Honorable Garland A. Smith
Casualty Insurance Commissioner
Board of Insurance Commissioners
Austin, Texas                            Opinion No; S;35

                                         Re:   The necessity that auto-
                                               mobile deakrs who are
                                               attorneys-in-fact for
                                               Lloyds be licensed as in-
Dear Sir:                                      surance agents.

             Your   request for an opinion reads:

              “During the’past few years several Lloyds have op-
       erated under a pkn permitting credit dealers, .principally
       in the automobile field, to write insurance in connection
       with the credit transactions.    The general plan was that
       the dealers have been appointed ‘attorneys-in-fact’   of the
       Lloyds and have agreed that the dealers Would reimburse
       their Lloyd6 on losses written through their dealerships
       up to a specified.percentage   of the premtums received,
       normally about 80%: it the losses ‘were .-less ~than the
       agreed percentage of the premiums the difference would
       be retained by the deakr.     The funds over the agreed per-
       centage.. of course.~ would be. paid to the Lloyds.

              *Usually the powers oftattorney convey to the deal-
       ers full power and authority to act for the underwriters $n
       all inatters.,except to receive .service~of~.citatiod. -in .the
       operation of the Lloyds, most~of the statuto&y duties and
       privileges of the attorney- or attorneys-in-fact      are re+
       served and exercised by the managmg official or officials
       of the Lloyds, named by power of attorney from+he undcr-
       writers as provided in Article 18.03. For instance, the
       dealer attorneys-in-fact    ares not s,ignatories to the original
       application .to transact.business   mentioned in Article l8.03,
       nor to the renewal applications from year to year..descrihed
       in Article ,18.04,; and no license.~of any hind isever ~k+sued:,
       to them. They .ara not a party t,o the joint co&o1 ~agreemeut
       required by Article, 18.10, nor do they participate iri the fil-
       ing of the annual statement~piescribed ,in Article 18.12 Cita-
       tion served on tbe,Chairman ,of the Board as alternate agent ,’
       for service set ,out in Article .l8.17 is, never,forwarded.-to
       ‘..
Hon. Garland A. Smith, page 2 (S-35)



       them; nor does the Board treat with them in the giving
       of notice required by the Board in Artic.le 18.18.

               “The dealer attorneys-in-fact  have claimed ex-
       emption from the Solicitors and Recording Agenta Act,
       Article 21.14, by virtue of Paragraph (e), Section 20 of
       the Article, which exempts ‘the actual attorney in fact
       for any Lloyds.’ Many, if not the majority, of the deal-
       er attorneys-in-fact  are not actively engaged in the so-
       liciting or writing of insurance from the public general-
       ly, and, in many .cases, less than 25% of thir tdtal vol-
       ume of premiums is derived from persons other than
       themselves and from property other than that on which
       they control the placing of insurance through ownership
       of mortgage, sale, family relationship or employment.

               ‘Your Department had before it the related ques-
       tion concerning deputy attorneys-in-fact,    and issued
       opinion approved June 27, 1939 by Mr. Gerald C. Mann,
       Attorney General of Texas, written by Mr. Ardell wil-
       liams. Assistant Attorney General, to Mr. Marvin I%&
       Fire Insurance Commissioner.       At that timi Article
       5062a. Section 12, Paragraph (e). exempted from A.&-
       title ,5062a ‘the attorney-in-fact for any Lloydn.’ In
       1941 present Article 21.14 was enacted, similar In
       wny respects to Article 5062a, and in thelatter the
       corresponding exemption is set out in .&ction 20. Par-
       agraph (e) to ‘the actual attorney in fatit forkany Lloyds.’
       (Underlining addec

               “There is considerable question in the m&s   of
       the Board as to whether the dealer attorneys-in-fact
       are. in the circumstances, exempt from $he provisions
       and requirements of Article 21.14. Our information is
       that the dealer attorneys-in-fact are performing sub-
       stantially the same duties as insurance agents. Em-
       ployment of the wqrd “actual” in Section 20 (e) which
       did not appear in the corresponding exemption in Ar-
       title 5062a. is persuasive that the L-e&l&tire intended
       to restrict the e%emption to the attorney- or attorneys-
       in-fact whose privileges and obligations are actually
       exercised in the manner set out in Articles 18.03. 18.04,
        18.10, 18.12. 18.17 and 18.18.

