:.
n1
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OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Honorable 0. P. Lookhart
Beard d Iasumnor Coamieeioners
Awltill, TBxae.
Ret 8eetloa
Konoreblr 0. P. Lockhart, Page 8
EdOn Of Section l? Of Senate ijill 135, Acts
of the 46th Legislature. . . ."
Seotion 17, Senate Bill 135, &Lots Forty-sixth
Legislature, p. 405, provides8
wPapnnts on Certifioates Already in Foroo.
Ii tbs payments of the members of any aosooia-
tion ooming within the eoope of this Act, on
oertifioates issued and in foroe when this Act
takes effect, or tba reinsuranoe or renewal6 of
such csrtifloatea, shall prove insufficient to
pay matured death end dieability olaime in the
maximumamount 8tatsd in auoh@.liaiis or oer-
titloetes, and to provide for tlw oreation and
maintenan0pe of the funds requi&?ed by itb law6,
such aseooiation may with the approval of the
Eoard of Ineuranae Gommiesioners and after prop-
er, heari!@ before said 5oa1'$ provide for meeting
suah deflaian0y by additional, in0reaeed oi
extra rates of payment, or by reduction in the
saulmum benefits stated in such ptilioies or oer-
tifioatse then in force, or by both euch~ Inoreaesd
payments and reduced na%imumbemfite, or t.ho
members may be given the option of agreeing to
reduoed maximwa benefita, or of making horeared
payments."
Seation. S of said enactment gives the followi~
definitions of certain terms used therein:
" 'Xembsr' aball inolude policyholders or
any persons irpured by an aesoaiation, by what-
soe~er~meena the inauranoe may be effeotlve.
W~Certifioats' shall include any insurance
policy or aontraot of ineuranoe, oertifioate of
membership or other dooumokat through whioh ia-
aurenoe is lffeotod or evidenaod.
v*hsso0iation' shall refer to and inolude
all types 'of organizations, oorpor~tions, Pinas,
asaooiati0ns, or groups eubjeot to the provisiona
o? th&s &et,"
Its-is observed that Motion 17 is oaptioaed vj&-
ment on CWtifi6tat6# Already in For0e.v The SeOtion then
Honorable 0. P. Lockhart, Page 3
stipulates how an association may aot to meet oertain oon-
tingencies arising from ite operations. Thuely: “If the
payments of the members . . . prove insufficient to pay
matured d,eath and dlsabillty olsime in the maxlmum amount
e&ted in such policies or certificates*’ then the assooia-
tion, with the approval of the Ineuranoe Board,~may “provide
for meeting arch detiaienoy by additional, inorcased. or
extra rats8 of (premiumj payment, or by reduotion in the
maximumbenefits etated in suoh polioies or oertifioates
then in foroe, or by both such gnoreaeed payments end re-
auoed maximum beNtits, or the members may be given tno
ti r agreeing t.a reduoed maximumbenefits, or of aak-
f& zogeesed payment6.“(Undersoorfn$ ourz)
Seotion 13 of’the same Aot provides:
“It is the ~riamra DUSDOBB of this riot to
seoure to the membera of the assooiations and
their benefiolaries the full and prompt payment
of all ~olaime aooording to tta maximumbenew
provided in their certifioates. . . .” (Under-
aoor4~; OUPS)
The pSOViSiOn8 of Sections 13 and 17 of the Bat
8eem to constitute an anomaly. ‘Ihe language of each rootion
soems in aireot varlanoe with that o? the other. This, how-
ever, oan be explained.
Seotion 36 of the Aot, the emergency olause, states
that thevpresent laws governing life, health and accident
asaesament insurance, . . . do not adequately proteot the
members from loss through unwholesome, unsound or fraudulent
practioes” therefore, an emerrjenoy and an imperative pub110
neaesaity was deolared to exist.
The Legislature apparently
realized that nat all
insuranoe companieswere finano:ally able to give “full ana
prompt payment of al.1 olaims according to the maximumbene-
fit provided In their oertifloates.‘~
The Legislature, therefoxe, reasoned that there
must be come provision inoorporated in the Aot whoherebythoee
oertaln finanoially unsound associations or companies could
go back into the past and make any neoeesary ohanges with
regard to its old members and oertifioate holders. They must
be allowed to put their houses in order.
