THE ATTQEWEY GENERAL
O,P TEXAS
Arrwrmi 11. TEXAS
PRICE DANIEL
ATTORNEYGENERAL
December 9, 1948
Hon. George B. Butler, Chairman
Board of Insurance Commissioners
Austin, Texas Opinion No. V-729.
Re: The legality of a
County Mutual Insur-
ance Company, under
Article 4860a-20,
Vernon's Civil Stat-
utes, wrlting insur-
ance outside of Texas.
Dear Mr. Butler:
Your letter of October 25, 1948, asks our opln-
ion on the following question:
“Please advise me whether a County Mu-
tual Insurance Compan organized and oper-
ating under Article 4 8'60a-20, Vernon’s Stat-
utes, may write Insurance outside of Texas,
If its reserve fund, or pollcyhoXders con-
tingent llablllty, or both such reserve fund
and contingent llablllty taken together, ex-
ceeds the sum of Fifty Thousand Dollars
($50,000) . ”
Article 4860a-20, Vernon’s Clvll Statutes, con-
‘%alns only two Sections specifically limiting the terrl-
tory in which County Mutual Insurance Companies may enter
‘~‘into insurance contracts.
.‘~’
Section 15 provides:
“A County Mutual Insurance Company may
write insurance (a) in any County adjoining
the County in and for which it is organized,
or (b) In any County in which no County Mu-
tual Insurance Company has been organized, or
(c) anywhere, if Its reserve fund, or pollcy-
holders contingent liability, or both such re-
,serve fund and contingent llabillty taken to-
ether, exceeds the sum of Fifty Thousand
? $~O,OOO.OO) Dollars." (Emphasis supplied)
Hon. George B. Butler, Page 2, v-729.
Section 20 provides, in part:
“County Mutual Insurance Companies may
reinsure any or all of their risks against
any or all hazards which they are permitted
to insure against with any other company or
companies.
“They shall have power and authority to
make and enter into mutual or reclprocai re-
insurance contracts with other Companies on
the mutual or cooperative plan; provided that
no County Mutual shall write or assume the
relnsurance on any other property than the
property it is permitted to Insure, or on
property situated outside of the State
Texas; . . . I’ (Emphasis supplied)
Having expressly limited the authority to assume
the
. reinsurance of property to that situated in Texas,
tnere arlses an lmpllcatlon that the Legislature did not
intend to so limit the assumption of primary Insurance to
property situated In the State, except as limited by Sec-
tion 15 where the company’s reserve fund or policyholders
contingent llablllty, or both, is $50,000.00 or less.
There 1s nothing essentially different in the
scheme of organization of “County Mutuals” from the scheme
of any other type of mutual or reciprocal Insurance organ-
ization. Many types of companies are restricted In var-
ious ways unless the capital, reserves or surplus exceed
stipulated amounts, or unless certain excess coverages
are reinsured. No other type of insurance company, nor,
for that matter, other type of business corporation, is
ordinarily restricted to operations within the terrltor-
la1 limits ‘of the State of Texas, other than by operation
of laws in other States governing the territory outside
of Texas. The flat authority granted by Section 15 to
operate “anywhere” if the reserve or contingent llabll-
lties ,of members exceed the stipulated amount, when con-
sidered in the light of the absence of territorial re-
strlctlons on corporations and individuals generally, ln-
dicates’the absence of any intent on the part of the Legis-
lature to impose the suggested llmltatlon, and you are so
advised.
Of course, the fact that under Texas law these
companies may operate beyond ,the borders of the State,
does not mean that the laws of other States permit such
operation.
Hon. George B. Butler, Page 3, v-729.
SUMMARY
County Mutual Insurance Companies
with a reserve fund or policyholders
contingent liability, or both taken to-
gether, in excess of $50,000.00, may
write insurance outside of Texas. Art-
icle 486Oa-20, Section 15, Vernon's
Civil .Statutes.
Yours very truly
ATTORNEYGENERALOF TEXAS
By $&&kLQei&
Ned McDaniel
Assistant
APPROVED:
T ASSISTANT
ORNEYGENERAL.
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