THEAVTORNEY GENERAL
OFTEXAS
AUSTIN 11. -,?EXaS
WVILL WILSON
A-rroBzNEY GENERAL
August 24, 1960
Mr. William A. Harrison Opinion No. WW-913
Commissioner of Insurance
International Life Building Re: May an insurer who has made a
Austin 14, Texas deposit with the State Treasurer
under Article 3.15 of the Code
elect to have its deposit consi-
dered as held under Article 1.10,
Dear Mr. Harrison: paragraph 17 of the Code.
Your opinion request recites that prior to May 8, 1959, domestic
legal reserve life insurance companies were authorized to make deposits
with the State Treasurer under Articles 3.15 and 3.16 of the Insurance Code
only. On that date the Commissioner of Insurance and the State Treasurer
held approximately 56 deposits not having been made under authority of
either of these articles. You state that such deposits were usually made
to enable the depositing insurer to enter a foreign state. The records con-
cerning such deposits carried the word “voluntary” in the space provided
for citing the statute under which the deposit was made. . .
On May 8. 1959, paragraph 17 of Article 1.10 of the Insurance Code
became effective. It specifically authorizes voluntary deposits with the
State Treasurer where necessary to enable a domestic company to do busi-
ness in a foreign state. Since that time, at the election of the depositors,
these “voluntary” deposits previously made have been considered as hav-
ing been made under such Article.
You state that in addition to these voluntary deposits, the Treasurer
holds 27 deposits made, at the option of the insurer, under Article 3.15.
Some of these companies are asserting that these deposits are “voluntary,”
having been made at their option, and also, that such deposits were made for
the purpose of gaining admission to another state.
Consequently, you have asked the following questions:
” 1) May an insurer whose deposit is held under
Art. 3.15 of the Code elect to have its deposit considered
to be held under Par. 17 of Art. 1.10 upon proof that the
deposit was made for the purpose of gaining admission
to another state.?
” 2) If your response to the above ‘question is in
the affirmative, we then request your advice as to whether
the depositing company may redesignate the purpose of the
Hon. William A. Harrison, page 2 (WW-913)
deposit in accordance with Par. 17(a) of Art. 1.10 and
withdraw such deposit upon presentation of satisfactory
evidence that all obligations have been discharged inso-
far as the class of creditors or policyholders appro-
priate to the designation is concerned?”
Article 3.15 reads as follows:
“Any ‘domestic’ company may, at its option, de-
posit with the Treasurer of this State, securities in which
its capital stock is invested, or securities equal in amount
to its capital stock, of the class in which the law of this
State permits such insurance companies to invest their
capital stock, and may, at its option, withdraw the same
or any part thereof, first having deposited with the Treasurer,
in lieu thereof, other securities of like class and equal a-
mount and value to those withdrawn. Any such securities,
before being so originally deposited or substituted, shall be
approved by the Board of Insurance Commissioners. When
any such deposit is made, the Treasurer shall execute to
the company making such deposit a receipt therefor, giv-
ing such description of said stock or securities as will iden-
tify the same, and stating that the same are held on deposit
as the capital stock investments of such company; and such
company shall have the right to advertise such fact or print
a copy of the Treasurer’s receipt on the policies it inay’ ~.
issue; and the proper officer or agent of each insurance
company making such deposit shall be permitted at all
reasonable times to examine such securities and to detach
coupons therefrom, and to collect interest thereon, under
such reasonable rules and regulations as may be prescribed
by the Treasurer and the Board of Insurance Commissioners.
The deposit herein provided for, when made by any company,
shall thereafter be maintained so long as said company shall
have outstanding any liability to its policyholders in this
State. For the purpose of state, county, and municipal tax-
ation, the situs of securities deposited with the Treasurer
by domestic insurance companies shall be in the city amd~
county where the principal business office of such company
is fixed by its charter.”
It can be seen that the deposit therein made is for the protection of
its policyholders in this State. Such statutes are generally held to create
trust funds of the deposits. Texas Fidelity & Bonding Co. v. City of Austin,
246 S.W. 1026. Additionally, by making a deposit under Article 3.15 an
insurer obtains the right to advertise the fact of such deposit on its policies,
Complete protection of the deposit for the policyholders is assured by the
requirements of Article 3.15, that such deposit may not be withdrawn unless
other securities of the same class and of equal amount and value are first
Hon. William A. Harrison, page 3 (WW-913)
deposited in lieu thereof, and that such deposit must be maintained so long
as said company shall have outstanding any liability to its policyholders
in this state. That there are no exceptions to these plain provisions has
been established by Opinions O-5051 and WW-362.
