The opinion
‘SHE ATrOEzSEY GESEKAL
OiF TEXAS
The State Board of Insurance Opinion No. WW -3 56
International Life Building
Austin, Texas Re: Does Article 3.50, Texas
Insurance Code, authorize
the issuance of a group life
insurance policy to trustees
of a fund established by a
labor union to insure thz
Gentlemen: members of such union?
Your request for an opinion of this department on the questl’ons a:
are herein stated has been received, and we quote from your letter as
follows:
“The trustees of a welfare fund are considering the
purchase of a group life policy to cover union members.
The welfare fund is administered pursuant to a declara-
tion of trust executed between two unions as one of the
parties, a contractors’ association as a second party,
and a group of trustees as a third party. The trust agree-
ment recites that the ‘employers’ (without otherwise de-
fining them) and the union have entered into a bargaining
agreement requiring periodical payments by the employers
to the fund for the purpose of providing and maintaining
certain welfare benefits for duly qualified and eligible
employees and designated dependents employed by the em-
ployers, and such other employees who may desire to par-
ticipate.”
Your opinion request concerns Article 3.50 of the Texas Insurance
Code, the relevant portions of which are quoted as follows:
“Section l(1). No policy of group life insurance shall
be delivered in this State unless it conforms to one of the
following descriptions: . . .”
Section 4 of this Article provides in part as follows:
“Except as may be provided in this Article, it shall
be unlawful to make a contract of life insurance covering
a group in this State. . .*
Therefore, unless the policy conforms to one of the statutory de-
scriptions set out in Article 3.50. it cannot be legally issued.
.
The State Board of Insurance, page 2 (WW-356)
Subsection (2) of Section 1 provides as follows:
“A policy issued to a labor union, which shall be deemed
the employer and policyholder, to insure the members of such
union who are actively engaged in the same occupation and
who shall be deemed to be the employees of such union with-
in the meaning of this Article.”
In the case of Board of Insurance Commissioners Y. Great Southern
Life Insurance Company, 239 S. W. 2d 803, the Texas Bankers Associa-
tion was attempting to purchase a group life insurance policy from Sou-
thern Life Insurance Company to insure the members of ihe assocj.ation
pursuant to a trust agreement. The Court stated that, “The real poir.t~
of departure from the requirements of the statute i,s thai wher.:z.:; rhe
statute prohibits the writing of group insurance fo; r.rr;p:‘~yers v..;l.h
fewer than twenty-five employees, an effort is here made throu,n a
trade association to write group insurance for a number of emp:r,:,-rz
with fewer than twenty-five employees* and then went on to strike dov.:ii
the plan as being violative of the statute. The facts that you havs~. out-
lined in your letter are analogous to those in the Great Southern &.ife
Insurance Company in that, the plan under consideration would mcXe it
possible for an employer with fewer than ten employees to procure group
life insurance on such employees in direct violation of Article 3.50.
To permit a number of employers to establish a welfare fund Tvith
the union and to then permit the trustees of this welfare fund to pu:c!~z~se
group life insurance on the lives of the employees of the employers who
were parties to the welfare fund, or to allow a number of labor ur~!.ons
to establish a welfare fund with a trustee to purchase group life insur-.
ante on the lives of the employees of the several unions, wouid be an at-
tempt to circumvent the statute and to make it possible for one of the
employers or labor unions having less than ten employees or members,
to be provided with group life insurance. Any interpretation that would
permit such an arrangement would clearly nullify the legislative re-
quirement of Article 3.50 that the policy of group life insurance must
cover at least ten (10) employees at the date of issue.
Subsection (2) of Section 1 is explicit in its requirements tha? the
policy may insure “the members of such union who are actively engaged
in the same occupation. . *” We hold that this restriction, when read in
light of the holding in the Great Southern Life Insurance Company case,
supra, prohibits the issuance of a group pohcy where the membership
of such group is derived from more than one employer or labor union,
except where expressly permitted in the case of affiliated businesses
set forth in Subsection (a) of Subsection (1) of Section 1 of Article 3.50.
The use of the singular “employer” in the phrase -. . . estabbshed
by an employer. . .n is significant. It evidences the intention of the
Legislature that a single employer may, under the stated conditions, have
a policy of group life insurance issued to it, or the same employer may
establish a fund and have a;’@&y of group life insurance issued under
The State Board of Insurance, page 3 (WW-356)
stated conditions to the trustees of that fund. The only persons eligi-
ble for insurance in either event are the employees of the employer,
,that is, a singular employer.
SUMh4AR Y
Article 3.50 of the Texas Insurance Code does not
authorize the issuance of a group life insurance
policy to trustees of a fund established pursuant
to a trust agreement between the members of two
labor unions as one party, a contractors’ assoria-
tion as the second party, and a group of trustees
as a third party.
Yours very truly,
WILL WILSON
Attorney General of Texas
Richard A. Weils
Assistant
RAW:dac
APPROVED:
OPINION COMMITTEE
George P. Blackburn, Chairman
Ralph Rash
Jack Goodman
J. Mark McLaughlin
REVIEWED FOR THE ATTORNEY GENERAL
By: W. D. Geppert