Hon. 0. P. Lgckhart       Opinion No. 0-4986-A
Chairman                  Fle: Is the Cass County Rural Health
Board of Insurance        Service engaged in the Insurance busl-
 Commlssloners            ness, and, If so, Is the service sub-
State of Texas            ject to the.supervision.of the State
Austin, Texas             Insurance Department, and related
                          questions. (Thls,oplnlonoverrules
Dear Slrr                 Opinion #O-4986)
          This is in answer to your request for opinion dated Novem-
ber 23, 1942, and its accompanyingdocuments. From your communica-
tion we summarizethe following statement of facts as the basis for
this opinion:
          The Cass County Rural Health Service is a domestic corpora-
tion, chartered under Section 2 of Article 1302, Vernon's Annotated
Civil Statutes, as a "charitableand benevolent" association. It is
organized for the effectuationof several objects. It is lncorpor-
ated for the purpose of promoting the general health of the members
by the prevention of disease. The officers and directors of the
Service receive no remuneration,and the organization itself is co-
operative,with no possibilityof profits accruing to anyone. Member-
ship In the Service is confinedto members of Cass County families,
whose Income is derived principallyfrom farming and allied pursuits.
The Service executes a form of contract with the members by the terms
of which the members pay to the Service a membership fee. In return
for this membership fee the Service undertakes without profit to lt-
self to provide dental care, medical care, drugs, etc. for the mem-
bers and their familles.~ In order to furnish its services the asso-
ciation has entered into an agreementwith the various hospitals,
physicians, dentists and drug stores, whereby the latter parties
agree to render stipulated services to the members of the Service at
agreed and standardizedfees, etc. A member who requires any of the
stipulated services, or merchandise,or goods is free to obtain same
from any of the contracting physicians,dentists, drug stores, etc.,
but the member Is not allowed to obtain said services from Parties
not bound to the Service by contract, unless some contracting party
refers the member to the noncontractingpractitioner. When the said
services are performed or the said medicines are furnished, the Serv-
ice then reimburses the practitioner;the member does not pay the
practitioneror the one who furnishes the services or drugs other
than by the payment of the membership fee to the Health Service.
          Article VIII, Section 3(a), of the By-laws of the Health
County Health Service, provides that:
Hon. 0. P. Lockhart, page 2   (O-4986-P)


          "This associationdoes not guarantee that any hospi-
     tal, physician, surgeon, dentist or druggistwith whom
     it may enter into agreement to render serviceswill per-
     form such services, and its only obligation ln the event
     of the breach of such agreement shall be to use Its best
     efforts to obtnln the needed services from another source.@8
          AlthoughtheService is a domestic corporationand Its offi-
cers and directors presumably are resldents of Cass County, Texas,
it was rostered by a branch of the Federal Department of Agriculture,
and that department furnished the organizersto establishthe Service,
formulated Its inner organization,and has paid a great propprtlon of
the membershipfees. The Service has compliedwith none of the stat-
utes of Texas relating to health and accident insurance companies.
          Your letter Inquires (a> whether the soclety8sbusiness
constitutesan insurance business; (b).whetherthe operation of the
service is ul.travlres; (c) whether the Board of Insurance Commisslon-
ers has any urisdiction over the society as now constitutedand oper-
ated; and (d3 whether the business otherwise Is lawful.
          In order to determine whether or not the business conducted
by the Cass County Rural Health Service is Insurance it is necessary
to test and measure the said business by the Texas statutory deflnl-
tlon 0S insurance.
          Article 4716 of Vernon’s Revlsed Texas Civil Statutes reads
as follows:
            “A life Insurance company shall be deemed to be a
    corporationdoing business under any charter Involving the
    payment of money or other thing of value conditionedon the
    continuanceor cessation of human llfe, or Involving an ln-
    surance    guaranty, oontract or pledge, for the payment of
    endowments or aunuities. b accident insurance company shall
    be deemed to be a oorporatlon doing business under any char-
    ter involvingthe payment of any amount of money or other.
    thing of value conditionedupon loss by reason of liability
    due to sickness or 111 health. A health insurance company
    shall be deemed to be a corporation doing btisinessunder any
    ohartsr involving the payment of any amount of money, or
    other thing of value, oondltlonedupon loss by reason of dls-
    ability due to slokness or ill health. . . .‘I
          We know of no Texas decision which answers the question as to
whether or not the business of the Cass County Rural Health Association
is Insurance business, and in the absence of such Texas deoislon we
must have reoourse to the dsoisiona of other jurlsdlotlons.
          In the State of Washington the statutory definition of lnsur-
ante is substantiallythe same as that which obtains in Texas.
 Hon. 0. P. Lockhart, page 3   (O-4986-A)


