Kotiorable0. P. Lockhart
Chairman, Board of Insurance Commissioners
Austin, Texas
Dear Sir: OpLnion No. Q-5461~
Re: Insurance cotipanie%organLzed
under the laws of the Republic
of Mexico doing business in
Texas.
Your letter requesting the opinion of this department
on the questions stated therein reads in pert as follows:
"We ask your opinion upon the following
lags1 questions, which we certify are not moot
or abstract or premature but are actually con-
fronting this Department at this time in the
discharge of our official duties:
"1 . Prior to May 10, 1943 the effective
date of Article 5012a, (Acts 1943, 48th Leg.,
p. 436, ch, 295, S.B. 357), ala the provlsTons
of Article 4686, sec. 6 of Artbti$e4859f, and
Articles 5054-5062b, inclusive, of Vernon's
Texas Civil Statutes, and Articles 568-572, in-
clusive, of the Penal Code, both as amended and
supplemented to that date, or any other appll-
cable statutes or le al principles, prohibit
(a) licensed and/or 7 b) unlicensed insurance
agents in Texas froinissuing and delivering in
this 3tat.e insurance policies for Insurance
companies domiciled In the Republic of Mexico
(assuming such companies to be reputable and
financially sound) covering automobile risks
of all types, effective and operative only
upon persons and property while physically
situated within Mexico; such Mexican companies
not having complied with and obtained certifi-
cates of authority to conduct insurance business
In Texas under the laws of this State?
"2. Is Article 5012a aforesald, alone or
in conjunction with the other laws of this State
referred to in question 1, above, permissive in
Honorable 0. P. Lockhart, page 2 0 -5461
the sense that It merely authorizes Mexican ln-
surance companies at their option to domesticate
and obtain certificates of authority to conduct
the insurance business In this State if they so
desire, being free to conduct in Texas the actl-
vlties described in question 1 if they do not so
obtaxn certificates of authority, or is Article
5012a mandatory In the sense that It requlres
Mexican companies In comply with its requirements
as a condition precedent to exercising In Texas
the privileges described in question l?
"3 . If question 2 be answered to the effect
that Article 5012a is mandatory in the sense men-
tioned, theri,as thus construed and applied, is.
Article 5012a or any part or provision thereof
void or inoperative as applied to the actlvlties
of such Mexican companies mentioned in question 1,
as being vlolatlve of any provision or provisione
of the constitutions of Texas and of the United
States; and if so, which of the statutory provi-
sions violates which of such constftutional provl-
sions?"
Senate Bill No. 357, Acts of the 48th Legislature,
Regular Session, 1943, provides:
"Section 1. Any insurance carrier lawfully
organized under the laws of the Republic of
Mexico, or under the.laws of any state thereof,
and duly authorized by such laws and by Its
charter or articles of association and by cur-
rent license of the appropriate insurance regu-
latory authority of such Republic or any state
thereof to underwrite risks of the kinds and
in the circumstances hereinafter mentionecl,may
issue in the State of Texas, under license of
the Board of Insurance Commissioners of Texas,
policies of insurance affording any and all kinds
of automobile coverage, accid'entinsurance and/
or other casualty coverage, upon persons and/br
personal property, to be in force only while
such persons and/ or personal property shall be
physically within the boundaries of the Republic
of Mexico, by complying with the following re-
quirements:
"(a) Such insurance carrier shall file with
the Board of Insurance Commissioners of the State
of Texas (called Board) a written application for
certificate to do business in this Btate, accom-
Honorable 0. P. Lockhart, page 3 O-5461
panied by a correct English translation of its
charter and by-laws, duly certified by two of its
principal officers and by the insurance regulatory
officials under whose supervision it operates In
the Republic of Mexlco, and of all of its policy
forms, application forms, claim forms, and other
forms of every nature which It uses or expects to
use in underwriting the coverage hereby author-
ized to be written In Texas, all of which shall
be subject to the approval of such Board.
