Kotiorable0. P. Lockhart
Chairman, Board of Insurance Commissioners
Austin, Texas
Dear Sir:                      OpLnion No. Q-5461~
                               Re: Insurance cotipanie%organLzed
                                    under the laws of the Republic
                                    of Mexico doing business in
                                    Texas.
          Your letter requesting the opinion of this department
on the questions stated therein reads in pert as follows:
          "We ask your opinion upon the following
    lags1 questions, which we certify are not moot
    or abstract or premature but are actually con-
    fronting this Department at this time in the
    discharge of our official duties:
             "1 . Prior to May 10, 1943 the effective
    date of Article 5012a, (Acts 1943, 48th Leg.,
    p. 436, ch, 295, S.B. 357), ala the provlsTons
    of Article 4686, sec. 6 of Artbti$e4859f,     and
    Articles 5054-5062b,     inclusive, of Vernon's
    Texas Civil Statutes, and Articles 568-572,     in-
    clusive,     of the Penal Code, both as amended and
    supplemented to that date, or any other appll-
    cable statutes or le al principles, prohibit
    (a) licensed and/or 7 b) unlicensed insurance
    agents in Texas froinissuing and delivering in
    this 3tat.e insurance    policies for Insurance
    companies domiciled In the Republic of Mexico
    (assuming such companies to be reputable and
    financially sound) covering automobile risks
    of all types, effective and operative only
    upon persons and property while physically
    situated within Mexico; such Mexican companies
    not having complied with and obtained certifi-
    cates of authority to conduct insurance business
    In Texas under the laws of this State?

          "2. Is Article 5012a aforesald, alone or
    in conjunction with the other laws of this State
    referred to in question 1, above, permissive in
Honorable 0. P. Lockhart, page 2         0 -5461


    the sense that It merely authorizes Mexican ln-
    surance companies at their option to domesticate
    and obtain certificates of authority to conduct
    the insurance business In this State if they so
    desire, being free to conduct in Texas the actl-
    vlties described in question 1 if they do not so
    obtaxn certificates of authority, or is Article
    5012a mandatory In the sense that It requlres
    Mexican companies In comply with its requirements
    as a condition precedent to exercising In Texas
    the privileges described in question l?
          "3 . If question 2 be answered to the effect
    that Article 5012a is mandatory in the sense men-
    tioned, theri,as thus construed and applied, is.
    Article 5012a or any part or provision thereof
    void or inoperative as applied to the actlvlties
    of such Mexican companies mentioned in question 1,
    as being vlolatlve of any provision or provisione
    of the constitutions of Texas and of the United
    States; and if so, which of the statutory provi-
    sions violates which of such constftutional provl-
    sions?"
          Senate Bill No. 357, Acts of the 48th    Legislature,
Regular Session, 1943, provides:
          "Section 1. Any insurance carrier lawfully
    organized under the laws of the Republic of
    Mexico, or under the.laws of any state thereof,
    and duly authorized by such laws and by Its
    charter or articles of association and by cur-
    rent license of the appropriate insurance regu-
    latory authority of such Republic or any state
    thereof to underwrite risks of the kinds and
    in the circumstances hereinafter mentionecl,may
    issue in the State of Texas, under license of
    the Board of Insurance Commissioners of Texas,
    policies of insurance affording any and all kinds
    of automobile coverage, accid'entinsurance and/
    or other casualty coverage, upon persons and/br
    personal property, to be in force only while
    such persons and/ or personal property shall be
    physically within the boundaries of the Republic
    of Mexico, by complying with the following re-
    quirements:
          "(a) Such insurance carrier shall file with
    the Board of Insurance Commissioners of the State
    of Texas (called Board) a written application for
    certificate to do business in this Btate, accom-
Honorable 0. P. Lockhart, page 3          O-5461


