Untitled Texas Attorney General Opinion

TEE A+IYORNEY GENERAL OF.TEXAS AUETIXN II. TNXAIS October 31, 1952 Hon. Garland A. Smith Caqalty Insurance ConnnlBBloaer Board of Ineurance,Comm$sslonerB Austin lA,,TeF+B. ~.:. @&nlon Np. V-L534 ke: Authority of the Board of Insurance Commlsslon- em to suspend or revoke ,' the'certificates of ll- aensed workmen's compen- sation insurers who refuse to write this insurance Dear Mr. Smith: for eligible applicants. Your request for an opinion reads as follows:, "Section7, of Article 8308,Revised Statutes of Texas (EmployersLiability and WorkmenIs CompensationLaw) provides, 'Any employer of labor in this State who may be s!$ject to the,terms .ofthis 18~ or to the '.,term$:~of the Lon@hol'&nen~!sand Harbor Work- ers' CompensationAct of the United States may become a subscriberto the Association:' "~Asso~latlon~1s the Texas Employers' InsuranceAssociation,as provided for In Sections 1 through 6, of'Article 8308. "The Supreme Court (Co@. of App.) held In the case of Texas Em layers' Ins. Ass% v. U. S. Torpedo.Co.,2I!!S.W.2d 1057, that the Associstionhad no :choice~aB to Its hub-, scribers and.must inBure,eye~ryeligible em- player who apjilledfor compensation lnsur- ante to the Association.~ "Section2, of Arti&le 8309, provides that other companies may Insure subscribers and Imay have and exercise all the rights and powers conferredby thle law on the assocla- tlon created hereby. . . .I "The oonrta have held in Harris v. Traders' & Oeneral Ins. Co., 82 S.W.2d 750; Southern Casualty Co. v. Freeman, 13 S.W.2d 148; Federal UndervrlteraEx- change v. Walker, 134 S.X.26 388; and Capps v. General Accident, FIri8& Life Assur .Corpi, 92 F.Sup. 227, that such other companies also have to vrlte oom- pensatlon lns~ance for,any eligible employer applying for such Insurance. "It has been brought to the attention of the Board of InsuranceCommlssionel'B that Texas Employers InsuranceAssociation and other oasualtp companies chartered or licensed to transact a 1labllltyand accl- dent business in this state, and with per- mlts to write WorionenlsCompensationlnsur- ' ante, have refused, In many Instances,to write such lnsnrance for eligible employers. "The situationvlth reference to the qbtalnlng of Workmen's Compensationlnsur- ance has become serious, and some employers have had to cease operationsor to refuse' to enter Into certain operationsbecause of their Inabilityto procure such coverage. The Board of Insurance Commleslonersaridthe IndustrialAccident Board have had many in- quiries from such employers,asking how they might obtain the needed Insurance. "Article1.10, of the Texas Insurance Code, Section 1, Bets otitthat one of the duties of the Board Is to 'see that all laws respecting Insuranceand Insurancecompanl?,s are faithfullyexecuted.' "Section7 of this Article 1.10, providea that, 'The Board shall suspend the entire business of any company of this State, and the business althin this State of any other com- pany, during Its non-compliancevlth any po- vision of the laws relative to Insurance,or vhen Its business is being fraudulentlycon- ducted; by suspendingor revoking the certlf- lcate granted by It.' Hon. Carland A. Smith, page 3 (V-1534) "The Board desires your opinion as to whether refusal by a licensed insurer to write Workmen's Compensationinsurance for an eligible applicant constitutesnon- compliancewith the Insurancelaws referred ,toabove; and.vhether the Board, where such refusal Is found~bg It after notice, and hearlng,~~maysuspend the entire business o? such refusing company by suspendingor re- voking the certificategranted to lt'bg the,Board." The cases aivlna effect to the rule announced In Texas &sployers'~InsTAs& v. United States Torpedo Co., 26 S.W.26 1057 (T~zx.COQIUI.A~~. 1930, affirming 8 S.W.2d 266), clearly estabilsh a,duty on-the part of any insnrer licensed to write workmen's compensationInsuranceto give protection to all aoolicsnts vha are ellnlble for vorlcmen'scomnensa- tlon coverage. Southern Casualty Co. v. Free.man,~l3-SiW.2d 148, 150 (Tex.Clv.App.1928~afflrmed~Com.AppJ 24 S.W.26 370); Harris v.~l'raders'.% General Ins. Co., 82 S.W.2d 750 (Tex. Clv.App. 1935,~~error ref.); Federai?Jndervrlterstixchengev. Walker, 134 S.W.26 388 (Tex.mp 1.1939,erro;;lsm.by agr.); rv.~Qenm1 Accident Fire % Life Assur o Da,92 F.Sup. CCLDDS 227 (S.D.Tex.1950). See also Yoselovltz v. Peoples Bakery, 277 R.W.221 (Mlnn.Sup.1938);CaliforniaState Automobile Ass'n Inter-InsuranceBureau v. Dovnev. 21b P.2d 882 (Cal. Dlst.Ct.ofApp.,1950,afflrmed341-iiTi05j. The applicant for such Insurance must, of course, also comply vlth any legal conditions oreCede& to nerfectlnn the duty of the insurer tomafford-the protection. Texas EmDlOyeh3 Ins. AssIn V. Russell, 127 Tex. 230, 91 S.w.2d 317 (193b); Pose- __ lowits v. Peonies Bakery, suvra. Your question Is whether an Insurer vho refuses to Issue a proper policy to any employer ~vhohas perfected his right thereto Is guilty of such "non-compli?ncewith any provlslon of the laws rel%tLve to InSuIanCe as to au- thorize the Board of InsuranceCommissionersto suspend or revoke the Insurer's oertlflcateof authority to engage In the Insurancebusiness within the meaning of Section 7 of Article 1.10 of the InsuranceCode (Vol. 14, V.C.S.). Section 7 of Article 1.10 Is derived from S.B. 291, Acts 31st Leg.,R.S.1909,ch.lOS,p.lY2.The Act provided for regulation of the Insurancebusiness generally. We conclude that Section 7 applies to any type of insurance company or Insurancebusiness In the absence of Inconsistentspecific Hon. Oarland A. Smith, page 