Untitled Texas Attorney General Opinion

April 5* 1950 Hon. Qeorge 8. Butler, ChaUman Board of Insurance Commissioners Austin, Texas Opinion No. V-1034 Legality of funma sew- foe policy “plan” of’ the. American National Intwr-’ ance Company. Dear MIT, Eutler: Your recent request outlines 8 “plpa” in- rtituted by American N+o%l Insurance Company and one Ben Wkl&3ma. to .sall- tdfe insurance u+gr. .8 .i?!iGiG&ipv.le-~Ilo~f ~.,.,:- ..~-,,\s )I,-tn. ,~.*,conjunction w3th tne irsu- ‘^*‘tide by ‘Williams; o&r II@ under the name of InsUlwd Funeral Service, of a so-oalled “Funeral Serv&oe Con- tract” mhweti Williams undcrtakws to sppmwe e llat of Funeral Directors and tb obtaia tR& p~%OiPr- tion,in providing funerals fog poltdgholdera. SPeo%- l_ men policies, funeral service oontracta and variow supplementary Instruments are attached to ycrtrr re- quest which reads: “Wfll you please advise me whether these transactions by the lnstwaace corn-- pany and Insurance Funerak Servloe, or either of them ere In conS+llct ~1% See- tzona 23 and 24 of Actiole ~33-1, or Article 5053, Vernon8s Texas Civil Stat- utw, u wended.” The Sections from Artiole 506&1'pPevf&r %0l 23. Any 1nd~v1bua1, indtvi- &ala, firms, co-partnerships, oorpora- tion~ or aesoclationtr doing the bu8ine66 of provldlrq burial or funeral benefltr, which under any clrcumstanoes may be pafable partly or who117 in merohandiae or saviaes not in exce56 of One HwtdWd atId Fifty ($150.00) Dollars, or the value . Oeorge 8. Butler, page 2 (V-lQ34) ,‘. thtireof’, are hereby declared to be burial bompanle8, aasocfatfows or socfetfes, and ehalp organize under provfsfons of Chap- ter 274 Acts of the Forty-ffrat Legisla- t&e, $29, and amemdsen%s theP&og amd shall operate under and be Sovernad W Chapter 274, Aote of the FortpfSrrt Leg- lilature, 1929, and amendment6 thereto, and thfs Act, .I% shala be wlawful for afiy fmdivfdual, fndiv%duaPs, ifpmm, oo- pattnm8hfpeo oorpomtfonr, or ul)oaia- tloMp 08tMF thim thoaL de?&- tikbve, .tO engage In the bumfmess of &wovfcUS8g ‘burl- al m furtwa’i befifmuffts, t&f& War any alraumutasrcem raybo paMwhoPl~ar mrt- ly in rrchandO8e OP reFvfaes. “Sea. 24* Poliefer OP anrtifloater .ir+ue4 bj btwfal arsoefatloq -1 &wtw iide fw~payment of the.bmkefft fn oar- tati 8tlpxPated waWfw rsb burfti mIMiaoo Mieh #half be maha&.¶~. fn t?n polle;l 0 oertffiaato anad hppraord &awl of R6Wrame CoMd.rsfowr am ‘, or the ruronabOe value am sta8ed fn the Woe ~oi the poffe7g unlerr the ,fnrured rhail &t the time said poBf@y fa fseued elort to have 66me paid in cash- The pol- 90 ohaP1 Show %mm%%mg the eleo%Lon a&. xx 8&m am~oafatfom ~rnrn~~ said gfty ebPP’ fafP OP refume 84 Poarpnfms%r urahaandfee md eerwfaam propv%(kdfor a the~pfkfog, mm@ &mPB be paid fw e96hog BPfeffy8 Ame~fcannsllatfoaaX has mcitlfffod m lndustrfal fife fnsumk%ce ptdfay $0 provfde fop par- ment upon the dea%h of &he insured “at %be ilfrectlaa of the beneffcfen”y’ to ‘Ims~@d FepwePm.p Srpppjloe op to InsuredJknepal Sepvfoe and Texas Funeral Dfrectorr and ‘habalmers Assoefatfow the praceeda of %he polpcy which contains provisions desfgned to leave an option with the benefloiary to receive or direct payments~otherwiseo The salesmen, agents of the %nsurawce company, endeavor alao to seoIppe an ass~S~~~% of the proceeds of the polioy fro16 the insured to Ir@uPed FuAePaP Service or the Arsoclatlon in comfdera%fon of whZeh Insured ?ua- lr81 Service gaeoer an agPeemmta oalPed a “Rneral Servlae Contract o a to apply suah ppooeeds to the pur- ahue of a funeraP. The latter also obligates Impred .. . . .