   panied by a correct English translation of its
   charter and by-laws, duly certified by two of its
   principal officers and by the insurance regulatory
   officials under whose supervision it operates In
   the Republic of Mexlco, and of all of its policy
   forms, application forms, claim forms, and other
   forms of every nature which It uses or expects to
   use in underwriting the coverage hereby author-
   ized to be written In Texas, all of which shall
   be subject to the approval of such Board.
         "(b) Before admission, and annually there-
   after, such carrier shall also file with such
   Board a photostatic copy of Its current license
   or licenses to operate in the Republic of Mexico,
   and shall file a copy of its latest financial re-
   ports or statements, and of the latest examina-
   tion reports of its affairs and financial condi-
   tion by the insurance regulatory authorities under
   which it operates ln Mexico.
         "(c) Such carrier shall deposit with the
   Treasurer of the State of Texas at least Twenty-
   five Thousand ($25,OOO.OO) Dollars In lawful money
   of the United States or in securities eligible for
   other casualty insurers licensed in Texas and ap-
   proved by such Board, which deposit shall be liable
   for all lawful claims and final judgments against
   such insurance carrier, including taxes due the
   State of Texas, and policy claims and other debts
   and obligations Incurred in the course of opera-
   tions hereunder as provided herein, and such de-
   posit shall be kept replenished from time to time
   with like cash or approved securities to maintain
   a mininmm total deposit of Twenty-five Thousand
   ($25,OOO.OO) Dollars. Such deposit or theunin-
   cumbered balance thereof shall be returned to such
   carrier with approval of such Board upon wlthdraw-
   ing from the business authorized hereby and upon
   a showing to such Board that all of its policies
   written In Texas hereunder have expired OP have
   been cancelled and that all of its claims and ob-
   ligations upon policies written in this state
   which would constitute lawful charges against
   such deposit have been satisfied.
         "(d) Such carrier shall    file with the Board
   a power of attorney, in a form   designated by the
   Board, designating an agent or   attorney-in-fact
   upon whom legal process may be   served within this
Honorable 0. P. Lockhart, page 4       O-5461


   State, which appointment shall continue until re-
   voked and a successor duly appointed by the car-
   rier, and further authorizing service of legal
   process upon the Chairman of the Board of Insur-
   ance Commissioners of Texas and his successors in
   office as alternate attorney-in-fact for such
   carrier upon whom service of process may be had
   in event such process cannot be served,upon the
   designated agent or attorney-in-fact for service
   as hereln provided, upon suits for any alleged
   llabilltg incurred in operations of the-~carrier
   pursuant to this Act, with like effect as if such
   process had been served personally upon the ap-
   propriate persons, representatives or officials
   of such carrier within its home jurisdiction in
   the Republic of Mexico. In event process shall
   be served upon the Chairman of the Board, as pro-
   vided above, he shall immediately give written
   notice thereof to such carrier and shall forward
   such process by registered mail, postage prepaid,
   and properly addressed to the president of such
   carrier at its home office as furnishedto the
   Board; and no judgment by default shall be taken
   in any such cause until after the expiration of
   forty (40) days after said process and notice
   shall have been received at the home office of
   such carrier. Until rebutted, the presumption
   shall obtain that such notice and process was re-
   ceived at the home office of the carrier on the
   fifth (5th) day after being deposited In the mail
   at Austin, Texas, as herein provided. The State
   Treasurer, upon the approval of the Board, shall
   pay from the deposit required herein any unsatis-
   fied final judgment obtalned against such carrier
   In any court of competent jurisdiction in Texas
   based upon such substituted service as author-
   ized herein.
         "(e) Such carrier shall pay the State of
   Texas annually a premium or occupation tax upon
   its gross premium income from policies issued
   In Texas according to the reports made to the
   Board each year, and shall pay such other fees,
   charges and taxes upon the same basis as like
   insurers licensed to do the same kinds of busi-
   ness in the State of Texas -are required by law
   to pay; and shall make the same reports as such
   other licensed carriers, but in such adapted
   forms as may be prescribed by such Board for such
   purposes.
Honorable 0. P. Lockhart, page 5        O-5461