              “Will you please advise me whether the dealer
       atttirneyslin-fact as above described should be licensed
       by this Department as insurance agents as prescribed
       by Article 2 1.14. or whether they qualify under the ex-
       emption oft Section 20. Paragraph (e) of Article 21.14
Hon. Garland A. Smith, page 3 (S-35)



        and are thus relievbd of the necessity    of being licensed
        as insurance agents 7‘

               Your specific question is whether such “dealers’, prin-
cipally automobile dealers, are exempt frpm the license requirement
of Article 21.14 of the Insurance Code [Article 5062b, V.C.S.]l  in
view of the express exemption in Section 20 (Id.] of “+&e actual at-
torney in fact for any Lloydb.”

              Article   21.14 (Article   5062b] provides in part:

              “SfC. 1. &EEeS    Of Agents. - Insurance Agents,
       as that term is defined in the laws of this State, shall
       for the purpose of this article be divided into t+vo class-
       es: Local Recording Agents and Solicitors.

               -Sec. 2.;Definitions;  Certain Orders, Societies.
       or AsEociationE Not Affected. - By the term ‘Local
       Recording Agent’ is meant a person or firm engaged
       in soliciting and writing insurance, being authorized
       by an insurance company or insurance.carrier.      includ-
       ing fidelity and surety companies, to solicit business
       and to write, sign, execttte, and deliver policies of in-
       surance, and to bind companies on insurance risks,
       and who maintain an office and a record of such busi-
       ness and the transactions which are involved, who col-
       lect premiums on such business and otherwise perform
       the customary duties of a local recording agent represent-
       ing an insurance carrier in’its relation with the public;
       or a person or firm engaged in soliciting and writing in-
       surance, being .authori!zed by an insurance company or
       insurance carrier, includir:g fidelity and surety companies,
       to solicit business’, and to forward applications for insur-
       ance to the home office of the insurance companies and
       insurance carriers, where the insurance company’s and
       insurance carrier’s general plan of operation in this State
       provides for the appointment and compensation of agents


r
   Statutory references in this opinion are to the “Insurance Code“
enacted as Senate Bill 236, Acts 52nd Leg., 1951, unless otherwise in-
dicated. Corresponding references to Vernon’s Civil Statutes in effect
prior to the effective date of Senate Bill 236, and corresponding to the
statutory references in your request, are noted where practicable .in
brackets following such references.     Section 2 of Senate Bill 236 provides:
                “Substantial Law Preserved. - Nothing contained in this
        Act shall be held or construed to effect any EUk+3bmtii’e    change, 1
         in the laws existing prior to the passage~of this Act + ‘. t *
Hon. Garland A. Smith, page 4 (S-35)



       for insurance and for the execution of policies of in-
       surance by the home office of the ins’urance company
       or insurance carrier, or by a supervisoryoffice    of
       such insurance company or insurance carrier, and
       who maintain.an office and a record of such business
       and thentransactions which are involved, and who cal-
       lect premiums on such business and otherwise quali-
       fy and perform the customary duties of a Local record-
       ing agent representing dn insurance carrier in its re-
       lation with the public.

                 . . .
             Y




              “Where reference is made in this article to
       ‘Company’ or ‘Ca:rrier’ such reference means any
       insurance company, corporation, inter-insurance
       exchange, mutual, reciprocal, association, Lloydsl
       or other insurance carrier licensed to transact
       business in the State of Texas other than as excepkd
       herein.
             Y
                 .   *   .




             “Sec. 4. Acting Without License Fokbidded. -
      It shall be unlawful for any person or firm or part-
      nership to act as a local recording agent or solicitor
      in procuring businers for any insurance company,
      corporation, interinsurance e3~chk@e~ mutual, ra-
      ciprocal, association, Lloyde or other insurance car-
      rier, until he shall haveice       the license provided
      for herein.

             “Sec. 5. Active Agents or Solicitors Only to Be
      Licensed. - No license shali be granted to any person,.
      firm or partnership, either aBr‘a local recording agent
      or solicitor, for the purpose OrE writing any form of in-
      surance, unlesd it is-found by the E?oard~d~~fxhtrance
      Commisnioners that such person or firm is, or intends
      to be, actively engaged in the s~ulicitin~ or writing of
      insurance from the public generally; that each person
      or individual of a ,firm is a reside& of Texas. of good
      character and good reputation, wo~thay of a license, and
      is to be actively engaged in good faith in ,the business
      of insurance, and that application is not being made in
      order to evade the laws Bgainst rebating and diecrim-
      ination either for the applicant or for some other person.


