Honorable J;'D;~Mutt     .:       Opinion Do. C- 154
Commissioner of Insurance
State Boaid of Insurance          Re:   Whether the bulk sale of
Austin, Texas                           insurance policies and their
                                        distribution under the stated
                                        facta violate any of the pro-
                                        visions of the Texas Insur-
Dear Mr. Y&t:-                          ante Code.

          Your letter requesting the opinion of this offioh, to-
gether with its attached exhibits, reflects the following relwant
facts:

            The State Board of Insurance has received proposals from
several insurance companies.concerning plans whereby service sta-
tions, motels, or retail stores will purchase accidental death and
accidental bodily injury policies to be distributed to their pat-
rons under programs similar to those involving trading stamps.
There are several variations of the proposed plan, but all of such
plans contemplate the bulk sale by the insurance company,to ser-
vice stations,   motels or retail stores of its policy forms execu-
ted by an authorized agent of the,company. The policy forms will
be forms which have been approved by the State Board of Insurance.
The policies will be executed by an authorized agent prior to de-
livery to the purchaser: however, the portion of the form requiring
the name of the insured, his beneficiary, and the effective date
of the policy will be left blank. The inmrance     company will,re-
ceive, a8 premium, from the purchaser (service station, motel, or
retail store) a s$ecified sum i$ar each of the policy forms de-
livered in the bulk sale. *tar purchasipg such policy forms in
bulk* the purchaser will pass uuch policies on to its patrons or
customers   under condititona determined by the purchaser. It is
presumed that the insurance company will have knowledge of the
purchaser's program for,dispensing the insurance policies.
    Hon. J.'N. Nutt, page 2 (C7154)



              For instance, one service station operator will display
    a sign advertising that a~free travel accident policy in a certain
    sum will be furnished to anyone who buys enough gasoline to com-
    pletely fill his tank. Inasmuch as it cannot be determined who
    will become the insured or the beneficiary until after the bulk
    sale of the policies, they will be issued by the insurance company
    and countersigned by its duly authorized agent without a designated
    insured or benefi,ciary,and then delivered by such agent to the
    purchaser. Likewise, the effective date of the policy will be left
    blank. The service station operator or his employees would then
    give one of the policies to a ,patronor customer at the time of
    his purchase of gasoline. Either the service station employees
    or the customer would complete the blanks setting out the name of
    the insured, his beneficiary, and the effective date. The policy
    is designed so that a carbon copy of the name of the insured, the
    beneficiary, and the effective date would be made. The carbon
    copy would-be forwarded to the insurance company.

              The official opinion of this office has been regueeted
    as to whether or not the insurance company or the service station
    owner or his employees would violate any provisions of the Texas
    Insurance Code by making insurance available under the facts above
    set out.

              We find that,*under the-stated facts, there woialdbe a
    violation of Articles 3.70-2(A)(2) and 21.01 of Vernon's Texas
    IntiuranceCode.

              Article 21.02 of Vernon's Texas Insurance Code reads in
    part as follows:

                  “Any person who. . .takes or transmits other
              than for himself any application for insurance or
              any policy of insurance to or from such company,
              or who advertiees or otherwise gives notice that
              he will receive or transmit the Same, or who shall
              receive or deliver a policy of insurance of any such
              company, . . .or do or perform any other act or
              thing in the making or consummating of any contract
              of insurance for or with any such insurance com-
              pany other than for himself, . . .whether any of


b
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                                              .’




