Untitled Texas Attorney General Opinion ( 1997 )


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    DAN MORALES
    ATTORNEY
    GENERAL                                  July 25, 1997
    The Honorable Antonio 0. Garza, Jr.                 Opinion No. DM-445
    Secretary of State
    Office of the Secretary of State of Texas           Re: Whether the Automobile Club Services Act,
    P.O. Box 12697                                      Transportation Code chapter 722, authorizes
    Austin, Texas 7871 l-2697                           automobile clubs to contract to reimburse
    members for expenses incurred in obtaining
    Commissioner Elton Bomer                            services (RQ-917)
    Texas Department of Insurance
    P.O. Box 149104
    Austin, Texas 787149104
    Dear Secretary Gatza and Commissioner Bomer:
    You ask whether the Automobile Club Services Act, Transportation Code chapter 722 (the
    “act”), authorizes automobile clubs to contract to reimburse members for expenses they incur
    obtaining services an automobile club is authorized to provide under the act. You suggest that the
    act does not authorize an automobile club to contract to reimburse members for expenses other than
    legal fees incurred in the defense of traftic offenses. You also suggest that a contract to reimburse
    a member for expenses incurred obtaining a service constitutes the business of insurance rather than
    the provision of a service, and that the act, with the exception of reimbursement of legal fees, does
    not authorize automobile clubs to engage in the business of insurance. We agree.
    Section 722.002 of the Transportation Code defines an “automobile club” as follows:
    [A] person who, for consideration, promises the membership assistance in
    matters relating to travel, and to the operation, use, or maintenance of a motor
    vehicle, by supplying services such as services related to:
    (A)   community traftic safety;
    (B)   travel and touring;
    (C)   theft prevention or rewards;
    0)    maps;
    Q     towins;
    The Honorable Antonio 0. Garza, Jr. - Page 2          (m-445)
    Commissioner Elton Bomer
    (F)   emergency road assistance;
    (G) bail bonds and legal fee reimbursement in the defense of traffic
    offenses; and
    (H) purchase of accidental injury and death benefits insurance coverage
    from an authorized insurance company.
    Transp. Code 4 722.002(2).
    A person may not engage in business as an automobile club unless the person meets the
    requirements of chapter 722 and obtains an automobile club certificate of authority from the
    secretary of state. 
    Id. $722.003. An
    automobile club is required to file a copy of its service contract
    with the secretary of state. 
    Id. $ 722.010(a).
    Section 722.008 authorizes the secretary of state to
    revoke or suspend an automobile club’s certificate of authority if the secretary determines that the
    club has, among other things, violated chapter 722 or is not acting as an automobile club. 
    Id. $722.008(a)(l)(A), (B).
    Chapter 722 contains two provisions regarding insurance. Section 722.012 prohibits an
    automobile club from advertising or describing “its services in a manner that would lead the public
    to believe that the services include automobile insurance.” 
    Id. $j722.012(2), Section
    722.013
    provides that an automobile club “is exempt from the insurance laws of this state, except that
    accidental injury and death benefits furnished to club members must be covered by a group policy
    issued to the club for the benefit of its members.” 
    Id. 5 722.013(a).
    You ask whether the phrase “supplying services” found in the definition of “automobile club’
    includes reimbursement for any service identified in the definition, other than legal fee
    reimbursement, which is expressly listed as a service in section 772.002(2)(G) and is clearly within
    the authority of an automobile club. Your letter states that “[r]egulatory questions have arisen when
    an applicant [for an automobile club certificate of authority] proposes to provide reimbursement for
    an enumerated service for which reimbursement has not been expressly authorized.” You state that
    the Department of Insurance “has historically viewed contracts providing for the indemnification or
    reimbursement against specified loss upon the happening of certain, fortuitous events as constituting
    the business of insurance within the meaning of [Jnsurance Code article 1.14-l].”
    The letter provides towing as an example: “Rather than provide the service or contract with
    others to do so, the applicant [for an automobile club certificate of authority] offers to reimburse or
    indemnify a member, up to a fixed amount, for expenses incurred by the member who has
    independently arranged for his or her own towing with a third party contractor.” The Department
    of Jnsurance has promulgated forms and rates for towing reimbursement as a rider to the Texas
    Personal Auto Policy. Your letter states that while the current rate approved by the Department of
