                    THE       ATTORNEY                    GENERAL
                                     OFTEXAS


  WILL    WILSON
AlTORNEYOENERAL
                                     March    1,   1961


      Honorable Thomas C. Ferguson             Opinion    No.   WW-1005
      Chairman,     State Board of
      ,bsurance                                Re:    Whether the State, Board of
      International   Life Building                   Insurance may promulgate
      Austin,   Texas                                 or approve rating plans which
                                                      insurance   companies may
                                                      elect to use for modification
                                                      of basic automobile  rates
      Dear   Sir:                                     promulgated   by the Board.

               Your letter   requesting   an opinion of this office   is as follows:

                       “It has been proposed to the State Board of
               Insurance, that it rescind the Texas Safe Driving
               Insurance Plan as a mandatory,         prescribed    plan and
               revert to the pre-1960    classifications    which were
               based solely on ,(a) ,the~age of the driver,      (b) the
               normal use made of the automobile,         and (c) the terri-
               tory in which the automobile      was principally     garaged.
               The Board would then prescribe, and promulgate            rates
               for each claes thus established.        For brevity,    such
               rates will hereinafter   be referred to as ‘basic rates. ’

                        “,It is proposed that the Board provide for
               modification     of its ‘basic rates’ by one of these two
               methods:      (1) Board approval of rate modification
               plans filed by insurers,        or (2) Board prescription
               and promulgation       of a, rate modification  plan.

                       %ubcbapter    A of Chapter 5. Texas Inatrance
               Code, and more particularly    Acts 1953, 53rd Legisla-
               ture, pages 64, Chapter 50, are cited as authority by
               which rate modifications   can be effected under either of
               the methods stated above.    If the filingprocedure       is
               used, only the companies making modification         filings
               would be required to use the ‘modified rates’ produced
               by their respective  rating plans.   If ,the prescribing
               method is used, it is proposed that insurers       be given
Hon.    Thomas   C. Ferguson,     page 2     (WW-1005)




         the option of accepting or rejecting the plan.      Thus,
         regardless   of whether rate modifications     are accom-
         plished by filing or prescribing,    any insurer could use
         ‘basic rates’ if it care to do so.    Insurers would,
         however,   be forced to an election,    so that it would not
         be possible for the same insurer to write, at ‘basic
         rates’ and also at ‘modified rates. ’

                  “Any rate modification   plan, whether filed or
         prescribed,   would be designed to encourage the preven-
         tion of accidents and to take account of the peculiar
         hazards and experience    of individual risks.    The ‘modi-
         fied rates’ produced would not be prescribed       or approved
         if they were, found to be excessive,   inadequate,    or un-
         fairly discriminatory.

                  “We respectfully request your opinion as to
         whether the Board may legally authorize the use of
         ‘modified rates’ through either of the two methods
         stated above, each insurer having an option to use either
         ‘basic rates’ or ‘modified rates’ but not both, ”

        In our opinion the Board is not authorized         to pursue    either   of the
two proposed courses of action.

        At the outset, we must make it clear that our opinion does not
deal with any concrete proposals,   as none have been submitted.   We
merely undertake to point out some of the features in the general pro-
posals outlined in your letter of request which, in our opinion, are
contrary to law.

         Briefly stated, automobile   rates of insurance,    classification of
risks,  and policy forms are fixed and promulgated       by the State Board
of Insurance,   Article 5.01,   Texas Insurance Code, * and no company
may issue an automobile     insurance policy “at premium rates which
are greater or less than, or different from, those approved by the
Board. ” Article    5. 03. These provisions   are the ingredients      of a
“single rate” law where all companies must charge the same premium
for the same risk, rather than a competitive      rate law.    Gibbs v. United



         *Unless otherwise      specified,   reference   throughout    shall be to the
Texas   Insurance Code.
Hon.     Thomas   C.   Ferguson,    page 3    (WW-1005)




States   Guarantee     Co.,   218 S. W. 2d 522,   (Civ. App.   1949,   error   ref. ).
Proponents    concede such proposals   to be inconsistent with these pro-
visions,   but insist that the amendments  to Article 5.09 and the addition
of Articles   5.77 - 5.79 in 1953 contemplate   and permit just such
methods.