Honorable O.P. Lookhart, Page 4
Consequently Seotfon 17 naa placed in Benate
Bill 135 80 that the old members of any assooiation within
the soope or the Aot oould be proteotsd also from *loss
through unwholea~me, unsound or fraudulent praatioes~ by
havine: now, *additional, lnoreaesd, or sxtra rate8 of pay-
ment, or by reduotion in the mexlmumbenefits. . . or by
both . . ." levied agalnet them so a6 to meet any *doti-
oisnop whioh m%$ht prevent their aeeooiation from nttcrin-
lng the ultimate aia or being rinenoially able to meet
Its valid obligations in the future by giving "full and
prompt payment or all alaim43,*
We rind no anomaly between the respective pro-
vLelons or the two Deotlone. The Legislature derlrrd and
Intended that all maabare of en aaeooiation, both @II to
the mrt am well as the future, 6hould benefit by t& pro-
vitaionn of senate Bill 126.
m0tion 16, astic I, (mli or Rights) or tma
Texar Constitution, providea that:
Wo bill 0r attainlor, ax po8t raoto law,
ntroaativo law, or any law -airing the ob-
ligation or oontraots, aball be madorW
A retroaotiv6 or :~rotr+iapeative statute is one
whioh reaohos b&ok to impose or attaoh now rlghfe, h*r dutlea,
now obllgatiolu, end new liabilities on paat truusaotioru or
oonolderetiona. 2 R. 0.. L,; p. 310, Cooley',~,Oonstitutlo~
Limltatlone, p. 771.
The oourt Ln Turbevills v. %vidy, (C.C.A.) 272
S. ~34'.559. stated:
='A retroaotire lawi In the aanae or the C&A-
8tltution . . . wtioh prohibita auoh aota, la
one made that afieota aota or rfghte aaoruing
bst020 it oam into roroo. a rtatute im retro-
aotive which ta?&ee away or l!apalrs rested rlght8
aoquired under existing law, or ore&toe a new
obligation, iapof~8s a new duty, or edopta a MW
disability in reepect to tran&sotions or co&U&d-
eratlone alreqdy pa8sedrw
St is a well-aettlod rule of statutory oonrttuo-
tioa that 8tatutee are to be treated as operating prOOpeO-
tirely unlsae the contrary is apparent from the leng~~a Of
Honorablo 0. P. Lookhart, Pago 5
the statute. 330 Ine. 00. v. Ray, 50 Tax. 511, at p. 6191
1 Couch on Insuranoe, p. SOS, Cooley’s Constltutionel Limni-
tat10ns, p. 772.
The language or Seotion 19, Senate Bill 135, plaln-
ly reveala the legislative intent that the provisions ot said
section should operate retroepeotirely. Asr *oertitioatse iesued
and in foroe when thio Aot tekea efteat” shall ba eubjeot to
%norsasod, or extra ratoe of peyment, or by reduotion in the
maximum benefits stated in such poliolee or oertlrioates then
in foroe.” (Undeieoorilrgours)
Mr Justloe Phillips in the ease of Cox v., poblson,
105 Tex.. (Se,, at page 487, said:
“Had the authors of thir provision (of the Texas
Constitution) intended it to have a prospeotite
operatlon and efioot they oould, and it fr fair
to assume that thoy wouI&,~ have used terms whoso
undoubted common use and meaning would. have ma&a
that Intention plaln,~ instead of a term whoa6 ‘usual
rrignifiaanoa ‘ie not proepeative,, and to whioh wa
mast attaoh a use it does not ordinarily have and
Impart a meaning it doe8 not oommonly bear, in ordir
to give the provision a’prospootire interpretation.*
(Parenthetfoal insertion’ our(l)
The statement by Mr. yustioe Phlllipa 18 applioable
to our situation., ltmre apgwma a olear legislatire intention
that the provisions of Seetlon II should operate retroepeotlvely.
In the oaso of Gemtring P. Sovereign Camp, W.O.W.,
278 6. Ww.310, Chief ~Uatiee yly oi’the Court Or civil Appeals,
states that:
“. lall lawa retroactive
‘? in their na-
ture do aoh oomo under the -~oonstitutlonal. cow
devnnationl”
’ Theichier Juetioe then prooeeded to quote with
apparent approval the following sxtraot from Oooley*a Oonsti-
tutional Li.mitationst
*,@Where a rtatute is expressly rstroaoti76,
and the objeot and sireet 0r It ia to oorreot an
i~oo~nt mlstdro, remedy a mlrohhief exeout~e the
Intention or the parties, +d promote 3ustioe~
then* both a8 a matter ,Or Hsht &d of publie
Honorable 0. P. Lookhart, Page 6
poliap tm00ting the pea00 and mirar9 or the
oommunity, the law should be ~)~staineQ.'"
We shall a&so quote raw Oooley*s Treatise on
Oonlltitlltional LlaIit&iOM, pp. 179~7%;
“. . . %brO i# n0 doubt of the right of
the legislature ta pane nbatutes uhioh naoh
baok to and ahange or moaiif the ;r?eot or prior
Mr, CooLey then prooeeds to enumerate oertala ox-
oeptional aitustlone where retmspeotlro etatutes hare been
held valid. They rolla:
*A retn,epeatira statute ouring defeat6
in legal prooao8iage where they are in their
nature irregularitiae only, and do not extend
to tatt0rrr or jurlrdlction, 18 not void OD bon-
stitutional gr0und8, ~nluss expresoly rorblddon.
