R-309


                                 OFFICE        OF
                     THE ATTORNEY~GEMSRAL
                                AVSTIN.TEXAS
I   PRICE DANIEL
    .mTTORNEY
           GENERAL            June 30, 1947

          Hon. J. UP.Gibbs.~
          Casualty Insurance Dlvlalon
          Board of ItistianceCommlsslon8rs
          Austin 14, Texas
                                     Oplnlon No. v-280
                                     Re: Clarlflcatlon and am-,
                                          pliilcatlon of Opinion
                                          No. O-7300, coIlwmling
                                          Seotltin21.o? Article
                                          1302-a v. ~C S
                                          tive ti dlvl;lo;l'o~?'a-
                                          premium8 with abstraet-
                                      .' 'em representing title
                                          lnsuranoe companles;and
                                          thmmsaning of "an
                                          abstract plant" as used
                                          therein.
           Attention: Mr. Ned Prioe
                      Dlrector,Tltle Section
           Dear 8i.r:
                     ,Yourrequest for advice of this departmmt
           states that Opinion Ho;,o-7300, readered'under   a former
           Attorney General, does not adequately cbver questions
           before your department ln'the sdmlnlstratlon~f your du-
           tl6s tinderRouse Bill 153, Chapter 40, Aots of the~41rt
           Legislature,~regular seipsion,,1929, page '77, and +mend-
           ments thereto, ~publlshed as Artiole 1302-a of Vernon's
           civil statutes. You request ampllflcatlon and clarlfica-
           tion of Opinion No. o-7300. Your statement and questions
           I-8&i:
                      "The &estlous now submitted relate to
                 98pr888ntat1v8s~ of title gWm?mty compan-
                ies under Seotlon 21 of Art1018 1302-a of the
                Revised ciVi1 St8tUtM Of 1@9. .U8 m8 UOt
                ~lnqulrlngwith respeot to abstracters~who~are
                s,implgconduotlng an abstract business or who
                are simply oomplling abstracts. Our questions
                relate to suoh a %epresentatlvel of a title
Hon. J. P. Gibbs, Page 2, V-280'


        oompny in the COllW8 of his business of rep-
        resenting the company in soliciting, writing,
        or Oth8rwls8 participating In the Issuance or
        88l’ViCiII.g Of tit18 iIl8llkVX.lC8
                                       pO11C188.
             "Questions:
             "1. What constitutes such an abstract
        plant, as the term 1s used in Seotlon 21,
        Article 1302-a, Of the R8ViS8d Civil Statute&,
        as will qualify tW 'person, firm, or corpora-
        tion, owning and operating an abstract plant
        in such Oounty' for appointment by any title.
        company as 1ts:representatlve and permit the
        making of such arrangements for'divislon of
        premiums between~the title company and Its
        representatlve.as may be approved by the Board
                     Commis~sloners. In this connec-
        of.1ZlSU'aIliZ8
        tiOIL:p1e688define, and specify as fully a8
        convenient:
                   :?(a)!!?h&characterof +ecords
  ..,   ‘,             .:requlred.
                   ";(
                     b)~"'
                         The mlnlmum area that such
                         records must cover.



              "(d) Whether or not the Depart-.
                    mant may require that th8    1
                    contraot -of appointment,
              'j~ "and division 0f~premiums,
                    3rmst.a$eolfgthe area for
                    which 'therepresentatlve~
                   l.18app&.nted 'In orders'that
                  ~,the Dspart~ilt~may be sure ~" :;~'
                    such representatlv8 has the
                    requ1,slteabstract plant       .'
                  ~.ror suen.area.
.~.'.;
   .,       ,,,
         "2. May the ioskof      Insurance Commls-
    sionera withhold Its approval to an arrange-
    nmmt for the division of premiums between the
    title company a@ Its representative until
    evl&enoe 1~'submltted td the Board showing i
    that such representative owns and operates an
    abstraot::planta&defined or explained by you
              .:
Hon. J. P. Gibbs, Pege 3, v-280


