Th8 in8U.P.d18, by
             rirta0 of thI8 polloy, a member      of the oan-
             pany, 8ubjeOt to the ~f;LaWS,rr?or~noe to
             rhioh 18 had, and 8 8ll be ontltlod to suoh
             unabrorbed DeporIt~8r8mium     or Divlbontla8
             may be deolared   b    the Board of DiT8OtOr8
             or Bxeoutir8 Gonau  Ittw,   8UbjeOt.  horotor,
             to approval by thr Board or In8uraAoa &me
             ai88iOA.r8 Ot the State Or TOXa8 bOiOm bO-
             In6 paid.9

     ‘ml8 brpartmont ha8 al80 plW80?1bed th8 rollOwIng
     18agurge to bo amd by a r8oIprooal erohangb when
     the lliglbIllty r~cplrementr are met:
             "'80 GCBPl'IRURt?T     I3BIIDYt     Lpopol1oyhoXior
             in thi8 tiohango inOIl& lAy liability other
             than the bpo8It pnmlum or pm5Ium paid8
             the uohange harlug aaoaruleted and now har-
             Ing lntaot a tree surpl08 in the uouut do-
             fined by Artlot 5026 a8 arndod br Ghaptrr
             8, Pam 4l7, Aots 46th b@blatPra              1939,
             Regular      S88810nr    Thlr l8 in  aoaorlanoe dth
             th e     lxohangM &tiOlO# Of &r8Olll8nt      8od th8
             ptiviriona~       or the roion’odto ArtIolo (5026).t
     W8 are roqoltlngmmerou8 InquIrI88 .Inoonnoot1cm
     with there prGV181On8. Wo, thrroiore, i~8peOtit.diy
     roquort Jrouropinion on thO iOuO*ing quO8tiOnt
        %% the 8vont that a mutual Io8uranao oodapany
        or  a noiprooal or lntor-iMur0n00 0xohan@m i8-
        8~08 polioI oontaixhiag   tho sppropriato ioro-
        going non-oontingentlirbllitr prwIrIon8 pm-
        8orIbedby the department and boron tho oxpira-
        tioa Of PO110188thu8 188UO6, the mUtU81 iU8Ul-WLOO
        oompany or the no & p & -o l
                                   o rohang0
                                     a l     88oomo8 in-
        80lYMt,   r0ul.dthe polio oldor bo .lIableiOr
        a8ee88ment or for a oont.ngont
                                 P       addltianal premIum?R
Ifonorrblo3. P. bibbr, UoxmI88ioner,Pago 3


           Tho lo t rofrrrrd     to In the 8ooond prragraph     o?
pltr
 _ _  lOtt8r a8 "YlltUIl
            _-_- -_          -8UanO8
                             - __ - -  et   p8888d  !g   th? W8t   Lo-
glrlature, 1929, Flr#t OUlW         Sblllon, page 90, chapter 40,
smotlon10". %8 &rtiCple 48&a-10,        VeIPI10n’8 &tIOtatOd   Civil
StatUt08,  jliOh ~tIO1~ I8 88 ?olloW8t
            Vho pOliOi       8hal.l provide ror a premium
     or promlum doporltpqabl.0in oarh, and lxoept
     a8 horeln prorlded tar a oontlngwnt premium at
     lea86 lqttal60 the pre&mi or prelaiumdepO8it.
     St&oha mutual oompaw may i8SUS a polloy wIthout
     a aontlngont promlum uhI10, but only while, It
     ha8 a 8urplu8 equal to the oapltal requirrd 0r
     a do3ne8tIortook in8Pr8nOO oompanf tranraotlng
     the 88M kinds o? inruranti, but anr 8u0h oompan~
     my f88UO a poliof providing that the hol&r O?
     anr ruoh polior 8hall be liable ?Or no greater
     amount thau the premittm or premium dOpO8it ex-
     pre88rd la the pollay. X? at any tlu thr abtit-
     ted   l88et8 are 1088 than tho uaoarnod premIw4 re-
     bervo,    other lIabIlit~o8 aad the required 81arplur~
     the oomp8tty ehall Immediately oolleot upon poll-
     Oh8    with a ooatlngont premium a 8U??iOi@At pro-
     portionato part theno? to re8tore aaoh a88rt8,
     profldod no member 8hall be Uable ?or any part
     or suoh oontlngmt premium in 8x0088 o? the amount
     demandedwithin one par artor the tormlnatlon o?
     th8   QOliOr.     The Board may,  by written  order, dl-
     Mot    that QrOO0Oditl~860 MUtOM        8uOh a88Ot8 be
     do?onod       durfq the time   ifx.6 in ruoh OfbOr.*
             The ?I?th ~nggh     o? pur latter roiorr   to Arti-
Oh   5026,  remoil’       anotated
                                OIrll Qtatutrr (I8 mndod.    Tho
portiOn   O? 8UOh     & tiOl@
                           lpplloable 60 thi8 qUO8tfOA, tOllOW8t
             1).
             . .  suoh ponr or attorney  or 0th~ au-
     thority ououtod by the 8ub8orlberr at any ru0h
     lxohango 8hall provide that 8a0h 8ubroriben ohau
     be llablo, In addition to the premium or pnlirrr
      depO8it      8peOi?iOd   iU   the   pOiiO3   OOUt?aOt,   t0   a
     oontlngent lIabllIty equal in amount to omS~~-
     tlonal annual premium or premium dOpO8it.
     8Ub88l'ib@r8at moh l  xohange relypZ'oVi6.bf amOe-
     ment that the proalan or premium dWO8it   8pOOi?i@d
     In the pollor oontraet on all ?om8 a? in8uranoo
     exoept lI?e 8hall oonstltute their ontirr llabll-
     Ity t&o@    the lxehan$e while, but only while,
Honorable t. P. Qibb8, Oommi88ion8r, Pag8 4


