    OFFICE   OF   THE ATTORNEY    GENERAL      OF TEXAS
                         AUSTIN




Hon. R. 0. watrr8,Co8drrioner
Hoard oi fnruramo Commi8rloarr8
Austin, Toxar


Dear Slrr




                                            greater     and may
                                            d to rl8k8 or 1088


                                              pinion of,thir de-
                                              hp8   barn   keoelted.

                                   Otter a8    fO11OW81



                                  8.d   UO&8LM’8      CO@M-
                                or approvala8 it8
                           or wrltlng viorkmen~r oom-
                     uranoo,a partlolpatlonand
                     an rh8nbr d rk8 ‘Of a gi~on
                     er ~$11 bo written on a parti-



           Vhr Attorney Oonoralhrld in an opln-
      ion dated D8oembbrr lb, 1228, that a company
      oould not u8e a partlolpatlon  8nU 888os81mat
      plan of.oprratlonrhloh would apply t0 80101
      Ot it8 pO110188 but not t0 ti1 it8   QO1101.8,
                                                               202



Hon. R. 0. Watarl, Pago R



       the selection OS tho8e to which it rroald a,?ly
       to 110 dthln the dlecretloa OS the carrier.

           Vhr AttorneyGeneral held ln an oplnlcn
       dated %oeaber 16, 1958, that the Retmspeo-
       tit8 Rating Plha oould ba legally adopted  by
       whloh risk8 oi a &iron sits and larger oould
       llsot a plan nhambpthay   would participate
       or be o8rerssd  in acaordanoedth theirlndl-
       ridual expdrfMo8 and that risk8 of lOS8.than
       ths gtr8n 8ize would not be eligible.
            *In view of the two oplnlona zxentloned,
       we rsquart your opinion as to nhether or net
       there 18 any'legal barrier to our ap;roral
       Of the plM of Opaxation and andorsemnt a8
       requarted by the 8aid aarriar  which glen till
       raqulr8 that the andorsa;eentbe attached to
       pO11C188 r0r ri8k8 or given slzr or greeter
       and sar &ot be atteahed to rirks of lass than
       tba glvqn.81Z0.D

           The propored ondorrercantto be attached to pOlI-
 ales Sor rIak8 of a given size or grastar and which may
'not be attaohed to risks ot less than the &Ivan 81213,read8
a8   iOiiOW8:




                *The 'assuredwill.pay tha Catcpanpthe
       manual or e~8rlsnoe rate8      of   :reJlfrcns appll-
       aabb     tothis pollcy a8 promulgated by tha
       Board (d Insumncs ComIss:oner8 of Texas,
       (1) litlie pretfuas    80 mid are lnsufflolent
       to prorido   far the psyment of, (a) all gald
       and lnourrad lObeel, Inol~~dlnglegal and other
       lspansa8 lnoidsntal thereto arI8Ing under til8
       pollorg and (b) ruoh par osnt of all prelniuft8
       a8 my be agreed u?on bstneez the assured and
       the Company,    wbloh per oent rhall be ratafned
       by the Compaajr the assured dll py to thr
       Company upon damaad, such addltloncl emamtr
                                                                 .,
                                                                      203




Hon. R. 0. Sator:,Pegs 3



     a8 nay be necessary to provide adequate re-
     serve8 ooinut8d a8 presorlbed by the Board
     of Insurance CommIesloner8 under the lneur-
     anoa kin of the 3.at.e or Ttz~xa8~ (2) fr
     the preaiua80 paid 8hell prove to be ore
     than surrlolent to 8o protide rorthe payment
     6t the chars88 uentlonedIn (al and (b) or
     ,(lI,and the malntananno of adqqunte reearves
     doltpitedon tii jOifCIe8 a8 rtated in 2 hex-dot,
     T&e Company will return the exae88 to the
     a88UrOd, aooording to ouoh pban8 a8 may be adopt-
     ed by the Compeny, s8 and when such return shall
     be approved by ths Eoard of Insuranoe Comalr-
     8loLlersor Texar. (3) The paapmentaprovided to
     be made under (1) and (2) above shall be made
     arter th? exp1rat:o.oof tho ye&r'8 perfed for
     wklchthe policy Is rrltten aal provided all
     premIuPlphereunder hcve be3n gald, and not
     OthelFW18..This endorsement shall not apply
     oa pollcie8, (a) the estlmted s~ual premium
               &a ohown on the pollcfr 1s 1068 than
     of vikloh,~
     Fire Thousand Dollar8 ($5,OOO.OGj, or (b) pol-
     Icier to which 18 attaohed the hetrospeatlYe
     Rating Plan Zndorsenent, 'This Eodorsement,
     when ea\ntersIged by a dulr authorized Agent
     or the Company and attaohed.to Fclloy No.
     WC               188ued to
     by tin Ametioan’Ganeral Insuranae Company,
     shall be ralld ati forsa ptit 3f raid policy.