     in answer tc~Qusstion l?
          “3.  ,May the Board Of InSUrana8 CO&Sit+
     aloners disapprove, or ~*evokeits approval
     Of, an aFMbllg8mentWith r8f8l%nO8 to dlvl-
     SiOIlOf pP8UliUIllSentered into between the
     title company and ita representative if th8
     Board later learns that the abstract plant
     of th8 representative does not in fact con-
     form to, or does not in fact continue to
     conform to the requirements of an abstract
     plant as such Is defined or explained by
     yOn in 811SW82’ to Question 1."
                                              T'.
          Article 1302-a, V. C. S., oontaini provlslons
authorizing and r8guLatlng the conduct 0r ~th8 title ln-
EIaPBPCbbuSb8SS in %XBa, and IS 8Sp8Cially appliOa@lO
to those phaSe%?i.of the tit18 lnSUrenC8 Industry whlah
are peoullar ln the'field of InsUranoe. It tends to
combIn the formerly distinct bUsin8ss of tit16 gparan-
ty Wlth.th8 business of tit18 lnSuranO8 and ob$ously
contemplate8 that th8 b~slneas of guaranteeing ax&in-
suring titles is to b8 oonsldered'as insurance bu~lness
and18 tob8 eonduoted andregulatedlnamanner         slml1;ar
to the conduat and regUlat.lonof the lnsuranee business
gemrally.
                                                      'I.
            SeatiOn 21 Of Arti@    1302-a r8edS:       '
           "Ho commlsslons, rebates, discounts or
     other devioe shall b8 paid, allowed or per-
     mitted, by any oompany; donmetlo or foreign,
     dolxigthe'buslness provided for in this Aot,
     l'818tillgt0 tit18 @.iC18S-OzlUUI%8lWiti~-~
     oontrecta; provlded~this shall not prevent
     any title,company from appointing as Its
     representative In any county any person,flrm
     or corporatlon.ownlng and operating an ab-
     atraot plant In auoh county and making such
     arrangements,for dlvlalon of~preml~ms as may
     be approved by ~%a8Board of Insurance Commis-
     sioners ."
          Substantially the same questions as now presented
were codsldsTed.under a fomPbr Attorney 08neral in Opinion
No. O-7300.. w8~wll1 therefor reoonslder th8 problems pZ'8-
sented in CoMB~tion with Opinion No. 0-7300, and will Sp-
proaoh the mattersas on8 of first lmpF8aslon.
Hon. J. P. Gibbs, Page   4, V-280


