The opinion
Honorable W1111atn A. Narrlaon
Commissionerof Insurance
Austin,&xas
Opinion No. WW-1337-A
Re: Authority of the Insurance
Department to issue original
or renewa& local agents’
lioenses to firms,or part-
nerahlps composed.partly
of individualswho do not
qualify by examinationas
local recordingagents and
who are not actively en-
gaged in writing insurance.
Dear Mr. Harrison:
You have reque.s“d tha,tthlso,fflcereconsider its
opinion e-1337 whl%h$i
% volvea the following,Que#.lon&~hlch
we quote:‘,fram
.. I your letter:::
., ,,i
111.. Is this D&&me& authorlz~ed to.issue either
an orlginal or renew&l of local recording agent’s license
to a firm or partnership lf’such firm or partnershipIs
oomposed partly of indivl&u#ls whi,qualify as local
recording agents and partly of individualswho do not
qualify and who are aot active In the writing of insurance
busfness? In answsrmng ‘thisc&&Won, assume that all
o,fthe@rsons 1nbWeted ln such firm are partners.
, “2~. fifth
yo.ur
~anawer.to question NG. 1 is in the nega-
tive, 1s this Departmentauthorized to !ssue”eitheran
original or reneyal of looal recording agent’8 l~loenseto
. a firm or partnershipIf such firm or partnership.is
composed partly of lndlvldualswho qualify as local,
recording agents and partly of individualswho have an
interest on’1 in the ~profltsof such firm and have no’volce
or author1 + y ln the BOaratIon of such firm? (i.e. the
. aurvlvlng widow of a partner with such widow’s Interest
limited by the ‘partnership agreement to an Interest only
in the p~otlta of the firm with the surviving partners
to have full authar1ty.W its operation).
Honorable William A. Harrlson, page 2 (WW-1337-A)
“3. If your answer to question No. 1 or question
No. 2 Is In the affirmative, I request your opinion as
to whether or not this Department should require all
persons named in the license to me,etthe requirements
of Section 6 of Article 21.14 (pertainingto written
examination)before Issuing such license.”
These questions are directed specificallyto the provi-
sions of Article 21.14 of the Texas Insurance Code, the
relevant portlbna of'wh%oh.readBe;follows:':
II
1 . .
3.
':'Sec. Application for License; To Whom License
May be Issued; CorporationaNot to Be Llcensed.-cWhen
any person or firm shall dealre to engagc In business
as a local recordlng,agentfor an insurance company or
insurance carrier, he shall make application for a lfcense
to the Board of InsuranceCommissioners,in such form as
the Board may require, which application shall require a
algned endorsementby General or State or Special Agent of
a qualified insurance company or Insurance carrier that
applicant Is a resident of Texas, trustworthy,of good
characterand good reputation,and la worthy of a license.
!$heBoard 16 authorize4 to issue licenses to firms or to
3zndlvldualeengagln&aa partners In the insurancebusiness,
provlded the nampe,of all 'persons.interestedin,such firm
are named In the Pioense, and each named as active In the
business of the partnerahlpqualify, and it be ,established
that none not aotlve have interest In partnershipprincl-
pally to have written and be compensatedtherefor for
Insurance on property controlled through ownership,
mortgage or sale, family relationship,or employment;and
provided further, that all licensed agents must be
reeidents of Texaa . . . The Board shall not Issue a
license to a corporation.
“Sec. 4. Acting Without License Forbidden. ‘-:-It
shall be unlawful for any person or firm or partnership
to act as a local reoord%ng agent or solicitor In
procuringbuslnese for any insurance oompany, corporation,
interinsuranceexchange, miutual,reciprocal,association,
Lloyd6 or other Insurancecarrier, until he shall have
In force the license provided for herein.
Honorable William A. Harrison, page ,3 (w-1337-A)
“Sec. 5. Active Agents or Solicitors Only to Be
Licensed:--No license shall be granted to any person,
firm or partnership,either as a local recording agent
or solicitor, for the purpose of writing any form of
insurance,unless it is found by the Board of Insurance
Commissionersthat such,personor firm Is, or Intends
to be, actively engaged in the solicitingor writing
, of Insurance from the public generally; that each person
or lndivldualof a firm Is a resident of Texas, of good
character and good reputation,worthy of a license, and
Is to be actively engaged In good faith in the business
of Insurance,and that application is not being made %n
order to evade the laws against rebating and discrimina-
tion either for the applicant or for some other person.