"(b) Before admission, and annually there-
after, such carrier shall also file with such
Board a photostatic copy of Its current license
or licenses to operate in the Republic of Mexico,
and shall file a copy of its latest financial re-
ports or statements, and of the latest examina-
tion reports of its affairs and financial condi-
tion by the insurance regulatory authorities under
which it operates ln Mexico.
"(c) Such carrier shall deposit with the
Treasurer of the State of Texas at least Twenty-
five Thousand ($25,OOO.OO) Dollars In lawful money
of the United States or in securities eligible for
other casualty insurers licensed in Texas and ap-
proved by such Board, which deposit shall be liable
for all lawful claims and final judgments against
such insurance carrier, including taxes due the
State of Texas, and policy claims and other debts
and obligations Incurred in the course of opera-
tions hereunder as provided herein, and such de-
posit shall be kept replenished from time to time
with like cash or approved securities to maintain
a mininmm total deposit of Twenty-five Thousand
($25,OOO.OO) Dollars. Such deposit or theunin-
cumbered balance thereof shall be returned to such
carrier with approval of such Board upon wlthdraw-
ing from the business authorized hereby and upon
a showing to such Board that all of its policies
written In Texas hereunder have expired OP have
been cancelled and that all of its claims and ob-
ligations upon policies written in this state
which would constitute lawful charges against
such deposit have been satisfied.
"(d) Such carrier shall file with the Board
a power of attorney, in a form designated by the
Board, designating an agent or attorney-in-fact
upon whom legal process may be served within this
Honorable 0. P. Lockhart, page 4 O-5461
State, which appointment shall continue until re-
voked and a successor duly appointed by the car-
rier, and further authorizing service of legal
process upon the Chairman of the Board of Insur-
ance Commissioners of Texas and his successors in
office as alternate attorney-in-fact for such
carrier upon whom service of process may be had
in event such process cannot be served,upon the
designated agent or attorney-in-fact for service
as hereln provided, upon suits for any alleged
llabilltg incurred in operations of the-~carrier
pursuant to this Act, with like effect as if such
process had been served personally upon the ap-
propriate persons, representatives or officials
of such carrier within its home jurisdiction in
the Republic of Mexico. In event process shall
be served upon the Chairman of the Board, as pro-
vided above, he shall immediately give written
notice thereof to such carrier and shall forward
such process by registered mail, postage prepaid,
and properly addressed to the president of such
carrier at its home office as furnishedto the
Board; and no judgment by default shall be taken
in any such cause until after the expiration of
forty (40) days after said process and notice
shall have been received at the home office of
such carrier. Until rebutted, the presumption
shall obtain that such notice and process was re-
ceived at the home office of the carrier on the
fifth (5th) day after being deposited In the mail
at Austin, Texas, as herein provided. The State
Treasurer, upon the approval of the Board, shall
pay from the deposit required herein any unsatis-
fied final judgment obtalned against such carrier
In any court of competent jurisdiction in Texas
based upon such substituted service as author-
ized herein.
"(e) Such carrier shall pay the State of
Texas annually a premium or occupation tax upon
its gross premium income from policies issued
In Texas according to the reports made to the
Board each year, and shall pay such other fees,
charges and taxes upon the same basis as like
insurers licensed to do the same kinds of busi-
ness in the State of Texas -are required by law
to pay; and shall make the same reports as such
other licensed carriers, but in such adapted
forms as may be prescribed by such Board for such
purposes.
Honorable 0. P. Lockhart, page 5 O-5461
"(f) The coverage hereby authorized shall
be underwritten only at rates prescribed or ap-
proved from time to time by such Board.
"(g) Such Board shall have the authority
to examine at any or all times, at the expense
of such carrier, the affairs and condition and
all books and records of such carrier for the
purpose of ascertaining its financial condition
and solvency, and its compliance with the appli-
cable laws of this state and of its home jurls-
diction.
"(h) Such carrier shall file in English a
document executed by Its officials expressly
accepting the terms of this Act and agreeing that
such Board may at any time in Its lawful discre-
tion revoke, suspend or refuse to grant or renew
the license of such Board to such carrier to
conduct in Texas the business hereby authorized,
upon a determination by such Board that it is
Insolvent or in dangerous financial condition,
or that it has violated any applicable law of
this state or of its home jurisdiction.
