Board of Ins. Com'rs v. Carter, 9858

• Decision Date: 01 March 1950
• Docket Number: No. 9858,9858
• Citation: 228 S.W.2d 335
• Parties: BOARD OF INS. COM'RS et al. v. CARTER.
• Court: Texas Court of Appeals

Page 335

228 S.W.2d 335

BOARD OF INS. COM'RS et al. v. CARTER.

No. 9858.

Court of Civil Appeals of Texas, Austin.

March 1, 1950.

Rehearing Denied March 22, 1950.

Price Daniel, Attorney General, Ned McDaniel and Clinton Foshee, Assistant Attorneys General, for Board of Insurance Commissioners. Thompson, Knight, Wright, Weisberg & Simmons, William H. Neary, Will C. Thompson, of Dallas, for intervenors, Nat. Fire Ins. Co. of Hartford and others.

Jones & Herring, by Herman Jones, of Austin, for appellee.

HUGHES, Justice.

Jess D. Carter sued the Board of Insurance Commissioners of Texas and its members to compel cancellation of an order adopted by the Board prohibiting any insurance company from insuring the first $100 of loss resulting from windstorm, hurricane or hail.

The only interest which Mr. Carter has in this order is, reflected by his testimony, that he is unable to buy insurance against these hazards covering the first $100 of loss. This is true, yet it is an interest which is common to all. Mr. Carter predicates his right to maintain this suit upon Art. 4893, Vernon's Ann.Civ.St., and his right to do so has not been challenged. We, therefore, assume his authority.

Many insurance companies have intervened and are aligned with the Board.

After a non-jury trial the court 'making no determination with reference to whether or not the order herein attacked is unreasonable, arbitrary or discriminatory, is of the opinion that said order of June 13, 1949, and the orders and rules continued in effect thereby were adopted by the Defendant Board without statutory authority,' and accordingly rendered judgment vacating and annulling the order in question.

The statutes relied on by the Board to show its statutory authority are:

Article 4905A, Acts 1945, p. 214, which provides that the writing of insurance against loss by tornado, windstorm, hail, etc., 'shall be governed and controlled by the provisions of Articles 4878 to 4901, inclusive, and also Articles 4903 to 4905, inclusive, of Chapter 10, Title 78, Revised Civil Statutes of 1925, including amendments to Article 4891, in the same manner and to the extent as fire insurance and fire insurance rates are now affected by the provisions of said Articles of said Chapter.'

Article 4878. 'The State Insurance Commission shall have the sole and exclusive power and authority and it shall be its duty to prescribe, fix, determine and promulgate the rates of premiums to be charged and collected * * *. Said Commission shall also have authority to alter or amend any and all such rates of premiums so fixed and determined and adopted by it, and to raise or lower the same, or any part thereof, as herein provided. * * * Said Commission shall ascertain as soon as practicable the annual fire loss in this State; obtain, make and maintain a record thereof and collect such data with respect thereto as will enable said Commission to classify the fire losses of this State, the causes thereof, and the amount of premiums collected therefor for each class of risks and the amount paid thereon, in such manner as will aid in determining equitable insurance rates, methods of reducing such fire losses and reducing the insurance rates of the State, or sub-divisions of the State.'

Article 4879 provides that maximum premium rates shall be established by the Board with companies privileged to write insurance for less than this rate so long as they are uniform in the same community.

Article 4881 authorizes the Board to obtain certain information in order 'to enable said Commission to make, amend and maintain the general basis schedules provided for in this law and the rules and regulations for applying same and to determine reasonable and proper maximum specific rates and to determine and assist in the enforcement of the provisions of this law.'

Article 4882 provides, in part: 'The rates of premium fixed by said Commission in pursuance of the provision of this law shall be at all times reasonable and the schedules thereof made and promulgated by said Commission shall be in such form as will in the judgment of the Commission, most clearly and in detail disclose the rate so fixed and determined by said Commission to be charged and collected for policies of fire insurance.'

