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WIILL WIlLSOnl June 11, 1958
AT-x-GRNEY GENERAL
Hon. Zollle Steakley Opinion No. WW-447
Secretary of State
Austin, Texas Re: Whether a domestic OP.
foreign corporation may
Hon. William A. Harrison qualify in Texas to act
Commissioner of Insurance as the general agent of
Austin, Texas an, insurance company
other than a life lnsur-
Gent 1 emen: ante company.
You have each submitted requests for the opinion of this
office as to whether a domestic or foreign corporation may~quallfy
in Texas to act as the general ~a,gent of an insurance company other
than a life Insurance company. The Secretary of State has also
submit ted two purpose’ c,lauses of proposed corporations which
desire to do business in Texas as such general agents; We have
also received, and carefully.consldered briefs of attorneys repre-
senting corporations ,havlng an interest in the question involved.
The basic question to be determined is as follows:
“Under the .provlslons of the Texas Business Corporation
Act, may a corpo’ratlon be formed or may a foreign corpora-
tion be admitted to do business in Texas to act as the
general agent for an insurance company other than a life
insurance company?”
The opinion request of the Commissioner of Insurance refers
to certain opinions by prior Attorneys General, specifically
referring to Opinion No. O-1931 dated February 14, 1940, by
Honorable Gerald C. Mann, and Opinions No. 063250 dated May 14,
1941, and O-7302 dated August 19, 1946, by Honorable Grover
Sellers, all of the oplnlbns being addressed to Honorable Marvin
Hall, Flre’lnsurance Commlsjloner of the. Board of Insurance
Commissioners. All of these opinions specifically hold that a
general agent’s license could not be granted by the Board of
Insurance Commissioners to a corpcratlon on account of the
statutory provlalons then in force and dffect, and which are still
in force and effect, being Article 2105, and Section 3, Article
21.14, Texas Insurance Code. Attorney General’s Opinions Nos.
O-3250 and O-7302 also held that absent the provisions prohlblt-
lng a corporation to act as agent for an insurance company,
including a life insurance company, there was no statutory
provlsl,on in the general corporation laws of Texas which would
permit the creation of a domestic corporation to act as general
Hon. Zollle Steakley
Hon. William A. Harrison, page 2. (WW-447)
agent for an insurance company of any description, or for’ a
foreign corporation to secure a permit to do business in Texas
for that purpose. All of ttie opinions of the Attorneys General
were rendered prior to the effective. Dante of the Texas Business
Corporation Act, and therefore if the provisions of the Texas
Business Corporztlon Act did not enlarge the purposes for which
such a corporation could be formed, or for which a foreign
corporatlop might receive a certificate of authority to conduct
such business in Texas, then, of necessity, the holdings of the
prior Attorneys General in the opinions above referred to should
be followed.
Article 2.OI-B(1) of the Business Corpcratlon Act speclfl-
tally provides that no corporation may adopt or be organized
under or obtain authority to transact business in this State under
the act if any one or more of.lts purposes for the transaction of
business in this State is expressly prohibited by any law of this
State.
Article ,21.02 of the Insurance Code provides that ,any person
who solicits insurance on behalf of any lnsur,ance company or who
takes or transmits other than for himself any application for
insurance to.or from such company, or who shall receive or
deliver a policy of insurance of any such’ company, or who shall
examine or inspect any risk or receive or collect or transmit
any premium of insurance, or make or forward any diagram of any
building or buildings, or do or perform any other Let in the
making or consummating of any contract of insurance for or with
such insurance company, or who shall examine. into or adjust any
loss for any such insurance company, whether any of such acts
shall be done at the request or by the employment of such lnsur-
ante company; shall be held ‘to be the agent of the company for
which the act is done. Article 21.05 provides that no corpora-
tion shall be licensed or granted a certificate of auth~orlty ads
the agent or representative of any life insurance company who in
any manner places life ~insurance, poIlc,ies or contracts in Texas.
Article 21.14; Section 1, provides that “Insurance agents, as
that term is defined, in the .laws of this State, shall for the
purpose of this article be divided into two classes: Local
Recording Agents and Sollcltors.w. Section 3, Article 21.14,
provides specifically that *‘Th.e Board shall not issue a license
to a corporation.”
The Texas Insurance Code does not specifically define the term,
“general agent”, nor are any references to a general agent to
be found therein except lnSe&lon 20(d), Article. 21.14, which
provides that “any General Agent or State Agent or Branch Manager
representing an admitted and licensed insurance company or
carrier, or insurance. c’ompanles or carriers, in a, supervisory
capactty” shall be exempt from all provisions of Article 21.14.
