        ,^     -




                      The Attorney              General of Texas
                                         July   26,    1978
JOHN L. HILL
Attorney General

                   Honorable A. R. Schwartz                      Opinion No. H-12 16
                   Chairman
                   Senate Jurisprudence Committee                Re: Whether      article     21.48A,
                   State Capitol                                 Insurance   Code,      prohibits   a
                   Austin, Texas 78711                           lender from refusing to accept
                                                                 property insurance policies from
                                                                 a company.

                   Dear Senator Schwartz:

                        You have requested our opinion as follows:

                              Does Article 21.48A of the Texas Insurance Code
                              prohibit a lender from refusing to accept property
                              insurance policies from a company admitted to do
                              business in Texas when said company’s liability is
                              guaranteed by Lloyd’s of London when the sole reason
                              given for such rejection is that the lender does not feel
                              secure with the language under Lloyd’s guarantee even
                              though such language is mandated by the State Board
                              of Insurance?

                          For the purpose of this opinion, we assume that your reference to “a
                   company admitted to do business in Texas” means an insurance company duly
                   licensed to do business in the State of Texas.

                        Section 2 of article 21.48A provides in part:

                                 (b) No Lender shall directly or indirectly impose or
                              require as a condition of any financing or lending of
                              money or the renewal or the extension thereof, that
                              the purchaser or borrower or his successors, shall
                              procure any policy of insurance or the renewal or
                              extension thereof, covering the property involved in
                              the transaction,    from or through any particular agent
                              or agents, solicitor or solicitors, insurer or insurers, or
                              any other person or persons, or from or through any
                              particular type or class of any of the foregoing.




                                                P.    4869
Honorable A. R. Schwartz      -    Page 2       (H-1216)



     Section 3 specifically   provides:

           Nothing contained in Section 2 hereof            shall be deemed to
           prevent such Lender from:

              . . . .

              (c) refusing to accept or approve insurance in any
           particular  insurer on reasonable     and nondiscriminatory
           grounds relating to its financial soundness, or its facility to
           service the policy; . . . .

       We believe that section 2 prohibits a lender from refusing to accept a
property insurance policy written by an insurance company duly licensed to do
business in the State of Texas, except for those reasons and in the manner specified
in section 3 of article 21.48A of the Insurance Code.

        We make no determination          whether     a particular   company   meets   these
criteria.

                                     SUMMARY

            Article 21.48A of the Insurance Code prohibits a lender from
           refusing to accept property insurance policies from a
           particular company except where such refusal is reasonable
           and nondiscriminatory     as relates to the company’s financial
            soundness or its facility to service the policy.




                                                Attorney General of Texas




Opinion Committee




                                          p.   4870