     the free surplus of the reolprooal exohangcia
     lqua1 to Two mtt~a         Th0tt8aa Dollar8 ((200,000)~
     pr+d*      that I? suoh lxohange +8       not or tt
     not applylag     to aonangr wormen~8 8ompen8atxon,
     emplomrrt llabllltf, or sontrsotr providing In-
     domnIty agaIn8t leg81 llabilltf to third per8on8,
     exoept lutoaoblle pub110 liability and ro           rtf
     danu3gOwhich I8 not 8UbjoOt       to the regu!at~n8
     Of the Intrr8tato Oommeror ~O~I8IBIOA,the Rall-
     road ComnI88lon 0r TeXa8, or other 8ImIlar bodler
     In the tarloue     Statea,   8uoh exohange mnf proride
     by agreement that the premiumor premium 60pO8it
     8peOi?I@& In the policy oontraot 8h811 oon8tItute
     the 8Ub80ribsrt8     OntiM llablllt~ through     the  @I-
     ohange nhlle, but only whllo, It maintain8 a fro@
     surplu8 of not lera than Fifty Thousand Dollar8
     ($50,0001      if   Otif   On@   kina   of   iII8UNInOO   18   0X-
     ohanged nIth an addItIOna Ten Thourand Dollar8
     (#lO,OO6) or rm     rurplu8 for eeoh additIonal
     kind or In8uranao lx 0h a ng     0a
                                    (InoludIngeatomo-
     bile pub110 liability and property damag8 whloh
     18 not 8ubjeat to the regulation80r tlm Inter
     8tate 0oEperoe   &NUMi88iOtl,the Railroad aomnI8-
     8Ioa O? hXa8, or other 8Imilar boaI@ In the
     tarIou8 Stats8), but not more than One attar
     Thousand Dollar8 (#lOO,OOO)surplus 8hnll be ro-
     qulred~provided, howrfer,that any dOM8tiO re-
     alprooal organIs     prior to the lffOOtiV8  date
     of thir Act whioh ha8 born and 18 oxohanging Om-
     traot8 wltlsaut  oontlngrnt liability an6 whIoh
     6008 not hate the   ml.nlmm rurplw r*quInd br
     thlr Sootion to oxohange 8uoh eontraotr, mar oon-
     tinuo to exohangr oontraetrwithout oontlngent
     lIabIlIty until Dooembor   Sl* X943, provided that
          *(a)  On Deoember $1, 1939, Dooomber     31,
     194o,.~oe~mbor31, 194l, aad Dosomber      31, 1942,
     it shell hato inorea8ed it8 rurplus by r88 OtiVe
     WOUAt8 0r twntprite (25) per oentum of t@      he dir-
     ferenoe between the 8urplaa lri8ting on DW@mbW
     31. 1938, and the rurplu8 herein required of 8
     reoIprooal before it i8 p0rPritt04 to 8XOhang@ OOD-
     traotr without omtlngent liability; and
             m(b)
               At no time during eaoh oaleadarmar
    a? the period above re?erreato 8hall the 8urplu8
    .
            i
                                    Paga 5
Honorable J. P. Olbbr, Oollpi88Ioner,