    Jnsurauce “for towing reimbursement is $2.00 per automobile for a $40 lit per disablement [s]ome
    auto clubs typically charge sums between 20 and 100 times greater than the approved rate.”
    p. 2488
    The Honorable Antonio 0. Garza, Jr. - Page 3                  (lX-445)
    Commissioner Elton Bomer
    Your letter suggests that a contract to reimburse members for expenses or to indemnify
    members for expenses incurred obtaining services other than legal fees exceeds the statutory
    authority of an automobile club. We agree. Chapter 722 was codified by the legislature in 1995.’
    The statutory predecessor to chapter 722, now-repealed article 1528d, V.T.C.S.,2 defined
    “automobile club” in section 2(a) as follows:
    [A]ny person who in consideration of dues, assessments, or periodic
    payments of money, promises its members or subscribers to assist them in
    matters relating to travel and the operation, use or maintenance of a motor
    vehicle in the supplying of services which by way of illustration and not by
    way of limitation may include such services as community traffic safety
    service, travel and touring service, theft or reward service, map service,
    towing service, emergency road service, bail bond service and legal fee
    reimbursement service inthedefense of traffic offenses, and the purchase of
    accidental injury and death benefits insurance coverage corn a duly
    authorized insurance company. [Emphasis added.]
    Act of May 15, 1963, 58th Leg., B.S., ch. 250, 4 2(a), 1963 Tex. Gen. Laws 678, 678.’ The
    codification of chapter 722 in the Transportation Code was part of a nonsubstantive revision4 and
    any construction of chapter 722 must be consistent with the former statute. See Johnsonv. City of
    Fort Worth,774 S.W.2d 653,654-55 (Tex. 1989) (stating that, when conflict exists between former
    statute and nonsubstantive revision, former statute controls); Attorney General Opinion N-1230
    (1990) at 8 (quoting Johnson,774 S.W.2d at 654-55).
    The repeated use of the word service in former section 2(a) indicates that the legislature
    intended automobile clubs to provide services directly, not to contract to reimburse members for
    expenses incurred in obtaining these services. In addition, the description of reimbursement for legal
    fees as a service is notable. We believe that the fact that the legislature described legal fee
    reimbursement as a service supports our view that the legislature did not intend generally to permit
    automobile clubs to contract to reimburse to members for expenses incurred in obtaining any other
    services.
    It appears that the legislature decided to permit automobile clubs to reimburse members for
    legal fees in response to a specific legal ruling. In 1962, some months before article 1528d was
    ‘See Act of May 1, 1995,74tb   Leg., RS., ch. 165,s   1,1995 Tex. Gen. Laws 1025,1814,1817.
    ‘See Act ofMay 15,1963,58th     Leg., R.S., ch. 250, 5 2(a), 1963 Tex. Gen. Laws 678,678,   repealed by Act
    ofMay   1,1995,74tb  Leg., RS., ch. 165,s 24, 1995 Tex. Gen. Laws 1025, 1870.
    ‘See Act of May 1, 1995,74tb Leg., RS., ch. 165, 5 25, 1995 Tex. Gen. Laws 1025, 1871 (“This Act is
    intended as a recodification only, and no substantive change in law is intended by tbis Act.“).
    p. 2489
    The Honorable Antonio 0. Garza, Jr. - Page 4          (IN-445)
    Commissioner Elton Bomer
    enacted an appellate court had determined that an incorporated association that agreed to reimburse
    members for attorneys fees incurred in the defense of a moving traffic violation was engaged in the
    business of insurance. See TexasAss ‘n of QualifiedDrivers,Inc. v. State,361 S.W.2d 580 (Tex.
    Civ. App.-Austin 1962, no writ). The legislature appears to have intended to change the result of
    this opinion by defining reimbursement of legal fees in this context as a service. Given the court’s
    holding and the legislature’s subsequent action, the legislature appears to have been well aware that
    an agreement to reimburse members for expenses incurred obtaining other services would also
    constitute the business of insurance. The legislature did not act, however, to expressly authorize
    automobile clubs to contract to reimburse members for expenses other than legal fees. For this
    reason, we believe that the statutory definition of the phrase “automobile club” indicates legislative
    intent to preclude automobile clubs from agreeing to reimburse members for expenses incurred in
    obtaining other services.
    The two provisions of chapter 722 regarding insurance, sections 722.012(2) and 722.013(a),
    are wnsistent with our construction of section 722.002 to preclude an automobile club from agreeing
    to reimburse its members for expenses incurred obtaining services other than legal fees. The
    relationship between these two provisions is more apparent from the original statutory language,
    section 8 of former article 15284 which provided in pertinent part:
    (a) Automobile Clubs operating hereunder [shall not] advertise or
