~-648
THEA~ORNEY GENERAL
OFTEXAS
Ausust 25, 1947
Hon. &iorge B. Butler, Ch8irman
Board Of Insurance COlmaiSSiOners
Austin 14, TOX8S
Opinion NO. v-356
Re: Proper statutory pro-
visions under which to
Incorporate a stock in-
SUl'8nc8 i3ODlp8UyWl-iti=
an "all cover’ automobile
policy; 8nd the lUiIlillllUS
Dear Sir: capital required.
Your letter of July 7, 1947, requests advloe 8s
follows:
"Texas Farm Bureau Insurance Company ia
seeking Incorporation as a domestic stook in-
surance company for the purpose of lasuing
the standard all cover form.lnsurance poliay
on automobiles, a copy of which is enclosed.
"Will you please advise m8 Whether the
Company should be incorporated under the pro-
visions of Chapter 11 or Chapter 18, or both
of Tit18 78, and what th8 minimum capital re-
quuirement is."
Your references are to Chapters 11 and 18 of
Title 78 of Vernon(s Civil Statutes.
The policy form which you enclose Is the uniform
policy form promulgated by the Board of Insurance Commls-
sloners and contemplates various coverages appropriate to
th8 ovtirship, maintenance and use of motor vehlCl88. It
provides for two kinds of "liability" Insurance, nsmelar
that which insures the legal liability of the "insur8d
for accidental injuries to prsons, and that whloh inswm
th8 legal llablllty of the inSUr8d" for accidentsl~ daznag@
to property. It inclUd8S a formof "accident" insura~e
which directly insures various medical expense,8 ,of psrsoae
aCCid8ntally injured by th8 automobil8. It includes vhat
Hon. Oeorge 8. Butler, Page 2, V-36
is known a6 "oollirion" insurance which Insures the owner
against certain aoaidental damage to the automobile caused
by oolllslon. In addition to the 8bov8, there ,sre several
other forma of insurance against dSmag8 to the 8utomobile,
811 of whiah forme may, if desired by the Insured, be cov-
%red under 8 conpreh%nsiveTovIsion whloh provides gener-
ally for insurance against 'any loss of or damage, to the
automobile." While there are a number of exceptions and
eXolusiOns in ohe polloy, 8d the insuranoe provided is
llmlted undbr oertaln alraumstanoes, the coverage afforded
to an automobile and its owner or permlaslv8 operator un-
der such a polidy may be broader than sng kind M8;Fduranoe
speoifloallynamed in the Insurance statutes.
another wag, the insuring clauses of the policy form are
not ao-extensivewith the many speoifled forms of insurance
named in th8 statutes~, and the'comprehensive provision in-
sures the automobile agaitist all risks except those speclfl-
'6811y,excluded, there being no "all risk" or "811 cover'
prdvislons in the statutes dealing with incorpor8tionof
stoak lnsurence oompanles.
The only chapter containing articles authorizing
lncorporatlon of a stook insurance company which neither
enumerate8 the kinds of Insurance whiah may be authoriced
nor 8XOlUd8S oertsin kinds of Insurance from that whloh
thereby may be authorized is Ch8pt8r 2 of Title 78. Art1018
4699 of Oh8pt8r 2 merely provld8s that "any number of per- :
sons desiring to form a company for the Purpose of trans-
acting insurance bUSln8,SS shall" perform the necessary acts
thereln provided to affect such lnoorporatlon. No limita-
tion Is therein stated on the kinds of insurance which may
be written.
Article 4919 of Chapter 11 reads as followss
"It shall be lawful for any in8urance com-
pany d?_iBe business in this stat8 under the Prop-
er oartifti te of authority except a life or
health ins~anoe aompany, t; insure houses, build-
ings and all other kinds of property against loss
OF damage by fire; to take all kinds of lnsuranoe
on goods, ~rchandise, or other property in. the
course o'f transportation, whether on land or Water,
or any ~8SSt9l afloat, Wherever the ssme may be; t0
lend money on bottomry or respondentia; to C8US8
ltaelf to be insured against sng loss or risk it
may have incurred in the course of its buSin8sS
and upon the interest whioh It may have in any
Property by means of any loan or loans whloh It
Hon. George B. Butler, Page 3, V-356
may have on'bdttomry or respondentle; and
generally to do and perform all other matters
and things proper to promote these obj8ots;
Insure 8utomobileb or other motor vebbles,
whethel? st8tionary or being operated under
their own power, against 811 or sny,of the
risks of fire, lightning, wind storms, hail
storms, tornadoes,cyclones, explosions,
traneportrrtion by land or water, theft and
oollisions, upon filing with the Commlselon-
er notifioatlon of their purpose to do so."