     be lesr than thlrtr (30) per oentum of the pn-
     aIum8 altten during#rob 8uoh year1   and
          '(0) fil othor pXWi8IOn8 Of thi8 Aot                             8hall
     b8 oomplled with; and
              *(a)        xr    8uah reoIprooalrail8 to Inenare
     it8   8Pirp1U8        in   aOOOrd8UOO         with thi8    8Ub8OOtfOA,
     8uOh r8OfprOOal ehall b 8ttbJeot to the minImum
     8urplus a8 above-arntfonod,or dI8oontInue ex-
     ohanging polio188 without oontlnent UabIlIt~.
               . . . .(I
              I)

           The brie? aooompanfinghour letter 8llttao8to the
Df86riOt hurt    Oa88 O? Wrist 2iora-0~ Reoelver, f8. Trinity
Portland Cement 00.. 0t al, No. 51,& on the docket of the
126th Df8triOt oourt a? TraYi     Oounty, 'hxa8. The jml@nent
br the a0m    in  thi8 OO80 WO8 entered x8r  1, 1933, and I8 or
reoord In the 01~11 mlnutrr   of said Court In Volume 50, page
1. Thi8 @a88 oOntaln@d an frrua Involving a 8tatatorT po-
rI8ion 8imilar to those oontainod In the 8bon      uoted 8tatute
8aId provlllon being Sootion 16a of Artlole 8308 of the Work-’
men'8 Oomp4nratIon L8w Aotr or 1917 a8 amen404 by the 42na
Legi8latPre in 1939 whioh $8 a8 fOilOwN
              4300. 16a. Whonwu  the ti8ooIatIon 8hcll
     h a lolo eumula ted,
                      at the end of any      oalrndar fur,
     an admitted rurpla8 In 8x0088 or Inourred 108808,
     lxpen8e8 and unearned prmtdwm    or other    liablll-
     tie8 amountin(lto tho 8UE or Two Hundred Thoaraad
     DO11U8 (#ZOO,OOO.OO)or EON* tho lIablllt~ of
   _ it8 member8 fO~a8808M#~t tttkd,r &'tiOlO 8308, 800.
     tfon 15 rha11 b8 rurpea(lod, and it 8hall b8 au-
     thor&d          t0    188U8   pOliOi           UOt   8UbjeOt   60   688088.
     met&. It 8hall be the                  autr
                                     08 the Board or Xn8tir-
     an00 Qoamiulonus to 6*texain* promptly aftor the
     riling or tho annual Statement of thr AWooIation,
     whether or not '8aoh an amount     of rurplur lxirtr
     @Ad if it find8 that it 6008, it rhall 80 8tat0 in
     a aertI?Ioate. Suoh oortifioato      rhall remain    in
     full for00 and a006 for one (1) fur         or until
     8uoh the   a8 a lator report to o r lx88iaatIon bf
     the De rtxmnt of fn8uranro 8hall 8how the~8urplu8
     to be r088 than Two HttndMd thourand ($200,000.00)
     Doll~r8, whennpon the Board or Sn8uranoe Ootdr-
     donor8 ahall oattool and nroko iraoh cwtI?loat@
Honorable f. P. ~ibb8,'ConmIs8Ioner,Page 6


