        Thisopinion holasthat proposed Insurance
        p0JFcg provisions providing for an asslgn-
        ment to the issuing company by the insured
        of all his dividend earnings and all hls
        right, title and Interest in such policg,~to
        the extent of his, as well as the benefl-
        ciary's, Indebtedness of every kind and
        character are void.




                 OFFICE OF TRE ATTORNRY GENERAL

                                         August   8,   1939

Honorable Walter%. Woodward, Chairman
Board of Insurance Commissioners
Austin, Texas
Dear Sir:
             -             Optnion No. 0-886~
                           Re: Whether certain provisions of
                                a proposed policy of Mutual
                                Reserve Life Insurance Company
                                are legal.
        This will acknowledge receipt of your letter of May
26, 1939, fin which you submit for an opinion of this depart-
ment the question of the valldlty of the"hereinafter quoted
proposed insurance policy provisions viewed Mthe    light of
Articles 4764b (also, codified as Article 3832a), 5068a, 4809,
and 4811 of the~Revised Civil Statutes of Texas, 1925. Such
provisions are:
        "It being contemplated that the applicant,
    and/or the beneflclary might be or become in-
    debted to the Company otherwise than by reason
Honorable Walter   C. Woodard, August 8, 1939, page 2    0-886


    of or in connection with such policy, it is agreed
    that if any liability accrues against the company
    under the terms of any policy issued on or under
    this application, or any renewal of any such poIloy,
    or any policy issued in lieu thereof or exchange
    therefor, any and all such indebteaiiessto the %om-
    pany, directly'or 'indirectly,of whatsoever'kind,
    el-therby the Insured or 'any beneficlary;shall-be
    deducted in any settlement.of such policy, or of
    any benefit thereunder, and I hereby irrevocably
    transfer and assign unto said Texas Mutual Reserve
    Life Insurance Company such policy, and/or any'and
    all beriefits'thereunder,aid/or  any right to any
    settlement thereunder to the extent necessary to
    cover and discharge any and
                              .,all of such Indebtedness."
        "I hereby lrrevocably'asslgn to Te%as Mutual
    Reserve Life Insurance Company all of my rights,
    title and InterestYIn and to all of the surplus
    profits which has accrued or may'accrue'to me
                    as is provided for-In Chapter 7
    under my-~'polrcy
    of the Revise& CivllStatutes of~the State.'of-
    Texas, 1925, and advance-Sal&sum or any portion
    thereof that in'the -judgment of the Board of
    Directors of the Company may be necessary to en-
    able the Company to promote or conserireits .bus-
    ~iiessor to enable It to comply with any require-
    ment of the law."
                                                            _
        ArtFcle 4764b,~'RevlsedCivil Statutes~of Texas, 1925,
also codified by Vernon as ArtLcle 3832a, reads:
        "The castisurrehder value of any life lnsur-
    ante policy which has been'in force more than two
    years;'shall be exempt from liability for any debt,
    and shall not be subject to forced sale, or other
    process to satisfy any debt, provided-'amember or
    members of the'famlly of the insured are the bene-
    flclarles under such pollcg, and in event they are
    only partially the beneficiaries then such policies
    shall'be SC exempt to the extent of their beneficiary
    Interest. This adt shall not apply to debts arising
    under the policy nor to d~ebtssecured by lawful as-
    signment of the policy."
          Article 5068a, Revised Civil Statutes of Texas, 1925,
reads :
        "Section'1. No money or benefits of any
    kind to be paid or rendered on a weekly, monthly
-    .