         The 1953 legislation   referred to, Acts 1953, p. 64, amended
portions of Subchapters A (pertaining to automobile     rate regulation)
and D (pertaining to Workmen’s       Compensation Insurance rate regula-
tion) of the Insurance Code and enacted three new sections,      1, la, and
lb? which apply to and supplement not only the Automobile       and Work-
men’s Compensation      rating laws, but the Casualty rating laws contained
in Subchapter B of the Code.      Art. 5.77; Sec. 11, Acts 1953, p. 64.

        Article 5.09 forbids insurance    companies from making or per-
mitting “any distinctron or discrimination   in favor of the insured having
a like hazard,  in the matter of the charge of premiums.    ‘I Since its
original enactment,   this Article has carried a proviso:

                    “provided that nothing in this Act shall be
                  construed to prohibit the modification   of
                  rates by an experience   rating plan designed
                  to encourage the prevention of accidents and
                  to take account of the peculiar hazards of
                  individual risks, provided such plan shall
                  have been approved by the Commissioner.       ”

Acts 1927, p. 373, Sec. 8.    This proviso, however,  was itself               conditioned
on a further proviso that “only one such plan shall be approved                for each
form of insurance hereunder.”     Acts 1927, p. 373, Sec. 8.

        Acts 1937, p. 671, extensively     amended what is now Article      5.01,
incorporating  provisions   dealing with the subject of experience    rating
plans.   No change was made in Article 5.09,      but clearly the power to
author such experience    rating plans rested exclusively    with the Insur-
ance Department    after such amendment by virtue of the following
language of thenAct:

                  “The    Commissioner       shall have the sole and



          * These have been codified by Vernon’s   as Articles   5.77           through
5.79,    respectively, of the Code and will be so referred   to.
                                                                                 -   .




Hon.      Thomas    C.   Ferguson,   page 4   (WW-1005)




           exclusive  power and authority.     . . to determine,    fix,
           prescribe,   and promulgate.   . . rates of premiums       to
           be charged and collected by all insurers.       . . includ-
           ing fleet or other rating plans, designed to discourage
           losses from fire and theft and similar hazards and to
           take account of the, peculiar hazards of individual risks,
           and an experience   rating plan designed to encourage
           the prevention of accidents,   and to take account of the
           peculiar hazards of individual risks,      provided that only
           one such plan shall be fixed or promulgated        for each
           form of insurance hereunder.”        Acts 1937, p. 671,
           Section 1.

          The 1953 Act, with some additional elaboration,     re-enacted
Article 5.01 and Article   5.09 essentially  as they were, but deleted the
restriction   on more than one plan.   In addition, Ar,ticles 5. 77 - 5. 79
were added, 5.77 providing that the, Board is:

                    II. . . authorized and empowered to make or
           approve and promulgate         premium rating plans designed
           to encourage the prevention of accidents,          to recognize
           the peculiar hazards of individuals risks and to give due
           consideration     to interstate as well as intrastate     exper-
           ience, of such risks for Workmen’s         Compensation,      Motor
           Vehicle and other lines of Casualty Insurance to be appli-
           cable separately      for each class of insurance,      or in
           combination     of two crmom      of such classes.     Such plans
           may be approved on an optional basis to apply prospec-
           tively,  or retrospectively,      and may include premium
           discount plans, retrospective        rating plans or other
           systems,     plans or formulas,     however named, if the
           rates thereby provided are not excessive,           inadequate or
           unfairly discriminatory.         The Board shall also have
           authority to make or approve and promulgate            such
           reasonable     rules and regulations     as may be necessary,
           not in conflict with provisions      of this Act. ” Acts 1953,
           53rd Leg.,     p. 64, ch. 50, sec. 1.