~ , 80th aeo*ge B. Butler, page 3 (v-1634) ,., _ ‘~’ E%she*al Serviae ‘io.eeleot a staff of “approved” &era1 U3matora who till, under contract, bury the dew& bYa proper’wmna and glrb him bs much for his in- buParioe 819 would be @iPen to those Paying LI like amount etW than through the lneurahce arraqement. Thla omtract generally outlln?s Item of aefvice which the %ip$roved funeral direators will f’trrnl6h under v~lou# 0Qwmstancee. All ib’ aontingent upon pamnt by Amer- ican Hational of the proceeds of the policy to In&wed iWtera1 Service, Ang exuena of proceeds above the tkme~al directorlr aharges go to the bensflalary named in the policy cw other authorloed perman. Beas aontracts azw lmplmted,by #upplatiat- Wy eontract between Inwred Fmeral SemPae and vari- Ow narhal diMotom o the Assocla~iion aotlng in the @Qt*Ipl~ bwhali. Bohdr am Co!ItQap&Bt8d to amure pa- f+q!@' @ o? the utual obllgat$orrs, tid Williaam Is rri ~~~‘eheraoter o? remuneration by Ammlaan yltlon- a$ In,omfion with the “plaq” the exact nature OS uhiah ZB not stated except that it Is not for difedt @#1X* of tha polialer involved0 The “plan’ is to be p@wdded to the pub110 by a rales pro am rpomored by tha Insurer doguy tkowh it8 qa$ an& otherwise whlah pant8 art tin 8&a&a&w of “vlamo m ma rwmt qumt9on 18 WhethaP Murrd mur81 Mwfoe or PIIManta Stetimal, or both, are eng&ged Ln %M’bwiiI~@8 @f movfdfng buPla1 or funeral bme2ilrr dr any afl*cumstancer may be paid wholZg or merohandfse OF wWvlaeas Although the exact lega 8Ma$io*rhlp of the parties i!avoPved In the “plan” is not SulPp developed by the ?aots submitted, It la olear that there exists a#~ amwment or device carefully designed by uhlah the Insured may provfde in advance for a funeral TOP blmelf L Uhder the “planpn the insured aas,igns the pnsc ce&e from the fnsuranae policy to Instwed FuneWal Serw iee OF Insured Funeral SePvioe,and Texas Funeral Wree- tars and Embalmers Assoalation, and reoeivea a funeral servfce contract along with the polfoy of insurance from Xnsured Buneral Sewfoe, In turn, the beneficiary of the lnmred reoefvea merohandfse end aenices or part merchandise and servfoea and pa& cash, or all wah in the iaoe amount of the polfava Mm. Oeorge B. Butler, page 4 (V-1034) The plrfn Pangmge of Seotfone 23 an&24 of Ai’tiale 5068*X0 rupra, pc~ufpoe an examlnatlon of all thet stunde bed&d tRe aoratraatuel veil. It is eug- goHid that the prfae intention of the insured in par- tiolp&tfng fn the “p9ran”la to pumhaee a funeral for hi-elf. It 98 not,questfoned that he aotuallf re- Mlve8, in come fnstanaes, a fxineral a8 a result of the amration of the “plan.?’ If the insured intend0 to ptWOhr8e a’funepal when he entere into the contraate deef ed to titimatePy aoaomplf6h that puFpdee and ac- tualY‘y reaefves a funeral as a restit of partloipatfon 0” the “plan” afl doubt that the “plan” in queatlon lellra ”funer4 el 8r e80P vedp Ineaed Funeral Semfce undoubtedly caueee, In eome olrcuartances, funeral mercRandlse and serviaea to be rurairhed the deoeared polfayholder who has a8- rl@nd Mw rooeedr ot,hfr polfoy fop that purpoeeB Dir- otw# oi t R$8 relponeibflfty $8 the end result OS and aocompliahes the puppore for whfah thb “plan” 18 de- signed, that ia, to provide funeral aervioe benefitr in wrohandfse and services, Thus the plan operatea to proximately resu9t fn a afrcumetanae uhloh the statute prohlbl;ts. Soetfon !& carpPa pPobQbfts companles’and all athem not organl(sed undw &he ovfsfona of Chapter 274, Act6 of the W&y-ffwt m$fsPa r wire8 1929, and amend- men%8 theretOo ipo8is n6900 p~ovfding bwfaP or fUnsPaS bene- ffts, wh%ch umd w be ~3; gho Pay OP e OF aerv- 0 1lsrpPoUfr added WObabOP~8 te~t~o~~’ DfatPonary, Seoond wd4tiaa,ulllalhsf defflaeo “ufPa%mstmnee” as *OR%of the oomd tfon8 under whfeh an e-t dF” taken pleoe Ed with reepeot to w&f& a fact fs determined; a condi- tion, faot 0s evm& actwmpuPfing or deteminlng the oo- owrettoe of’, amothcP taut or events a.O’an aoceerory~ oorbd$tfonj 8n attencbmt faot oc qnn*Slfrfoatien9 often, a more OP Ierr oxtrameouaooaditforssa non-ersen$ial or ouu*l detallo.o,” 172 Atl. 659 (Pa. SuppaIi umlI~~8” as ovor roasonebl~ lik3y to be * 135S.B.408 (aa. e is noted8 * 0s0 ‘Clruu6wtaneos are iaets or gy&6aMl%p awouml, or about nom oen- **.