Thus, it will be seen that Artlole 4919 does not in
terms provide for the incorporation of insurance aom-
panlea but in terms merely states certain kinds of in-
8urana8 whioh it Shell be lawful for "any insurance
comp8ny" to write.
Chapter 18 contains two artiOles pertinent to
your inquiry., The material provislpns of Artiole 4989
of Chapter 18 are aa Lollows:
“Any three or more pmwona, 8 majority
of whom 8XW residents of~thls gtOte, may 8S-
soolate in aooordenoe with t@e provisions of
this ohapter 8nd form an inaorporated aompany
for any one or more of the following purposes:
"1. To insure any person against bodily
injury, disablement or death resulting from
accident and against dlsablem8nt resulting
from diSe8S8.
'2. To insure against loss or damage
resulting from accident to or injury sus-
tained by an employ8 or other person for
whiah 8OCid8nt or injury the assured is lia-
ble.
"3. To insure ag8lnst loss or datnag8
by burglary, theft or house breaking,
"4. To insure glass against breakage.
no
5. . . . .
"6. To insure agahet loss or damage
by water to any goods or premises srising
from the breakage or leakage of sprinklers
.
'Hon. 'George B. Butler, Page 4, v-356
and water pipes,
“7 * To insure against losg result+'
from acaldental damage to automobiles ore
orutsd accident8lly by automobiles.
“8. To in&m against loss or demages
resulting from aoaldent to or $njWy suffer-
rCaby any person for which loss and damage
the insured is liable; excepting employers
'liability insurance 88 authorlted under aub-
dfvlrion 2 of this article.
“10. , i .
1111, To write marine fnsuranoe in
whioh may be included the hasards and
perils incident to war,
%i~ To insure against any other 088u81-
tp or lnsuranoe risk
specified in the article8
of inoorporatlon which may be lawfully made the
mb ject of fnsurance and the formatfon of 8 oor-
po*ation Par Issuing against whicsh Is not other-
wlrb provided for bx thlm law, exaepting fire
and llfb inruranoe.
Arti@la 4993 sf @hapier 18 deala with eapitalisatlon and, 80
PaP as pcsrtinent, provides:
Utfole 5037 of Chapter 21, which adds nothing of
Hon. George B. Butler, pSg8 5, V-356
gaK4ia1 V81Ue to th" Other Statutes, prooides.in ""t
: .'
"Fire, marine, life and live stock in-
sur8noe companies may be organited under the
,provisiona of this title."
Artlole 5038 of' Chapter 21, which is material to your
inquiry and whioh authorices incorporktlon of Insurance.
companies, provides:
"Corporat$ons may be Incorporated under
th8 law8 of this 3t8te t0 tr8nS8Ct any one or
more kinds of insurance business other than
life. fire, marine, Inland, lightning or torna-
ao insurance business in the 8ame InBnner, 8nd
by oomD1ying with the same requiremsnts. 8s
prescribed by law for the lnoorporatlon of life
i suranoe oomDani8a. No such company ah811 b
i:dorporated having the power to do 8 fidelit;
and surety businers or 8 ltisblllty insuranoe
business with 8 paid upy Yipital'stook of less
than two hundred thousand dollars."(Emphesis
supplied.)
As steted, each of these last two artioles is contained in ,A
Ohapter 21 of Title 78 d88ling with "Insuranoe", which Chap-
ter is captioned "Qeneral Provisions”.
The quoted Artlcles from Chapters 11 and 18 and
Article 5038 of, Chapter 21 were considered:~in the case~.of~"
Commercial Standard Insuranoe Company vs. Moody, Attorney
General, decided In 1925 by the Commission of Appeals, Sea.
A, and reported In 270 S. W. 1011. Commercial 3t8nd8rd In-
surance Company had incorporated in 1924 with a capital
stock of $100,000.00 snd was authorl8ed by charter to do
all of the kinds of business provided for in Article 4919
of Chapter 11. The company thereafter sought to amend its
charter without lncreeslng Its capital stock so as to au-
thorlze the wrltlng of "insurance against loss or d8mag8
resulting from legal liability of the 8SSUred on aaoount
of 8ooid8nt81 injuries to the person or property of $nOz,
ineluding liability for injUrieS resulting in death.
Attorney &+nerel refused to approve the charter and mandma
W8S sought to compel spproval.