It,may~be noted that although the duties of a general agent are
not specifically defined, neverthele.ss, the -words,“representlng
Hon. Zollle Steakley
Hon. Wllllim A. Harrison, page 3, (W-447)
an admitted and licensed insurance company:’ or carrier. . .
in a supervisory capactty” would definitely limit the authority
of such general agent to act for the insurance company or
carrier in tge supervision of the insurer’s activities.
Article 21.14 lncorpa’ates by reference the provisions of
Article 21.02, slrce it specifically refer& to the term 'finsUrItnCe
agents, as that term is defined in the law of this State”. Art lcle
21.14 provides generally for the licensing of ,a,11 insurance agents
representing lnsurance~companles or carriers other than life
insurance companies, and, Section 20 exempts certain classes of
persons who perform certain of ,the functions of an lnsur&nce agent
as defined in Article 21.02 from obtaining such license. In
addition to exempting a general agent or State agent or branch
manager representing an insurance company in a supervisory capa-
city, it is not necessary for an actual full-time home office or
salaried traveling representative of an insurance company licensed
to do business in Texas to have a license. Any attorney-in-fact
or traveling salaried representative of a reciprocal or lnter-
insurance exchange doing buslness?ln Texas is also exempt from the
necessity of obtaining ‘a license, as are adjusters of losses
and inspectors of risks, and attorneys in fact for an organization
doing an insurance business under .the Iloyds Plan. Sub-division
(f) of Sect ion 20, however, specifically exemptsall incorporated
and unincorporated mutual insurance compan.lss and their agents or
representatives operating under the authority of Chapters 16 and
17 of the Insurance Code, and sub-division (g) exempts, in toto,
all members, agents, employees, or representatives of any county
or farm mutual insurance company exempted under Chapters 16 and
17 of the Cdde. The conclusion must therefore be drawn that the
omission of the word “corporation ” from the exemption from obtaln-
lng an insurance agent’s license under the provisions of Article
21.14, which is extended to a general agent, special agent, or
branch manager, acting in a supervisory capacity for an insurance
carrier, does not necessarily constitute a legislative authorlza-
tlon~ or permission for such general agent, special agent, or
branch manager to be a corporation.
One of the purpose clauses submitted to the Secretary of State
as part of the proposed articles of incorporation of a domestic
corporation is as foIl&ss
“To exercise a general supervision or control over the
-.zbCsiness, of one:or more insurance companies .(excludlng life
insurance companies) in this State (but not to operate
insurance companies as such) and to maintain a supervisory
office or offices, with the authority to appoint local agents
or special agents and, in the case of fire, marine and
casualty insurance companles,to receive, record, inspect,
underwrit.e and flle the dally reports from local agents of
the business done by such local agents.
Hon. Zollle Steakley
Hon. William A. Harrison, page 4 (WW-447)
“In general, to carry out any other business in connection
with the foregoing and to have and execute all the powers
conferred by the laws..of the State of Texas upon corpora-
tions formed under the Texas Business Corporation Act and
to do any and all things hereinabove set forth to the same
extent that natural persons might or could do (except that
it may not act as, nor perform the functions of, a llocal
recording agent’ as the latter ,term is defined in the
Insurance Code) .‘I
Another purpose clause which has been submitted to the Secretary
of State by a foreign corporation requesting the issuance of
a Certificate of Authority to transactbusiness in Texas is as
folIows:
“To act as General Agent for admitted and licensed
insurance companies, in a supervisory capacity, lnclud-
lng the right to exercise a general supervision and con-
trol over the business of one or more such insurance
companies in this State, and maintain a supervisory office
or offices, with the authority to appoint local agents or
special agents; to receive, record,-inspect, undeiwrlte
and file the dally reports~ from local agents of the business
done by such local agent, it being expressly provided,
however, that such corporation shall have no authority to
act in any event for an insurance company or carrier author-
lsed__ to transact a life insurance business. Such corporation
shall have such authority, if any, as may lawfully be extended
to it under the provisions of Article 21.38 of the Insurance
Code of Texas.”
It will be noted that the proposed purposes above set forth are,
with certain exceptions hereinafter noted, almost identical. If
the -purpoSe. cfahses:ln~ quest&on?!wer’e’ttmited tom the...phrase, :,“To.
act Lasiganerab agent:f,er onenpermbeergdmd~ted;$nd licensed
insurance companies or carriers in a supervisory capacity”, there
would be no question that such purpose would be a lawful purpose
within the meaning of Article 2.01A of the Business Cor oration
Act since the provisions of Section 20(d), Artlc,le 21.1 e Texas
Insurance Code, specifically except a general agent reprisentlng
an admitted and licensed insurance company or carrier or insurance
companies or carriers in a supervisory capacity from the prohl-
bltlon contained in Section 3, Article 21.14, that the Board shall
not issue a license to a corporation.