         "(f) The coverage hereby authorized shall
   be underwritten only at rates prescribed or ap-
   proved from time to time by such Board.
         "(g) Such Board shall have the authority
   to examine at any or all times, at the expense
   of such carrier, the affairs and condition and
   all books and records of such carrier for the
   purpose of ascertaining its financial condition
   and solvency, and its compliance with the appli-
   cable laws of this state and of its home jurls-
   diction.
         "(h) Such carrier shall file in English a
   document executed by Its officials expressly
   accepting the terms of this Act and agreeing that
   such Board may at any time in Its lawful discre-
   tion revoke, suspend or refuse to grant or renew
   the license of such Board to such carrier to
   conduct in Texas the business hereby authorized,
   upon a determination by such Board that it is
   Insolvent or in dangerous financial condition,
   or that it has violated any applicable law of
   this state or of its home jurisdiction.
          "(i) It shall underwrite business in Texas
   only through its resident Texas agents thereunto
   duly authorized by It in writing and duly licensed
   by, such Board under the provisions of Article
   5062b (Acts 1941, 47th Legislature, page 374,
   Chapter 212), as the same now exists or as it may
   be amended hereafter, and the license issued to
   such Texas agents shall specially authorize them
   to write for such foreign carriers complying here-
   with the risk authorized hereby.
         "Sec. 2. All laws and parts of laws in con-
   flict herewith are hereby repealed only to the ex-
   tent of such conflict.
         "Sec. 3. If any Section or portion of Sec-
   tion of this Act shall for any reason be declared
   invalid by a court of competent jurisdiction, such
   adjudication shall not affect the validity of any
   other Section or portion of Section of this Act.
         "Sec. 4. The Importance of this legislation,
   and the immediate and urgent need of the reforms
   to be effected hereby, create an emergency and an
   imperative public'necessity demanding the suspension
Honorable 0. P. Lockhart, page 6                O-5461



       of the Constitutional Rule requlrSng that all
       bills be read on three several days In ea,chHouse,
       and said Rule is hereby suspended, and this Act
       shall take effect and be In force from and after
       its passage, and It is so enacted."
          Apparently Senate Bill No. 357, supra, was enacted
by the State through its Legislature In the exercise of Its
police power. Generally speaking the police power of the State
Includes the authority to restrict the pursuit of any business
or occupation which is injurious to the health, peace, security
or morals of the public, or to the general welfare of society.
A business which concerns the public at large calls for an ex-
ercise of State regulation. The Legislature may, under the
public welfare clause of the State Constitution, enact laws
regulating the conduct of lawful business In the State, I$ may,
in the Interest and for the protection of the public, prescribe
the mode or manner in which business may be conducted or trans-
acted. (See Texas Jurisprudence, Vol. 9, page 514 and Rulin
Case Law, Vol. 6, page 217 and the authorities cited thereink
             It   is   stated in Texas Jurisprudence Vol. 9, page
507:
             “However, neither the 'contract' clause
       nor the 'due process' clause has the effect of
       overriding the power of the state to establish
       all regulations that are reasonably necessary
       to secure the health, safety, good order, com-
       fprt or general welfare of the community. The
       ekerclse of the police power upon subjects lying
       within its scope, in a proper and lawful manner,
       is due process of law. The decisive question
       is whether or not the action is sustained by the
       existence of facts affecting the public welfare
       sufficient to justify such an application of the
       police power. The answer to-this question de-
       termines whether or not the action constitutes
       due process of law. The mere fact that a law
       necessary for the welfare of society regulates
       trade or business, or to some degree operates
       as a restraint thereon, does not make It uncon-
       stitutional."
          The police power cannot be used for the purpose alone
of'raising revenue, the fact that an assessment under police
power results in producing revenue does not deprive the assess-
ment of the character of the police regulation. (Brown vs. City
of Galveston, 75 S.FI.488)
Honorable 0. P. Lockhart, page 7           o-5461



          We quote from Texas Jurisprudence, Vol. 24, page 1311
as follows:
            "The State may impose upon nonresident in-
      surance companies such conditions precedent to
      the right to do business In the state as are
      deemed proper. Thus the state may require the
      filing of a power of attorney authorizing serv-
      ice of process upon any agent, officer or repre-
      sentative of the company, the procuring of a
      certificate from the insurance commissioners,
      the filing of a bond, and the making of a special
      deposit as a trust fund for the protection of
      obligations arising under policies issued within
      the state. . . . . D .
            "A foreign insurance company which has
      elected to do business in Texas is deemed to
      have consented to be governed by the insurance
      laws of Texas, irrespective of their constitu-
      tionality. Such a corporation may not contest
      the validity of its contracts on the ground that
      It has not complied with local laws."
          A foreign corporation 1s required, as a condition pre-
cedent to the right to do business in the State, to obtain a
certificate of authority from the Insurance Commissioner.
(Articles 4686, 4687, 4701, 5059 V.A.C.S.)
            It 1s stated in American Jurisprudence Vol. 29, page
70:

            "As Is true with respect to foreign cor-
      portation generally, a state may entirely exclude
      foreign insurance companies from the transaction
      of business within its boundaries, or may pre-
      scribe such conditions of admission not In con-
      flict with applicable provisions of the Federal and
      State constitutions as it desires . . . S .
            ';NoInsurance company has the right to sell
      insurance in a state without complying with the
      statutes embodying such conditions of admlsslon.
      As a condition of Its admission to do an insurance
      business within the state, a foreign insurance
      company may, for example, be required to secure a
      license or certificate allowing it to carry on such
      business; to possess a specified amount of capital
      paid-up and unimpaired; to have additional assets
      sufficient to offset its l,labilltles,including
      reserves on Its risks; to deposit security for the
Honorable 0. P. Lockhart, Page 8          O-5461


      performance of Its obligations within the state;
      or to appoint a state official or a local or
      statutory agent to receive service of process.
      Likewise, a state may, In effect, impose a condl-
      tion upon the right of insurance companies to do
      business therein, by declaring that contracts shall
      be construed and Interpreted according to the law
      of that state, notwlthstandlng the statute annuls
      the provisions of a poIScy which contravenes the
      statute 0 . . D . . .'
           We quote from American Jurisprudence, Vol. 29, page
72 as follows:

            "The well-established rule 1s that the
      Issuance of a policy of insurance is not a trans-
      action of commerce and, although-made with a cor-
      poration organized or having Its office in a state
      other than that in which the insured resides and
      in which the Interest insured is'located, is not
      interstate commerce. Insurance is not a commodity
      to be shipped or forwarded from one state to an-
      other. As a consequence, the regulation by a
      state of foreign insurance companies within Its
      borders, or contracts made with such companies
      within the state, is not invalid as allregulation
      of interstate commerce. . . . e . .
            It is stated in American Jurisprudence Volume 29, page
79:
            'A state may prescribe that a foreign in-
      surance company may not transact an Insurance bus-
      iness wlthin the state except through lawfully
      authorized nor duly licensed agents, or that an
      agent of such company in order to act for It must
      be duly licensed; and the rights of one applying
      for a license to act as agent for such insurance
      company are contigent upon the compliance of the
      company with conditions precedent to its right to
      appoint such an agent D S . 0 q'
          In answer to your first question, it is our opinion
that prior to the effective date of Senate Bill 357, supra, no
Insurance company organized under the laws of the Republic of
Mexico had any legal authority to do business In this state
without securing a certificate'of authority as required by
Article 4686, V.A.C.S., and that neither licensed nor unlicensed
agents had any authority whatsoever to Tepresent said companies
as agents, as the term 'Insurance agent Is defined by Article
.




    Honorable 0. P. Lockhart, page 9           O-5461


    568 of Vernon's Annotated Penal Code and Article 5062b, V.A.C.S.
    (Also see Article 5056, V.A,C.S, and Article 572, V.A.P.C.)
              In answer to your second question, you are respectfully
    advised that it Is our o inion'that Senate Bill 375, supra,
    (Article 5012a, V.A.C.S.P is mandatory In the sense that It re-
    quires insurance companies organized under the laws of the Re-
    public of Mexico to comply with its provlslons as a condition
    precedent to doing businessin this State and unless such company
    or companies desiring to do business in this State comply with
    the provisions thereof such company OP companies are not author-
    ized to do business in Texas. In other words any insurance com-
    pany organized under the laws of the Republic of Mexico desiring
    to do the kind of insurance business as authorized by SenateBill
    357, sum-a, must comply with the provisions thereof before it
    can legally engage In such business in this State.
              By your third question you inquire as to the constitu-
    tionality of said Senate Bill 357, supra, and in answer thereto,
    you are respectfully advised that it is our opinion that said
    act does not violate OP contravene any provision of the Federal
    or State constitution that has come to OUP attention OP been con-
    sidered in connection with your request. In other words we are
    not aware of any provision of either the Federal or State consti-
    tution that is violated by said act.
                                       Yours very truly
                                  ATTORNEY GENERAL OF TEXAS
                                       By s/Ardell Williams
                                            Ardell~Williams
                                            Assistant
    AW:ff:wc
    APPROVED SEP 15, 1943
    s/Gerald C. Mann
    ATTORNEY GENERAL OF TEXAS
    Approved Opinion Committee By s/BWB Chairman