 Emphasis ours throughout t-his opinion.
Hon. Garland A. Smith. page 5 (S-35)



       Nothing herein contained ahall prohibit hia ineuring
       his own property or properties in which he has an
       Mere&      but it is the ‘intent of this section to pro-
       hibit coercion of inauraace and to preserve to each
       citizen W right to chooee hi8 owwagent or               u3ance
       carrier, and to prohibit th& licensing of an a ividual
       or firm to engage in the insurance burineaa princi-
       pally to handlo bWneaa which ,b controls only thr~ough
       ownershtp; mortgago or sale. family relationship or,
       employment, which shall be taken to mean that an ap-
       plicant who is maWag an original application for li-
       cense shall show the Board of Irmoraace Commissioners
       that he has a boaa fide intenti~ to engage ia business
       in which at leaet tvmitpfive      .(25$).per  cent of the total
       volume of prcmfwnu mbll be derived from persons
       other than hiimelf and from ptoparty other than that
       on which the ipplicant lhall~control the p           ing of in-
       suraaca through wrship.          mortgage.   ma !ir , family re-
       lationehip or employment: and which shall be taken to
       mean, iu the case 4t application for renewal of license,
       that at lea& iwenty-five     (25%) per cent of qpplicafrt’s
       total vohum d pnmkme,           dwekrg the year preceding
       .such application foF P enewal, ehll have been derived
       from pmon8 other than Mmsdf and from rj&OpQFty
       other than that on which the applicant contaomd the
       placing Oa inaura~e thr@u&h ownership, mortgage,
       sale, faamUy PelatiasaSh4p03 employment.



              2340; 20. Life, Health a&d Accident bodarance,
       TaxQpMcable Ws O&W ExcaptSoaa. - No prtieions          of
       thie as&&a &all apply to the Life, Health laadAWL-
       dent hsosarms bua6nawe or the Life. Health and A&i-
       dent De Btmont     of Mm compamtemengaged therein,
       rfm ehac 1 it 8pply t0 any Of the foll@wimgs 33aap4ly:
Hon. Garland A. Smith, page 6 (S-35)



               Under the definition of ‘Company’ or “Carrier” in Sec-
tion 2, and under the terms of Section 4. a person who shall “act as a
Local Recording Agent or Solicitor in procuring business.for any . . .
Lloyds’ is required to have a license under Article 21.14. Since the-
same statute, in Section 20.. expressly exempts from its requirements
“the actual attorney in fact for any Ll6w.’   the statute obviously con-
templates a distinction between such Ag’ent or Solicitors and such “at-
torney in fact.” The fact that the tigidnture   expressly exempts such
“attorney in facts also impliedly recognizee that the attorney in fact
may function in some respec+,.as a Local Recording Agent or Solici-
tor. and, except for the exem@on,    would be required to obtain a license
under Article 21.14. The late Chief Justice Alexander, while sitting on
the Waco Court of ,Civil Appeals, wrote in 1931. “under the law. all
agents of an insurance company are required to procure a license from
the Insurance Commissioner regardless of the extent of thkir authoritv.”
Great American Casualty Comp&y vs. Eichelberger.,. 37.SiW.2d ,105O ’
   ex. Clv. App, 1931 s error re . .

               After studying S+ion   2. it is sufficiently clear. as to what
are the characteristic functiona and authority of a Local Recording
Agent or Solicitor. His status, under the siatute, is determined not’
only by the authority granted him by the Company or Carrier, but also
by what he actually does. Jnthis regard, Section 4 does not in terms
prohibit the appoimment of an unRcen+d person as, an Agent or So-
licitor. To “act”~as a Local Recording Agent or Solicitor without a
license “in procuring businessa is prohibited. The policy thus indicated
is significant since consistency dictates that only an “attorney in fact”
who.+cts or functions as such is intended to be exempt.

               it’ia t,o be presumed that the Legislature created the ,ex-
emption in the light of existing stat.utes regulating the ,functions of Lloyd6
organizations. especially where the functions and duties of attorneys in
fact are specifically treated, regulated and recognized.

              In McBride vi Clayton, 140 Tex. 71, 166 S.W.Zd 125 (1942).
the court quoted the following language from 59 C.J., p. 1038, 0~616:

                   “AR statutes are presumed~ to be or&ted by the
           LegisAature with full hnowledge of the existing condition
           of the law and with re,ference to it. They are therefore
           t.o be construed in connection and in harmony with the ex-
           isting Law. and as a part of a general and uniform .system
           of jurisprudence, and their meaning and effect is to be de-
           termined in connection. not only with the common law and
           the constitution, but. also with reference to other statutes
           and the decisions of the courts.*

                 Article 21.14 [        was enacted in 1941. At that,time
Articles    18.01 through 18.24 [ 501   through 5023a] comprised most of
.       .