Therefore it is necessary to analyze the phraseology of each of
the foregoing purpose clauses in order to ascertain whether all
or any part thereof would authorize a corporation to do or per-
form any of the. functions connected with the issuance of an
insurance POIicy which are specifically described in Article
21.03, supra. While the words, “to act as general agent”, do not
. ’
Hon. Zollle Steakley
Hon. William A. Harrison, page 5 (WW-447)
appear in the purpose clause of the proposed domest lc corporation,
nevertheless, this purpose clause, when construed in its entirety,
clearly authorlees a corporation to act as a general agent for an
insurance carrier or carriers, not only in a supervisory capacity,
but also to perform certain of the functions of such insurance
carrier, which is manifested by the use of the word, “control”,
and therefore the parenthetical phrase (“but not to operate
insurance companies as such) ” does not negative the broad power
of the general agent to exercise control over the functions
specifically referred to later on in the purpose clause.
The purpose clause of the proposed domestic corporation author-
izes a corporate general agent “to carry out any other business
in connection with the foregoing, and to have and execute all of
the powers conferred by the laws of the State of Texas upon
corporations formed under the Texas Business Corporation Act,
and to do any and all things hereinabove .set forth to the same’
extent that natural persons might or could do, . . .I’ with the
exception that it could not perform any of the functions of a
local recording agent as that term is defined in the Insurance
Code. The foregoing does not constitute a statement of the
purpose for which the corporation 1s~ being formed, but 1s a dec-
laration or restatement of the powers granted to any corporation
under Article 2.02 of the Business Corpcratlon Act. Therefore,
the quoted paragraph does not constitute a part of the purpose
clause of the proposed corporation since the powers set forth
therein are possessed by the corporation as a matter of law upon
the granting of its charter.
‘In the purpose clause proposed by the foreign corporation
reqrrkstlng thk issuance of a cert,lflcate of authority there appears
the following sentence:
“Such corporation shall have such authority, if any, as
may lawfully be extended to it under the provisions of
Article 21.38 of the Insurance Code of Texas.”
Article 21.38 contains seven’sectlons which regulate the
writing of insurance by insuring insurance companies or
carriers which. are not authorlied to do business in Texas,
and is too long to be restated here. Section 2 of .the Act
provides, generally, for the licensing of agents thereunder,
and provides that such license may issue “to an agent who
is regularly commissioned to represent one (1) or more
fire, fire and marina, i nland, casualty or surety insurance
companies, licensed to do business in this State, . . . .e.
It is clear that insofar as delegable duties of an
insurance company are concerned, that Article 21.38 princl-
pally regulates the issuance of policies by an insurance
company not licensed to do business in the State by local
recording agents to the general public, such loca.1 recording
.. -
Hon. Zollle Steakley
Hon. William A. Harrison, page 6 (WW-l&7)-
agents being licensed under Artlcle,21.@ of the Texas
-Insurance Code. As previously discussed, h corporation may not,
act as a local reco.rdlng agent. In view of’ the nature of Article
21.38, it is the opinion of this office that the above quoted
purpose clause is deceptive and amounts to less than a full
statement of the corporate purpose intended to’be pursued by
virtue thereof and% therefore vlolat lve of Article 2.01A of the
Business Corporation Act.
It is the opinion of this office that a charter may be
granted to a domestic corporation and a certificate of authority
be issued to a foreign corporation by the Secretary of State con-
taining a purpose clause, ‘to act as general agent for one or
more admitted or licensed insurance companies br carriers, other
than life insurance companies or carriers, in a supervisory
capacity; provided that it may not act as a local recording agent
or solicitor as such terms are defined in Section 2, Article
21.14 of the Texas Insurance Code; and the Commissioner of
Insurance may thereafter lawfully issue a certificate of author-
ity or permit to such corporation in accordance with the provisions
of the Texas Insurance Code.
SUMMARY
A charter may be granted to a~dqmestlc corporation and a certl-
flcate of authority be issued to a foreign cdrporatlon by the
Secretary of State containing a purpose klause, “to act as
general agent for one or more admitted and licensed insurance
companies or carriers, other than life insurance companies or
carriers, in a supervisory capacity,, provided that it may not act
as a local recording agent or solicitor as such terms are defined
in Section 2, Article 21.14 of the Texas Insurance Code”, and the
Commissioner of Insurance may thereafter lawfully issue a certl-
flcate of authority or permit to such corporation for such purpose
in acc,otidance with the provisions of the Texas Insurance Code.
Yours ve?y truly,
Will Wilson
Attorney General of Texas
s/ Fred’ B. Werkenthln
FBW:lm BY
Fred B.. We’rkenthln
APPROVED: Assistant
OPINION CC%UTTEE:
C. K. Richards. Chairman
J. Mark McLaughlin Reviewed for the.Attorney General
Llnward. ‘Shivers By: W. V. Geppert