Hon. 12.P. Lockhart     O>inion No. O-5940
Chairman                I3e: .Whhethzr
                                     the proposed contract sub-
Board of Insurance      mltted by <<group of physicians operat-
Commissioners           ing.the S,tz.mford
                                         Sani.tari:lm
                                                    is a contract
Austin, Texas           01 ln:.:uran;,e,
                                      subjecting the issuance of
                        sai'dcontr:st 20 the supervision of L;t'.,e
Dear Sir:               Bo,z;.sd
                              of Insurance Commissioners.

          Your ietter o.?March 14, 1%-t, requesting the oplnion
of this department regarding the above mentioned matter, reads
as follows:
          'I.4
             group of doctors operating Stamford Sanitarium
     have submi.ttedthe e:lclosedproposed contract to this
     Department for consjderttion.
          "T;;ill
                you pleass advise me whether the Lnstrume'lt
     constiktes an insul:::ncecontract subjecting the issu-
     ance of it to the supervision of this Department or
     whether it is merely 1 service contract with which this
     Depzrtment may not properly concern itself."
            The contract under consideration is as follows:
            "STiMFORD MEDIC&   AND HOSPITAL SERVICE PLQ
           "This plan provides for MEDIC& .kNDHOSPITAL SERVICE
      specified to the extent herein provided.
          "ST:MFOHD MXDICiiL A'IDHOSPITAL SERVICE is comoosed
     of DRS; E. P. BUNKLEY, DALAS SOUTHARD, F. E. HUD&N,
     L. F. MdTZ, J. W. YOL%GBLOOD, I. F. HUDSON and T. ii.
     BUNKLEY, who own and operate STAMFORD SANITARIUM, Stam-
     ford, Texas. The same-shall also.include any other
     DOCTOR who may become a participating member with the
     consent of STAMFORD MEDICAL AND HOSPITAL SERVICE.
           tlSTAMFORDMEDICAL AND~HCSPITAL SERVICE hereby agrees
      to furnish                     andhis or her dependents,
      (hereinafter called 8CONTRACT'HOLDER') SERVICES as herein-
      after defined, subject to all provisions and limitations
      herein contained, made necessary by reason of bodily in-
      jury sustained, directly and independently of all other
      causes, through accidental means while this contract is in
Hon. 0. P. Lockhart,    page 2    (O-5940)


     effect,    (hereinafter      called   ‘SUCH ACCIDENTS1) and SERVICES
     made necessary       by reaaon ‘of dIseasQ or.slckmess    contracted
     more than thirty        days after the effective   date hereof,
     (Hereinafter      called    ‘SUCH SICENESS’).
     _.                                     .  __-*
                                  I,COpJsm

             “The consideration      for ‘such ‘SERVICES is CONTBQCT     HOLD-
     ER’S application      and the representations      contained.there2.n
     and the payment to STkMFORDMEDICAL ANDHOSPITAL SERVICE
     OF $                , representing     thrge months premiums.       The
     same may be renewed with the consent of ST&FORD MEDICQL
     4ND HOSPITAL SERVICE so long as advance payment -of simLlar
     premium is-made In accordance with the terms and provisions
     hereof.
           “No obligation      is assumed by STAMFORD  MEDICALAND
     HOSPITBZ,SERVICE for rendering        SERVICES by reason of any
     accident  occurring     or disease   or sickness arising  prior to
     the date of this contract        nor unless CONTRACT   HOLDERnamed
     herein is alive and in sound health at the ,time of delivery
     and acceptance     hereof.
            “The conditions  and privileges  printed on the follow-
     ing pages hereof constitute     a part of the contract  as fully
     as if they were recited    at length over the signature   hereto
     affixed.
           “IN WITNESS WHEREOF,STAMFORD MEDICALANDHOSPITAL
     SERVICE has issued this JONTEACT at its kiEDICAL CENTERin
     Stamford, Texas, on this the       day of
     19-g which ts the effective-       of this CONTRACT. ’
                                       “STAMFORDMEDICAL ANDHOSPITAL
                                         SERVICE
                                       ‘BY
                                       ‘!BY
                                       !BY
                                       ‘?BY
                                       ?BY
                                       !‘BY
                                       !‘BY-’
     “CONTRACTNO.                      _


     Ii
          “REGISTRAR
Hon. 0. P. Lockhart, page 3     (O-5940)


