Untitled Texas Attorney General Opinion ( 1983 )


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    The Attorney          General of Texas
    August 18, 1983
    JIM MATTOX
    Attorney General
    Mr. Lyndon L. Olson, Jr.               Opinion No.   JM-67
    Supreme      Court Building
    P. 0. BOX 12548
    Chairman
    Austin.    TX. 78711. 2548                 State Board of Insurance               Re:    Whether    the    Texas
    5121475-2501                               1110 San Jacinto Boulevard             Catastrophe Property Insurance
    Telex 910/874.1367                         Austin, Texas   78786                  Association is subject to the
    Telecopier     5121475-0268
    Administrative Procedure Act
    1607 Main St.. Suite 1400                  Dear Mr. Olson:
    Dallas.   TX. 75201.4709
    2141742-8944                                    You have requested our opinion concerning specific provisions of
    the Administrative Procedure and Texas Register Act (APTRA), article
    4624 Alberta          Ave.. Suite    160
    6252-13(a), V.T.C.S., as they apply to the State Board of Insurance
    El Paso. TX.          79905.2793           (board) with respect to the Texas Catastrophe Property Insurance
    9151533-3484                               Association (association) and its plan of operation (plan). The board
    P                                              first approved this plan on May 14, 1971 and most recently approved it
    1220 Dallas Ave.. Suite 202
    with amendments on February 4, 1983.
    Houston,     TX. 77002-6986
    7131650.0666                                    The legislature enacted the Catastrophe Property Insurance Pool
    Act (act), article 21.49 of the Insurance Code
    806 Broadway,            Suite 312
    Lubbock,     TX.        79401-3479
    to provide a method whereby adequate windstorm,
    6061747-5238
    hail and fire insurance may be obtained in certain
    designated portions of the State of Texas.
    4309 N. Tenth, Suite B                     V.T.C.S. art. 21.49, 51. Section 4(a) of the act commands that the
    McAllen.     TX. 78501-1685
    association shall consist
    5121662.4547
    !
    of all property insurers authorized to transact
    200 Main Plaza. Suite 400                          property insurance in this State, except those
    San Antonio.  TX. 76205.2797                       companies that are prevented by law from writing
    5121225-4191
    coverages available through the pool on a
    Statewide basis.
    An Equal          Opportunltyl
    affirmative         Action     Employer   One of the duties of the association's initial board of directors is
    to submit a proposed plan of operation to the board. Section 5(d) of
    the act requires that the plan
    shall set forth the number, qualifications, terms
    of office, and manner of election of the members
    of the board of directors and shall provide for
    the   efficient, economical, fair, and        non-
    discriminatory administration of the Association.
    p. 285
    .     -
    Mr.   Lyndon L. Olson, Jr. - Page 2   (JM-67)
    You ask two related questions: (1) is the plan a "rule" as
    defined by the APTRA; and (2) if it is a rule, is the plan a rule of
    the board or of the association? In responding to your inquiry, we
    adhere strictly to the definition of "rule" ss given in article
    6252-13a, section 3(7), V.T.C.S.:
    (7)   'Rule' means w      agency statement of
    general applicability that implements, interprets,
    or prescribes law or policy, or describes the
    procedure or practice requirements of an agency.
    The term includes the amendment or repeal of a
    prior rule but does not include statements
    concerning only the internal management or
    organization of any agency and not affecting
    private rights or procedures.
    We conclude that the plan is not a rule of the association. The
    APTRA defines a rule as an "agency statement." Therefore, the plan
    cannot be a rule unless it is promulgated by a specific agency: &,
    a body empowered by statute to promulgate rules. Since article 21.49
    of the Insurance Code does not empower the association to promulgate
    rules, the association is not a rulemaking body. The association is
    only empowered to submit a proposed "plan." All rule-making powers
    are reposed in the board.
    The association is s statutorily mandated association of private
    insurance companies. It operates on assessment fees collected from
    the member insurance companies; it receives no funds from the state.
    Although the association initially formulates the plan, the board is
    its ultimate overseer.     The board has full power to approve,
    disapprove, and amend the plan. The association in no manner acts
    with the sanction of the state; rather, it must look to the board to
    enforce any provisions of the plan: s,     in the case of a member who
    refuses to pay his assessment fee. Although the association was
    created by state statute, it is wholly controlled by the board, and it
    acts primarily as an advisory body to the board.
    We conclude that the plan is a rule of the board. The State
    Board of Insurance is unquestionably an agency. For the following
