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The Attorney General of Texas
December 31, 1982
MARK WHITE
Attorney General
Hr. William P. Daves Opinion NO. Mw-564
SuDreme Court Building
Chairman
P. 0. Box 12548
Austin. TX. 78711.2548
State Board of Insurance Re: Solicitation of insurance
5121475-2501 1110 San Jacinto
Telex 91OlS74-1367 Austin, Texas 78786
Telecopier 512l4750266
Dear Mr. Daves:
IS07 Main St.. Suite 14M)
Dallas. TX. 752064709 You ask whether any of three sample letters from lending
214/742%944 institutions to borrowers reminding them to renew their hazard
insurance policy constitutes solicitation of insurance in violation of
articles 21.02, 21.02-l. 21.14, section 4 and 21.48A. section 2(c) of
4824 Alberta Ave.. Suite 160
El Paso. TX. 79905.2793 the Texas Insurance Code.
9156333484
A summary of the factual context in which these letters are
written is helpful. It is our understanding that it is common
220 Dallas Ave.. Suite x)2
practice for a lending institution to require that a borrower obtain
Houston. TX. 770026936
713m- and maintain hazard insurance coverage on the collateral for a loan as
a term of the written loan agreement. Such an insurance contract is
generally negotiated for a one-year term while the loan agreement is
806 Broadway. Suite 312 generally for a term of fifteen, twenty or thirty years. We
LubboctC.TX. 79401.3479
understand further that the borrower is required to provide the
SOM47.5238
lending institution with a copy of the hazard insur,ancecontract and
that the lending institution generally sends out letters to the
43M) N. Tenth. Suite B borrower to remind him to renew his hazard insurance coverage to
McAllen. TX. 78501-1685 insure continuous coverage as required by the loan agreement. We are
51216824547
advised that insurance agencies may be owned and operated by the same,
or substantially the same, individuals who own and operate the lending
200 Main Plaza, Suite 400 institution that sends out such letter. Your inquiry relates to the
San Antonio, TX. 78205-2797 specific language used in these letters reminding the borrower to
512m5-4191 renew his'hazard insurance coverage. In particular, you ask whether
certain language used in three sample letters violate provisions of
An Equal Opportunity/ the Texas Insurance Code which prohibit solicitation of insurance
Aftirmative Action Employer without a license.
At the outset, we should note that a financial institution cannot
be licensed as an insurance agent because it is not "actively engaged
in the soliciting or writing of insurance from the public generally"
as required by section 5 of article 21.14 of the Texas Insurance Code.
Thus, a lending institution is prohibited from engaging in acts of an
insurance agent, such as soliciting insurance.
p. 2073
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. . Mr. William P. Dave6 - Page 2 (MW-564)
Various provisions of the Texas Insurance Code prohibit the
solicitation of insurance on behalf of any insurance company without
the proper license from the State Board of Insurance. Ins. Code arts.
21.02; 21.02-l; 21.14. However, the code does not define the term
~solicitation."
Article 21.48A of the code, entitled "Prohibiting Certain
Practices Relating to Insurance of Real or Personal Property," is
directed to landers who require insurance on real or personal property
constituting collateral for loans. Section 2(c) states:
(c) No Lender shall~use or permit the use of any
of the information taken from a policy of
insurance insuring the property of a Borrower for
the purpose of soliciting insurance business from
the Borrower, or make any of such information
available to any other person for any purpose,
unless such Lender has first been furnished
specific written authority from the Borrower
permitting or directing such particular use or
disclosure; provided, however, this paragraph
shall not prevent a Lender who is a licensed local
recording agent from selling insurance to a
Borrower.
We would note that the proviso about local recording agents does
not apply to lending institutions. Section 1 of article 21.48A of the
code defines "lender" as "any person, partnership, corporation,
association, or other entity, or any agent, loan agent, servicing
agent, or any loan or mortgage broker." Thus, while a lending
institution is a "lender," it nonetheless is disqualified as an
insurance agent, which includes local recording agent, for the reasons
discussed above.
The Texas Insurance Code does not define the word "solicit".
Words that are not defined in a statute are given their ordinary
sinnificance unless thev are words of art or words connected with a
paiticular subject mat&r. V.T.C.S. art. 10; National Life Company v.
Stegall. 169 S.W.2d 155, 157 (Tex. 1943); Willingham v. Hagerte, 553
S.W.Zd 137. 139 (Tex. Civ. App. - Amarillo 1977, no writ). The word
"solicit" is one of c-on usage and its meaning is simple and not
subject to any peculiar usage. Coutlakis v. State, 268 S.W.2d 192.
198 (Tex. Grim. App. 1954); Page v. State, 492 S.W.Zd 573 (Tex. Grim.