    describe their services in such a manner as would lead the public to believe
    such services include automobile insurance.
    (b) All Automobile Clubs operating pumuaut to a certificate of authority
    issued hereunder shall be exempt from the operation of all insurance laws of
    this State, except that accidental injury and death benefits furnished members
    of such Automobile Clubs shall be covered under a group policy issued to the
    Automobile Club for the benefit of its members and such policy shall be
    issued by a company licensed to write such insurance in this State.
    Act of May 15, 1963, 58th Leg., R.S., ch. 250, 5 8, 1963 Tex Gen. Laws 678, 680. Former
    subsection (a) suggests that, with the exception of reimbursement for legal fees, the legislature did
    not intend for automobile clubs to provide insurance. The exemption t?om insurance laws in former
    subsection (b) appears to have been predicated on former subsection (a) and to have assumed that
    automobile clubs would not engage in the insurance business.
    This construction of the relevant statutory language is supported by the legislative history
    of former article 1528d. The legislation at issue, House Bill 172, as introduced, contained
    detinitions of various services. These definitions appear to have been intended to authorize “motor
    p. 2490
    The Honorable Antonio 0. Garza, Jr. - Page 5           (CM-4451
    Commissioner Elton Bomer
    clubs” to provide a broad array of services. The definition of the term “motor club service” may
    have been intended to expressly authorize a motor club to reimburse its members for services:
    “Motor club service” means the rendering, tiunishing or procuring of
    towing service, emergency road service, bail bond service, discount service,
    buying and selling service, theft service, map service, touring service, license
    service and reimbursement of legal service, as herein defmed, to any person,
    in connection with the ownership, operation, use or maintenance of a motor
    vehicle by such person, in consideration of such other person being or
    becoming a member of any company rendering,procuring,furnishing.or
    reimbursingthe same, or being or .bewming in any manner affiliated
    therewith, or being or becoming entitled to receive membership or other
    motor club service therefrom by virtue of any agreement or understanding
    with any such company.
    See H.B. 172,58th Leg., RS. (1963) (filed version; emphasis added). Jn addition, House Bill 172,
    as introduced, defined the term “insurance service” to mean “any act by a company . . selling or
    giving... a policy of accident insuran ce covering loss by the holder of a service contract . . . as the
    result of injury or death . . . following an accident resulting from the ownership, maintenance,
    operation or use of a motor vehicle.” 
    Id. We believe
    the fact that the legislature deleted these
    provisions from subsequent versions of House Bill 172 supports the position that the legis!ature did
    not intend to permit an automobile club to reimburse members for services, other than legal services,
    or to engage in thebusiness of insurance.See Transportation      Ins. Co. v. Maksyn,580 S.W.2d 334,
    337-38 (Tex. 1979) (“The deletion of a provision in a pending bill discloses the legislative intent to
    reject the proposal. . . . Courts should be slow to put back that which the legislature has rejected.“);
    2A NORMANJ. SINGER,SUTHERLAND            STATUTORY   CONSTRUCITON     5 48.18 (5th ed. 1992) (adoption
    of amendment is evidence that legislature intends to change provisions of original bill).
    Our construction of chapter 722 is further supported by a prior opinion of this office,
    Attorney General Opinion M-994, which considered whether the secretary of state should issue a
    certificate of authority to an automobile club that agreed to collect and hold membership fees that
    would be available to the member to draw on “to reimburse an insurance carrier the amount of any
    deductible it pays out in settlement of claims under a policy of deductible automobile insurance, and
    p. 2491
    The Honorable Antonio 0. Garza, Jr. - Page 6                     (DM-445)
    Commissioner Elton Bomer
    to pay the increased cost of insurance when a policy must be obtained at higher than normal rates.”
    Attorney General Opinion M-994 (1971) at 1.5 In the view of this office, by offering this service the
    association was engaging in the insurance business:
    An insurance wntract arises when for a stipulated consideration, whether
    called a premium or a fee or something else, one party undertakes to
    compensate another party for loss on a specified subject by a specified peril
    or contingency. . . . When the association, in consideration of a membership
    fee, obligates itself to honor the member’s draft for the amount of the
    deductible, which otherwise would be lost by the member, in the event of a
    collision, the association is engaging in the insurance business.
    