    Rouorable Walter C. Woodward, August 8, 1939, page 3   o-886


         or other periodic or installment basis to the
         insured or any beneficiary.under any policy of
         insurance iss~uedby a life, health or accident
         Insurance company;including mutual and fra-ter-
         nal~insurande, or~under any plan or program of
         annuities and benefits in use by any~~employer,
         shall be liable to execution, attachsient,~gar-
         nishment or other process or be seiied, taken
         or appropriated or applled by any legal or
         equitabZe process or operation'of law to bay
         any debt or liability of the insured or of any
         beneflclary, either before or after said money
         or.heneflts isor'are paid orrendered,~.ex&ept
         f'brpremiums payable on such policy or a debt
         of the insured secured by a pledge thereof.
            "Sec. 2. Wherever any policy or insurande
        or pian or program of annuties Andybenefits'men-
        tioned in Section 1 of this Act shal'lcontain a
        grovislon against assignment or commutation by
        any beneficiary thereunder of the money or bene-
        tits to be paid or rendered thereunder, or any
        rights thereln. any assignment or Commutation or
        any attempted assignments or commutation by su.c.h
        beneficiary of sucilmoney or benefits or rights
        in vloiatlon of such provision shs.11~be wholly
        void. "
                                                        _.   .~_
            Article"483.3,Revised Civil Statutes o,f'Texas~;'l925-,~
    provides that the ?et premium shall be calculated inaccord-
    ante with the prorrisionsof Article 4808, Revised Civil
    Statutes '4 Texas, 1.925,and provides that no portion of such
    net premium so arrived at sb.allever be used forkany’ Character
    of e'xpenseof the company or for any purpose other than the
    nayment of death losses, surrender values, lawful dividends
    i.0policyholders, loans on policies, snd for such investments
    ES tre prescribed by law. The :mport of such article is to
    @ace a statutory limitation upon the right of a company to
    expend its funds.
            Articis 4811, Revised CirIl Statutes of Texas, 1925;
    provZ.desthat mutual companies'she.11make an annual account-
    ing s;;ddeclare dlv:d,en.ds
                              from its surplus after deducting
    t.herefroma contirgency reserve as is provided for elsewhere
    'InChapter 7, Title 78, Revised Clvll Statutes of Texas, 1925,
    end requires that such dividends so declared shall be paid
    the policyholder in cash or in the equivalent of cash In any
    no.tion
    -_     stated In the policy and selected by the policyholder
    5x3writing.
           .

Honorable Walter C. Woodward, August 8, 1939, page 4     0-886


     '. In addition to the articles of our statutes to which
you make'reference Sn your inquiry,'it 1s to be noted that
t;U?;cle4819, Revised Civil Statutes of Texas, 1925, provides
    :
     -~.."Thebrovlsions of'Chapter3 of this Title
    when not In conflict with the.artl<les-'of.this
                        to and govern mutual insur-
    chaeter 'atiall'a~ply
    ance companies.
         Article 4733, Incorporate&in Chapter 3, Title 78,
Revised Civil Statutes of Texas,~1925, provides that ho policy
of life insurance shall be issued~or'delivered in this-state
or be issued by a life-insurance company incorporate&under
thb~laws of this state, if it contains-'certainprbvislons      .-
thereinafter enumerated in three separate subdivisions. Sub-
division 3 thereof reads in part:_.
         "A provision for any mode of settlement at
    maturity of less value than the amounts insured
    on the face ofthe policy"and less.ang inclebted-
    ness to the company on the policy and leas any
    premium that may by'th-eterms'of the policy be de-
    auctmc'my      company may issue a policy promis-
    ing a'benefit less'than the full benefitin case
    of the death--ofthe insured by hissown hati while
    sane or Insane, or by following stated hazardous
    occupations . . . .I'
.~.
         The words "on the policy", as 'usea in the above quoted
article can have no other meaning than that no policy of insur-
ance can be issued   in Texas which provides for the deduction
from the proceeds of such policy of any sums of money whatso-
ever bther than for such loans as might have been ma&e against
the same together with such interest thereon as was provided
for in the loan contract. -'Inaddition thereto; such other
deduCtions as are specific,allymentioned in such article may
be made.
        The Supreme Court, In the case of First Texas State
Insurance Company v. Smalley, 228 S. W. 550;‘held that pro-
visions inconsistent with the above statute are void. We deem
the language of Judge Greenwood in such case.'asa true ex-
pression of the Legislative intent, as well as the public
policy of such statute. He said:
        "In order to determiiie~~the
                                   true meaning of
    the'~obscureprohibition against provisions for
    modes of settlement of less value than the amounts
    Insured.on the face of a life Insurance policy,
-..   .