      and requlro the A8soeIatIon to 18~    QOiiOf88 utb-
      jsot to l88088lUWt uttaerArt1010 8308, Seatlon 15,
      a8 ther were prior  to the time when 8uoh 8urpla8
      of Two mta0a    Thousand (r)2OO,OOO.OQ)bollar8 or'
      more war first aooumUlate4.~
          Purporting to aot In aoaordanre dth thlr 8tatutorr
prOvi8fOA, the hnbexz%ent8 Reolprooal A88OOiatlon  of Rou8$,ton,
Texa8, In 1929 8nd again Ih 1930 lttaohed an endorsement to
oontraot8 188UOd during ruoh year prwiaing for ‘8U8p@A8iOn Of
liabilitr t0 I88b8W@tlt,  rubrtantiallya8 fOllOW8t
           "By tirtru of thr,aoo~mulatIonbf the Iclro-
      elation at the end of the year iamedIatelypro-
      00aing the   year  of i88U8 of this  oontraot of a
      aa5ittra   8arplae  In 0x0088 or lnourrea 108808,
      oxpmwr     and unerrnrd   premiums amounting to more
      than #200,000.00 in aooordanoe wlth Seotlon 1641
      of put 3 and Sootion 2 of part 4 of Chapter 179,
      A&r of 194, Stat8 of Tex88, and/or a4 d8ma-
      memtr thereof,  and by virtue of authority of thb
      Ieruranoe Department of the State of T8z11, the
      home 0??1oo 8tato O? thI8 A88OOiatfOA, the llabll-
      itr t0 a88e88WUt oi the 8UbsOribrr ttW@d in thin8
      oontraot 18 8U8QbAd@dattag the warrant oalendar
      par 8d for ruoh further period a8 tho A88ooia-
      tlon rhall oontlnue to m8InteIn uaImpaIrod ruoh
      lrplue  of more than $2OO,OOO.O0.
            =ROthiA& horeln ootttain@d   8hl11 be hold to
      waive, vary, altar or 8Xhnd      any or the term8 lud
      oondit3onr 0r thl8 oaatraat 8xoept 88 art.4 Iboi-8.
             WAttaohod to ma,r0rring  a part 0r 00ntraot
      Ho.          , f88U8d by the 8UbsOrib8r88t LMkr-
      ~n~~~rooal         A88oolatIon,Of 80U8tOnt Teu8,
      to                 , da;:& at Bowton, Texa8, th18
                a4
          The Lumbermbnt8 Reolprooal A88ooiation  beoame in-
8olten.t.the Court’8 detemInatIon or the begin&kg a? In-
8olrenof being July 1, 1929 and the noolru n8 a polated
J'u 31, 1930. Whbroupon, &he noeiter     brought rui i in oau8e
No. 51,667 mentioned above against the polI8fhold@rmombrr
or the a88ooIation for juagmbnt levying l8808umnt8 against
8uoh meakr8 to m8k8 Up the de$iOit in th8.a8800iatiOZlt8
?UAdl In order that the debt8 and ola¶.m8 lg a In8t
                                                  it miight
            .. :
                                                                           84.3