    Hon. Garland A. Smith. page 7 (S-35:



    the statutes on tke subject of Lloyds Plan insurance, most of which
    articles were carried forward, as amended, from Ckapter 19, of Title
    78. Revised Civil Statutes of 1925, headed “Lloyds Plan.” These atat-
    utes, upon careful study, contain provisions which ahoW tke nature of
    Lloyd8 Plan insurance and tke functions of tke attorney in fact in con-
    nection therewith as authorized in Texas.

                    The’tarm *Lloyda* or ‘“LLloydsPlan” as used in tke stat-
    utes ia generally descriptive of an authorized metkod by which individ-
    uals acting collectively may underwrite large numbers of insurance
    risks and at the same time each may limit kis individual liability to
    tke insured6 and to tke otbdr undeaw%ecrs to a designated sum. Tke
    individual underwriter, like a stocltkoldar in a corporationl may venture
    only tke ampunt to which he iadividually subscribes.     He mey limit kis
    total liability to tke persons insured tc tke proportionrt4 prt of any loss
    which kis part of a guaranty fund baars to tka total guaranty fnnd con-
    tributed by the eeveral underwritesrz. A&&de      18.13. Tke term “Lloyds”
    is also sometimes used to designata tka place at which tke business is
    to be conducted apd sqmatimaa as descriptive of the insurance concern
    organized and doing business on the Lloyds Plan.

                  In order to effect Insurance Q~Bthe Llo9ds Plan tke stat-
    ute& require tke undemifcrs     to executa opticles d 8greement express-
    ing their purpose to do LO and ta c0mpl9 with t&a reqnirements of the
    statutes governing Lloyds’ ar.ganizatinno, Articla 18.01. Article lg.02
    authorizes pclicies of insurance tz be axa~~~@da
                  DL by an ottcrney or by attzrneyz in fact
                   . . .
            or otker representative. hereby de6ifpatd ‘ato
            torneye . e em

    on.behaif of tke underwriters   undar a pz~ar cf attcrnsy.

                   A license is raqufaad by Art&lea lg.85 and fg.(M Whi6h
    may be renzwed annually ug~la a akcwing by tka undorwritsrs ob CQRXW
    pliance with .the law. Tke licenao is8 kcwavar~ issued tc tke attorney
    in fact whose appRcati@z is required to zat f0ztk cr include:

                 “(a) Thi -me   a8 tke attwmy ati the title
            undarwkick the business is tu be emu&tad 0 0 0




                   “(d) A copy of each b&m @4?        @JrCEaa-
            tract by WI&E oxxok&%e?Mans~e 8s ti bQ effeeti.
Hon. Garland A. Smith. page 8 (S-35)



               “(e) A copy of the form of power of attorney
        by virtue of which the attorney is to act for and bind
        the several underwriters and a copy of tke articles
        of agreement entered into between the underwriters
        themselves and the attorney.

              “(f) The names and addrasser:of all under-
       writers, whose number shall be not less than ten.

              “(g) A financial statement showing in de-
       tail the assets contributed or accumulated in the
       hands of the attorneys in fact, .coinmittee of under-
       writers, trustees and/or other officers of such
       underwriters at Lloyd’s, together with the liabili-
       ties incurred and outstanding and the income re-
       ceived and disbursements made by tke attorney
       for the underwriters.

              “(k) An instrument executed by each and
       all of tko underwriters specially empowering tke
       attorney to accept services of process for each
       underwriter inany action on any policy or con-
       tract of insurance and an instrument fro@ the at-
       torney to suck Board delegating tke attorney’s
       powers in this respect. to suck Board.”

               Aswe construe tkese statutes, permission to operate on
the Lloyds Pia~nmay only be obtained by and througk an attorney in fact
who holis tke necessary power of attorney from the required group of
underwriters, and who meets tke other requirements for tke operation
of a Lloyds. We construe such an attorney in fact to be specifically the
attorney in fact who makes the initia: filing for a group desiring to op-
erate a Lloyds and who obtains tke license as such attorney in fact, and
that he is tubeonly %ctual attorney in fact” for a Lloyds witb,in tke maan-
ing of Article 21.14.

