AUUTXN ~,.TICXAS
JdBN BEN SX$RPPEMD
Ar-roxaNmY
"~rmrr,. October 11, 1954
.’
Hon. Garland A. Smith, Chairman
Board of Insurance Commissioners
Internat ional Life Building
Austin, Texas
Opinion Nob S-143
Re: Legality and rffaot of various
provlslanr In a tarm lift3 in-
surance policy lesued under the
whole sale plan.
Dear Mr. Smith:
The pertinent parts of your request for our opin-
ion read as follows:
“From time to time life insurance cdmp~les
submit policy forms to this Department for fll-
ing which are to be issued under what is known as
the Wholesale Life Insurance Plan (sometimes
called Employee Life Insuranoe Plan) e This plan
has been In use in Texas for some years and wa.6,.
evolved to extend administrative expense savingg, .
possible in group coverage, to individual poli-
cies issued under individual underwriting stand-
ards to groups of employees too small to be ellgi-
ble for group coverage under Code Article 3.500.
“In our review of such wholesale life insur-
ance forms submitted to this department for filing,
certain questions have .arisen that need to be re-
solved, and we respectfully request that you give
us your opinion on these questions which ‘are set
forth as follows:
“lo Must an individual term life insurance
policy provide coverage for .a definite time period
by specifying a number of years, months weeks or
days, or may the term of the insurance b e geared to
and measured by the term of the insured’s employ-
ment with a specified employer?
“2 . If an Individual term life insurance pol-
icy may provide coverage for an indefinite, term’
-
Hon. Garland A. Smith, page 2 (S-143)
conditioned upon cessation of employment,
should such a policy provide that the insured’s
coverage will terminate at the next premium
due date subsequent to termination of employ-
ment, or may such a policy provide that cover-
age will cease immediately upon termination of
employment?
"3 * If an individual term life insurance
policy is issued on the one year renewable
term plan, or on the one month renewable term
plan, may it provide that it is renewable only
at the option of the insurance company, or must
it be renewable during a specified period of
time following its date of issue at the option
.of the insured only?
"4. May an individual term life insurance
policy be issued that provides for the payment
of premiums only by the employer or some other
specified person or firm, or must the policy
provide for payment, of premiums without specl-
fying the person or firm that will make the pay-
ments.
II
c 0~ ‘ Obviously our concern in this mat-
ter grows out of our understanding of Article
3.50 of the Texas Insurance Code which was con-
sidered by the Court in Board of Insurance Com-
missioners:~~ Great Southern Life Insurance
Company, 239 S,W.2d 803,~ There has been no es-
tablished ,departmental practice with respect to
the inquiries enumerated above, but it does seem
that, the intent of Article 3‘50 would be substan-
tially defeated if all the elements of group
insurance can be embodied in individual policies’
sold under a @whole sale plan. rll
In answering the four specific questions above 9 we
are assuming you are dealing with a “Wholesale Life Insurance
Plan” which Is not in violation of any of the provisions of
the Texas Insurance Code.
Individual life insurance policies are required to
contain certain specific provisions enumerated in Article 3.44
of the Insurance Code, and are also required to exclude certain
provisions enumerated in Article 3>45 of the Code, Group life
insurance policies are required to conform to certain standards
Hon. Garland A. Smith, ,page 3 (S-143)
outlined in Article 3.50. Individual contracts of life
insurance may contain provisions and conditions agreed
upon between the parties to the contract and which are not
in conflict with the law. Hatch v. Ta 145 Tax. 17,
192 S;W.2d 668 (1946); v . Metrooo itan Life m-
au e omwax 77 S.W.2d !ex%i;.App.
cticut Eeneral Li Insurance omuu
Tex%iv.App. 1936, eri& ref .I.
Our answers to your questions in the four propo- 1
sitions above are not in conflice with Articles 3.44 and
3.45, supra and it is our opinion therefore, that insofar
as an indivjdual life insurance po i icy Is concerned under a
valid “Wholesale Plan”, the answers are:
1. Ordinarily an individual life insurance
policy provides coverage for a definite time
period by specifying a number of years, months,
weeks or days, but it may provide a term of in-
surance geared to and measured by the term of the
insured’s employment with a specif led employer.
2. If an individual term life insurance pol-
icy provides coverage for an indefinite term con-
ditioned upon cessation of employment, such policy
may provide either that coverage will terminate at
the next premium due date subsequent to termination
of employment, z, that coverage wi.11 cease imme-
diately upon termination of employment.
3. An individual term life Insurance policy
issued on a one year or on a one month renewable
term plan may provide either that it is renewable
only at the opt ion of the insurance company Q&
that it is renewable during a specified per 1 od of
time following its date of issue at the option of
the insured only.
4. An individual term life insurance policy
may be issued that provides for the payment of
premiums’.only by the employer or some other specl-
fied person or f lrm, or it may provide for payment
of premiums without specifying, the person or firm
that will make the payments.
tde, is titled:
and provides:
Hon. Garland Aa Smith, page 4 (S-143)
“Except as may be provided in this kticle,.
it shall be m to make a contract of life
insurance covering a group in this State- . * .@I ; .
(Emphasis supplied.)
It is apparent that the Legislature direoted its 1-r<
prohibitions against any plan, scheme or system of life
insurance which covers a group of persons in any manner WI-
der policy provisions not in harmony with Article 3a5Q9 as
amended o supra o
Paragraph (3) of Section 1, Article 3.50’ subchap- ’
ter I?, of Senate Bill No. 236, Chapter 491, Acts 0% the 52nd
Legislature R. S 19513 was amended by Acts .53rd Legisla-
ture;,. R,S, f953, EL, 345, p., 853, and this amendment reduced
the ‘number of insureds necessary to be eligible for the
‘“group plan” from a minimum of 25 to a minimum of 15 and it
also allowed incorporated cities, towns or villages 4 o par-
ticipate in a “group plan.”
In determining whether or not a Wholesale Life In-
surance Plan” is not in fact a “Group Plan” as defined in
characteristic of group insurance is the willingnessof the
insurance company to waive its right to select who shall be
insured for a “spread of risk” which it receives through a’
“.., guarantee that a certain percentage of one class of persons
would be covered,
,
4 Individual life insurance p’olicias may
“-,,provide for a term of insurance to end either
at a specified date or at termination of
’ specified employmen$ or at due date of next
+~premium subsequent to termination of such em-
.&.iloyment , etc 0, and an individual one year ;
‘”,term life policy may provide for renewal .at “’
option of the insurer, and such policy may
specify who is to pay the premiumso In deter-’
mining whether OP not a Wholesale Life Insup-
ance Plan” is not in fact a “Group Plan” as,
..
,
Hon. Garland A. Smfth, page 5 (S-143)
set out In Article 3.50, as amended you may
*. .
ge guided by the opIni;;einBoard oh rp;iur- .
ners ve at Sou-
:Insurance Cornoat& 150 Tex. ~58~ 239 S&2d
;.803(1951.1.
APPRbvq: Yours very truly,
Phillip Robinson JOHN BFiNSRFiPPEBD
Reviewer
J. C. Davis, Jr.
Bevlewer
Robert S. Trotti
First Assistant
BGR:wb