02 this alas8 are the etatube to oure irrsgu-
leritles in the arrsaunent at property for t-a-
tlon end the lory of taxes thereon Irregular-
Itles in the organization or eleot 1ona of aor-
porationsi lrregulerftiee ia the vote8 or other
a&ion by mlraioipal oorporation#, or the like,
where .a statutory power hae i&lea or due QM
raguler exeoution through the oarelesansre of
oifioere, or other aausesi Irregular procreb-
ings in oourt, sto.
The rule epplloable to aaaes of this do-
60ription ie rubatantially tha r0ii0dng: xr
the thing wanting @r wh%oh railed to be don*,
and whioh oonstitutae the defeat in the prooFed-
lnga, is aomothi~ the neoer8lty for which the
legislature might hare dinppsneed with by prior
statute, then it is not beyond the power of th0
Honorable 0. P. Lockhert, Page 7
legislature to dispense with it by subsequent
statute. md if the irregularity conslets in
doing some act, or in the mode or menuer of do-
ing come eot, which the legislature might here
made immaterial by prior law, it is equally oom-
peter& to make the 6eme tieterlel by e eubsa-
quent law." (pp. 774-776)
' 'Ihe situation oonfrontlng ua doee not fall with-
In any of the wed eroeptlona to the general rule. More-
over, the Texas Constitution forbid8 retroactive lawa s
nomin* .
Seotion 17, Senete 3111 133, by its eqwe88 $erm8,
seeke to direct a new obligation upon the old msrbbrrr of
derh4a lneuranos~ae8oaiatlonr. Upon them* it lerl.8 new
and dnerpected lie8ilitie8; It impoeer new &ties, end at-
tacher new di8abilltie8i end all relative to pa8t t+nn8ae-
than8 and oonoidoraticn8. The provinion 18 intenllrd to at-
toot rd;ghtswhioh aoorued betOr it became operative.
The paer whioh it saokr to bs8tor upon the
:f~iatio" is quite bsyond the 800~6 or leg&l legi8la-
~e'grenteb power in it8 prctririon8 eavor8 rtroag-
ly 0) the power tc arsato new contraate between the l8eo o ia -
tion end its old manb8r8and that without the latter'8
oonemt. The Legirlature cannot give it* sanction to
aote whioh will impair existing contraote.
The orfieial rim of thi8 department plainly
show the latent evil in the provirlone of Seotlon 17, Sen-
ate Bill 135; Unoonsoionablo and unsorupuloue operator8
were quick to recognize and subsequently utilize Its po8-
aibilitiet3. People,who, beoa98s of tlmeir age, could bv
oleeeeb as "bed risks" received notice8 that henceforth
their premium pepente would be doubled, trebled, or better,
or that the benerite provided lo-their oertlfioatee or pal-
iolee w&to be cut to a relatively nominal figure or both
increased premium peymente end out beuafite. Thue theee
"bed rlekeW were VMzen-ofi* the eesooiationel membership
list. To those puople who could not meet the new, dra8tio.
and even prohlbitiva demende, end, ee a coneequenee, loet
their inaurenoe, the effect was cataetrophic beosuaes;W,
as a whole, were of a olase not readily insurable. -
stential equities were adversely effected.
Honorable 0. P. Lockhart, Page 8
Such practloealere not of neoessity ooniined to
thoee people alone. Others Pelt the effects. heny found
that the ineuranoe item in their budget was no longer eu?-
rioient, Their calculation8 made at the time they firat
became members were upset. The praotioel result was wide
epreed lapsing or Insurance contraate.
Thle seetion tir Senate Bill 135 cannot be deemed
to be in furtherance or oqulty and good morals or to pm-
mote Justioe, remedy a mieohiei, nor a8 one sxeoutlng the
Intention of the pertiee.
The good motive of the ~giDlatur4 in enacting
thin hw is not to be qub8tiOn.d. The honest aOt8 Of th8
legitimate ineuranoe OperatOSD 88ektng to abide the law ti
oortainly not to be que8tione6.
hTeverthe~888, Section 17, Senate Bill ~8;00m88
within the con8tftutionel oondemnatioh 0r 8eoti4n 16,Atti8le
I, at the Peran Bill ot Bighto, a8 being s'retroaotive law
and one impairing the obligation of contracts,.
Seotlon SO, iuWcl8 I, hxaa Constitution, (Bill
0r Right*) providesr
Qcoguerd again8t tran8gre88ton0 or the
Aoaordlnglp you are eaviaea that Section 17, of
sonat Ml1 136 or the Acts or the Borty-sixth Legislature,
is void end of no roroe or errsot.
Yours very truly
‘*l ATTORNBEYGENERAL OF TEXAS
Wm. J. Fanning
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- AasiGuOi
Untitled Texas Attorney General Opinion
Combined Opinion