                                     August    12. 1959

Honorable  William    A Harrison                          Opinion   No. WW -684
Commissioner     of Insurance
State Board of Insurance                               Re: Must accident and health
Austin, Texas                                             insurance policies issued
                                                         by mutual insurance   com-
                                                         panies subject to the pro-
                                                         visions of Chapter 11. Texas
                                                          Insurance  Code, be on a par-
Dear   Commissioner     Harrison:                        ticipating dividend basis.

            We quote from     your    letter   as follows:

                          “As legal reserve      mutual life insurance    com-
            panies were given the authority in 1947 to write accident
            and health insurance      policies    ‘subject to the provisions
            of this chapter’ , it appears      to us that such accident and
            health insurance     policies   must be on a participating      divi-
            dend basis in accordance        with Articles    11.11, 11.12, ‘and
            11.13 of the Code.      However,     we find that the departmental
            practice    since 1947,has been not to require        accident and
            health insurance     policies   issued by legal reserve      mutual
            life insurance    companies     to contain participating    dividend
            provisions.

                         -We. therefore.   respectfully  request your
           opinion as to whether a legal reserve        mutual life insur-
           ance company may issue accident and health insurance
           policies   which do not contain participating     divided  pro-
           visions in accordance’with       Chapter 11. Texas Insurance
           Code, or must all such policies       issued by a legal reserve
           mutual life insurance     company within this State contain
           participating    dividend provisions    7n

           You are hereby advised that all policies      issued by a legal reserve
mutual life insurance   company    subject to the provisions   of Chapter    11 (which
we have held in WW-682     to mean domestic     mutuals only), whether they be
combined or separately.    life, health and accident insurance     policies,  must
contain participating dividend provisions.

            As originally   passed.    what is now Chapter 11 of the Texas Insur-
ance Code, authorized      domestic    mutual insurance  companies  to transact
only a life insurance    business.
Commissioner      William   A. Harrison,    page    2 (WW-684)




           In 1947 the Legislature   by the passage of S.B. 293, Acts 1947.
59th Leg., p. 532. ch. 312. 8 1, authorized domestic legal reserve     mutual
companies   to write health and accident insurance for the first time.   The
caption of that Act stated:

                        “An Act amending Article 4800, Revised
            Civil Statutes of Texas.   1925. so as to authorize a
            mutual life insurance   company to also issue, com-
            bined or separately,  life, health, and accident insur-
            ance policies;.  . .”

            Section   1 of S.B.   293 contained    among    other things the following
language:

                         Y
                          . . .and any such company, heretofore      or
            hereafter   created,   may issue, combined or separately,
            lzfe, health. and accident insurance     policies. subject
            to the provisions    of this chapter. . .” (Emphasis   added)

This language    is now set forth    in Section    1 of Article   11.01. Texas   Insurance
Code.

            What is now Article  11.13. which was in existence at the time of
the passage  of S.B. 293 and is without question one of the “provisions  of
this chapter” mentioned in Article   11.01, reads as follows:

                        “Mutual life insurance   companies  are author-
            ized to transact business throughout this State and other
            states to which they may be admitted; they may issue no
            policy except upon the participating   plan with dividends
            payable annually as provided in this chapter;.    . .I

              In reading the entirety of Chapter 11 of the Insurance         Code, and
doing so in conjunction with the historical         background   of the various enum-
erated provisions,      it is apparent that the Legislature     in authorizing  domes-
tic life insurance     companies     to write accident and health insurance     policies
desired these companies         to issue no policy other than those providing      for
participating    dividends.     Had the Legislature    desired to exempt the health
and accident policies       from the provisions    of Article  11.13 of the Texas
Insurance Code, they could.have          easily done 80. Not having done so. the
requiremat       therein contained must be controlling.

           We note from your opinion request that you make reference      to
certain departmental  construction which is at variance  with the conclusions
reached herein.   You are advised that since the language of Chapter 11 is
Commissioner      William   A. Harrison,     page     3 (WW-684)




unambiguous     in its requirements.        the above mentioned departmental        con-
struction is not controiling.        Jones v. Marrs.       114 Tex. 62. 263 SW. 570;
State v. Texas Mutual Life Insurance Corn1sny (Tex. Civ.App.)               51 S,W.Zd
405. reversed     IComm. AnnI.- .~-I 58 S ‘W  . 2 d 37: Brmyownv. City of Amarillo,
(Tex. Civ.App.)     180 S.W.654. error        ref.

           It is noted in passing      that Article     11.19 of the Texas   Insurance
Code provides    as follows:

                        “The provisions    of Chapter 3 of this Code,
            when not in conflict with the Articles      of this Chapter,
            shall apply to and govern mutual life insurance         com-
            panies organized    under the provisions     of this Chapter;
            provided,  however,   that when any mutual life insurance
            company organized     under the provisions      of this Chapter
            has a surplus equal to or greater       than the minimum of
            capital and surplus required      of capital stock companies
            under the provisions    of Article   3.02 of Chapter 3, Insur-
            ance Code of the State of Texas, Revised Civil Statutes
            of Texas of 1925. the following provisions        of Chapter 11
            only shall apply to such mutual companies:          11.01, 11.02,
            11.03. 11.04. 11.05, 11.~06. 11.07. 11.09. 11.10. 11.11.
            11.12. 11.14. 11.16, 11.17. 11.18 and 11.19. Onall         other
            matters the provisions     of said Chapter shall apply to and
            govern such mutual life insurance companies.           As amended
            Acts 1955, 54th Leg., p. 546. ch. 171. $ 1.’

             In reading Article     11.19 it is noted that any reference     to Article
11.13 is omitted therein; thus, indicating that the Legislature          did not intend
to restrict   those mutuals. which can qualify under the proviso          of Article
11.19 to the requirements       of Article   11.13. Consequently,     a domestic mutual
life insurance    company which has been organized          under the provisions     of
Chapter 11 but which has a surplus equal to or greater            than the minimum
of capital and surplus     required    of capital stock companies     under the pro-
visions of Article    3.02 of Chapter 3 of the Insurance Code, need not comply
with the participating    dividend plans payable annually as required          under
Article   11.13. This caveat has been prompted by the language of your opin-
ion request wherein      you ask if all policies     issued by a legal reserve    mutual
life insurance    company within &        State of Texas must contain a participating
dividend provision.      You are advised that Article       11.19 would operate ‘as an
exception to tbe general requirement          of Article   11.13.
Commissioner      William   A. Harrison.   page 4 (WW-684)




                                     SI3M.MAR Y

                         Accident and health insurance
                         policies issued by domestic mu-
                         tual insurance    companies  subject
                         to the provisions   of Chapter 11,
                         Texas Insurance     Code, must be
                         on a participating   basis unless
                         they come within the exception of
                         Article  11.19.

                                           Yours   very   truly,

                                           WILL    WILSON




                                            ’ C. Dean Davis
CDD: jg                                       Assistant Attorney   General


APPROVED:

OPINION     COMMITTEE:

Geo. P. Blackburn.     Chairman

Linward Shivers
W. 0. Schultz
James P. Ryan

REVIEWEDFOR     THEATTORNEYGENERAL
BY:
     W. V. Geppert