It is unquestionable that some of the insurers making deposits under
Article 3.15 were motivated, to some extent at least, by a desire to qualify
to do business in other states. Opinion O-3855 invites such a course of
action. (That opinion speaks of Article 4739 which, together with Article 4777,
was the predecessor of Article 3.15) However, the opinion is quite plain that
the deposit is subject to all the provisions of such Article. As stated therein:
.1
. . .We think that the above mentioned company
has the right to make the above mentioned deposit provided
said deposit does not exceed the capital stock of said corn-
pany, and, as above stated, the Treasurer is authorized to
receive and accept the same. Whether or not this deposit
fulfills or meets the requirements of the Illinois law is a
matter on which we express no opinion. In other words, we
think that the deposit can be made under Article 4739, supra,
if all the conditions of said statute are complied with regard-
less of the motive of the company which prompts the tender
and deposit. Of course, when said deposit 1s made It 1s sub-
ject
- to a
Paragraph 17 of Article 1.10 was passed in 1959 by the 56th Legislature.
Subparagraph (a) thereof provides for deposits to be made with the State
Treasurer where necessary in order for a domestic company to engage in
business in a foreign state. The company making the deposit has two alterna-
tives. It may designate whether such deposit is made “for the protection of
all policyholders or creditors of the company wherever they may be located”
or “for the protection of the policyholders and creditors of a particular state,
country or province.”
If made with the latter designation, the deposit may be withdrawn
upon filing with the Insurance Commissioner evidence satisfactory to him
that the company has withdrawn from business and has no unsecured liabili-
ties outstanding or potential policyholder liabilities, or obligations in such
other state, country or province. If made for the protection of all policy-
holders, such deposit may be withdrawn after filing with the Insurance Com-
missioner evidence satisfactory to him that the company has no unsecured
liabilities outstanding or potential policy liabilities or obligations anywhere.
Subparagraph (b) provides:
“(b) Any voluntary deposit now held by the State
Treasurer or State Board of Insurance heretofore made
by any insurance company in this State, and which deposit
was made for the purpose of gaining admission to another
I
,, ,
i ..
Hon. William A. Harrison, page 4 (WW-913)
state, may be considered, at the option of such company,
to be hereinafter held under the provisions of this Act.”
The companies of which you speak in your opinion request are seeking
to bring themselves within the purview of the above quoted paragraph in spite
of the fact that their deposits were made under Art. 3.15. This they cannot do.
By the use of the term “voluntary deposit” the Legislature undoubtedly had
in mind the numerous deposits made under no specific statutory authority and
labeled as “voluntary” in the records of the Insurance Department* Pro-
ponents of a contrary interpretation have pointed to the legislative history
of Paragraph 17 of Article 1.10. As originally introduced, subparagraph (b)
thereof prohibited the switching of any deposit “made under the authority of
any statute which requires the holding of such deposit for the benefit of the
policyholders of this state,” obviously referring to Article 3.15. As finally
enacted, this qualification was omitted. We do not believe such argument to
be persuasive. To allow a redesignation tif 3.15 deposits, at least under the
second alternative of Paragraph 17, would unquestionably abi-idge the vested
rights of policyholders of this State who purchased policies during the time
the deposit was held under Article 3.15. Cochrane v. Pacific State Life In-
surance Company, 27 P.2d 196. This is so because when made under 3.15,
regardless of motive (Opinion O-3855) the deposit is by the words of the
Article for the protection of Texas policyholders. When redesignated for
the protection of policyholders or creditors of a particular foreign juris-
diction the Texas policyholders would lose their rights thereto. We cannot
read such an intention into Article 1.10, particularly when its wording shows
zealous protection of the beneficiaries of the deposits made thereunder in
that such deposits may not be withdrawn except under the stated conditions.
Our conclusion is reitifbrced by Section 2 of Chapter 157, Acts 56th Leg.,
1959, page 281, which provides:
“Sec. 2. The provisions of this Act shall be cumu-
lative of all other provisions of the Texas Insurance Code,
and shall not affect in any manner any other deposit require-
ment or provlsion of the Texas Insurance Code.” (hmphass
supphed)
Accordingly, in regard to deposits made under Art. 3.15, we answer your
first question in the negative, rendering unnecessary an answer to your second
question.
Turning now to deposits made under the last paragraph of Article 8.05,
we see that such deposits by the plairrwording of the statute have no other
purpose than the gaining of admission to another state, and can be withdrawn
if the company ceases to do business in such other state and has no outstanding
unsecured liabilities therein. These provisions are to the same effect as
paragraph 17 of Article 1.1.0 and hence, no vested rights could be affected by
allowing a redesignation. They would, therefore, come within paragraph 17,
Article 1.10, sub-paragraph (b).
Hon. William A. Harrison, page 5 (WW-913)
SUMMARY
Deposits heretofore made under Art.
3.15 of the Insurance Code may not be rede-
signated as having been made under paragraph
17 of Art. 1.10. Such a redesignation. my .b@
made of deposits heretofore made under Art.
8.05.
Respectfully submitted,
WILL WILSON
Attorney General of Texas
RVL/pe
APPROVED:
OPINION COMMITTEE:
W. V. Geppert, Chairman
Phocion S. Park, III
W. 0. Schultz
Ben Harrison
REVIEWED FOR THE ATTORNEY GENERAL
BY:
Leonard Passmore