Nothing herein contained shall prohibit his insuring his
own property or properties In which heXhas an interest;
but it is the Intent of this section ta prohibit coercion
of insuranceand to preserve to each citizen the right
to choose his own agent or Insurance carrier, and to
prohibit the licensing of an individualor firm to
engage in the insurancebusiness principallyto handle
business which he controls only through ownership,
mortgage or sale, family relationshipor employment,..'..
“Sec. 6. ExaminationRequired; Exceptions.--Ifappll-
cant for a local recording agent's license has not prior
to date of such a.pplfcation,been licensed as'a,local
reoording agent; or If the.appllcantfor a solicitor's
license has not been licensed as a local recording agent
or as a solicitor prior to date of such application,the
Board of Insurance Commissionersshall require such
applicant to submit to a written examinationcovering
all kinds of Insuranceor contracts,which license if
granted, will permit the application to solicit. Any
‘,I applicant for local recording agent's license who has
prior to the date of auah applicationbeen licensed as a
local recording agent, shall be entitled to a local
recording agent's license without examination,provided
the other requirementsof this article are meet. Any
applloant for solicitor'slicense who has been licensed
as a local reoording agent or as a solicitor prior to
date of such application,shall be entitled to a soli-
citor's license without an examination,provided the other
requirementsof this article are met,"
You have informed ua that at various times there have been
different and conflictingadministrativeconstructionsof this
statute by the Insurance Commlsslon. One constructionattempted
to harmonize the provisions of the section. For a long period
..,~ 1
.r
.
.
Honorable William A. Herrleon, page 4 (WW-1337-A)
of time, the administrativeconstructionwas that the provision8
were in direct conflict and the exception was ignored, and
everyone partiaipatlngin an Insuranceagency was required to
hav.ea license.
In contdaeringyour first questicn, It is apparent that
we are faced with a matter of statutory construction,as there
appears to be a basic repugnancy in the provisionsof Section.3
,ana Section 5. The language of Section 3 authoris& the Board
to issue licenses to firms or to individualsengagtng as partner8
~ In the insurancebusiness and, by inferenceat least, indicates
l
that some of the members o?,,thepartnershipmay be.active and
other8 not active if ‘it.,.59 . . . establishesthat none not
active have interest In .Qartnershipprincipallyto have written
and be comQet&sated therefor f@r insurance on property controlled
through ownership,’. . .s Cn the other hand, Sectian 5 speci-
fically provides that no licensee shall be granted to any
person, firm or partnershipunless the Board of Insurance Commission-
em first fMa that ” , . . LIoch person or firm is, or intends
to be, actively engaged in the eolicltlng or writing of
insurance from the public generally; that each person or indivi-
dual of a firm 16 a xW!Jiflent of Texas, of good character and good
reputation,northy of.a license, and is to be actively engaged
Tn good faith in the business of insurance, . : :’
WeJeare aware that a fundamentalrule of statutory construc-
tion requ ,resthat a statute be construedas a whole and that
all of iti“parts be harnonited, if possible, so as to give
effect.to thisentire act acoorUlng to the evident intention of
tha Legislature.39 Teat.Jur. 209, Sec. 113. In the instant
case, however, ,wedo not believe that the general ana somewhat
ambiguous language of Sectlon3 can be harmonized with the plain
an&specific provisionsof Section 5. Unaer such circumstances
it is an equally fundamentalrule of statutory construction
that in case of a conflict between a general Qrovision and a
special provision dealing with the same subject, or between
general language and specific language, the special or specific
provision will control. 3 Tex. Jr. 212, Sec. 114; City of San
Antonio v. Toepperwein;103 Tex. 43, 133 SW 416.
One of the spedific Qurposes of this act, as expressed
~ in Section 5, is to prohibit the licensing of an individualto
engage in the insurancebusiness principallyto handle business
which he controls through ownership, mortgage or sale, family
relationshipor emplbyment. If we construe Section 3 a8 creating
an exception for those partners who are not active, the con-
traaictory effect of such constructionwould result in the
statute providing, in effect, that no license shall be granted
to a firm unless all members are active, except in a case where
Honorable William A. Harrison, page 5 (WW-1337-A) '
one or more members are inactive. The previously quoted
specific language of Section 5, that each person or individualof
a firm is to be actively engaged in the business of insurance,
would thereby be nullified and one of the central purposes of
the statute would thereby be frustrated.
