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The Attorney General of Texas
July 26, 1978
JOHN L. HILL
Attorney General
Honorable A. R. Schwartz Opinion No. H-12 16
Chairman
Senate Jurisprudence Committee Re: Whether article 21.48A,
State Capitol Insurance Code, prohibits a
Austin, Texas 78711 lender from refusing to accept
property insurance policies from
a company.
Dear Senator Schwartz:
You have requested our opinion as follows:
Does Article 21.48A of the Texas Insurance Code
prohibit a lender from refusing to accept property
insurance policies from a company admitted to do
business in Texas when said company’s liability is
guaranteed by Lloyd’s of London when the sole reason
given for such rejection is that the lender does not feel
secure with the language under Lloyd’s guarantee even
though such language is mandated by the State Board
of Insurance?
For the purpose of this opinion, we assume that your reference to “a
company admitted to do business in Texas” means an insurance company duly
licensed to do business in the State of Texas.
Section 2 of article 21.48A provides in part:
(b) No Lender shall directly or indirectly impose or
require as a condition of any financing or lending of
money or the renewal or the extension thereof, that
the purchaser or borrower or his successors, shall
procure any policy of insurance or the renewal or
extension thereof, covering the property involved in
the transaction, from or through any particular agent
or agents, solicitor or solicitors, insurer or insurers, or
any other person or persons, or from or through any
particular type or class of any of the foregoing.
P. 4869
Honorable A. R. Schwartz - Page 2 (H-1216)
Section 3 specifically provides:
Nothing contained in Section 2 hereof shall be deemed to
prevent such Lender from:
. . . .
(c) refusing to accept or approve insurance in any
particular insurer on reasonable and nondiscriminatory
grounds relating to its financial soundness, or its facility to
service the policy; . . . .
We believe that section 2 prohibits a lender from refusing to accept a
property insurance policy written by an insurance company duly licensed to do
business in the State of Texas, except for those reasons and in the manner specified
in section 3 of article 21.48A of the Insurance Code.
We make no determination whether a particular company meets these
criteria.
SUMMARY
Article 21.48A of the Insurance Code prohibits a lender from
refusing to accept property insurance policies from a
particular company except where such refusal is reasonable
and nondiscriminatory as relates to the company’s financial
soundness or its facility to service the policy.
Attorney General of Texas
Opinion Committee
p. 4870