           The problems raised In your first Inquiry and
8t this tims have b88n the sub jeot 0s mch controversy
among thoS8,engaged in the tit18 iIlSUraIlC8 and abstrsot-
IDg
.. _ business.  soxm
               .._   0s_ th8 tit18
                             _ _-. lnSUranC8
                                         - _ COSTpaIli8S
                                                       and
tnelr representatives naV8 oullt up, and lnveSt8ClConSld-
8r8bl8 Sums in, eXt8nSiV8 faCiliti8S for the plvtparatlon
of abstracts, and heve.formed a definite conception of tb
minimum fyliiti8S r8qUlslt8 to what Is termed by them 8
            abstraot plant, as contemplated by Seotlon 21.
GE==98 OOmp8ni8S and lYlpr8Sent8tiV8SaZW faced With COmpe-
tltlon by companies appointing representatives who main-
tain 18SS than such minlmom fSClilti8S, and who, it Is
feared, will, by the inadequacy of their faclllties,E8use
p0liCi8S  to be Written on bad titles, thereby Causing
eventual lmpalrment of th8 finaWl      stability Of the corn
pani8S they represent. It is feared by them that a break
down will occur in the high standard of security offered
by the title insurance industry.
         :Able briefs have been submitted to this OfflC8
by those maintaining that such minimums are contemplated
by Section 21, and nunmrous conf8ren~8s have been held
wherein th8S8 parties have presented orally many roraeful
and persuasive armnts    on their points. Equally able
briefs and argumsnts h8v8 been pr8sented by those opposed
to such construction of Section 21.
          In Spit8 Of the 8V8r inCB3aSlIIgtempo Of th8
controversy during th8 eighteen years 0s operation under
this Act, W8 have found the Legislature apparently satis-
fied with its provisions, ,therehaving been no amendments
to Section 21 enacted. Nor, in so r8.ras can b8 ascer-
tained, was any attempt msde.dUt'lI33
                                    th8~r8a8nt~S8sslon 0r
the Legislature to clarify or smpllfy this section. Our
lnvestlgatlon reveals that the title insurance industry
continues to enjoy an 8lStostnegligible loss ratio, and
an increasing volume of business.
          Section 21 contains provlslons common to statu-
tory regulations of other lines of lnsurance,~prohlbltlng
the granting of commissions, rebates,,dlscounts, and other
concessions to insurance buyers considered to COnStitUt8
detrinmntal and unfair competition, and which lead to dis-
crimination by the company as between insured in the cost
of insurance. As stated in Couch on Insurance, Volume 3,
Section 584, page 1872:
          "The object or Intent of statutes aimed
     against discrimination and rebates is that
Hon. J. P. Gibbs, Page   5, V-280


     uniform rates shall be established and maln-
     .talned,a0 as to'secure all persons equality
     8s to burden.3imposed, &g We11 811to b8IEiflt8
     derived, by preventing dlsorlminatlon by ln-
     surer8 In favor of 1ndlvlduals of the seme
     class, either as to premiums charged or dlvl-
    'd8ndS allOWed, or, 8s has been stated, in or-
     der that prosp8ctlvejlnsurants 0s the same
     class shall not b8 unfairly treated or dls-
     crimlnated against, by Inducements being given
     to one of such class, which are not available
     t0 811 th8r8in.”
          The proviso in Section 21 8ff8CtS an exception
to the prohibition against commissions, rebates, discounts,
8tC. It provide8 in effect that the 8ppOintUb9ntby a ti-
tie Insurance company of 8 prson, firm or corporation own-
ing and operating an abstract plant 8s its FepreS8ntattiV8,
with compensation to the r8pr8s8ntatlw on 8 divis$on of
         basis, shall not aonstitute a violation 0s the
P~~IUIUIIIS
rule against dlsorlmlnation 8nd unfair comp8tltlon where
such arrangement is subject to supervision by the Board of
Insurance Gommlsslon8rs. In suoh oases, it makes lawful
thatwhich oth8rWiSe might be unlawful.
           !Pheclauses 0s the caption 0s the Act describing
 the VaI'iOUSs8OtiOnS thereof 828 set Out 1n the s8mb 88-
'qUeFM8 as the sections described. Our Interpretation of
 the soaps and purpose of Section 21 1s supported by the
 language of the caption or the Aat'ln that It describes
'Section 21 as "prohibiting commlsslons, rebates and dls-
-cotintsby corporations doingbusiness Under this Act."
 This 1s the only language contained In the caption speali-
 iCally d8SCriptlv8 of Section 21. !Ch8only subject oon-
 tslned ln this Claus8 of the caption 18 "OOnrmisS1OnS,
 rebates and discoUnts" and nothing is oontalned In this
 laIl@lSg8t0 lndlCat8 the pW3088 Of SeCtiOn 21 t0 be
 Oth8rWiS8. ConSld8r8tlOnS of oonstltUt1onal1ty impel us
 t0 OOIKItrU8the body Of the Aat in 8 manner COnSiSt8nt
 with the stated purpose of th8 Act, as oontalned in the
 U8ptiOn. The caption Is, 0s oo~rse always considered as
,,valldeVld8llC8Of the 18giSl+iV8  int8nt.