                Tke application and license are primarily for the benefit
of the comzern.   No provision is xnade for additional    licens,eo as to the
same concern in order to enable additional attorneys in fact. to act for
the same concern at tke same place of business since tke statute is not
intended to authorize a merely personal license to an attorney in fact.
In otker words, the license provided for is granted tkrou h the attorney
in fact to tke organization. The license c~ontinues m  -----%
                                                           opera xon witk ih,e
continuing existence of the organization regardless of ckanges in tb~e
personnel of the individual underwriters or tke attorney in fact. Unless
the aitorney in fact be so named and designated in the original license, :
it is essentaa> that ~authority to act as an attorney in fact for the organi-
zation be found elsewhere in tke statutes.
Hon, Garland A. Smith, page 9 (S-35)



              Article   18.14 piovides:
              ”
                . . C.tke acts of the duly appointed deputy
        or substitute attorney of any attorney licensed
        under this chapter accepting powers of attorney
        from underwriters and in making and issuing poli-
        cies bnd contracts of insurance and in doing any
        additional acts incident thereto shall be deemed
        authorized by the license issued to the original,
        attomey.m

By expressly authorizing “deputy” and “Substitute’ attorneys to act
under the authority granted to the ‘original” attorney, the statute im-
pliedly forbids any but a “deputy” or “substitute’ to act as an “attorney
in fact*‘under tke license granted to the “originalW attorney. This is
especially true since these statutes are so designed as to place tesponsi.
bility on a single “attorney” for the general operation of a Lloyds. The
capacity of a ‘deputy. attorney in fact is not identical to “the attorxiey in
fact.-   The design&ion as “deputy- implies d capacity to act for and un-
der the authority of a superiwr   26 C. J.S. 978. In Attorney General
Opinion No. O-1010, approved June 27, 1939, it was held that such ‘dep-
uties” performing tke duties of Local Recording Agents did not come
witkin an exemplion of “The Attorn     -in-Fact for any Lloyds” under the
comparable statute then applicable. Y

               Provision’for a %ubstitutea attorney in fact is the only
other provision for an attorney in fact not named in the license to act
as such under the license. A ‘substitute’ attorney in fact, as we under-
stand Article 18.14 is the attorney in fact. who replaces the “original
attorney” and thereupon becomes ‘Yhcactual attorney in fact* upon va-
cation of that position and capac~ity by tke predecessor.  60 C. J. 980.
Under such circumstances tke ‘substitutem would be exempt from tke
requirements of Article 2 1.14.

               In view of tke considerations discussed, we are convinced
that a lawfully organized Lloyds kas only one attorney in fact through
whom the autkority $f tke concern to operate icl derived. No other ar-
rangement fits the scheme of regulation and organization set up by the
Lloyds statutes. Such attorney in f&t is “the’ attorney in fact as that
designation is used in the Lloyds statutes as well as in Article 21.14.

               be therefore, conclude that any ‘dealerW who does not fill
the position of “the attorney in fact’ for a Lloyds as that position is
contemplated by the statutes is not exempt from the license requirement
of Article 21.14~ 4 5062b].



  Acts 42nd Leg.,   1931, ck. 96, p0 150 [5062a)
.3ion. ~Garlanu A. Smith, page 10 (S-35)




               Anautomobile or finance “dealer” may not act
         ,for a Lloyifg insurance concernas a *Local Record?
         ing Agent or Solicitore as defined in Article ‘2 1.14 of
       . the Insurance Code, Without obtaining a,aLocal Record-
         ing Agent’s or Solicitor% license, u&es     such ‘dealer0
         is the “attorney in fact. named in the Lloyd6 permit or
         a “substitute6 succeeding to the poeition of such eat-
         torney in fact. upon hi6 vacation of that position.

APPROVED:                                  Your6 very truly,

Rudy G. Ric.e                        JOHN. BEN SHEPPERD
State Affair6 Division                 Agcjrney Gem-T? !.

Willis E. Gresham
Reviewer

Robert S. Trotti .,
First Assistant

John Ben Shepperd
Attorney General

VFT:cm




   NOTE:

   Our attention:has been called to the pa6t administrative
   practice by the Board of in6urance:Commi6sioners      in
   permitting the operation of dealer6 and deprrty-attorneys
   without a Bc~ense; we have been favored tiith brief6 by
   able counsel that would favor continuance of that prac-
   tice. and pointing out the haM&ipa which will necessari-
   ly follow our ruling. It appe&+that some’bardships will
   folhnv. add we therefore recommend that a,reasouable
   time be ~given by the Board forke    deaLer6,.and other6 af-
   fected to mahe application and necessary adjustments.
   This recommendation, however, shuuld not be construed
   to alter the holding of our opinion.