"(i) It shall underwrite business in Texas
only through its resident Texas agents thereunto
duly authorized by It in writing and duly licensed
by, such Board under the provisions of Article
5062b (Acts 1941, 47th Legislature, page 374,
Chapter 212), as the same now exists or as it may
be amended hereafter, and the license issued to
such Texas agents shall specially authorize them
to write for such foreign carriers complying here-
with the risk authorized hereby.
"Sec. 2. All laws and parts of laws in con-
flict herewith are hereby repealed only to the ex-
tent of such conflict.
"Sec. 3. If any Section or portion of Sec-
tion of this Act shall for any reason be declared
invalid by a court of competent jurisdiction, such
adjudication shall not affect the validity of any
other Section or portion of Section of this Act.
"Sec. 4. The Importance of this legislation,
and the immediate and urgent need of the reforms
to be effected hereby, create an emergency and an
imperative public'necessity demanding the suspension
Honorable 0. P. Lockhart, page 6 O-5461
of the Constitutional Rule requlrSng that all
bills be read on three several days In ea,chHouse,
and said Rule is hereby suspended, and this Act
shall take effect and be In force from and after
its passage, and It is so enacted."
Apparently Senate Bill No. 357, supra, was enacted
by the State through its Legislature In the exercise of Its
police power. Generally speaking the police power of the State
Includes the authority to restrict the pursuit of any business
or occupation which is injurious to the health, peace, security
or morals of the public, or to the general welfare of society.
A business which concerns the public at large calls for an ex-
ercise of State regulation. The Legislature may, under the
public welfare clause of the State Constitution, enact laws
regulating the conduct of lawful business In the State, I$ may,
in the Interest and for the protection of the public, prescribe
the mode or manner in which business may be conducted or trans-
acted. (See Texas Jurisprudence, Vol. 9, page 514 and Rulin
Case Law, Vol. 6, page 217 and the authorities cited thereink
It is stated in Texas Jurisprudence Vol. 9, page
507:
“However, neither the 'contract' clause
nor the 'due process' clause has the effect of
overriding the power of the state to establish
all regulations that are reasonably necessary
to secure the health, safety, good order, com-
fprt or general welfare of the community. The
ekerclse of the police power upon subjects lying
within its scope, in a proper and lawful manner,
is due process of law. The decisive question
is whether or not the action is sustained by the
existence of facts affecting the public welfare
sufficient to justify such an application of the
police power. The answer to-this question de-
termines whether or not the action constitutes
due process of law. The mere fact that a law
necessary for the welfare of society regulates
trade or business, or to some degree operates
as a restraint thereon, does not make It uncon-
stitutional."
The police power cannot be used for the purpose alone
of'raising revenue, the fact that an assessment under police
power results in producing revenue does not deprive the assess-
ment of the character of the police regulation. (Brown vs. City
of Galveston, 75 S.FI.488)
Honorable 0. P. Lockhart, page 7 o-5461
We quote from Texas Jurisprudence, Vol. 24, page 1311
as follows:
"The State may impose upon nonresident in-
surance companies such conditions precedent to
the right to do business In the state as are
deemed proper. Thus the state may require the
filing of a power of attorney authorizing serv-
ice of process upon any agent, officer or repre-
sentative of the company, the procuring of a
certificate from the insurance commissioners,
the filing of a bond, and the making of a special
deposit as a trust fund for the protection of
obligations arising under policies issued within
the state. . . . . D .
"A foreign insurance company which has
elected to do business in Texas is deemed to
have consented to be governed by the insurance
laws of Texas, irrespective of their constitu-
tionality. Such a corporation may not contest
the validity of its contracts on the ground that
It has not complied with local laws."
A foreign corporation 1s required, as a condition pre-
cedent to the right to do business in the State, to obtain a
certificate of authority from the Insurance Commissioner.
(Articles 4686, 4687, 4701, 5059 V.A.C.S.)