Article    5.78    provides:

                   “Before the Board of Insurance Commissioners
           approves class rates or rating plans, due consideration
           shall be given to all relevant factors to the end that no
Hon.      Thomas    C.   Ferguson.   page 5   ,(WW-1005)




           unfair discrimination   shall exist in class rates or rating
           plans as they may affect risks of various size.”     Acts
           1953, 53rd Leg.,    p. 64.,  ch. 50, sec. la.

Article     5.79   provides:

                    “If for any form of casualty insurance affected
           by this Act more than one rating plan is approved for
           optional selection and application,   the selection of the
           plan shall rest with the applicant. ” Acts 1953, 53rd
           Leg.,   p. 64, ch. 50, sec.   lb.

          We shall deal with two questions.     The first is whether the 1953
amendments     permit companies to file their own plan in this field, as
suggested by one of the alternate proposals       in your letter.   Proponents
of an affirmative   answer to this question suggest that the use, by Acts
1953. p. 64, of terminology     permitting the “approval”     of rating plans
indicates that companies may initiate their own rating plans, which the
Board may approve or disapprove,         an admitted departure from the pre-
vious practice.     They also point to the deletion of the restriction    formerly
present in both Article 5.01 and Article 5.09 against more than one such
rating plan as further evidence that the legislation      contemplated   company
proliferation   of multiform  rating plans.    The result would authorize each
company to adopt its own form of automobile merit rating.

        For several reasons,   it is our opinion that the 1953 legislation
does not permit such far-reaching    changes,   and that, as before,   only
the Board may initiate the rating plans mentioned in the, Articles.

        First,   the amendment of 1953 was drawn recognizing     the distinc-
tive terminology    of three separate ratmg laws, each of which the amend-
ment was to complement.      * The Automobile   and Workmen’s   Compensation
rating laws speak in terms of the Board fixing and promulgating      rates**
while the Casualty rating laws vest the Board with authority to “approve”
rates.  Hence, it was quite reasonable    for the Legislature in its 1953
enactment to use language that fitted all three laws.

           Also    the term    “approve”   may encompass   rating procedures



       * Automobile,     Art. 5. 01 - 5. 12, Casualty,       Art.   5. 13 - 5.51,
Workmen’s   Compensation,      Art. 5.55 - 5.68.
     ** Articles   5.01,   5. 55
Hon.   Thomas   C.   Ferguson,   page 6   .(WW-1005)




authored by the Board and is not limited to approval of proposals       initiated
by companies.     In everyday conversation,    rates fixed and promulgated      by
the, Board are often referred    to as Board “approved”    rates, and indeed
the Legislature   has followed this same convention.      Examples   of such
usage appear throughout the Automobile       and Workmen’s     Compensation
rating laws, but perhaps the most convincing usage appears in Article
5.03,   wherein companies writing automobile      insurance are required to
use the exact rates “approved”      by the Board.   There can be no doubt
that the reference   to Board f’approved” rates is to the rates actually
fixed and promulgated     by the Board for all companies in accordance      with
Article  5. 01.

        The suggestion that the use of the term “approved” permits      com-
panies to use their individual merit rating systems was met and countered
in Gibbs v. United States Guarantee Co.,      supra, arising under the
Casualty rating law.   There the court held that even though the law spoke
in terms of companies    “filing ” their own rates subject to Board “approval”
the Board not only had the authority to fix absolute rates,    but must do so.

        Nor do the provisions    of Article 5.09 referred    to above permit
companies    to institute their own versions   of rating plans.   The language
of the proviso in question authorizes     nothing -- it simply purports to
be interpretive   of the scope of the balance of the: enactment.

         As pointed out above, Article 5. 09, since its origin, has spoken
of Board “approval”     of modifying rating plans and it is clear that the
reference   to approval is, as in Article 5.03,      to Board-authored    plans
and that the language of the proviso is controlled by Article 5.01,          plac-
ing exclusive   authority to promulgate      rating plans in the Board.     There
is nothing to indicate that in the amendments        of 1953, the Legislature
intended to use the term “approved”       in Article 5. 09 in any sense
different from that previously     assigned.

