Honorable 0. P. Lookhart, Chairman
,Boardof Insurance Commissioners
Austin, Texas
Dear sir; Opinion No. O-5926
Re: The Board o?'Insurance
Commissioneia has no legal
authority to enter the
order herein~mentioned.
Your letter of,Maroh 8, 1944, requesting the opinion of
this department concerning the legal authbrlty of the Board of Inauranae
Commissioners to make an order to the effect as mentioned in your
letter has been received. 'Said letter reads 88 follow&:
"MututilAssessment Associationa, other than
assessment-as-needed or post-mortem oompsniea, opara-
ting under Article 5068-1, levy regular and periodic
assessments for payment by tha members on the Leval
Premjum Plan; that is, the amount of each member's
assessment Js the same each time. The asstiasments
when collected are divided into two funds as provided"
in Section 12 on the percentage set out in the As-
sooietion's by-laws.
"Occasionally'the Mortuary hund becomes depleted
through excessive claim payments B&cannot be re-
stored by regtilarassessments alone. ,In suoh oaaea
a special or emergency assessment is levied against "
the membership. The purpose and authority for such'
speaial assessments are replenishment of the Mortuary
or claim Fund.
"Please advise me whether the Board of Insurance
Commissioners has authority to enter'its Order to the
effect that thereafter,the entire proceeds,of such
special dr emergenay assessments shall be placed in
the Mortuary Fund, exoept an amount show to the Roard
to be neoessary to defray the aotual expense in&dent
to collection of the',assessment,whioh may lwplaced in
the Expense Fund.!'
Section 7 of Artiole 5068-1, Vernon's Annotated Civil Statutes,
requires each association to keep a oomplete and correct roster of its
Honorable 0. P. Lookhart, page 2 O-5826
members with proper statistical reoards for the purpe of determining
the proper cost of the insurance, by ages or otherwise, and eaoh as-
sociation shall keep accurate records of groups, classes or olubs or
other divisiOn6 of mambership, if any; and shall keep reoords to show
amountspaid in asse66ments by eeoh member in eaah groun) and a6 to
groups. it must be shonn how the funds are distributed between expense
and mortuary or relief funds, and show the amounts paid out of the funds
of the whole membership foreaoh group in death claim6 or other benefits.
Section 11 of Artiols 5068-1, Vernon's Annotated Civil Statutes,
providest
"Eaah assooiation shall levy a wgular'and $ariodLoal
asseasmentlrby whatever name they may be oalled. These
assessment8 must be in ~suoh amounts and at such proper
intervals as will meet the reasonable operating expense
of the assaoiation, and pay in full the claims arising
under it6 certificates. hhen or if in the ,cour6e of
operation it shall be apparent that the claims aannot be
met in full from ourront asse6sments and fund6 on hand,
the 6mounb must be inoreaeed until theyare adequate to
meet suoh olaims, and the Board shall 60,0rc?ar.
%hen any assooiation shall refuse-to comply with
the Board's reoomm6ndations or requirem6nts reapeoting
rates or assessments, it shall be treated a6 insolvent,
and shall be dealt tith aa hereinafter provided.
"Each assooiation operating under the provisions of
this Act shall file its rate sohedule with the Board of-
Insurance Connnissioners."
Motion 12 of Artiole GOSS-1, provides, in effeot, that as-
sessments when collected shall b6 divided into at lsaet two funds.
One of these shall be the mortuary or relief fund, by whatever name
it may be oalled in the different associations from which olaims under
aertifioates shall be paid, and to a limited extent the oost of de-
fending contested claims, and nothing else; and the other fund shall
be the expense fund from which expenses may be paid. 'ihissection of
the statute further requires that at least sixty per cent of the se-
eessmenta collected, exaept the membership fee, must be pleoed in the
mortuary or relief fund. E:aohassociation shall provide in its by-
laws for the portion of its assessments to be allotted to the mortuary
relief fund and may provide for the payment out of said mortuary re-
lief fund of attorneys' fees and neoessary erpsnses arising out of the
defense, settlement or payment of oontsstsd claims. Any suoh payments
out of the mortuary relief fund for other than claims shall be subject'
to approval of ths Roard of Insuranoe Co66sissioners. In connection
with the foregoing statement, it should be borne in mind that Article
601X3-4as enacted by the 48th Legislature, Regular Session, 1943, page
Honorable 0. F. Lo&hart, page 3 O-5926
696, Chapter 366, authorizes any oompany or association operating
under ,thsprovisions of S. 9. 135, Aots of the Regular Sessi.onof the
46th Legis3,ature,Chapter 6, page 401, to pay fr& the mortuary or
relief funds, by whatever name it may be called, eny taxes that may
be assessed against or required to ba paid by the company or association
because of inaome to such funds.
Under the foregoing provisions of Brtiele 5068-1, when or
if in the ooursa of operation, It is apparent that the oleIms of any
assooistion oannot be met in full from asaessmants and funds on hand,
the amount must be inoreaeed until they ara adequate to meet such
olaims and the Board of 'InsuranceCommissioners shsll so order that an
increase hn made in the assessments until they ars adequate to meet
suah claims. Tf my associetion shall becrrmeunable to ,payits rsalid
clRms withj.,nthe time specified in the statute after due proofs are
received, such association for the purposes of Article 6060-1, must 3o
rsgsrded as insolvent, and dealt with as is Pully provided in said Act.
The foregoing statute expressly sets forth the manner in which assess-
melts when collected shall be divided and a compliance with this
statute in rsspect to the divisions of such assessments is all that oan
he required of such assooiationa.
Generally speaking, the Board of Insuranoe Commissioners,
like other regulatory and administrative boards, possess only such
powsr or authority as is expressly given or necessarily impljed by the
Constitution and statutes of this State. After a careful search of
the statutas and various constitutional provisions of this State, we
f'ajlto find any e,xpresssdor implied authority empowering the Board
of Insurance Commissioners to make and enforae an order such as the
one i~nquirsdabout, Therefore, it is our opinion that the Board of
insurance C!!mmisslonershas no legal authority to make and enforce an
ordsr of the ,natureof the order inquired about.
Yours very truly
ATTORNEY GMWLAL OF TEXAS
By *,/Arch313
tiilliams
,&dell Wlili.ams
Assistant
AW:W:wo
APFROVED MARCY 17, 1944
s,/Geo.P. Blackburn
ATTORNEY GkNtiRA!,
OF TEXAS