          w8 mllsttherefore 88S~lM that the proviso was
Intended t0 pl'888rV8a praOtiC8 in 8XiStellO88t tha tims
of the paSSag8 of the'ACt, 8nd was designed to prOteat th3
oompanles from a possible Interpretation whloh would pro-
hibit a division of premiums as payment for legitimate
UIld8I'WI'itiIlg
             S8rVic88 performd by 8bStrSCt3PS, and 8t the
Hon. J. P. Gibbs, page   6, V-280


SSmS tims to.afford supervIsIon by the Board of such
division In order to.pr8v8tltabUs8S 0s th8 d8    ag8itMt
rebates, 8tCi Given thls Interpretation, any uncertaln-
ty illth8 18ngUSi38Of g8OtiOn 21 iS minlmited. The pUr-
DOS8 of the proviso 1s alear , consistent with the cap-
tlon, consistent with the usual regulation of other
fields Of inSur8ne8 IAOtiVity8IldCOnSiSt8nt with the
Il8g8tiV8 lS.w8g8 used in the prOViS0.
           Under this COl$eptiOn Of SeCtiOn 21, th8 phriUl8
 "owning and operating an 8bStrWt plant in such Oounty"
 appears to be descriptive or the person,.rirm or corpora-
                                                 and With
 tion who may be appointed aS a "l'8pI'8S8nt8tiV8n
whom the company may arrange for a "division of preml~ms.~
 It 8ffOI'dSthe Company the pFiVil8g8 Of Using such per-
 sons, firms and corporations on such 8 basis. The ser-
 vices of..abstrsctersin the title Insurance industry go
beyond mtre production 8nd are ,akln to underwriting and
.inspection of proposed risks. The industry has developed
 8 schems of compensation based upon 8 division qf premiums
 8nd.th8 proviso pre~e~ves,th8t nwthod of doing business.
           In OCR oplnlon, the representative contemplated
 RIUSt,it the tims Of~8ppOintmdnt, be8ngeg8d in the busl-
 1168s0s preparing abstracts or title to, and Lnterests in,
 land In the county in,which he or It is appointed 88 a
 representative;.that ths.representatlve must own and oper-
 ate such busln8Ss; an&that such business must be cond~ote
 from and at a~definite place In the county, before  ~%h8
 Board Is authorlted to approve an arrangelasntfor division
 of premiums. It IS this p&U38 Of bUSin8S8, piUS the SqUip
.lssnttherein designed for and used In the prepar.+tion0s
 abstracts which constitutes the "plant" of the representa-
 tiw . It SlUStbe definite and aSe8rt8in8ble. In OUX'
 opinion, the Board may require a r8aSOnabl8 showing that
 the88 requirenunts 8XiSt before 8X8OUting hits,approval oe
 the division 0s premiums =r8ng8m8nti we further belie*8
 that If at any tlSW, .8ny of the n-d  conditions cease -to
 8XiSt, the Board iS warraited and required to Withdraw or
 suspend Its approval of the division of premiums arrange-
 ment.
          w8 do not b8li8V8 that the extent Or charaOt8r
of faCtilti88 owned and Utilised by the 8bStraOt8rS al'8th
subject Of an exact formula or standard. Nor oan we antic1
pate the C~USE3tanc8S S~rS~~nding a Situation which may i
VO1V8 the US8 Of 8 IWpr8SentEitiV8t0 Qff8Ct a rebate Or
UnlawfUl ConrmiSSiOnto an insured or others in the prOCUr
msnt of business. These W8 matters   which Will h8V8 t0 be
Hon. J. P. Gibbs, Peg8 7, V-280


