OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Hon. R. 0. watrr8,Co8drrioner
Hoard oi fnruramo Commi8rloarr8
Austin, Toxar
Dear Slrr
greater and may
d to rl8k8 or 1088
pinion of,thir de-
hp8 barn keoelted.
Otter a8 fO11OW81
8.d UO&8LM’8 CO@M-
or approvala8 it8
or wrltlng viorkmen~r oom-
uranoo,a partlolpatlonand
an rh8nbr d rk8 ‘Of a gi~on
er ~$11 bo written on a parti-
Vhr Attorney Oonoralhrld in an opln-
ion dated D8oembbrr lb, 1228, that a company
oould not u8e a partlolpatlon 8nU 888os81mat
plan of.oprratlonrhloh would apply t0 80101
Ot it8 pO110188 but not t0 ti1 it8 QO1101.8,
202
Hon. R. 0. Watarl, Pago R
the selection OS tho8e to which it rroald a,?ly
to 110 dthln the dlecretloa OS the carrier.
Vhr AttorneyGeneral held ln an oplnlcn
dated %oeaber 16, 1958, that the Retmspeo-
tit8 Rating Plha oould ba legally adopted by
whloh risk8 oi a &iron sits and larger oould
llsot a plan nhambpthay would participate
or be o8rerssd in acaordanoedth theirlndl-
ridual expdrfMo8 and that risk8 of lOS8.than
ths gtr8n 8ize would not be eligible.
*In view of the two oplnlona zxentloned,
we rsquart your opinion as to nhether or net
there 18 any'legal barrier to our ap;roral
Of the plM of Opaxation and andorsemnt a8
requarted by the 8aid aarriar which glen till
raqulr8 that the andorsa;eentbe attached to
pO11C188 r0r ri8k8 or given slzr or greeter
and sar &ot be atteahed to rirks of lass than
tba glvqn.81Z0.D
The propored ondorrercantto be attached to pOlI-
ales Sor rIak8 of a given size or grastar and which may
'not be attaohed to risks ot less than the &Ivan 81213,read8
a8 iOiiOW8:
*The 'assuredwill.pay tha Catcpanpthe
manual or e~8rlsnoe rate8 of :reJlfrcns appll-
aabb tothis pollcy a8 promulgated by tha
Board (d Insumncs ComIss:oner8 of Texas,
(1) litlie pretfuas 80 mid are lnsufflolent
to prorido far the psyment of, (a) all gald
and lnourrad lObeel, Inol~~dlnglegal and other
lspansa8 lnoidsntal thereto arI8Ing under til8
pollorg and (b) ruoh par osnt of all prelniuft8
a8 my be agreed u?on bstneez the assured and
the Company, wbloh per oent rhall be ratafned
by the Compaajr the assured dll py to thr
Company upon damaad, such addltloncl emamtr
.,
203
Hon. R. 0. Sator:,Pegs 3
a8 nay be necessary to provide adequate re-
serve8 ooinut8d a8 presorlbed by the Board
of Insurance CommIesloner8 under the lneur-
anoa kin of the 3.at.e or Ttz~xa8~ (2) fr
the preaiua80 paid 8hell prove to be ore
than surrlolent to 8o protide rorthe payment
6t the chars88 uentlonedIn (al and (b) or
,(lI,and the malntananno of adqqunte reearves
doltpitedon tii jOifCIe8 a8 rtated in 2 hex-dot,
T&e Company will return the exae88 to the
a88UrOd, aooording to ouoh pban8 a8 may be adopt-
ed by the Compeny, s8 and when such return shall
be approved by ths Eoard of Insuranoe Comalr-
8loLlersor Texar. (3) The paapmentaprovided to
be made under (1) and (2) above shall be made
arter th? exp1rat:o.oof tho ye&r'8 perfed for
wklchthe policy Is rrltten aal provided all
premIuPlphereunder hcve be3n gald, and not
OthelFW18..This endorsement shall not apply
oa pollcie8, (a) the estlmted s~ual premium
&a ohown on the pollcfr 1s 1068 than
of vikloh,~
Fire Thousand Dollar8 ($5,OOO.OGj, or (b) pol-
Icier to which 18 attaohed the hetrospeatlYe
Rating Plan Zndorsenent, 'This Eodorsement,
when ea\ntersIged by a dulr authorized Agent
or the Company and attaohed.to Fclloy No.
WC 188ued to
by tin Ametioan’Ganeral Insuranae Company,
shall be ralld ati forsa ptit 3f raid policy.