                              “SERVICES
                                         on account of such
         “PART I. If the Citi?Riil“ti~LD~~
    accident
           . or.such sickness,_shall-require Medical Service
    or be confined as a bed patient within the Medical Center
    Hospital at Stamford, Texas, STAMFORD MEDICAL AND HOSPIT&
    SERVICE will render to the CONTRACT HOLDER the-following
    services, subject to all of the provisions and limitations
    herein set forth:
          “ii. All office calls, including nursing care or
     treatments that the CONTRACT HOLDER shall necessarfly need,
     not exceeding three in ~1;~one week or ten on account of
     any one accident or any one period of sickness.
          “B. Hospital confineme:~~t,including general nursing
     care and Hospi~tal.
                       Service for the period the CONTRACT
     HOLDER shall be necessarily confined therein, not exceed-
     ing twenty-one (21) days Hospital Service on any one period
     of sickness or accident in one twelve months period follow-
     ing the date of this CONTRACT.
          “C. Private room or bed service, based on a $5.00 per
     day rate.
            “2.   All general nu,rsingcare and hospital care.
          “8 a ill services of professional .sndnon-professional
     emp?,oyeesof hospital,
          “F ” Use of operatf.ngroom when a bed patient in hos-
     pit41 for major or minor operations.
            “G.   Ul   services of :Inetheslstif employed by hospi-
     tas.
          “H . Maternity: dil services under part one of this
     CONTRACT for a m.:x?i:lum
                            of five (5) days, including nursery
     care of newborn of CONTRACT HOLDER has kept this CONTRACT
     in continuous force for one year or more immediately prior
     to such hospital confinement.
          “PART II. The services as provided herein are to be
     rendered at the Medical Center Hospital at Stamford, Texas,
     by STU4FORD MEDIC.% AND HOSPITAL SERVICE.
     Hon. 0. P. Lockhart,   page 4      (O-5940)


                                  “V
                                  *..        . _
               Ml.  This CONTRACT includes the endorsements, if any,
          and together with..
                            the -application for same, shall consti-
          tute the entire CONTRACT. No reduction .shall be made in
          any provision ,hereof by.reason of change of occupation of
          the CONTRACT HOLDER.
               “2. ‘No statement made by the application for serv-
          ices not included herein shall void the CONTRACT or be
          used in any legal proceedings hereunder. No change in
          this CONTRACT shall be valid unless approved by STAMFORD
          MRDICAL AND HOSPITAL SERVICE and such approval be endorsed
          hereon. ~_ .      _.

               “3. If default be made in payment of the agreed prem-
          ium for this CONTRACT and such default continue for a
          period of ten days, the subsequent acceptance of the prem-
          ium shall be optional with STAMFORD MEDICAL AND HOSPITAL
          SERVICE, and if accepted shall reinstate the CONTRACT but
          only to cover accidental injury thereafter sustained and
          such sickness as may begin more than thirty days after the
/’        date of such acceptance.
                  “4.  All services provided in this CONTRACT shall be
          ;arAd       or rendered by STAMPORD MEDICAL AND HOSPITAL
                    .                  :           ,-
               “5 . STAMFORD MEDICAL AND HOSPITAL SERVICE may cancel
          this CONTRACT at any time-upon ten days written notice,
          delivered to the CONTRACT HOLDER or mailed to the CONTRACT
          HOLDER at his or her last address as shown by the records
          of STAMFORD MEDICAL AND HOSPITAL SERVICE, together with
          cash or STAMF’ORDMEDICAL AND HOSPITAL SERVICE check for
          the unearnedportion of the premiums actually paid by the
          CONTRACT HOLDER. Such cancellation shall be without pre-
          judice to any claim originating prior thereto.


                ”A. This CONTRACT does-not cover drugs or supplies
          or seryices for incurable cases, ambulatory patients, semi-
          Invalidism, self destructlon or attempt thereat, or losses
          sustained in violation of the law, or cases coming under
          Hospitalization Insurance, or under provisions of any Work-
          men’s Compensation or Employers Liability Insurance. This
          CONTRACT does not cover abortion, syphilis or complica-
          tions arising therefrom, virulent or contagious diseases,
          rest cures or mental or nervous disorders, veneral dis-
          eases or tuberculosis.
Ron. 0. 2. Lockhart, page   5 (o-5940)