It 1s stated in American Jurisprudence Vol. 29, page
70:
"As Is true with respect to foreign cor-
portation generally, a state may entirely exclude
foreign insurance companies from the transaction
of business within its boundaries, or may pre-
scribe such conditions of admission not In con-
flict with applicable provisions of the Federal and
State constitutions as it desires . . . S .
';NoInsurance company has the right to sell
insurance in a state without complying with the
statutes embodying such conditions of admlsslon.
As a condition of Its admission to do an insurance
business within the state, a foreign insurance
company may, for example, be required to secure a
license or certificate allowing it to carry on such
business; to possess a specified amount of capital
paid-up and unimpaired; to have additional assets
sufficient to offset its l,labilltles,including
reserves on Its risks; to deposit security for the
Honorable 0. P. Lockhart, Page 8 O-5461
performance of Its obligations within the state;
or to appoint a state official or a local or
statutory agent to receive service of process.
Likewise, a state may, In effect, impose a condl-
tion upon the right of insurance companies to do
business therein, by declaring that contracts shall
be construed and Interpreted according to the law
of that state, notwlthstandlng the statute annuls
the provisions of a poIScy which contravenes the
statute 0 . . D . . .'
We quote from American Jurisprudence, Vol. 29, page
72 as follows:
"The well-established rule 1s that the
Issuance of a policy of insurance is not a trans-
action of commerce and, although-made with a cor-
poration organized or having Its office in a state
other than that in which the insured resides and
in which the Interest insured is'located, is not
interstate commerce. Insurance is not a commodity
to be shipped or forwarded from one state to an-
other. As a consequence, the regulation by a
state of foreign insurance companies within Its
borders, or contracts made with such companies
within the state, is not invalid as allregulation
of interstate commerce. . . . e . .
It is stated in American Jurisprudence Volume 29, page
79:
'A state may prescribe that a foreign in-
surance company may not transact an Insurance bus-
iness wlthin the state except through lawfully
authorized nor duly licensed agents, or that an
agent of such company in order to act for It must
be duly licensed; and the rights of one applying
for a license to act as agent for such insurance
company are contigent upon the compliance of the
company with conditions precedent to its right to
appoint such an agent D S . 0 q'
In answer to your first question, it is our opinion
that prior to the effective date of Senate Bill 357, supra, no
Insurance company organized under the laws of the Republic of
Mexico had any legal authority to do business In this state
without securing a certificate'of authority as required by
Article 4686, V.A.C.S., and that neither licensed nor unlicensed
agents had any authority whatsoever to Tepresent said companies
as agents, as the term 'Insurance agent Is defined by Article
.
Honorable 0. P. Lockhart, page 9 O-5461
568 of Vernon's Annotated Penal Code and Article 5062b, V.A.C.S.
(Also see Article 5056, V.A,C.S, and Article 572, V.A.P.C.)
In answer to your second question, you are respectfully
advised that it Is our o inion'that Senate Bill 375, supra,
(Article 5012a, V.A.C.S.P is mandatory In the sense that It re-
quires insurance companies organized under the laws of the Re-
public of Mexico to comply with its provlslons as a condition
precedent to doing businessin this State and unless such company
or companies desiring to do business in this State comply with
the provisions thereof such company OP companies are not author-
ized to do business in Texas. In other words any insurance com-
pany organized under the laws of the Republic of Mexico desiring
to do the kind of insurance business as authorized by SenateBill
357, sum-a, must comply with the provisions thereof before it
can legally engage In such business in this State.
By your third question you inquire as to the constitu-
tionality of said Senate Bill 357, supra, and in answer thereto,
you are respectfully advised that it is our opinion that said
act does not violate OP contravene any provision of the Federal
or State constitution that has come to OUP attention OP been con-
sidered in connection with your request. In other words we are
not aware of any provision of either the Federal or State consti-
tution that is violated by said act.
Yours very truly
ATTORNEY GENERAL OF TEXAS
By s/Ardell Williams
Ardell~Williams
Assistant
AW:ff:wc
APPROVED SEP 15, 1943
s/Gerald C. Mann
ATTORNEY GENERAL OF TEXAS
Approved Opinion Committee By s/BWB Chairman