_’   “Counterslgned at
     This -    day of                 19
                           8 Agal;.        Tni    s. wRTHAb4
                                                 FTe'8idtJIlt"
          As shown by the proporsd endxsement, abova quot-
ed, the plan of operation is to write all aeaured8 whoae
e8tiW.ted ranualpreaIum8 exoead $5,000.00, and who here
not 8boted to be rated under the Retrospectire  Ratin
Plan upon the baa18 of an 1nSlYidually epplled plan of
partlclpatlon e.ndarse8sment a8 appear8 from the form of
endorsement. However, the nbore nisntlonedplan specifically
                                                             204



Hon. R. 0. Waters, Pa68 4



prohibit8 ali whose estlmsied snnual pre;ri~is 1~8
than $5,OCO.O0 fro?,garticlpatlng In or.ogeratlnG under
suah plan. Artlalos 4907, 4908, 49L1, 4913, 4914 and
4916 of Vsrnon*s Civil Anratated Ststuter rsad 48 fol-
lower
         “ht.  4907. The said Cot?~xfs6io5  6hall
    make, eetablI8h end proml6ate   all cla88ffI-
    oatlon8 of hazard8 and rata8 of premium re-
    8pectlrely applloable to each, ocznterplated
    ati prevlded for by Title 130, kncun 88 the
    Workmen~s Compsnsatlan Law &d/or by the
    ~Long8horemenn'8~                    Comptbsa-
                     and Harbor ;S'orkcr8~
    tIOn Act' a8 enact&d by the COJl6r888Of the
    United 3tatss. Said ComxIsslon shall publleh
    allretss pronulgsted by It as aff'ecttng
    Compensation Insuranoe In thla State, snd
    said rates, or any change therein, 8hal1 be
    publlrhed SIfteen day8 before thsp become
    stfectlve and In force.
            “Art. 4908. The Cvzzlsslon shell prs-
     rcrib6 standard pAi0y for?;rs to be used by
     all companies or sseoclatlons writing wrk-
     3.811’8 comgensaticn fnlsurams,in thI6 State.
     Xc aompany or a68ocIatIon authorized to
     wkfte   wrkaan~8   oompsnsatlon Insurance In
     ttls State shall,    sxoept as hare:nafter
     provided for, use'any ala8slfIoatlon8 0s
     hazardr,    rata8 or prenium, or pglloy form8
     other than those mrde, established aad pro-
     mulgated snd prsscrIbod.by ths Commission.
          mArt. 49LL. The Comfaslc~        drall    deter-
     Pine hazard8 by elassee and fix 8uch ret88
     ot prei.tiuma?plIoable to the payroll 1~ eaoh
     Of 8uCh Ola88e8  a8 8ba11  be adOqUIt       t0  the
     risk8 to which they apply and ocnsistent nith
     ths nudntename   of solvenay and the are:-tion
     of ade-,uaterswrvs8 and s rearonsble sUrplU8,
     and for ouch purpose may adogt’a SYP ten Of
     so:;e&alsand srperIenos rating in such uanner
     as to take socount,of the jecullar       hazard of
     esch lr.dlvIdualrlrk,   provided such rate 8hall
                                                             205



Xon.   R.   C.   xtlt4rs,   ?eg4   5




       be fair and rearu,:ablsand not conrlsoatory
       as to any ala80 cb tneurenoe oarrlezs    autbor-
        lzed by law to write workm4n'# oompeneatl:n
        lnmrance in this State. To Insure the ade-
        ~uaop and reasor.ablene48of r~tea, ttn Coni-
        mlsaion shall take into oonsldemtion an cx-
        psrlenas gathered froma territory aurflolent-
        ly broad to lncluda the varying ctnditions
       ,?f the lndumtdss in ~Elab the Qlnaslf~catlcne
        are involved, and over a pcrlod euirloisntly
        lon& to lmaure that the ratas det-:rmlnediher4-
        from shall be just, re~laonsble,and adequate
        rates. The Cosxlssion shall exolang4 lnfor-
        mtlon and e?iperlenoedata with the rcte-making
        bodies of othar Strtes end atoll coneult anl
        national orgasnizatlonor aszoolation now or
        herearter exlatfns for the purpose ci'cssexbllng
        data for the making of compensation In,ourcncs
        rata.
            "Art. CQU . The Com$aeion ahall prescdb4
       a uniform gollcy for wortien'a oozpensatlon
       lnsuranoe acd no ooc?azy or asaooiatlon shall
       Wareafter use any 0thc.rfors In writing work-
       aen* ooagensatl.:ninsuranoe ir thir State,
       provldsd that a*;' company or association my
       use any fora of endorasment appropriate to its
       plfian
            or operatim, ii such endorsement shall
       be first subnittad to and a>pxvvadby the
       Comisslon, and contracts or agreement8 not
       wrlttsn Into the apylicatioo and 2ollcp shall
       be v;id and of no 4f'feCtand lnrLol5tlon   of
       the provisions of this cbaptor, and eball be
       sufflolent 0au::a for revooatlon of llcenee
       to write workmsn'r compsni3atlonlnsuranoe with-
       In this Steta.
               *Art. 4914. Nothing in thla chapter ahall
       be oonotrued to prohibit the opamtlon bere-
       undar of any stock ooaFany, mutual cogpany,
       reclprooal or lntsr-lne2ramr 4xotang4, or
       Llo:d*r aasoolatlon, to srohlblt any stock.
       ooqany,     sutual  cospeny, ~reoiprooal, or lntar-
       insuranoe     erohange or Lloydcr maoolmtlon,
                                                              206