Honorable J. P. Gibbs, ~OIUU&88IOMr, Page 7



be paid.           Some of the 40rendant8 plenara the above voted
lndor8ement 88 a d@ ?@ A80
                        lgaIn8t rtoorery or 8,uoha88088meAt.
It w88 found by the Court after hearing the Ql@naiAg8, ori-
denoe, and arguments, that euoh lndor8emont we8 no bar to
reooruy of la8esaments by the reoelver In that partioular
oaext,a8 rtatea in your brie?. The Court aid not a0netrao
the 8tatute Or pa88 upon the effeot the endoreemont may hare
had I? It h8d been validly lttaahed to the pollo~ at a time
when the re re8entatIon8 waited  In 8uoh snaoreementrotaa
hare re$lsoted the true faot8 a8 to the amount or surplu8,
but be886 It8 tIndIng that tho endornemontwa8 of no for08
and l??eo t
          upon             eVid8S4J0    that ruoh endor8ement \W8 r0~40a
UpOn ?a188 and~t~anaulentrepresentationsmade by tho oompanr,
the 8UlFplUs olaIinedtherein being, In faot, non-•ri8tont.
           Thii ?IudUg, even if we dieregard the faat that a
‘Motrlot Court juaiplsntalone, (there having been no appeal
 taken fran thir ti-ial)   18 wlthout'foroea8 a preoedent and
 18 not bIndIng en any other oourt, renders this oa8e,-and
 other 0~8~8.arI8In~ out or thi8 oa86, 8u h 8 Southern oriln-
mental Irh work8 fni sorrow; 101 %W. h!a!. 936 and xorrou
~8. Y&&hq Bkriaett .?brnIttuo    Company, Ino., Sup. at. or. Ap.
or Virginia, 4 S, Wtr,   (26) 399, this last montlonrd 8a80 b8-
 ing One O?,the Oa888 Oft06 %Liyour brie? (both Of th.Oe Oa808
having held in eiroat that the queetlon o?,the valIdlty of
the lzidorsementwad re8 aajuaio&*a in the trial oourt) o?'
little or no~help~io~o~an8truin-thelaw on your qw8tIon~
 b0OoU80 lt~l@av~8.illlan8we~d   ttz
                                   e qae8t$on a8 to whet the @?- ,.
root or the lador8emont would hare beon had the wwmtad
o~mplIaiiso with the'8tdtute been regular ana without fraad,
                           we ooneoIre It EJ be 8tdtOd~a8
               ~O&.&eitlo~.a8
?ollowr~       If
             a .h~taa&~lnruranoo oempanf or a reolprooal or
InterIn8aranor'~eroha~~ l88UO8 po1lole8 providing for non-
a88688mentor no p0ntI en6 lla'bIllt~,at a time when 8uOh
oaganf, noIprooal- orY nto*ln8uranoe lxohange ha8 in truth
and In fa8t th~~trro,rurplw requirua to meet the QrO~i8fOn8                  '.
O? the 8t8tU~8~~‘WOU16 the holbr8 Of 8uoh pOsIOi88 be liable
for a88088mont Or for *ontIngent addItIonal proaim   In the
want the oompanf. nofproaal or OXOhWig8,k@~e8 in8Olrent
4rUIAg     6h0      ii?0   04   8UOh   pOiiOi@8?

           we deem It tondaqtontal  that QIXW%~~OSW often In8ur-
attoeo'ontraotle a~osltrlot with rtatutor POWi8iOA8 aQQlfin&J
to 8uoh aontraot lra lqtalla and munt rne a to the pr0vl8loa8
Of the 8tatUtb.   xtt thi8 @OAA@OtiOtI pUW   at6eAtiOtt 18 direOt@d
Eonorablr      t. P.       Qlbb8,   Ooamiaalonu, Pam   8


to the following authority:
            Wtipplld4ona in a oontraot of inauranoo in
       oonfllatwith, or re u&mat to, lt~tutory,prori-
       llona, wh%oh lo lppPioablo to analfora a part oi
       the ooatraot, mat field to the atatuto, and arm
       lmalld, miner oontraota oaauot ohan@ ldatin&
       rtatutorF lnn,w -Aamrioenlatioaal Inaurmoa Con-
       pany fee Tabor, 230 S. W, 397; Quoon Iaouranoo
        Oollgaaytar Jarter#on foe O-any,           64 Tox. 578.
           Sin60 tho uordlng of Artlol~ 4860a-10 dsallog with
mutual lnauranoa oosupanioa la oubatantlall dlrrrrrnt  from
Artlolr 5026 Aoallq with reolprooala and L tor-lnaurano~
lo h a ng aauoh
              a ,Artlolea will be treated aoparatoltla thir
oplnlonr
               Thara are threa       possible oonetruotlonaof Art1018
486Oa-10      am     tar   am lamo lpplloa to the oontlaipntllabllltf
0r   poii0*0ia8r8~            The rb8t or thO80 00n8truotion8 wad
hare the ltatato meaa that wh6n Oh& lrplua roaohaa the ro-
qalred amouat aat forth lo the atatoto,  no polloyhol~r,
whefhor him pollrf k laauod prior to, or after tha time
luoh rurplaa lr roaohod, ahall be liable for any tarthrr
aa~oramrntajavan ir the 2-0pha lu r p fue  baoma       aired
arrriq the tlm   ror whioh the polioloa are iraw& i”%
oplnioa thla lntm-protatlonla inoomot     llnao the itat::
rakoa no pro+lalon.rer  roaovl~ the oocflnfpnt 1labllitJ
lttaohlngto pollrirr lraued ~rlor to the tiso that tho r6
q r a lrlurplu
          d     la naohrdi Morootu tha etatuto oontlaqoa
le r0u0r:'