.
As previously suggested,the language In Section 3 that.
might be construed as authorizing inactive members of a partner-
ship and as exempting them from the licensing requirementsof
Article 21.14 Is somewhat ambiguous. We think the provision in
Section 3 providing that the names,of all persons Interested in
the firm be named in the license, and that "each named as active
in the business of the partnershipqualify" means.nothlngmore
than that there shall be no hidden or silent partners and that
each person who is named as a partner shall qualify as an
insuranceagent under the licensing requirementsof Article 21.14.
The language providing that it must be established"that none not
active have interest In partnershipprincipallyto have written
and be compensatedtherefor for insuranceon property controlled
through ownership, mortgage or sale, family relationship,or
employment"does pose more difficulty. Consideringthe overall
purposes of thisstatute,we believe the true meaning of this
language is simply that it must be establishedthat there are
no inactivepersons In the partnershipprincipallyto write
controlledbusiness.
As previously indicated,we believe that the clear and
specific language of Section 5 must control and that the general
and ambiguous language of Section 3 must yield In the event of
a conflict. This construction of the statute is strengthened
by the fact that Article 21.14 contains specific exceptions from
the.licensingrequirementsin Section 2 and Section.20,and speci-
fic exceptions from the examinationrequirementsin Section 6
and 6a. Had the Legislature intended to authorize inactive part-
ners and exempt them from either the licensing or,examination
requirements,it ia only logical that It would have done so
clearly and explScit3.y as in the case of the other exceptions.
While not controllingof the conclusionswe have reached,
there are certain questions that might arise under a contrary
cans%ructionof this statute. For example, Article'21.11
prohibits any agent from paying, directly dr~-Ind~$tiectly,"any
oom,missionto any person.or firm.not duly licensed by the,board
as an insuranceagent. Would,an active dUCy licensed partner
violate this provision by sharing his profits with an inactive~
non-licensedpartner, or In other words, is this indirectly
paying a commissionto a person not duly licensed?
., I.,, , l,. .
Honorable William A. Harrison, page 6 (WW-1337-A)
L I
Additionally,this Office in Opinions No. o-2453 and
O-2453A issued ln 1940, concluded that limited partnerships
were prohibited from engaging in the business of insurance
agents.in this State. This ruling was based on the provision
of ~Artlcle 6110, V.C.S., which prohibits a llmltea. partnership
from carrying on any banking or insurancebusiness, and this
same provision is contained In the Texas Uniform Limited Part-
nership Act. Article 6132a, Section 4. A so-called “Inactive”
partner could thus not be a llmltea partner but would be a
general partner, who ordinarily la an agent of the partnership
for the purpose of its ,,buslnesa.In this situation,however,
he would have no authority to act for the partnerehipln Its
insurancebusiness.
For all of the forgoing reasons, we conclude that your
first question should be answered.inthe negative.
.Tiour second question asks, In effect, whether an excep-
tion could be made if the inactive partner has an Interest only
in the profits of such Plrm and has no voice or authority In
the operation of the firm. We find no basis In the statutes
for any such exception,and accordinglyanswer your second
question in the negative.
Cur answer to the first and second questions make an
answer to your third question unnecessary.
. Opinion No. W-1337, as originallywrltten,.lstherefore
withdrawn and this opinion substitutedtherefor.
SUMMARY
The’provialb’nsof Secglon 5 of ArtZclei21,14;ofthe
Texas Insurance Code prchiblt the Insurance.Department
from issuing a local recoralng agent’s llcense,toa
firm or partnerahlpunless each individualor member of
~ the partnership is to be actively engaged in good faith
In the business of insuranceand meets all of the other
quallficatlonsrequlrea for such license.
Sincerelyyours,
WILL WILSON
Attorney General of Texas
‘%Y
Robert Flowers
Assistant
Honorable Willlam A. HarrisonI, pdge ,.7, (W-1337-A)
APPROVED:
OPINION COMMITTEE
Cecil Rbtsch
Llnwara Shivers
REVIEWED FOR THE ATTORNEX GENERAL
BY: Leonard Passmore
.