          TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



                                         NO. 03-02-00742-CV



                           Service Lloyds Insurance Company, Appellant

                                                     v.

         Jose Montemayor, Commissioner of Insurance, and The Texas Department of
                                 Insurance, Appellees




         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
             NO. GN200477, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING




                                              OPINION


                This is an appeal of a district-court judgment affirming an order of the Texas Department of

Insurance. Service Lloyds Insurance Company contends that any credit accident and health insurance

policies it writes are entirely exempt from Department regulation. Credit accident and health insurance is

generally sold to debtors in connection with loan transactions. It covers the amount owed in the event that

the debtor becomes disabled before paying off the loan. The Department determined that although Lloyds

plan insurers are exempt from a statute providing comprehensive regulation of credit accident and health

policies, any such policies they write are nonetheless subject to regulation under the statute governing all

accident and health policy forms. Because we agree with the Department that credit accident and health
insurance policies written by Lloyds plan insurers are covered by the statute regulating accident and health

policy forms, we affirm the trial-court judgment affirming the Department=s order.


                                              BACKGROUND

                 Service Lloyds is a Lloyds plan insurer organized under chapter eighteen of the insurance

code. See Tex. Ins. Code Ann. arts. 18.01-.24 (West 1981 & Supp. 2003). As such, it is exempt from

many of the regulatory requirements applicable to other insurers. Article 18.23 first sets out a general

exemption from regulation: Aunderwriters at Lloyds= shall be exempt from the operation of all insurance laws

of this State . . . .@ See id. art. 18.23(a) (West Supp. 2003). It then sets out three exceptions to this

general exemption. Lloyds plan insurers are subject to (1) certain enumerated provisions of the insurance

code,1 (2) all the provisions of chapter eighteen, and (3) any provision itself providing that it is applicable to

Lloyds plan insurers. See id. art. 18.23 (a), (b) (West Supp. 2003).

                 In February 2002, Service Lloyds sent to the Department a proposed credit accident and

health policy form accompanied by a letter. In the letter, Service Lloyds opines that it is authorized to write

credit accident and health insurance policies, and that, as a Lloyds plan insurer, it is exempt from article 3.53

of the insurance code, which regulates such policies. The letter concludes by stating that because Service

Lloyds is Atreading into an area which is clearly unregulated@ it wishes to Ainform the Commissioner of its

intentions and allow the Department an opportunity to consider [Service Lloyds=s] plan of action.@



        1
          These enumerated articles, 1.15A, 2.20, 5.35, 5.38, 5.39, 5.40, 5.49, 21.21, and 21.49-8, are
not relevant to this appeal.




                                                        2
                 The Department responded by stating that the submitted form was subject to Department

regulation under article 3.42 of the insurance code, a statute applicable to many types of policies, including

Aaccident or health@ policies. The Department=s letter to Service Lloyds stated that the submitted form

could not be delivered, issued, or used in the State unless it had been filed with Department pursuant to the

rules implementing article 3.42.

                 Service Lloyds disagreed with the Department=s position and filed a petition for review with

the Commissioner of Insurance. See id. ' 36.103 (West Supp. 2003); 28 Tex. Admin. Code ' 1.705

(2003). The Commissioner then referred the matter to the State Office of Administrative Hearings. After

hearing witness testimony and considering the parties= briefs, the administrative law judge (ALJ) concluded

that Service Lloyds=s Acredit accident and health insurance@ form is a type of Aaccident or health insurance,@

and the proposed form must be submitted to the Department under article 3.42. The Commissioner agreed

with the ALJ=s proposal for decision, adopted the ALJ=s findings of facts and conclusions of law with minor

revisions, and ordered Service Lloyds not to use its form until it complies with the provisions of article 3.42.


                                               DISCUSSION

                 This is a suit for judicial review of a Department decision brought under the

Administrative Procedure Act. See Tex. Ins. Code Ann. '' 36.201-.205 (West Supp. 2003); Tex.

Gov=t Code Ann. '' 2001.171, .174 (West 2000). The trial court was therefore authorized to

reverse the case if the agency=s findings, inferences, conclusions, or decisions were characterized

by abuse of discretion, in violation of a statutory provision, or affected by another error of law.

See id. ' 2001.174(2)(A), (D), (F). Service Lloyds contends that the trial court should have



                                                       3
reversed the Department=s order because it is based on a misinterpretation of three provisions of

the insurance code Carticles 3.42, 3.53, and 18.23. This ground for reversal presents a question

of law that we review de novo. See Texas Dep=t of Transp. v. Jones Bros. Dirt & Paving

Contractors, 24 S.W.3d 893, 898 (Tex. App.CAustin 2000), rev=d on other grounds, 92 S.W.3d

477 (Tex. 2002).

                 As discussed above, article 18.23 provides that Lloyds plan insurers are generally exempt

from regulatory statutes unless such statutes explicitly provide that they apply to Lloyds. See Tex. Ins.