The same Article authorizes the use by the Board of any data 'which in their opinion will enable them to devise and fix and determine reasonable rates of premium for fire insurance. The said Commission in making and publishing schedules of the rates fixed and determined by it shall show all charges, credits, terms, privileges and conditions which in any wise affect such rates * * *.'

Articles 4888 and 4889 provide for uniform policies and standard forms, respectively, and they read:

'The Commission shall make, promulgate and establish uniform policies of insurance applicable to the various risks of this State, copies of which uniform policies shall be furnished each company now or hereafter doing business in this State. After such uniform policies shall have been established and promulgated and furnished the respective companies doing business in this State, such companies shall, within sixty days after the receipt of such forms of policies, adopt and use said form or forms and no other; also all companies which may commence business in this State after the adoption and promulgation of such forms of policies shall adopt and use the same and no other forms of policies.' Article 4888.

'The Commission shall prescribe all standard forms, clauses and endorsements used on or in connection with insurance policies. All other forms, clauses and endorsements placed upon insurance policies shall be placed thereon subject to the approval of the Commission. The Commission shall have authority in its discretion to change, alter or amend such form or forms of policy or policies, and such clauses and endorsements used in connection therewith, upon giving notice.' Article 4889.

The position of the Board is that the above statutes, particularly Articles 4888 and 4889, together with authorities later to be noticed, authorized promulgation of the mandatory order of which complaint is made. Appellee Carter cites the following cases as decisive in his behalf: Commercial Standard Insurance Co. v. Board of Insurance Commissioners, Tex.Civ.App., Austin, 34 S.W.2d 343, Writ Ref.; Scanlan v. Home Ins. Co., Tex.Civ.App., Beaumont, 79 S.W.2d 186, Writ Ref.; and Board of Insurance Commissioners v. Guardian Life Insurance Co., 142 Tex. 630, 180 S.W.2d 906.

We will discuss these cases in the order named.

The single question before the court in the Commercial Standard case was the validity of an order of the Board of Insurance Commissioners fixing the amount of commissions an insurance company could pay its local agents. The order was invalidated principally upon the ground that the order, if upheld, would permit the Board to usurp the right of private management of insurance companies which the statutes did not authorize.

In the Scanlan case the court held that the Insurance Board could not effectively incorporate a provision in a policy which was repugnant to a statute.

In the Guardian Life case the court held that where the statute expressly provided how reserve requirements of life insurance companies should be computed, the Board had no authority to compute them otherwise.

If we examine the statutes (enumerated above) which now govern and control the writing of windstorm, hail and tornado insurance, we find that a policy may not validly contain any provision violating the statute as to encumbrances, 4890, V.A.C.S., and may not validly contain any provision violating the statute as to co-insurance, 4891, V.A.C.S., but we find no statute requiring the inclusion of any provision in such an insurance policy. The uniform policy and the standard forms which the legislature directed the Board to prescribe and promulgate would be blanks, if specific statutory authority is essential. That it is not essential we need only refer to McPherson v. Camden Fire Ins. Co., Tex.Com.App., 222 S.W. 211, 214, which upheld the 'iron-safe clause' prescribed by the Insurance Commission without specific statutory authority, and Commercial Union Assurance Company v. Preston, 115 Tex. 351, 282 S.W. 563, 45 A.L.R. 1016, which upheld a clause prescribed without specific statutory authority limiting liability to three-fourths of the value of personal property.

Under the foregoing authorities there is no room for an extreme rule that the Board can write any kind of policy it sees fit as long as no positive statute is violated, nor is there room for a rule to the opposite extreme that the Board may not require the inclusion of any clause in a policy without specific statutory authority. Between these extremes lies the true power of the Board.

The decision in the Commercial Standard case, supra, curtails the right of the Board to interfere with the internal management only of an insurance company. It could not possibly mean otherwise. Assuredly the Board has some powers and every power that it does possess is a power that the company and its right of management has lost. Other powers of the same nature as the one reserved to the company by the decision in the Commercial Standard case could very well be, size of office, amount of rent, number of employees, their salaries, office hours, and many more.

We...