_’ “Counterslgned at
This - day of 19
8 Agal;. Tni s. wRTHAb4
FTe'8idtJIlt"
As shown by the proporsd endxsement, abova quot-
ed, the plan of operation is to write all aeaured8 whoae
e8tiW.ted ranualpreaIum8 exoead $5,000.00, and who here
not 8boted to be rated under the Retrospectire Ratin
Plan upon the baa18 of an 1nSlYidually epplled plan of
partlclpatlon e.ndarse8sment a8 appear8 from the form of
endorsement. However, the nbore nisntlonedplan specifically
204
Hon. R. 0. Waters, Pa68 4
prohibit8 ali whose estlmsied snnual pre;ri~is 1~8
than $5,OCO.O0 fro?,garticlpatlng In or.ogeratlnG under
suah plan. Artlalos 4907, 4908, 49L1, 4913, 4914 and
4916 of Vsrnon*s Civil Anratated Ststuter rsad 48 fol-
lower
“ht. 4907. The said Cot?~xfs6io5 6hall
make, eetablI8h end proml6ate all cla88ffI-
oatlon8 of hazard8 and rata8 of premium re-
8pectlrely applloable to each, ocznterplated
ati prevlded for by Title 130, kncun 88 the
Workmen~s Compsnsatlan Law &d/or by the
~Long8horemenn'8~ Comptbsa-
and Harbor ;S'orkcr8~
tIOn Act' a8 enact&d by the COJl6r888Of the
United 3tatss. Said ComxIsslon shall publleh
allretss pronulgsted by It as aff'ecttng
Compensation Insuranoe In thla State, snd
said rates, or any change therein, 8hal1 be
publlrhed SIfteen day8 before thsp become
stfectlve and In force.
“Art. 4908. The Cvzzlsslon shell prs-
rcrib6 standard pAi0y for?;rs to be used by
all companies or sseoclatlons writing wrk-
3.811’8 comgensaticn fnlsurams,in thI6 State.
Xc aompany or a68ocIatIon authorized to
wkfte wrkaan~8 oompsnsatlon Insurance In
ttls State shall, sxoept as hare:nafter
provided for, use'any ala8slfIoatlon8 0s
hazardr, rata8 or prenium, or pglloy form8
other than those mrde, established aad pro-
mulgated snd prsscrIbod.by ths Commission.
mArt. 49LL. The Comfaslc~ drall deter-
Pine hazard8 by elassee and fix 8uch ret88
ot prei.tiuma?plIoable to the payroll 1~ eaoh
Of 8uCh Ola88e8 a8 8ba11 be adOqUIt t0 the
risk8 to which they apply and ocnsistent nith
ths nudntename of solvenay and the are:-tion
of ade-,uaterswrvs8 and s rearonsble sUrplU8,
and for ouch purpose may adogt’a SYP ten Of
so:;e&alsand srperIenos rating in such uanner
as to take socount,of the jecullar hazard of
esch lr.dlvIdualrlrk, provided such rate 8hall
205
Xon. R. C. xtlt4rs, ?eg4 5
be fair and rearu,:ablsand not conrlsoatory
as to any ala80 cb tneurenoe oarrlezs autbor-
lzed by law to write workm4n'# oompeneatl:n
lnmrance in this State. To Insure the ade-
~uaop and reasor.ablene48of r~tea, ttn Coni-
mlsaion shall take into oonsldemtion an cx-
psrlenas gathered froma territory aurflolent-
ly broad to lncluda the varying ctnditions
,?f the lndumtdss in ~Elab the Qlnaslf~catlcne
are involved, and over a pcrlod euirloisntly
lon& to lmaure that the ratas det-:rmlnediher4-
from shall be just, re~laonsble,and adequate
rates. The Cosxlssion shall exolang4 lnfor-
mtlon and e?iperlenoedata with the rcte-making
bodies of othar Strtes end atoll coneult anl
national orgasnizatlonor aszoolation now or
herearter exlatfns for the purpose ci'cssexbllng
data for the making of compensation In,ourcncs
rata.