Code Ann. art. 18.23(a).

                 Article 3.42, entitled APolicy Form Approval@ requires that several types of policy forms,

including Aaccident or health@ policy forms be filed with and approved by the Department before an insurer

can Adeliver, issue, or use@ the policy form. See id. art. 3.42 (West Supp. 2003). This article explicitly

states that it applies to Lloyds plan insurers. Id.2 The Department is authorized to disapprove the policy

form if it (1) violates the insurance code, Department rules, or other law, or (2) contains provisions, titles, or

headings which are unjust, encourage misrepresentation, or are deceptive. See id. art. 3.42(i).




        2
          The relevant portion of the statute provides: A[n]o policy, contract or certificate of . . . accident or
health insurance . . . shall be delivered, issued or used in this state by a . . . Lloyds . . . unless the form of
said policy, contract or certificate has been filed with the [D]epartment . . . .@ Tex. Ins. Code Ann. art.
3.42(a) (West Supp. 2003).




                                                        4
                Article 3.53, entitled ACredit Life Insurance and Credit Accident and Health Insurance@3

imposes greater regulation on one specific type of accident and health insurance. It regulates credit accident

and health insurance, which it defines as Ainsurance on a debtor to provide indemnity for payments

becoming due on a specific loan or credit transaction while the debtor is disabled as defined in the policy.@

See id. art. 3.53, ' 2B(2) (West 1981). The section setting out the scope of the article provides:


        All . . . accident and health insurance sold in connection with loans or other credit
        transactions, the premium for which is charged to or paid for in whole or in part either
        directly or indirectly by the debtor, shall be subject to the provisions of this [article],
        regardless of the nature, type or plan of the credit insurance coverage or premium payment
        system, except [certain enumerated types of policies].


Id. art. 3.53, ' 2A(2) (West Supp. 2003). Article 3.53 goes on to provide a comprehensive regulatory

scheme for such policies. See generally id. art. 3.53, '' 1-14 (West 1981 & Supp. 2003). Similar to

article 3.42, article 3.53 requires that insurers file their policies with the Department for approval. Unlike

article 3.42, however, article 3.53 does not provide that it applies to Lloyds plan insurers.

                Because article 3.53 does not explicitly state that it applies to Lloyds plan insurers, Service

Lloyds is exempt from its provisions. See id. arts. 18.23, 3.53, '' 1-14 (West 1981 & Supp. 2003). This

fact is not disputed. It is also undisputed that policies governed by article 3.53 are not also governed by

article 3.42Cthat is, policies and policy forms are filed and evaluated under either article 3.42 or article

3.53, but not both. What the parties dispute is whether Service Lloyds must file its credit accident and

        3
          Section 2A of the article provides that it can be cited as AThe Model Act for the Regulation of
Credit Life Insurance and Credit Accident and Health Insurance.@ See id. art. 3.53, ' 2A(1) (West 1981).




                                                      5
health insurance policy forms under article 3.42. The Department argues that because a credit accident and

health policy is manifestly a type of accident and health policy, the plain language of article 3.42 requires that

Lloyds plan insurers file such policy forms under that article. Service Lloyds rejoins that article 3.53

removes all credit accident and health policies from the scope of article 3.42, and because article 18.23

exempts Lloyds plan insurers from article 3.53, the legislature must have intended credit accident and health

policies written by Lloyds to be completely unregulated. We reject Service Lloyds=s interpretation of the

statutory scheme.

                 Service Lloyds essentially makes two arguments: First, it claims that article 3.42, by its own

terms, does not cover credit accident and health insurance; then, it claims that, even if article 3.42 does

cover credit accident and health policies, it is superseded by article 3.53, which removes all such policies

from regulation under article 3.42.

                 In arguing that article 3.42, by its own terms, does not apply to credit accident and health

insurance, Service Lloyds states that A[i]t is worthy of note that the list of the types of insurance to which

[article 3.42] applies, while seemingly comprehensive, does not include >credit accident and health

insurance.=@ The Department responds that the plain meaning of the term Aaccident or health insurance,@ as

used in article 3.42, encompasses Acredit accident and health insurance.@ The primary rule of statutory

construction is to ascertain and give effect to the intention of the legislature. Southwestern Life Ins. Co. v.

Montemayor, 24 S.W.3d 581, 583 (Tex. App.CAustin 2000, pet. denied). If the statute is unambiguous,

we are required to seek this intent in the plain and common meaning of its words and not elsewhere. Id.

Implications of statutory intent are forbidden if the legislature=s intent can be gathered from a reasonable

interpretation of the statute as written. Id.