           Section 1 of the Insurance Code, Laws of Washington, 1911,
 C. 49, defines Insurance as followsr
            “Insuranceis a contract whereby one party, called
       the Insurer, for a considerationundertakes to pay money
       or its equivalentor to do an act valuable to another party
       called the insured or his beneficiary upon the happening
       of the hazard or peril insured against, whereby the party
       Injured or his beneficiary suffers loss or Injury."
               .i:_
            In the State of Washingtonthe Universal Service Agency was
  conductinga business essentiallythe same as that conducted by the
  Cass County Rural Health Service ln Texas. The contracts made bythe
  Universal Service Agency appeared to be substantiallythe same, with
  its members, as those made by.the Cass County Rural Health Service
  with its members. An action against the Universal Service Agency was
  Instituted in the state courts of Washington, on the relation of the
  insurance commissioner of that state; this action was brought seeking
  to forfeit the corporate franchise and to wind up the affairs of the
  Universal Service Agency. The special grievance complained of was
  that the Universal Service Qgency was engaged in the Insurance busl-
  ness in the State of Washingtonwithout complyingwith the statutes
. regulating the doing of such business.
           The Supreme Court of Washington decided that the business
 conducted by the Universal Service Agency was not the business-ofln-
 surance. The case referred to.ls State ex rel Fishbach, Insurance Com-
 mLssloner, v. Universal Service Agency, 151 P. 768.
          The case referred to is cited as authority on this subject ln
 29 Am.Jur., par. 12, on page 54, and in Ann.Cas. 1916C, page 1017.
           In the District of Columbia the Group Health Association con-
 ducted a business analogous to that of the Cass County Health Service
 and made substantiallythe same contracts with Its members as were     I
 made by the Cass County Health Service.
            The applicable statute of the District of Columbia reads as
 followst
           "Every corporation, joint stock company, or association
      not exempt herein, transactingbusiness in the District of
      Columbia, which collects payments, dues or assessments from
      its members as holders of its certlflcates or pollcles, and
      which provide for the payment of indemnity on account of slck-
      ness or accident or benefit In case of death, shall be known
      as 'health, accldent and life insurance company or assocla-
      tlon.‘” (Section653, D.C. Code, 1926, Title 5, par. 179.)
           The statutory definition of Insurance of the District of
 Columbia, above quoted, Is substantiallythe same as that of Texas.
Hon. 0. P. Lockhartpipage 4   (O-4986*A)


          In the case of Jordan v. tiroupHealth Associationit was
contended as against the Group Health Associationthat it was a
“health, accident and life insurance company or assoclatlon11
                                                            as de-
fined in the foregoing quoted District of Columbia Code.
          In passing upon this question the United States Court of
Appeals for the District.of Columbia decided that the Group Health
Associationwas not engaged ln the business of insurance. (Jordan v.
Group Health Association,107 P.(2d) 239)
          Upon the strength of the cases above quoted we are of the
opinion that the Cass County Health Service is not engaged in the in-
surance business.
          Insomuch as the Cass County Rural Health Service is not en-
gaged In the insurance business you are advised that It is not sub-
ject to the supervisionof the &ate Insurance Department.
          In our opinion there Is nothing disclosed in your letter or
ln the accompanying documentswhich Indicate that the business of the
Cass County Rural Health Service is either ultra vlres or unlawful,
            NE trust we have fully answered your questions.
                                      Yours very truly
                                      ATTOFlNEYGENERAL OF T&X88
                                      By /s/ Geo. P . Blackburn
                                      George P. Blaokburn, Assistant
APPROVED MAR 25, 1943
/s/ Grover Sellers
FIRST ASSISTANT ATTORNEY GENWAL
Thi.aoplnlm considered and approved In limited oonferenoe.
GF’Ba
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