    reasons, we conclude that the plan is the board's statement, and that
    it is a "statement of general applicability that implements,
    interprets, or prescribes law or policy. . . ."        V.T.C.S. art.
    6252-13~~.§3(7).
    Section 5(d) of the act orders that
    [tlhe proposed plan shall be reviewed by the Board
    and approved, unless it finds that such plan does
    not properly fulfill the purposes of this
    Act. . . . If the Board approves the proposed
    plan. it shall certify such approval to the
    p. 286
    r   .   .
    Mr. Lyndon L. Olson, Jr. - Page 3 (JM-67)
    directors and the plan shall become effective 10
    days after such certification.
    You have furnished us with copies of three board orders signed by
    all of the board members which document the board's approval of the
    plan. In our opinion, this approval constitutes the acceptance of the
    plan by the board as this agency's own statement within the meaning of
    article 6252-13a, section 3(7).
    Having decided that the plan is an agency statement, we must now
    decide whether this statement satisfies the "general applicability"
    requirement of article 6252-13a, section 3(7). The plan is the main
    guide to the functions, powers and procedures of the association. It
    contains definitions which complement those given in the act, x,
    "net direct premiums." The plan provides a schedule of meetings for
    the association and a procedure for voting by the members. It also
    lists the qualifications required for election to the association's
    board of directors and details the election procedure. The plan
    outlines the power of the board of directors and describes the method
    of selection and duties of the officers. None of these provisions is
    contained in the act itself.
    The plan elaborates upon the board's powers to enforce its
    provisions.   It provides for the collection and investment of
    insurance premiums and for the assessment of fees from the members.
    The plan also supplies a formula for credit which the association will
    give to any member for insurance which it may write voluntarily; this
    feature is not included in the act. With regard to any association
    member's failure to pay its assessment fee, the plan gives the board
    the power to suspend that member's certificate of authority; this
    power is also not mentioned in the authorizing statute.
    The plan of operation goes on to describe the insurance policies
    that the association may issue. Included in this section of the plan
    is a definition of "insurable property" that clarifies the definition
    provided in the statute (e.g., the plan's definition excludes mobile
    homes; see Attorney General Opinion H-824 (1976)). A limit on the
    amount oflability   is also provided.
    The method of application for insurance, acceptance, and
    rejection is described in detail in the plan of operation, as is the
    method of cancellation of a policy. Finally, the plan includes a
    detailed building code, which contains requirements to minimize
    windstorm damage. These procedures further implement the statute.
    When the details of the plan of operation are compared with the
    general standards that determine whether something is a "rule," the
    inevitable conclusion is that the plan is a rule. The plan is of
    general applicability; it covers virtually all property insurers and
    all persons in a catastrophe area who may wish to obtain insurance
    from the association. Thus, the plan has a substantial impact on a
    p. 287
    Mr. Lyndon L. Olson, Jr. - Page 4 (JM-67)
    business group as well as on a large segment of the public. The plan
    implements, interprets, and prescribes both law and policy through its
    various mandatory provisions. The plan contains specific provisions
    that implement the general policy of the Insurance Code; it augments,
    rather than merely interprets, existing law; and, it has a significant
    external impact on the private rights of both the industry and the
    public.
    You advise that if we should conclude that the plan is a rule,
    you will initiate rule making procedures under article 6252-13a,
    section (5), V.T.C.S. You express concern about enacting this rule
    before the onset of this year's hurricane season. We direct your
    attention to article 6252-13a. section (d) of the APTRA which provides
    for an emergency rule making procedure. The board should, however,
    begin standard rule making procedures as well since the emergency
    provisions have only a temporary effect.
    SUMMARY
    The plan of operation of the Texas Catastrophe
    Property Insurance Association is a rule of the
    State Board of Insurance.      1
    L-l L&iVe y truly yo : ,
    JIM
    ml/1
    MATTOX
    Attorney General of Texas
    I
    TOM GREEN
    First Assistant Attorney General
    DAVID R. RICHARDS
    Executive Assistant Attorney General
    Prepared by Rick Gilpin
    Assistant Attorney General
    APPROVED:
    OPINION COMMITTEE
    Susan L. Garrison, Chairman
    Colin Carl
    Rick Gilpin
    Yolanda McKeemsn
    Jim Moellinger
    Nancy Sutton
    p. 288
    

Document Info

Docket Number: JM-67

Judges: Jim Mattox

Filed Date: 7/2/1983

Precedential Status: Precedential

Modified Date: 2/18/2017