      Bonorable Walter C. Woodward, August 8, 1939, page 5   O-886


          plus dividends and less premiums and other indebtedness,
          subject to certain exceptlons, resort can properly-
          be had to the occasion'for the statute's enactment,
          and to the remedy it was designed to afford, and to
          all the words of the statute.
              "It was formerly usual for policies of life
          insurance to contain numerous conaitions~on which
          the amount or amounts promised to be pald on the
          death of the Insured might be reduced or entirely
          defeated. Among common conditions-were those re-
          lating to the insured's occupation, habits, resl-
          dence, and suicide. Not infrequently the amount
          of.the insurance was stated inbold type/on-the--
          face of the policy, while the conditions were in-
          conspicuously put on the back. Such~pollcles
          could be used to lead the unwary Into the beIlef
          that they held enforceable promises of real and
          substantial benefits,when the promises were so
          limited and conditioned as 'to'have slight actual
          value. 'In this'way premiums could be collected '~
          from the Insured in exchange for apparent, rather
          than real, obligations on the part of the insurers.
              "The above whereevils to be remedied by the
          statute, which was enacted in the interest of the
          lnsur~&. To accomplish the legislative intent,
          the language of the statute-must be given such
          signification as to afford a reasonable remedy
          for these evils. The public policy declared Is
          that the amounts promised to be paid on the death
          of the insured are not to be withheld.nor d,imin-
          lshed under limitations or conditions, except to
          the extent of subsisting indebtedness to the insurer,
           including premiums, save in the specially enum-
          erated instances of the insured's death by suicide
          or from following speclfiea hazardous occupations.
          In this way the contract in this state as to bene-
          fits from life insurance is rendered simple and
          easily understood by all; including those lacking
          legal or business experience.
              9,
               . . . . .
              "The object of the statute being to prevent
          insurers from accomplishing a diminution in the
          payments promised, except as expressly authorized,
          it Is mandatory. To give effect tomthe inhibited
          clauses would be to abrogate or evade the-statute.
          Provisions inconsistent with the statute are void."
                                                              ,   .   I




Honorable Walter C. Woodward,   August 8, 1939, page 6   O-886


        Article 4812, Revised Civil Statutes of Texas, 1925,
incorporated in Chapter 7, specifically provides that muttil
life insurance companies shall ~lssueno pollcles except upon'
the participating plan with dlvldends'pagable annually as pro-
vlded In this'chapter." To provide forthe assignment by the
Insured to the lnsurer~of all future dividends or's0 much
        as the Board of Dlrectorsof~the insurer should choose
:ie:::f would be in direct conflict with the plain wording
of su& statute.
        All statutes dealing with a given sub,jectwhen con-
sidered together reflect the-publlc~pollcy of this state.
McCameg v. Hollister Oil Co., et al, 241 S. W. 689.
        Viewingall the statutes hereinabove referred to and
the cases cited, It 1s manifest that the public policy of the
state is to protect those~who buy life insurance to the extent
of'givlng them some assurance that the?, their-estate'~orbene-
ficiary may reasonably expect to receive the face"value~of
their policies less such deductions, and only such d-eductlons
as are permltted by law. It 1s not logical to assume in the
Instant case that the great majority of lnstiance buyers would~y
or could fully understand the sign'iflcanceof the proposed pro-
visions. It Is equally as Illogical to assume that the insurer
and its agents would make a full explanation to prosepectlve
buyers of the slgnlflcance of such provlslons.
        To permit the lncorporatlon of the proposed   policy ~~-
provisions into a policy of life insurance would be   but plac-
ing a stamp of approval upon a'scheme to circumvent   and de-
feat not only the plain and unambiguous expressions   of the
Legislature In the statutes herein referred to, but   as well
the broad public policy of the law.
        For~all the reasons herein given, It Is the oplnlon
of this department, and you are so advised, that the proposed
policy provisions above quoted are contrary to the law and
cannot be Incorporated in a life Insurance policy.
                                      Very truly yours   .
LA:GO:wc                          ATTORNEY GERERAL OF TEXAS

   This opinion has been             By s/Lloyd Armstrong
considered in conference,                 Lloyd Armstrong
approved, and ordered recorded.                 Asslstant
s/Gerald C:.Eann
Gerald C. Mann
ATTORNEY GENERAL OF TEXAS