         Finally on this first point, the 1953 Act re-enacted      Article 5.01,
which, as before,    states the central theme of automobile      rate regula-
tion -- uniform rates.     It is difficult to believe that the Legislature
intended to tamper with the previously-given         exclusive authority of the
Board to author such plan in view of the following language re-enacted
into Article 5.01 by this measure.

                 “The Board shall have the sole and exclusive power
        and authority,  and it shall be its duty to determine,   fix.
        prescribe,   and promulgate.   . . any rating plans designed
Hon.   Thomas   C.   Ferguson,   page 7    (WW-1005)




        to encourage    the prevention    of accidents.   ”

        Nor was there any intent to change the basic mechanisms     of
rate regulation in any of the three fields touched by the 1953 Act.
The main and predominant purpose of this legislation    was to make
clear and to confirm the authority of the Board to permit retrospec-
tive experience  rating plans.  This is made clear from the history
of the case of Oil Well Drilling Co. v. Associated, Indemnity Corp.,
153 Tex. 153, 264 S. W. 2d 697 (1954. ).

         In 1943, then Board had promulgated      what was known as a
retrospective    rating plan applicable to Workmen’s      Compensation
Insurance policies.     Premium    rates in this field are fixed and pro-
mulgated by the Board, essentially       in the same manner as automobile
rates. * Under this plan, which was applicable to all companies writ-
ing this form of insurance,    the insured or policyholder     bad the option
of electing whether to come under the retrospective        plan, as well as
the privilege  of electing between three alternate versions      of retrospective
rating.

         In March of 1952, a Dallas County District Court in the above-
mentioned case rendered a judgment which, in effect, held that the
retrospective   rating plan was invalid.  In the very next session of the
Legislature,   H. B. 32, which culminated in Acts 1953, p. 64, was
introduced.    When the substantive language of the Act is considered,
it is apparent that the principal purpose of the Act was to confirm to
tne Board this authority it previously   believed it already possessed.
That the Act was to some measure prompted by doubts caused by the
Dallas decision is seen in the language of the emergency     clause that:

                 “The fact the present rating laws possibly do
        not provide adequate authority in the Board of Insur-
        ance Commissioners       to permit it to allow policyholders
        in Texas the full benefit of their own experience     as is
        now commonly done in other jurisdictions,        thus it mak-
        ing it difficult if not impossible   for many business
        concerns to obtain necessary       coverage at proper rates.    . .
        ( created the emergency).     ‘I



        * For an explanation of retrospective  rating and its history,
see the opinion of the Supreme Court in the Oil Well Drilling Co. case
and the opinion of the Court of Civil Appeals,  258 S. W. &l 523.
Hon.   Thomas   C.   Ferguson,    page 8 ,(WW-1005)




        At this point we have concluded that the first proposal in your
letter, if given effect, would be in violation of the statutes of this State,
for only the Board has authority to “fix and promulgate     rating plans”
and for the additional reason that the companies are not permitted to
adopt their own individual rating plans in the automobile     insurance field.

          The second proposal,       “Board prescription    and promulgation    of
a rate modification     plan, ” envisions that the companies      “be given the
option of accepting or rejecting”       such a plan.    No authority for such a
proposal can be found in the articles        devoted exclusively    to automobile
insurance    rate regulation,    and indeed seems to be prohibited by such
articles;   in particular,    Articles   5. 03 and 5. 09.  Proponents    of such a
proposal must and do rely on the language of Articles           5.77 - 5.79
referring   to optional use of rating plans.       In our opinion the option
permitted by such articles       cannot rest with the companies.

          The Legislature     specifically   provided that the option of selec-
tion must rest with the “applicant” and this can only mean the person
applying for the insurance.        Proponents     reason that the term “appli-
cant” refers to the insurance        company in the sense that they are
applicants seeking approval of a rating plan of the type described             in
Article 5.77.      Aside from the fact that we have hereinabove          held that
no such procedure       is permissible     under the automobile    rating law,
it is difficult to understand what meaning the Legislature           intended to
imply to Article     5.79 if proponents’ reasoning       be applied.   Assuming
the companies were authorized to file their own rating plans,              subject
to approval.    there is no reasonable       explanation for the Legislature
repeating what would in this premise be obvious -- that the company
has the “option” to determine         whether it will take advantage of the
privilege   of filing their own rating plan.

