Untitled Texas Attorney General Opinion

TEE ATTORNEY GENERAL OFTEXAS Honorable 0. P. Lockhart, Chairman Board of Insurance Commissioners Austin, Texas Dear Sir: Opinion No. O-5425 Re: Forms of "Multiple Life" and "Family Group" life insurance policies. Your request for opinion has been received and careful- ly considered by this department, We quote from your request as follows: "A . We transmit to you herewith a typewrit- ten form of so-called 'tiltiple Life' insurance policy, together with form of application there- for and schedule of insured lives to be attached thereto, submitted to this Board by Consulting Actuary, MO B. Gammlll, to be approved and filed by this Board under Article 4749; and a letter from Mr, Gammill to our Actuary under date of June 5, 1943 explaining to some extent the pro- posed use of this form of policy. It is our un- derstanding that a typical use of this form of policy will be that where certain donors make sub- stkantialdonations to such religious or charitable or benevolent institutions as churches, lodges, etc., some person acting as trustee for the donees will at the expense of the donees take out this form of multiple life policy to be owned and con- trolled by such trustee, for the purpose of re- imbursing or rewarding the donors for such dona- tions, in the form of endowment policies, or their named beneficiaries in the form of life in- surance benefits. "We have only the original copies of the policy and forms and letter transmitted to you herewith, and with your opinion given in response to this request we ask that you return such forms and letter to us. "Without the necessity of advlslng whether the terms of such policy form comply with the requirements of Sections l-11 of Article 4732, Honorable 0. P. Lockhart, page 2 O-5425 and with Article 4733, both as amended, will you please give us your opinion as to whether the ap- proval and filing of such form of policy by this Department and its issuance and use by insurance companies operating under Chapter 3 of Title 78 are forbidden by the provisions of Section 6 of Article 4764a (Acts 1931, 42nd Leg., 172, Ch. 101) . In other words Is it a 'group life insur- ance policy' within the meaning of that section, and can such a form lawfully be issued, assum- ing that it meets the requirements of Articles 4732 and 4733? "In this connection we invite your attention to the various forms of life insurance which are defined and authorized and regulated by Sect- tion 1 and the other provisions of,Article 4764a, as amended by Acts 1941, 47th Leg., pa 1346, ch. 610, Section 1, and by H.B. 326, Acts 1943, 48th Leg., which ~111 become effective August 10, 1943. "B0 This Department has in the past approved and filed and authorized the issuance and use of forms of life insurance policies by companies operating under Chapter 3, Title 78, Insuring the lives of all designated members of a family, commonly known as 'Family Group Policies'. Please advise us whether such practice is forbidden by Section 6 of Article 4764a, aforesaid, before and ;&rL;,"e effec%ive,date of H. B. 166, Acts 1943, ', effective May 15, 1943, adding Section 12 to Article 4732 and regulating the issuance of so-called family group policies. We quote from Mr, Gammill's letter, explaining the pro- posed use of the policy, as follows: I! . . . . . "This form of policy is prepared to meet the policy requirements outlined in Articles 47'32and 4733 of the Texas insurance statutes. It is not offered for filing as a group policy form as des- cribed in Article 4764a. This form of policy will not be written in cases where an employer and em- ployee relationship exists or on the lives of mem- bers of a labor union as described in Article 4764a e The policy will never be written on a specified group of persons or a fixed percentage thereof as is the practice under group in.WranCe. Honorable 0, P. Lockhart, page 3 O-5425 It will be issued only to an Owner applicant (other than the Insured or Beneficiary) in the same manner as ordinary policies are now issued in this state on the basis of third part applica- tions where such policies are owned by the appli- can,tand not controlled by either the Insured or Beneficiary. This form of policy is a composite of several individual insurances such as would be granted under separate policies. As to the composite structure of this policy, it is much similar to so called Family Group policies now be- ing Issued by many companies in this state on several forms which have been accepted for fil- ing by the Department of Insurance. "The primary use of this type of policy is to permit the economical handling of small poli- cies and insurance amounts on several individual lives through a policy issued to an Owner appli- cant, usually a Trust Company or other organiza- tion authorized to act as trustee, providing bene- fits to the several individuals accepted for in- surance to repay them for contributions made to an organization which transactions and relation- ships are covered under a trust agreement not a part of the insurance contract. 1, s . . . DII We have carefully considered the policy form submitted by Mr. Gammill, and the statutes referred to by you. Because of the length of these documents and statutes you have re- ferred to we deem it unnecessary to quote them. After a full considera.tionof same it is our opinion that the policy form submitted under the proposed plan of use of same as outlined in Mr, Gammill's lette,r,constitutes same a plan of group in- surance not authorized by law. We therefore answer your first question in the affirmative. With respect to your second question we cannot pass on the "Family Group Policy" forms heretofore approved by your department as you did not send us copies of said approved forms. How ever, it is our opinion that from and after May 22, 1943, the effective date of House Bill 166, 48th Legislature of Texas, all "Family Group Policies" must strictly conform to House Bill 166, which reads in part as follows: "Be it enacted by the Legislature of the State of Texas: Honorable 0. P. Lockhart, page 4 O-5425 "Section 1. That Article 4732 of the Revised Civil Statutes of Texas of 1925, be amended by add- ing thereto Section 12, which Section shall read as follows: "'Section 12. In all family group policies there shall be included on the face of the policy, the name and age of each insured;.'thename of the beneficiary of each insured, and after the name and age of each person insured, in figures, the amount which is payable to the payee in the pol- icy in case of.death, accident, or illness of such insured person, except where policy provides for Waiver of Premium only in event of total and per- manent disability or death of the payee, regard- less of what the maximum amount of said policy is, and if there is a provision in said policy for payment other than the full amount of said policy, such provision shall be clearly stated on the face of the policy, and this provision shall apply to all such Family Group Life, health and/or accident policies sold in this State.' "Sec. 2. This law shall be cumulative of all laws and parts of laws not in conflict here- with, and all laws and parts of laws in conflict herewith are hereby repealed. 'Sec. 3. There being no law in effect in this State governing the method of showing benefits payable under family group policies, creates an emergency and an imperative public necessity that the Constitutional Rule requiring bills to be read on three several days In each House be sus- pended, 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. "Passed the House, April 7, 1943: Yeas 133, Nays 0; passed the Senate, May 7, 1943: Yeas 26, Nays 0. "Approved May 22, 1943. "Effective May 22, 1943." (Vernon's 1943 Texas Session Law Service, 48th Legislature, p. 639.1 Honorable 0. P. Lockhart, page 5 O-5425 Very truly yours ATTORNEY GENERAL OF TEXAS By s/Urn.J. Fanning Wm. J.'~ Fanning Assistant WJF:db:wc Approved JUL 13, 1943 s/Gerald C. Mann ATTORNEY GENERAL OF TEXAS Approved Opinion Committee By s/BwB Chairman