    Id. at 3.
    This office concluded that this membership provision, if approved by the state, “would
    authorize the association to do business as an insurance carrier without a certificate of authority, in
    violation of Article 1.14 of the Texas Insurauce Code, and that the club is not authorized by Article
    1528d to engage in the insurance business.” 
    Id. The conclusion
    in Attorney General Opinion M-994 that an automobile club is not authorized
    to engage in the insurance business has stood unquestioned since 1971. We,believe that a Texas
    court would hold that Attorney General Opinion M-994 correctly concluded that an automobile club
    is not authorized to engage in the business of insurance. We also believe that a court would
    determine that an agreement by an automobile club to reimburse its members for costs incurred
    obtaining automobile-related services wnstitutes the business of insurance. See 
    QualifiedDrivers, 361 S.W.2d at 581-82
    (detining “insurance” as contract by which one party for consideration
    assumes particular risks of other party and promises to pay him or someone named by him a certain
    sum on a specified contingency).
    In sum, we construe chapter 722 to authorize an automobile club to contract to reimburse
    members for legal fees incurred in the defense of tra& offenses and to preclude an automobile club
    from agreeing to reimburse its members for expenses incurred obtaining any other service. An
    agreement to reimburse members for expenses incurred obtaining any other service exceeds the
    statutory authority of an automobile club under chapter 722 and constitutes the business of
    insurance. Given the language of chapter 722 and its statutory predecessor, the legislative history,
    and the 1971 opinion of this of&e, we can reach no other conclusion.6 If the legislature wishes to
    5After former article 1528d was enacted in 1963, it was only amended twice, io 1983 and 1987, before it was
    codified in the Traqatation     Code in 1995. See Act ofApril 21,1983,68&       Leg., RS., ch. 69, $ 12, 1983 Tex. Gen.
    Laws 310,318; Act of May 23,1987,7Otb Leg., RS., ch. 1007, $5 11,12,1987            Tex. Gen. Laws 3404,340s.     Those
    amendments in-          the amount of certain fees set by the act They are not relevant to tbis opinion and do not affect
    the continued validity of Attorney General Opinion M-994.
    6Giveo our conclusion that an automobile club is not authorized to agree to reimburse memben for expenses
    incurred obtaining any sexvice other than legal services, we do not believe it is necessary to address your second
    (continued...)
    p.   2492
    The Honorable Antonio 0. Garza, Jr. - Page 7                (IX-445)
    Commissioner Elton Bomer
    amend chapter 722 to authorize automobile clubs to contract to reimburse members for expenses
    incurred obtaining other services and to exempt such contractual terms from regulation by the
    Department of Jnsurance, however, it is within the legislature’s power to do so.
    SUMMARY
    Chapter 722 of the Transportation Code authorizes an automobile
    club to contract to reimburse members for legal fees incurred in the
    defense of traffic offenses. An agreement to reimburse a member for
    expenses incurred obtaining any other service exceeds the statutory
    authority of an automobile club under chapter 722 and constitutes the
    business of insurance.
    DAN MORALES
    Attorney General of Texas
    JORGE VEGA
    First Assistant Attorney General
    SARAH J. SHIRLEY
    Chair, Opinion Committee
    Prepared by Mary R. Crouter
    Assistant Attorney General
    question about the authority of ao automobile club to agree to reimburse members for services not listed in section
    722.002(2). Our conclusion applies to bath listed and unlisted services.
    p. 2493
    

Document Info

Docket Number: DM-445

Judges: Dan Morales

Filed Date: 7/2/1997

Precedential Status: Precedential

Modified Date: 2/18/2017