                                                        6
                 We believe that a plain reading of the terms of article 3.42, using ordinary rules of grammar,

indicates that Acredit accident and health insurance@ is simply one type of Aaccident and health insurance.@

As the ALJ observed:


        Based only on the ordinary meanings of the words, . . . it [is] linguistically impossible not to
        conclude that Acredit accident and health insurance@ issued by a Lloyds is anything other
        than one type of Aaccident or health insurance@ issued by a Lloyds. ACredit@ is simply a
        modifier. So according to its ordinary meaning, Acredit accident and health insurance@
        would be subject to article 3.42=s form-approval requirement.


                 Additionally, although the insurance code contains no provision defining Aaccident or health

insurance@ in article 3.42, the definitions found elsewhere in the code support the ALJ=s reading. The

definitions applicable to chapter three of the insurance code define Aaccident insurance company@ as a

corporation doing business that involves the payment of money or other thing of value conditioned on the

injury, disablement, or death of persons resulting from traveling or general accidents. See Tex. Ins. Code

Ann. art. 3.01, ' 2 (West 1981). A[H]ealth insurance company@ is similarly defined as a corporation doing

business that involves the payment of money or other thing of value conditioned upon loss by reason of

disability due to sickness or ill health. See id. art. 3.01, ' 3. As noted above, section 3.53 defines Acredit

accident and health insurance@ as insurance on a debtor to provide indemnity for payments becoming due on

a specific loan or credit transaction while the debtor is disabled as defined in the policy. See id. art. 3.53, '

2B(2). Based on these definitions, we conclude that because credit accident and health insurance involves

the payment of something of value conditioned upon a loss by reason of disability, credit accident and health

insurance is a type of accident or health insurance.




                                                       7
                 Service Lloyds does not argue that Aaccident or health@ insurance has a special technical

meaning in the industry that would exclude Acredit accident and health insurance@ from its scope. We

conclude that article 3.42, by its own terms, covers credit accident and health policy forms.4

                 Service Lloyds=s second argument is that because article 3.53 is a comprehensive statute

specifically covering credit accident and health insurance, it supersedes article 3.42. It claims that article

3.53 is the only statute covering credit accident and health insurance, Service Lloyds is exempt from article

3.53, and therefore the credit accident and health policies it writes are not subject to any regulation. We

reject this argument.

                 Because Service Lloyds is not subject to article 3.53, it cannot rely on that article to exempt

it from article 3.42. In enacting article 3.53, the legislature stated: A[t]he purpose of this [Article] is to

promote the public welfare by regulating credit life insurance and credit accident and health insurance.@ See

        4
            Service Lloyds does make one additional argument. Article 3.42 provides that A[e]ach individual
accident and sickness policy application form, which is required to be or is attached to the policy, shall
comply with the rules and regulations of the commissioner adopted under Subchapter G of this chapter.@
Id. art. 3.42(b) (West Supp. 2003). Subchapter G, in turn, does not apply Ato credit accident and sickness
insurance policies written under article 3.53 of this code. . . . Id. art. 3.70-1(C) (West Supp. 2003).
Service Lloyds claims that this provision explicitly exempts it from article 3.42. We reject this argument
because it is undisputed that 3.53 does not apply to Service Lloyds. As we explain below, Service Lloyds
cannot use an article that is totally inapplicable to it to gain an exemption from an article that, by its plain
language, does apply.




                                                       8
id. art. 3.53, ' 1 (West 1981). Thus article 3.53 is a comprehensive regulatory scheme that provides more

regulation than article 3.42. Service Lloyds asks us to infer that while simultaneously seeking to provide

more regulation over credit accident and health policies, the legislature also sought to exempt Lloyds plan

insurers from any regulation over such policies. We find no indication that, in enacting article 3.53, the

legislature intended to reduce the regulation of insurance companies falling outside its scope. If the

legislature intended to remove Lloyds insurers writing credit accident and health insurance from any

regulation, it could have said so. It did not subject Lloyds plan insurers to the more comprehensive

regulatory scheme deemed necessary for other insurers providing credit accident and health insurance in

article 3.53, but neither did it delete Lloyds from the application of the less stringent scheme applicable to all

accident and health insurance in article 3.42. In short, by not including Lloyds plan insurers in article 3.53,

the legislature left Lloyds= credit accident and health policy forms subject to regulation under article 3.42.

The choice to exempt Lloyds plan insurers from complying with the more comprehensive requirements of

article 3.53 simply cannot be construed as a choice to exempt such insurers from article 3.42, which by its

plain language applies to all accident and health insurance and specifically applies to Lloyds.


                                               CONCLUSION

                 Lloyds plan insurers are subject to regulation under article 3.42 of the insurance code. This

article covers all accident and health policies. Lloyds credit accident and health policy forms are not made

exempt from this statute by the fact that other insurers writing credit accident and health policies must

comply with the more onerous alternative regulatory scheme found in article 3.53. We affirm the judgment

of the trial court affirming the Department=s order.



                                                        9
                                              Bea Ann Smith, Justice

Before Chief Justice Law, Justices B. A. Smith and Puryear

Affirmed

Filed: May 22, 2003




                                                 10