Hon. J. :‘Ni
           .,NuFutt,
                 ,:‘mpagCi
                       k(C-1%)           ‘1


           such acts shall be done at the instance or
           request, or by,the employment of such in-
           surance company, or of, or by, any broker
           or other person, shall be held to be the
           agent o'fthe company for which the act is
           done, . . .'I(Emphasis added)

          The service station operator advertises or gives notice
to the public that he will transmit an accident policy to anyone
buying a tank of gasoline. The service station operator or his
attendants hand over such policies to its customers. The policies
are completed either by the customer or the service station opera-
tor by inserting the name of the insured, his beneficiary, and
the effective date of the policy. To "consummate" is to bring to
completion; to raise to the highest point or degree; to complete;
to finish. 9 Words and Phrases 17. It must be admitted that the
policies in question are not completed or finished when delivered
to the purchaser or service station operator; there is no insured,
no named beneficiary to receive payment of any loss, and no effec-
tive policy. The consummation of such policies occurs at a subse-
quent time when a customer purchases gasoline. Even though the
customer may complete the po,licyform by supplying the name of the
insured, the beneficiary and the effective'date of the policy, the
facts remain that the service station operator gives notice to the
public that he will transmit the policies to purchasers of gaso-
line and actually transmits the policies at the time of the pur-
chase.

          Article 21.02, provides that if any person shall per-
form any of the specified acts in this state, other than for him-
self, such person shall as a matter of law be an agent of the com-
pany for which the act is performed. The statute expressly pro-
vides that it makes no difference whether the acts are done at the
instance or request of the insurance company or some other person.
The only exception is when a person performs the act for himself.
Although it can be said that the purchaser or service station
operator benefits or gains from the distribution of such policies,
the benefit accrued is due to the promotional effect upon the
sale of gasoline. In performing the statutory acts the service
station operator cannot be said to benefit directly or indirectly
under the terms of the policy.



                                 -748-
Hon. Ji'$. Nutt, page4   (C-154)



          Therefore, the service station operator, who performs
such acts contemplated by Art. 21.02, cannot be performing.them
for himself: instead, the acts are within the terms of said
Article and an agency relationship is created as a matter of law
between the service station operator and the insurance company.
Consequently, there would be a violation of Art. 21.01 of Vernon's
Texas Insurance Code, which requires a person acting as an agent
to procure a license from the State Board of Insurance.

          Article 3.70-2(A)(2) provides in part as follows:

              “‘(A) No policy of accident and sickness in-
          surance shall be delivered or issued for delivery
          to any person in this state unlessr. . .(2) the
          a    at which the insurance takes effect and ter-
          minates is expressed therein; o o *" (Emphasis
          supplied).

          This clearly mandatory provision, enacted by the state
legislature to govern and control accident insurance policies as
are here involved, contemplates that the time at which the policy
takes effect and terminates must be expressed therein before the
issuance or delivery of such policy by the insurer or his agent
to the purchaser, The word, “time”,  as used within the context
of the above Article, has been defined as "a definite moment,
hour, day, or year, as indicated or fixed by a clock or calendar."
Webster's New International Dictionary, 2nd Ed., p. 2648. 41
Words and Phrases 639. This prerequisite for the issuance or de-
livery of a policy would not be complied with under the stated
facts, since the effective date is to be supplied subsequent to
the delivery of the policy by the insurance agent to the service
station operator. Although the policy forms have been approved
by the State Board of Insurance, it was anticipated that the re-
quirement of Art. 3.70-2(A)(2) would be fulfilled by expressing
the effective date before the policy is issued or delivered.
Therefore, failure to so prescribe the exact date at which the
policy takes effect before its issuance or delivery by the insurer
to the purchaser would violate Art, 3.70-2(A)(2).




                              -749-
.   -




        Hon. J/NJ; mutt,:'-page,
                              6: (C-154)      1 :,.




                      Under the,stated facts, the bulk sale
                  of policies by the insurance company and
                  their subsequent distribution by the unli-
                  censed purchaser,violate Articles 3.70-Z
                  (A)(2) and 21.01, Vernon's Texas Insurance
                  Code, respectively.

                                                 Yours truly,

                                                 WAGGGNEXCARR
                                                 Attorney General of Texas




                                                      James N. Stofer
                                                      Assistant

        JNStlmc

        APPROVED:
        OPINION COMMITTEE

        W. V. Geppert, Chairman
        Dudley McCalla
        Arthur Sandlin
        Frank R. Booth
        Jerry Drock

        APPROVED FOR THE ATTORNEY   OENERAL
        BY: Stanton Stone




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