          !‘~y ailment requiring a surgical operation s);allbe
     covered only if cause~of same originates after this CON-
     TR.CT has been in continuous force for thirty lays Prom
     d&e of issue or reinstatement hereof. In th$ case of a
     tonsillectomy the waiting period shall be ninety days.
          “B . The term of this CONTRACT begins    at l2:33 o’clock
     nocn, 3 an.dardTime , on ddte stated on the   face of this
     CONTRACT dS to Services.re@ired by reason     of ,Liy SUCh hC-
     cident 2nd on the thirtieth dky thereafter    as to 3e.rvices
     re:luirei..
              by re,son of such Sikness or any     such Disease
     and ends It 12::iOo(clock noon on the date    dny renewul is
     due.
          “C. In the event sufficient hospital  .._sp;lceshou1.dnot
     be avdil;i?~leclueto an -1ctof God or .in&piemic, the lia-
     bilitv !ofSTi’W’C~HD MEDIC J, 2iD HOSP1T.L SERVICE shal.1be
     limited to-6 return of the ‘unearned,lortionof cu”re!lt
     premiun,gaid ind such return shall rslieve the STAMFORD
     MEDIC:1 <ND HOSPIT     SERVICE from all liability un?er this
     CONTFMT.
           “;;i,Strict compliance on the T,:irtof the GONTRACT
     HO&X% &d 3ependent.scdith~j.1the terms and provisions of
     thi5 contra(:t , ind the q.plication signed by the CONTRZT
     HCLXA is i conition precedent to recovery hereon, dnd an:;
     f .ilur, in this respect shall forfeit to the ST&FORD MZDI-
     ;.LL iij HOSPIT& SERVICE all right to any services.”
          In order to determine whether the proposed contract is
.t:\
   in5ur2ice contract, it is necessary to test and measure the
cnntr....,,.
       t hy tl;eTexas Statutory definition of Itinsurance.”
          .izticle4716,   Vernon’s Annotated Civil Statutes, pro-
vides, in &rt:
          ‘I***:&accident insurance company shall be deemed to
     be ilcorporation doing business under any charter involving
     the i!aymentof any amount of money or other thing of value
     condi.tionedupon loss by reason of li’abilitydue to sick-
     ness or ill health. 6;health insurance company shall be
     deemed to be a corporation doing business under any char-
     ter involving the payment of any amount of money, or other
     thing of value, conditioned upon loss by r,easonof disabil-
     ity due to sickness or ill health. ***‘I
          ‘deknow of no Texas decision which answers the ques-
tion as to ;qhetherthe contract under consideration is a con-
tract of insurance.
Hon. 0. P. Lockhart, page   6 (O-5940)


           After carefully considering the foregoing contract,
it is apparent that the essence of the above mentioned contract
is to indemnify, in part, the members against excessive cost of
hospitalization contingencies. &.zin the case of burial asso-
ciations where the funeral benefits are contracted to be furn-
ished in kind and not paid in cash, the benefits here are uncon-
ditionally contracted to be either furnished in kind through
hospital services and accommodations, or, in the alternative,
,when the Stamford Medical and Hospital Service cancels the con-
tract at any time upon ten days written notice, delivered to the
contract holder or mailed to the contract holder at his or her
last address as shown by the records of Stamford Medical and
Hospital Service, the unearned portion of the premiums actually
paid by the contract holder are to be refunded.
           The word “insurancel’is defined in Texas Jurisprudence,
Vol.   24, page 650, as follows:
            “‘Insurance’ is a word of comprehensive and varied
       meaning. In a general sense, the term signifies an agree-
       ment, for a consideration, to pay a sum of money upon the
       happening of a particular event or contingency, or indem-
       nifying for loss in respect of a specified subject by
       specified perils; in other words, an undertaking by one
       party, usually called the insurer, to protect the other
       party, generally designated as the insured or the as-
       sured, from loss arising from named risks, for the con-
       sideration and upon the terms and under the conditions
       recited.”
          It is our opinion, that the benefits offered by the
Stamford Medical and Hospital Service plan as set forth in the
proposed contract under consideration, are insurance benefits
and that the proposed contract is a contract of insurance. It
is our further opinion that the Stamford Hospital is not author-
ized to issue any form of insurance contracts or policies.
          The Insurance Department of this State is authorized
to make investigations to determine whether the insurance laws
are being violated and to see that no company does an insurance
business without authority of law. The Insurance Department
can make such investigation as is proper and take such steps
and make such recommendations as may be necessary pertaining to
Hon. 0. Pa Lockhart, page 7   (O-5940)


the enforcement of the insurance laws and require a compliance
therewith. (See Article 4682, Vernonls Annotated Civil Stat-
htSS.)                               *   .

                               Yours very truly
                                LTTORNEY GENERAL OF TEXAS