"Art. CQU . The Com$aeion ahall prescdb4
a uniform gollcy for wortien'a oozpensatlon
lnsuranoe acd no ooc?azy or asaooiatlon shall
Wareafter use any 0thc.rfors In writing work-
aen* ooagensatl.:ninsuranoe ir thir State,
provldsd that a*;' company or association my
use any fora of endorasment appropriate to its
plfian
or operatim, ii such endorsement shall
be first subnittad to and a>pxvvadby the
Comisslon, and contracts or agreement8 not
wrlttsn Into the apylicatioo and 2ollcp shall
be v;id and of no 4f'feCtand lnrLol5tlon of
the provisions of this cbaptor, and eball be
sufflolent 0au::a for revooatlon of llcenee
to write workmsn'r compsni3atlonlnsuranoe with-
In this Steta.
*Art. 4914. Nothing in thla chapter ahall
be oonotrued to prohibit the opamtlon bere-
undar of any stock ooaFany, mutual cogpany,
reclprooal or lntsr-lne2ramr 4xotang4, or
Llo:d*r aasoolatlon, to srohlblt any stock.
ooqany, sutual cospeny, ~reoiprooal, or lntar-
insuranoe erohange or Lloydcr maoolmtlon,
206
Hon. ii. C. Caters, Pa&s 6
ls3uln.spartldlpatlng pollc1es, grovlded no
rilvidsadto Eubscrlbers under the ?:orkmn~r
Coqensatlon Aat shall t&4 effeot until
the same has bean ap;roved by th4 Comlls3l:n.
Go such dltldend 3ha.U be u;proved until
adeQuate res ne ha3 been provided, said
resrjrns to bs computed on ths saxe basis
ror all 016s848 or com?anles or as3oclatlons
.operetlng under t5ls chapter, aa rrdsorlbed
*uder the lnsurnnos laws of the State of
Texas.
-Art. 4916, 80 provlsloos of the Act
creating the Stat4 Insuranao Cotisslon, with
r4gard t,;tha fixlnc and ;,romul&atlonor
rctes for fir4 insurance or the grcscriblng of
tire laauranoe ~olicl4s end form shell bs
ep;;llczblsto the fixLng of coapmsatioa ln-
surance olasslrlcutlons or th4 xakl& of cam-
p4nsatlon lnsurano4 rLt4s or the prescribing
of aox~ensatlon insurance policy form: but
th4 provisions of this hot shail bc constnutd
and appllsd lndepsndentlp of any other law or
lawa, or garts of laws, havla~to do with tha
nattar of insursncs rate8 end form4 or of fl,x-
in3 th4 6utf4s or the ixet4 mumc4 COD
;1194lon.4
Under the above quoted statutes it is ths duty
of t?4 Board of Insurams Comlsslcners to jmsscrlbr retes
and all policy forxs thit every coximny wrItiWA coxponsa-
tlon lnsuranca Ibustuse'aod such coxganies ::r4requlrsd to
us4 such rates and forx4. Lpparently, the ges4~1 polioy
of the Lsglslature and all Insurance leslslatlon IS to
prevent d1sorlxlnatlon by tks carrier between Its pollcy-
holdars. As w4 uriderstond the above lrsotlonsdplan, it Is
cothlag Tore than or less than a s:,cclflodlscrlmlnatlon
betwesn the policyholders of the company, md the plaa of
opsrstion 18 contrary to th4 2011c144 or the Lsgfslature In
such xattors.
This dspartaent hold In an OplnlOn dated Ceoember
18, lG20, thct a company could not ~84 a partlolpatloa and
assessrent plan of operation r!loh would-apply to som4 of
Hon. R. 0. Watrra, P*gs 9
its polloles but not to all of its polloies,the asleo-
tlon of those to which it rould apply to 114 wlthln
the dlsoretlon of ths oarrler.
In rler of the pollcl4s of th4 'Legislatureex-
pressed by the forsgolng statutes, yo*urpusstion ia ro-
sp4otfully answered in th4 nsgatlre.
Tkie oplnlon or the Attorney C4nera1, bearing
date or Deoember 16 lFclS,holdlng t&t the retrorpsotlv4
rating lor.can be ieeal:y adopted by rkloh risks of a
given aPze end larger oould ele::te plr,nwhereby they
would participate or ba asFessed ln aocordance wlththeir
individual experience and thet risks of less than tbs
given size would not be eligible, Is hereby expressly ovem
ruled.
Trust1nc;tha.tthe firsgoi;lafully anmars your
Inquiry, we ranzln
Very truly yours
ATTOBKXY 5EHXW.L OP 'XXAS
By (al -dL
Ardell William
:.sslrtsnt
APi-KOTXDU!?CH 29, 1940
APROVED, OPINION coK!~mT?!z