determined by th8 Board ln~eeoh SltU8tiOn wh8re It Is
znpd   upon to 8pprov8 a~d1vlslon of premiums arrange-
     .
          Ii8 do, hOW8V8r9bei18V8 that the langW38 Of
%CtiOn  21 F8StriCtS the aCtiVitieS Of th8 X'8~S8llt8tiV8
to the county In which he owns and operates 8 plant. This
appsars to b8 Clearly required by the langusgt of Section
21 authorlSlng the appointment "In any county , 0s 8
"person, firm or corporation own3    nd operating an ab-
stract plant In such county."   (U~eL3orlng   ours.)
          To sum up, we do not believe that any partlau-
lar typs or character of reoords ar8 n8o8ssarlly required
by.thls StatUti, so long as they ar8 SUfflCl8nt for Satual
operation of an abstzact busln8ss. In this regard, 811 that
18 required 1s that th8 r8presentatlve be bona fide 8ngSg8d
in performing th8 servioes 0s an abstraoter, .the partiaular
msthods and faCiiit188 whloh h8 US88 being pri.Slarilya mat-
ter for his determination In aocomplfshing his undertaking
t0 the tit18 inallFaM8 Companies and to th8 public. Whether
he maintains all reoords 0r 8 partioular oharact8r, whether
th8y oowr a particular ar8a, or whether th8y oover a par-
ticuhr time, being merely 8Vid8ntiary matter8 on the queS-
tion 0s wh8th8r a plant In fact exists.
          The Board appears to be given ample authority to
pr8v8nt abuSes,or-the privilege grant@ by Se&ion 21. The
who?8 axwngement ,rordivision 0s p33mlum~ appears to be
subjeot to Sup8rvislon by the Board. Certainly no title
Insuranoe oompany could complain 0s a disapproval 0s a
dlvlslon of premiums arr8ngemBnt, or withdrawal of such
approve1 if such disapproval or withdrawal of approval 1s
predlcet8d upon the existence 0s a situation vloletive 0s
this ~iict.Responslb1llty appear8 to r8st first UPOn th8
company.to a8oertaln that It do88 not appoint or continue
Its appointment of one who does not qualify under the Act
as a r8CepreS8nt8tiVe. %O COnditiOQS 8XiSt as a COIiditiOn
precedent to lawful operations through a "r8pr8s8ntatlv8"
under.Sectlon 21. First,   the representative must be the
owner and operator 0s an abstract plant, and seoond, the
arrangement must b8 approved by the Board.
          The malnlssue Is drawn by the aontendlRg parties
on the question 0s th8 a0 letm8ss   0s the abstract plant
cont%mpZated by SectionMth8r            or not the statute
oontemplates a "complete" plant 8s 8 oond1tion precedent to
approval by the Board of the premium division srraagements
or to appolntmnt by th8 title Insurance OOSWQi8s.
     Hon. J. P. Gibbs,   Pat38   8, V-280