It will be UOt8d that the kind of Insurance sought
to be 8Uthoriaed by the mndxmnt could also have been au-
thorlsed under the provisions of Chapter 18. However, the
lion. Qsorge 8. Butler, Page 6, V-356
Court held that the, provisions of Article 4989, et seq.,
of Chapter 18, (then Articles 4942, et aerq., of Vernon's
Sayles Annotated Civil Statutea, 1914) "should not be
construed as prohibiting the Cosumrclal Standard Insur-
anoe Compenp from 8mendLng its oharter as here sought"
since the original Act from which Artlolea 4989 et aeq,,
were.derived provlted that "o,nlycompanies organised
and dolng)lusinesa ,,ther4under 'shall e subject to ita
.gpr;islo;;~ ~(the.,~lygpags of Art. 4993;
F and furtly pro-
:
"This ,Aot is cumulative aa to inauranoe
leglsletion in this State,and as to the mode
and manner of organlting and doing business
in this Stete, and Shall not be oonstrued to
repeal sny law now in forae in this State."
Them Court obs4rveU that Commerc?ial Standard was not lnoor-
porated underthat Article. This necessarily meant that
since'Cd~rolal.St8ndard was not incorporated und4r :the
provisions of Chapter 18, any limitation in Chapter 1.8 would
not be applicable. Slnae there existed no other statute
whlah did not so llmit lta appllcatlon, it must be assumed
that a company organlsed in the mdlnner of Conmrercial Stand-
ard, if properly suthorlced in its oharter or by amendment
thereto, might write any lawful form of insuranoe, not
speoirlaally prohibited to it by some statute. Thus It ap-
pears that a company organlsed in the manner of the Commer-
ala1 Standard Inauranae Company msy, If properly author-
ieed in its charter, writ4 811 of the klnda of insurance
4ontemplsted by the "all cover" automobIle insurance polley
form attaohed to your request.
We h8V4 examined the original pleadings and brief8
filed in the above ease, and It appears that ,Commsroial
Standard Insurance Company W&s originally inoorporsted under
: the provisions of Chapter 2 of Title 78 and, a8 the Court
noted in Its opinion, Its original charter authorized It to
,., do the kinds of Insurance business mentioned in Chapter 11.
We see no reason why the powers which may b4 authorized by
8mendIIlsntto the charter m8y not be included in the original
.'I _' oharter
l
The Gomsmrolal Standard case is also authority for
the requirement of a minimum aapitalltation of $200,000.00
for an insurance company so organiced by virtue of the pro-
vlrions of Art,.5038 8bovO quoted. The Court in that case
said that the provision of Art. 5038 that "I?0-Insurance
oompany shall be Incorporated having the power to do's
_~.,Y’ T.
. ,.
Ron. Ckorge B. Butler, Page 7, v-356
',Sldellty and rurety business ‘or iliability insiranoe
bu8lnea8 with a paid up oapltrl stock of,lras than
)~6.00" refer8 to any iasuranoe oompany'dolng a .
liability lnruranae bus$ners.
We,oonrtrw the ftrst p&t of 'pour Qudrtlon
to lnqulld whether or,not, ,in any eveiit, an lnauranoe
oompany may be lnoorporsted'to write'the broad coverage
oontemplated by,* poliay form attached; We will not,
therefore, attempt to dot&mine whether or not there'
,8~) alternative mthodr of inoorporotion s$noe w0 have
conoluded that, In lcy event, sinoe the oompany dealrcm
to do '8 liabllity~lnduran6e bu&ineas under the polioy
form attaohed, it will be, required to haves a paid up.
,capital stook of not lbsa than $200,000.?01 If It were
legslly'possible to inoorporate under Ohapte~ 18, with
autholrity to write,all of the kinds OT Insurance thee-
in named neoe6rary to thq ooversge of the attaobd poll-
oy fol?la,It would be moessary tom provide authority to.
write more thsn'three of then kinds of business Oonteti-
plated b Article 4989, and therefore the provision8 of
Article i 993 would require a minimum of,$206,000.00 of
oapltallzation. W6re It possible to so inoorporate ud-
der Artiole 5038, its provisions would, df course, re-
'quire a minimum of $200,000.00 of oapltalisation.
A stock lns!a.ranaeoompany may inoorporate
';nd~ p provisions or Ohapter 2.6s Title 78,.
. for the purpose of writing the insur-
a&e ooA;emplrted by the standard "all CoveF"
8utomObile polioy form promulgated by the Board
of Ipsuranoe Commlaaloners. The minimum capi-
talizzation required of such an Insurance company
la $200,000.00.
Yours very truly
APPROVED: ATTORHEYQRIiRRALOF TRXAS
T ASSISTART
By&eiz:&* Asslstarit
NMc/rt