* WQeaamot axbhatyh it ir 8twllglyah ably emtu##etC8 that 7-O be88 ooatmek ,ud tmtwaetlonr are 6egnm&c, 016 inaepmdsat uba rho*;ld be 80 emtrr#d. It $8 tanWu*W tlmb snatmmatr 8x~0*ed at the 8am t&m clr o6m%mwvoraneourl~ ioa- thr nm porpwe and in Cb OOWBQ,ot,Qhemap tllonsmtion aw’tO be eenm~der%U a8 m in*tnamab aad rrau asld miimmd together9 that pwole evtdanoe is adrnlerible tl)ooanwt inatru*hnts whwa me lnsfr\arent Is made a t of another br rei- mum*9 %&at the mum mle epp%!rl8 to m origfaal cow mat aAd 8a rrr;tmmmt~ bhrwti 4~94 *Ma beveral in- rtmmmtr oonetltPcin#pwt OF the Hu, txwlr84Uol?Wt &la@ree twethim 10 Tex. JUP, 286, ContFaotr, eu Wwm olOe4~ 12 AmL Swr. 781, aoa- 8r& ib. 22@p and *mea thora altwt.. ‘“Whme b a~lhfryrefer8 to anothm .doo- Itlirsrgt, that dommm t; QP 80 amch of It a0 I# refea+tWa to, is to‘bs, laat~ted arr part of the wit epla Whom a ttHtlt&does not rein ta anolt 9 OP writfn#, W uuah other writ- &au wa8 m&3 as a maet of tin #*mm tmmmw- Hon. Oeorge B. Butler, page 6 (%1034) therefore must be taken ana construed together as though th8y were one fnstrument D Wann v. IMetroDolitan Life Iiis. co.. 41 S.W.2d 50 ~Comm. Awe 1931) Ll oyds - America v. mind, 91 S.w,sd $66 (‘IYex,*ClvO Api. s error ref.); mv. Volunteer State Lffe ins, Co., 135 S.W.2d 588 (To%. Civ. AWD.--mgreP.s 011 co. v. Col- -uitt 2 S.W;%d 421 (Comm, App, is: F!m: EPlett v.XcMahon, &tW.2d 253 (Tex. Cfv. App. 1945) :- - As we aonstrue the statute, fts purpose Is to prevent imposftfons by diecharge of contr8iats at matur- ity fn eerohandfee or servfoea fmprovfdentJ.y contraoted for iA advance by thoee entirely unfamflfar with their value or the relatfom of ‘that value to the premiums paid during the life of the fnsured. The “plan” under con- 62deration is clearly susaeptfble to most, if not all, of the abuses Inherent in ordinary funeral policies payable in merchandise and services. The funeral serv- ice insurance “plan” under consSderatlon, though the poliay ls’payable in cash by American National, carries the eame evils that are present fn polfcies payable whol- ly in merchandise OP services. The “plan” supports and cnaouragea the beneficiary’s tendency to allow delivery of the pol%ay’s proceeds to some other person or persons for whatever funeral the money wfll buy without regard to whether an expensive fineral fs consistent with the needs of the su~vfvops ar,d creates the means for the abuse the statute pssblbfte,. &ire Insurance Co,, 336 U.S. We conclude that the effect of the “plan” sub- mitted is to provide l~si)rfaBor fEnnePal benefits which under some cf~cumstarmae me paid and recefved wholly or partly in merchandise euruse~vlcles and fes therefore unlawful under the a$at>ute, as& you are so advised. Since in our answer we hold t&at the ’ lan” aontravenes fn its operation., Sections 23 and 2 ie of Artiole 506&-l, V.c.So, we do not deem ft necessary to conelder the applfeatfon of APtfcPe 5053, V.C.S., to the “plan D* SUMMANY The funemil esemfee policy “plan* of American NatfonaP Insurance Company de- scrfbed fn the facts rmbmitted eonflfota . Han, George B. l¶Utler, Pa&%?7 (V-1034) with Se&fens 23 and 24 or Article 5068-1, V.C.S., and is therefore unlawf'ul. Yours very truly, PRICE DANIEL Attorney Oeneraa APRIOVJSDn c2s-w :A .-.&ALA c.-- BYi Charles D. Mathews Everett Hutahinaon Executive Assistant Assistant