                AS Indicated by OUrremarks, W8 ~%'8':~00lWillO8d
      that Section 21 18 directed solely to the matter ol;dls-
      crimlnatlon. Be that as it may, In OCR searoh for erl-
      d8nC8 Of th8 tigiSl8tiV8 intent, W8 have 6xamlned th8
      legislstlve history of this Act. Thetext of th8 orlgi-
      nal bill In the form originally introduced In the House
      0s Representatives and as now on file In the OffiC8 or
      the %3CX'8taryOf State, Used the phrsS8 "8 COm let.8
      abstract plant" In Section 21. UponoommI335&EEmmen-
      dation, this speclflc lang~sge wss:ohanged by smendnwnt
      prior.to passage by the House, and as changed, carri8d~
      into the Act as passed by the g8n8t8, deleting the Word8
      'a COstP18t8"and substituting in 118U thereof, the Word
      ~an",thereby indicating a sp8clflc intent to r8j8Ct the
     'iaz8 that a "complete" plant lsIleC8SSary to an 8ppOint-
      ment an&approval of the division of premiums arrange-
      mat by the Board. w8 CaIIIIOt; Of COt.IrS8,
                                                Writi into
    : this 18W that which the Ieglslature~has speclflcally
      IY3jeOt8d.
                To require th8 r8pr8s8ntatlves~'faciliti8S to.
    :~cover 811 0s the records.on 811 0s ,the lands in a patio-
     ular county might have the 8ff8Ct 0s closing the door to
     those experienced and qual%fled'abstraoters who at      wish
     to restrict their servloes to -only those lands within a
     county on which there ar8 adequate records to afford the
     compiling of a useful abstraot. From onr lnvestlgetion,
     W8 find that thel'8are SitUStiOlISin SOIM OOUnti88 WhQFS
     abstraotsrs have not attempted to maintain records on
     certain portions or th8 lands within the county beoause
     Of Utter COnfuSiOn in thOS8 l'8COrdS.
               Again, we ,888no reason to closi the door to
     those who wish to limit their cOVerag Of the r8OOrds On
     oertaln lands to only thO88 going back to th8 date .Of'a
     particular subdivision or survey; Suoh a llmltatlon-woUld
     appear to'b8 justified Where f&OS8 contlernedwith titles
     within that partloular area, by common CoLILIent,~
                                                     assume the
    '.titlesto b8 good back of certain subdivisions or sUrveys8,--
     and that buyers are.not warranted to go to the expense of
     procuring and examining copl8s or abstracts Of the older
     records and lnstrUments. Thi-sis also trU8 where printed
     base 8bStraCtS are available in plentiful quantities.
               It caniot be said that such an abstracter who SO
     limits his COV8rSg8 is not th8 own8r and operator 0s an
     abstract plant.
               At 811 ev8nts, if the authority given Or th8
,
on. J. P. Gibbs, Psge 9, V-280                             ‘I


iteral provisions or Articile1302-a ar8 inadequate to
SIpl8IWntadequate SUp8FviSiOU and OOUtrOl Of th8 tit18
ClSUW3IlO8
         business, oonslstent with the pub110 Interest,
8 b81ieV8 that.theS8 problems should b8 pl'888ntedto the
sgislatur8 for clarification and lmplem3ntatlon.
        Subject to this further clarlflcatlon and dls-
usslon,we affirm the 8Lmllar holdings 0s Opinion No.
-7300. This former opinion was written ber00rethe 50th
eglslature convened and was presumablyhewn to the
egis1ature. It was SCtU8lly known to fillinte~'~ted par-
188. Ao attempt was made before the Leglslatus%to amend
r p1eC8 a different interpr8t8tion on &3tiOn 21. This
ends gr88t weight to the COrXWatIi8SSOf the fOrnEirOpin-
on and the conclusions herein made.

                      SUMMARY
          The phrase “Owning and operating 8n abstract
    ';l~t"sas used In Section 21 0r Article 1302-8,
               Is deScriptiv8 of the type of business
     1; wilci'a person, firm or corporation must b8
     engaged a8 + OOnditiOn precedent t0 its appoint-
     ment as 8 representative 0s a title insuranae
     COmpSllyUpon a "division Of pWI&umS" basis 8Ild
     IS BP eXCeptiOn to th8 main pUl'pOS8Of g8CtiOn
     21 to'mvent conuulsslons,rebates, dlsoounts
     and Other unfair and dlsorlmlnatory pZWtiO8S.
     An "abstract plant" 88 used in Section 21 oont%m-
     plates the p1a08 0s business a@ f8Oiiiti88 there-
     in utlll88d by the abStraCt8r, the particular typ8
     8Ud quantity or l'8COl'dS
                             or f8Ci1iti88 being mere-
     ly evidentiary considerations In det%rmlning th8
     bonaflde existence of the plant.      .
          It is the duty 0r the Board 0s Insu+ance
     Commlsslone~s'to determine that the representative
     owns and operates 8n abstract plant 8Ud to dls-
     approve or revoke its approval 0s the appointment
     and division of premiums 8zrangenmnt, in the event
     0s 8 violation 0s the requirements 0s Section 21.
                                  yours very truly