App. 1972). In Attorney General Opinion VW-551 (1959), this office
addressed the authority of the State Board of Horticians to promulgate
rules governing solicitation, and related questions. There it was
stated:
p. 2074
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Mr. William P. Daves - Page 3 (MW-564)
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‘Solicit’ is defined as: ‘To ask for with
earnestness; to make petition to; to endeavor to
obtain; to make or excite to action; to appeal to;
or to invite.’
Black’s Law Dictionary, 1248 (5th ed. 1979).
Applying these definitions to the solicitation of insurance, we
conclude that any person, including a financial institution, who
requests, asks or appeals to or recommends or entices a borrower to
renew his hazard insurance policy with a particular insurance company
would be soliciting insurance and would be held to be an agent of that
company under article 21.02 and 21.02-l of the Texas Insurance Code.
Although the letters of the lending institutions recommend an
insurance agency rather than an insurance company, articles 21.02 and
21.02-l apply under the express terms of the statutes which provide
that any person who does or performs any other act or thing in the
making of any contract of insurance for or with any such insurance
company other than for himself shall be held to be the agent of the
company. The act of recommending an insurance agency is an act in the
making of an insurance contract. Moreover, an insurance company. as a
corporate body, can act only through its agents, and it expressly
authorizes and appoints its agents to enter into insurance contracts.
Turning now to the specific letters about which you inquired, we
believe that part of Trample 1 is permissible, hut Examples 2 and 3
are prohibited by the Texas Insurance Code.
The pertinent language of Example 1 is:
We fully recognize your right,of choice of agent
or carrier in selecting hazard insurance on your
dwelling. However, since there is a common
interest between yourself and our firm in seeing
that your hazard insurance is in a proper form and
sufficient in an amount to cover your valuable
home in the event of loss, we would be pleased to
assist you in obtaining this insurance coverage.
If you desire that we procure hazard Insurance for
your dwelling or have quotations provided to you
for such insurance. it will be necessary for you
to consent to our releasing the information which
we have in your insurance file. This consent can
be given by signing the appropriate space below
and returning this letter in the enclosed
self-addressed envelope.
p. 2075
. .
. 1 Hr. William P. Daves - Page 4 @iW-364)
We believe the second paragraph of Example 1, if sent alone,
would be permissible in light of article 21.48A. section 2(c), which
allows the lender to use information taken from an insurance policy
for the purpose of soliciting insurance business after obtaining
written authority from the borrower-policyholder. This statutory
provision clearly envisions and expressly provides for coannunications
such.as this. However, we believe the second sentence of paragraph
one constitutes an invitation to assist the borrower in securing
coverage and thus constitutes the solicitation of insurance. We
cannot determine from the information presented whether this
solicitation is made on behalf of an insurance company. If, however,
this solicitation is in fact made to benefit an insurance company, the
lender will violate the Insurance Code provisions under discussion.
The pertinent language of Example 2 is:
For your renewal we recommend you contact [name of
insurance agency]. In many cases, this agency can
offer you more coverage for less premium than you
are now paying.
Please call [name of insurance agency] during
office hours, 8:30 A.M. until 5:30 P.M; at [phone
number of insurance agency]. Ask for [name of
agent] or [name of agent].
We believe Example’2 is prohibited by articles 21.02 and 21.02-l
of the Texas Insurance Code because it recommends that the borrower
renew his hazard insurance policy through a particular agency.which
sells insurance on behalf of an insurance company. It also entices a
borrower .by stating that the agency can offer “more coverage for less
premium.” This language treats the insurance agency as an insurance
company because only a company can provide coverage. Moreover,
Example 2 asks the borrower to call the insurance agency, and directs
him to particular agents within the agency. Also, Example 2 can be
considered to be “perform[ing] any other act or thing in the making or
consummating of any contract of insurance.”
The pertinentlanguage of Example 3 is:
It is our reconrmendationthat you use [name of
insurance agency) as your insurance agent. It has
been found that in many instances insurance
coverage can be purchased for less money than you
are paying now. [name of insurance agency] can be
contacted during office hours at [phone number of
insurance agency]. Their address is [address of
insurance agency].
p. 2076
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I
Mr. William P. Dave6 - Page 5 (MW-5841
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Example 3 constitutes a solicitation of insurance in violation of
articles.21.02 and 21.02-l for the same reasons discussed relating to
Example 2.
SUMMARY
Articles 21.02, 21.02-l. 21.14. and 21.48A.
section 2(c) of the Texas Insurance Code prohibit
a lending institution from soliciting insurance
which includes requesting, asking or appealing to
or recommending or enticing a borrower to renew
his hazard insurance policy with a particular
insurance company or egency. On the other hand,
article 21.48A. section 2(c) allows a lending
institution to request written authorization from
a borrower to release information from the
borrower's file to an insurance agency for the
purpose of soliciting insurance.
Very truly yours.
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistan: Attorney General
Prepared by Yolanda McKeeman
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, .Chairman
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Jon Bible
Rick Gilpin
Patricia Hinojosa
Yolanda McKeeman
Jim Moellinger
Bruce Youngblood
.
p. 2077