               ?fr     at ray tlmo tha ablttod    laaota   are laar
        than tho~anoarnod




           %%o last quoted pretlaionlpeoiiylmgpolLoloawith
a oontlagent pramlam olouly lndloatea that thora Wy k out-
ltandiry fro olaaaea 0r polloleaj oao olaaa boaring a Oon-
tingant  llabllitr aad one olaaa without a ~ontlIle~~~~~;~iablllt~;
                                                    7,
               i00n4 00ti8tru0ti0n +0uld hm th0 aSmWe man
          "tro ma laaud without eontin@nt llablkltr oarrf
thit thi pol
lfonorabla J. P. Gibbs, Oomaiaaloa~r~ Pago          9


BUOh lxrmpf~lion
              for o!ilrao long am the requlrad atwplua re-
aialaaBnlmpalraa, thtta making tho lx o mp tlo
                                            trama ooating0ot
l.s.tty  dopoad upon the oontlauad lxlateaoo of the roqulrad
         The atatuta may8 la liteot that the oaapaay~y
la a ue
     l*poJlo* without a oontln4potproadum whllo but onlf
whll8,    W        nqulrad aurplua oxlata. It doom not ;a, that the
lromptlon irem oontlngoat llablllt~ ehall oantlarrrwhllo, but
odlf whllo, tho nqulrad aurplua oxlata.    It doom not apoolry
any tlm6 whoa the lxoarptioa from oontlagoat llabllity ahall
oaaaa, but apoolrlea only th& tlaw dIUlIIgwhioh the oompany
nar laaue pollolea without a oontlageat prenilua. In erdor to
a do pthla
       t loooad oonatruotloait would be aeoeaaar~to read
into the atatuqd'aprorlaloathat the l   xomptloarrau oontla-
gent llabllltf ahould oeaao wba the required lurplua beoomra
lapaired.  Suoh a oonatruotloawould do rlolenoo to the term
o? thr atatutar
              The third     #OtI8t?uOtlOA whloh we bellova to be in a+
oordanoa with the
ltatuto    mean that



gin haulag polloloa with go oontiiuont .llabilltr      or mny kl@d,
and that ii at a later data, it beoame nooraiart to make fia
laaeaamont, auoh ~aaraaaoat oould not,ba mad6 on thoao polXolo8
                      sly raaohod tho roqulrwlJnlma        lurplua
                      on that auoh pollof la ~~O?oo aubjeot to
                         Or oouraa, the oompaa~~a rl6ht to laauo
auoh pollolra oeaaoa, at tha momat   it8 larploa’~~falla below the
mpoir0a rinimr.
              Ii    I&, ,thoiororo   our oplnloa   thaf &fs pxwlslona
tprnirhaa   by JOO ior prlnt~ late m&ual pollof ooatnotr
should %a lmoadod in part am tallon      that’.pmtlon of the
  rovlalon ma4ingmao pollo~olaor     in thla lompaq laoura qr
Plablllty other lib&ntho 4opoalt proaium   or proniua Raid”
ahoula road lubatantiall~ a8 tollowal atho holder of thla
polioy l,aeura no llablllty other than the dapO8it g?OnirU or
premium   paid.*
          It la not anoommon ror a rutma oaapanr to urlta
inauranao on the oaab plan am wall am on tha lraoaamoat plm.
oooloy@a &lore on Xaauraaoo, 2nd M.,Vol. 2, PO 1576reaA*
la part am r0siorrt
              @mmra a oorpany la luthorlud to do buainoaa
         0p1the oa& plan am roll am on the mutual pla
                                                                   846