4 (V-1534) prwlaloaa applloableto a particular type of company er to a particular portion of the laws relative to insurance. Her do WC have any doubt that Section 7 Is applicable to thenvotienls compensationlaws and to com- panies engaged In vrltlng vorknmnfs compensationlnsur- ance, in the absenoe of particular provisions of the vorkmenls compensationstatutes at variance with the pro- visions of Section 7. Workmen8s compensation Is unques- tionably a type of Insurance. The original WorloDn's CompensationAct so treated the subject. S.B.ll, Acts 33rd"Leg.,R.S.1913, oh. 179,p.429. Subsequent acts deal- ing with workmeals compensationare of the same tenor. See, Acts 35th Leg 1917, ch.103 p.269, :;i ~~p:~i,Si:ts2;~ih bg.,R.S. 19ij,~h.l&',p.406. Specific provisionsgovern many phases.of regu- lation of workmen's compensationInsurers and admlnlstra- tlon of many phases of the workmen's compensationsystem. 100such specific provision deals with the enforcementof the i-nsurerl~s duty to Insure an employer. There being DO such specific provision Inconsistenttherewith, Section 7 applies If the refusal Is otherwise within Its terms. The question is thus narroued to whether such a refusal to Insure Is otherwise within the scope of Sec- tion 7. The duty of the Insurer arises under the aork- men's compensationstatutes. Texas EmDloyersl Ins. Ass'n. v. U. S. Torpedo Co., supra. While the duty Is not liter- ally expressed In the statute, "that which Is Implied In a statute Is as much a part of It as what Is expressed." 39 Tex. Jur. 186, Statutes, Sec. 99. The duty Is, therefore, a ~proirl$lon"of the laws relative to Insurance and a refusal would be literally a "non-compliance." However, we are of the opinion that the broad language of Section 7 Is not Intended to apply lndlscrlml- nately to every failure or refusal to perform an obligation under the "lavs relative to Insurance"which Is not the subject of more specific provisions of the statutesas to enforcement. Only such "non-compliance"as threatens to under- mine the rights of the public generally and policyholders as 8 class should be appropriatelyrecognized by the Board. See North Brltlsh % Mercantile Co. v. CralR, 62 S.W. 155, Hon. Garland A. Smith, p8ge 5 (V-1534) 159 (Term. Sup. 1901), vhtreln a slmllar statuk vi-.~5-3. appllca~le to matters which 'go to the general irte&:ity of the Insurancebusiness, and affect 811 policyhoLders In the same way." Individualdisputes, not of that nature, m8y be settled through the norm81 processes of the courts. Thus, where individualdisputes arise between an Insurer and a member of the public, though based on a contention that the Insurer has failed to fulfll an obligationarls- in& under provfslons of the Insurance laws, the Board does not normally have jurisdictionto revoke or suspend the lnsurerls permit. It Is a different matter, however, when the obligationon the part of the Insurer Is one In which policyholdersor other members of the public, as a class, have a common Interest. Thus, where the question between the company,anda member of the public or a policyholder 1s peculiar to the individualcontroversy,the Board, In the absence of specific authority, would not be authorized to act until the matter Is settled by judicialprocess. Where, however, the policyholderor member of the public has 8 clear rSgbt under the Insurance 18~s because of mem- bership in a class In whom the right Is clearly established, such right is within the scope of the Board's authority un- der Section 7. We conclude that the duty to insure an eli- gible employer Is of the latter type. The obligationto Insure employers who have properly qualified Is a sufflclentlysettled question to m8ke a refusal, In our opinion, such a "non-compliance"as to give the Board jurisdlctlonfor action In the premises. If upon the hearing required before a determinationIs finally made to revoke or suspend a permit, It appears that the employer'sright to Insurance Is clear, the Board's duty Is to enforce compliance. An opportunityto comply with the obllgatlon should be given the Insurer after a hearing at which It is confrontedvith the full facts which impose the obligationupon It. The authority and duty of the Board to effect com- pliance with the laws respecting Insurance Is fully dls- cussed and supportedby appropriate citations In Butler v. American Nat. Ins. Cc., 235 S.W.2d 185 (Tex.Civ.App.1950, error ref.). It Is suggested that, when an allegation of such refusal Is brought to the attention of the Board, a hearing should be conducted,after proper notice is given the Insurer, to determinewhether the insurer'sduty to Insure Is clearly establishedand to determinewhether the Insurer's permit should be suspended or revoked. Upon such . , eon. garland II. Smith, page 6 N-1534) hearing, thenBoard may, If tha duty to insure is clearly establlshe6, order compliance,and upon failure to comply, order a revocation or suepen13ionof the insurer~scertlfi- cate. SUMMARY The Board of Insurance Commls- sloners has the duty, under Section 7 of Article 1.10 of the Insurance Code (Vol. 14, V.C.S.), to revoke or suspend the certificateof author- ity of an insurancecompany operating under a permit to write workmen's com- pensation insurance if, after notice and hearing, the insurer refuses to comply with an order of the Board di- rectlng it to Insure an employer who Is eligible under the workmen's com- pensation laws. APPROVED: Yours very truly, Mary K. Wall PRICE DANIEL Reviewing Assistant Attorney General Charles S. Mathews First Assistant Bykh%rJ& Ned McDaniel NMc/rt Assistant