Hon.   ii.   C.   Caters,   Pa&s   6




        ls3uln.spartldlpatlng pollc1es, grovlded no
        rilvidsadto Eubscrlbers under the ?:orkmn~r
        Coqensatlon Aat shall t&4 effeot until
        the same has bean ap;roved by th4 Comlls3l:n.
        Go such dltldend 3ha.U be u;proved until
        adeQuate res ne ha3 been provided,  said
        resrjrns to bs computed on ths saxe basis
        ror all 016s848 or com?anles or as3oclatlons
       .operetlng under t5ls chapter, aa rrdsorlbed
        *uder the lnsurnnos laws of the State of
        Texas.
            -Art. 4916, 80 provlsloos of the Act
       creating the Stat4 Insuranao Cotisslon, with
       r4gard t,;tha fixlnc and ;,romul&atlonor
       rctes for fir4 insurance or the grcscriblng of
       tire laauranoe ~olicl4s end form shell bs
       ep;;llczblsto the fixLng of coapmsatioa ln-
       surance olasslrlcutlons or th4 xakl& of cam-
       p4nsatlon lnsurano4 rLt4s or the prescribing
       of aox~ensatlon insurance policy form: but
       th4 provisions of this hot shail bc constnutd
       and appllsd lndepsndentlp of any other law or
       lawa, or garts of laws, havla~to do with  tha
       nattar of insursncs rate8 end form4 or of fl,x-
       in3 th4 6utf4s or the ixet4 mumc4     COD
       ;1194lon.4
          Under the above quoted statutes it is ths duty
of t?4 Board of Insurams Comlsslcners to jmsscrlbr retes
and all policy forxs thit every coximny wrItiWA coxponsa-
tlon lnsuranca Ibustuse'aod such coxganies ::r4requlrsd to
us4 such rates and forx4. Lpparently, the ges4~1 polioy
of the Lsglslature and all Insurance leslslatlon IS to
prevent d1sorlxlnatlon by tks carrier between Its pollcy-
holdars. As w4 uriderstond the above lrsotlonsdplan, it Is
cothlag Tore than or less than a s:,cclflodlscrlmlnatlon
betwesn the policyholders of the company, md the plaa of
opsrstion 18 contrary to th4 2011c144 or the Lsgfslature In
such xattors.

          This dspartaent hold In an OplnlOn dated Ceoember
18, lG20, thct a company could not ~84 a partlolpatloa and
assessrent plan of operation r!loh would-apply to som4 of
Hon. R. 0.   Watrra,   P*gs 9



its polloles but not to all of its polloies,the asleo-
tlon of those to which it rould apply to 114 wlthln
the dlsoretlon of ths oarrler.
          In rler of the pollcl4s of th4 'Legislatureex-
pressed by the forsgolng statutes, yo*urpusstion ia ro-
sp4otfully answered in th4 nsgatlre.
           Tkie oplnlon or the Attorney C4nera1, bearing
date or Deoember 16 lFclS,holdlng t&t the retrorpsotlv4
rating lor.can be ieeal:y adopted by rkloh risks of a
given aPze end larger oould ele::te plr,nwhereby they
would participate or ba asFessed ln aocordance wlththeir
individual  experience and thet risks of less than tbs
given size would not be eligible,   Is hereby expressly ovem
ruled.
          Trust1nc;tha.tthe firsgoi;lafully anmars         your
Inquiry, we ranzln

                                   Very    truly   yours

                                ATTOBKXY 5EHXW.L OP 'XXAS


                                By (al -dL
                                              Ardell William
                                                    :.sslrtsnt



APi-KOTXDU!?CH 29, 1940




                                APROVED,     OPINION coK!~mT?!z