Honorable J. P. Qlbba, Ooamlaaloaer,Page 10


      promlum notea siren by mmbora laaurlng on the
      latter plan aaf be la a ea a to
                                   edpay loaaea mua-
      talaed     on pollolea written.oa tho eaah plan.’
           The thlra oonatruotioiabove adopted la rupported
by the oaae of Lewis we. IndepeqdeatSohool Dlatrlot of Auatla
deoldedby the Oourt of Old1 bp&ala at Beaumont and reported
in 147 S. W. (26) 298, s&loh oaae warn revereed b tho Supreme
Oourt or Pexaa  by oplnloa reported in 161 8. W.:.2d)
                                                  I   450. The
Lewla oaae warn a taxpa~r'a *ait to enJoin thr roh(ro1dlatrlot
m    buyln6 a pollor la the Hlller*mutual Xnrurasoo Gompany
OLLtho grountlt&t tho prorlaloa la Artlola 486Oa~~:~@itlaethe
lohool dlatriot lxpreaa authorltf to do 80 warn la ~i~olatlan ot
Seotlon 3, Artlole XI of the Texas Oonatltutionroatllng am fol-
l-1
           (avooountJ, olty, or othrr mualolpal oat-poq-
      tlon ahall hereafter broom* a lubaorlber to the
      oapltal 0r aaf prltate 0orpoMtloa or aaaoottloa,
      or make any a miprlatlon or donatloa’to’the8am,
     ~0~ ln lny wlPE
                   a oan
                     e lta’oredlt~   bat thla ahall not
      be ocaatrued to in l4way afieot any obll(Wloa
     heretofore auidortakea pursueat to law."
And la violation or S+otlon 52 ot A&isle IfI of auoh Oonatl-
tutlon reading am follow81
             Vho kglalature &all hare no      war to au-
      thorlaoany oouty, olt , tom or otrer polltloal
      oorporatloaor aubdlrirfon of tho State to Iend
      lta oredlt or to grant pub110 rone~ or thing et
      value in aid ~of, or to ray lndlrlaual,  aaioolatlen
      or oorporatfon  whtaoevor’l or to kooue a atook-
      holder & auoh o.orporatlon,   raaoolatloa or oompaay.w
The Court or 01~11 Appnr&a held ‘thatthe purohaaa of the poll-
oy war not a leadlag of the loQo1 alatrlot~a orodlt and the?&-
by, nsooaaarll~,hold that, the poUoy involved warn ioroter
non-•ar*a*abl*. 'The Oourt lxpreaal~ adopted the tellowlILg
ltateae~t      fr o l
                    mppell*o*a brlett
            WThla polloy of laauraaoe la non-a8aeaaabla.
      lie rurtlxm pa-&    oan ba lxaoted.*
Honorable J. P. Olbba, Oommiaaloner,Paem 11


And tho Oourt ta mth e
                     laldt
                       ?
          “In the pollo)rat laaui betorb am both on
     the law and on the taota, tho aohool dlatrlot
     oould aevu hare been oalled on to? say additional
     pa-at *a
          The ,SupremeOourt rev*raed the Lowla *am* on the
ground that tho polloyholdorwaa la lrtoqt a atookholderbut
the court erld*atl~ agreed with tho Oourt 0r 01~11 Appaala
am to the non-•aaoaaablllt~of the pallor involved alnoe.the
Oourt lIpnaal~  #al&~
          *It la true that the By-iawa provide that
     the llablllt~ o? eaoh pollo~older la limited00
     ad detem.laed to be the armouatof depoalt QPO-
     mlpr apoolrled in tho pollor laaued to auoh poll-
     oy holdarr.~
          It la our oplnioa, themtore, thet tho holder     or a
polloy la a mutual inauranoe oompaay whioh polloy   pro-f1468
that lt ahall bear no ooatlaigeutliability and diloh warnla-
sued at a time whoa the oompaayhad in truth and la iaot the
?ree aurplua reqalrodby the lta tutala,  not llablo ror aa-
reaaaont or to? oontlngeat addltloaalprerahm,     even thotlgh
the mutual oompaay beoomea laaolreatdurlag tha life of t;Be
QOllO~.
           Suoh an laterpretatloamafaeem at firat bluah to
ba tmfdlr to thorn.pollo~ldera whore pollolea were laaued
prior  to the attalmeat~o? the mqulred a= lo8 and whoao
polleloa thonroro bear a ooatlageatllabll~t~. On tho other
hand, tho mtrU1 oompaay’a lblllty to aell lnapraaoe without
oontinpgnt llablllt~ might gtsatly aid la the 8816 o? l$a
  olleiea end the growth ot the oanpanf and thus benetlt the
1oldera of laaoraable pollolea by reduoiagth~ ohaaoea that
their mntlnpnt lleblllt~ would over be bA?O?OO&
          Artlola 5026, aupra, dealing with later-laauraaoe
exohaagaa and reolprooala lpeolrloa the length ot flue durl.4
whloh the lxemptloa troxnooatlngentllablllty th*reln pro-
vi464 ior ahall oxlat. The statute ram la eiioot that the
                       ta m M J by l@-aeamt, b emade th eo a -
         o r p r a m& depoalt
p r a a +m
tlra llabilltq o? the aubaorlkr, while, but only w&ile, the
free aurplua of the roolprooal or inter-lnauramelxohaa@e 18
                     . ‘*
                                                                         f-348