         If some portions of Article 5.77 did permit company-authored
rating plans, the, at least,    equal right of the Board to author such
plans must be conceded.       Ignoring   Article 5.01 which provides that
the Board has exclusive     authority to promulgate    rating plans and which
was re-enacted     by the very measure     creating Article 5.77,  Article
5.77 itself confers this very authority wherein it states that the Board
is authorized to “make.     . . and promulgate”    premium rating plans.
With respect to Board-authored       plans, there is no respect in which
the company could be considered        as the applicant and hence, as the
beneficiary   of the option mentioned in Article 5.79.

         But even aside    from   this process   of elimination   approach,    it
.   . .   .




              Hon.   Thomas   C.   Ferguson,   page 9   (WW-1005)




              appears that the term “applicant”      refers to the policyholder.     As
              stated above, the 1953 Act came in the wake of the Dallas District
              Cour~t’s decision overturning     the Board’s retrospective    rating plan
              in Workmen’s     Compensation    Insurance.   The Board had provided
              several plans and in each instance the option of plan selection lay
              with the policyholder.    The optional aspect was a focal point of
              contention in the case.    It is not unreasonable   to assume that legis-
              lation introduced to confirm a power previously       exercised    contem-
              plates that once confirmed,     that power will be exercised     as before.

                       The construction   that we place on the term “applicant” is
              consistent with common usage,for        the person applying for insurance
              is often referred to as an applicant.       The same Legislature    in 1953
              in dealing with Workmen’s      Compensantion     Insurance in a manner
              closely connected with the subject matter of Acts 1953, p, 64, used
              the terms “policyholder”     and “applicant” interchangeably,      Acts 1953,
              p. 716, sec. ,l (Art. 5.76).     The provisions    of Articles 5.77 - 5.79
              complement     the Workmen’s    Compensation     rating laws in the same
              manner as the automobile      rating laws.    Sec. 2 of Acts 1953, p. 716,
              in amending Article    5. 65 relating to the regulation of Workmen’s
              Compensation     premium rates,     expressly   uses the term “applicant
              for insurance.   ”

                      Finally, your department has uniformly and without challenge,
              since the passage of Acts 1953, p. 64, promulgated    optional rating
              plans in the automobile and Workmen’s   Compensation     fields,  which
              in every instance place such option with the prospective    insured.

                       In such circumstances,     we deem it appropriate     to apply the
              rule of statutory construction    that the interpretation  of a statute by the
              administrative   agency charged with its enforcement       should be accepted
              if the statute be reasonably    subject to such interpretation    and such inter-
              pretation has been accepted without challenge over a long period of time.
              Texas Employer’s     Ins. Ass’n.    v. Holmes,   145 Tex. 158, 196 S. W.2d
              390 (1946).

                      Some question has been raised whether the Safe Driving Insur-
              ance Plan is a method of “classification”       rather than a rating plan of
              the character   referred   to in Articles 5.09,    5.77, 5.78, and 5.79.
              However,    since we have disposed of your request on other grounds,
              there is no necessity    to discuss this contention.
                                                                          .   ..   -




Hon.   Thomas   C.   Ferguson,   page   10   ,(WW-1005)




                                  SUMMARY

                 Insurance companies may not file for approval
         by the State Board of Iusurance,automobile    merit
         rating plane intended for individual company use, nor
         is the Board authorized to promulgate    such a plan or
         plans for optional use by the companies.

                                         Very   truly yours,

                                         WILL WILSON
                                         Attorney General      of Texas




                                         BY %-~B.(d!!~
                                           Fred B. Werkenthin
                                           Assistant   Attorney General
FBW/pe

APPROVED:

OPINION    COMMITTEE:

W. V. Geppert,    Chairman
R. V. Loftin, Jr.
Elmer McVey
Jack N. Price
Marvin R., Sentelle

REVIEWEDFORTHEATTORNEYGENERAL
BY:
           Morgan Nesbitt