Hoaorablo S. P. Olbba, Oommlial~aer,Page 12


0 aal to 4200,000.OO. Thus the exemption rrom oontlageat
1elblllty 1. lxpreaal~ arde to depeadupon the loatlauan**
or the requiredaurplum.
          The olause met out in ~our.letter whloh la pre-
aorlbod br Jour department for use in tho poll*lea or re-
olprooal ad inter-laaunnoo    exohangea ahould thare?*re be
altered or supplementedto ahow that the lxerptlon from eon-
tln@nt liability oeaaea whoa the re lrea marplum beoomea
irpalrad. We au&&eat that auoh prorraloa would be more aab-
ltaatlall~ la looordaaoe with the atatuto li a olauae to the
tallowing offoot be added thereto:
           9ut tho exe8ptlon ?rom oontlngratllablllt~
     heroin proridod for ahall oontlauo only lo lon(
     am tbia exohaage maint*lna the rreo awplua re-
     quired br the maid Artlola 5026.*
            Xt   ad&it   be Bald that aaoh a oonatruotlon or Artl-
016 5026 leatea the exemption from *aatlagat llablllty or
no praotloal kaeilt to the polloyholderalnoe the lremptlon
ooatlau*a  only 80 loag am a r-0 aurplue 0r $200,000.00 la
melntalaod end aIaoe am a praotloal matter no~~oooealoaoould
lrl.. during auoh tlma whloh wuld require the la+ got            .
an aaseaament again& the ~enbera o? the reolprooLr”  ,?or later-
laauranoe exohaw, and thus ths lxemptloa la la ioroe only
 urlng a t&e when it la not aooded b tho olloyholdera.
Pt la true that Arti*l* 11 o? the RevI aed 0Prlt Statubea may8

            *A
            trmapoaltlon 0r worde and olauae* mar be
     peaortea to tien the lenteaoeor olaiae la ulth-
     out mea nlng,a it rltaad&w
         Art1010 11 la a ~neral rule ot atatutorr oonatruo-
tloa lald.dam la the geaoral protlaloaa of the Roti..& 01~11
Statuter.
            We are unable to   mar that the wordlag o? Art1010
5028 18 without    meaalang beoawo th0 WOrdbu8bd ooaver a dbfl-
alto idea or latentloa o? the Legislature, even thbugh auoh
oxpnaaod   intention   or rule ham little or no Q~O8iOel of-.
root.   We do  not  foal  authorlred to resort to a traa8poaiti~a
of word8 la order to give tho statute more praofloal l??eo8.
            Iu looordaaoe     with thla   holdlngpu are   ulrleed   am
?ollowt
            1.  The owner oj n polloy lasued by a @ml   oompanf
providing   ror ma exemptimfkanoontlngeat liability and properly
Eoaorable J. P, Gibbs, Uoxmlaaloaer, Pa,gelj


Iaaued under t&e term&iot brtlol@ 486Oa-10 note? booomer
liable ?or the ooatiageat promiua eet out in auoh Artlola.
          2, Tho holder o? any polloy in a roolprooal or
later-laeuraaoelxohang ta liable for the oontlngent pre-
Q~~EIprovided in drtlole 5026 at any time tho au-plum or
auoh reolprooal or laterlaaunnoe oxohaap dorm not moot
the rrinlmumrequlrementa am met out la auoh Artiole.
          3. The prorlalona of aw polloy governed by Artl-
ale 5026 ar+ArtIole 4860a-10 that are In oon?Uot with and
repwaat,to auoh ArtIoloa are Iawlld ad not blqlng da
otther perty to the Iasuraao* oontraot.
         We trust this opinion la a aurrloleat anewer   to
hour problem.
                                       Your8   very tmly
                                  A’lTORWRX   (BoQ1LRAL
                                                      orT5AB




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