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AGO 1966 No. 117 - November 01, 1966
AGO Opinion Header Image
John J. O'Connell | 1957-1968 | Attorney General of Washington

OFFICES AND OFFICERS ‑- STATE ‑- INSURANCE COMMISSIONER ‑- NECESSITY FOR AUTOMOBILE DEALERS TO OBTAIN INSURANCE AGENT'S LICENSE WHERE COMPENSATED FOR SOLICITATION OF APPLICATIONS FOR GROUP CREDIT LIFE AND/OR HEALTH AND ACCIDENT INSURANCE.

Where, in the process of selling an automobile on a conditional sales contract, a dealer solicits and obtains an application for group credit life and/or health and accident insurance from the automobile purchaser which the dealer then forwards, together with an assignment of the conditional sales contract, to a bank which holds the master group insurance policy, the dealer is required to be licensed as an insurance agent under RCW 48.17.060 if by arrangement the assignee bank discounts the conditional sales contract at a more favorable discount rate than when the conditional sales contract is not accompanied by an insurance application for coverage under the bank's master group insurance policy.

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                                                                November 1, 1966

 

Honorable Lee I. Kueckelhan
Insurance Commissioner
Insurance Building
Olympia, Washington                                                                                                              Cite as:  AGO 65-66 No. 117

 

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:

            Where, in the process of selling an automobile on a conditional sales contract, a dealer solicits and obtains an application for group credit life and/or health and accident insurance from the automobile purchaser which the dealer then forwards, together with an assignment of the conditional sales contract, to a bank which holds the master group insurance policy, is the dealer required to be licensed as an insurance agent under RCW 48.17.060 if by arrangement the assignee bank discounts the conditional sales contract at a more favorable discount rate than when the conditional sales contract is not accompanied by an insurance application for coverage under the bank's master group insurance policy?

             [[Orig. Op. Page 2]]

            We answer your question in the affirmative for the reasons set forth in our analysis.

                                                                     ANALYSIS

            In 1961, the legislature added a separate chapter to the insurance code, chapter 48.34 RCW, regulating the sale of credit life and credit accident and health insurance.  However, since no section of that chapter deals with your question1/ we must turn to RCW 48.17.060, which is the general licensing statute.  It provides as follows:

            "(1)No person shall in this state act as or hold himself out to be an agent, broker, solicitor, or adjuster unless then licensed therefor by this state.

            "(2) No agent, solicitor, or broker shall solicit or take applications for, procure, or place for others any kind of insurance for which he is not then licensed.

            "(3)This section shall not apply with respect to any person securing and forwarding information required for the purposes of group insurance covering the unpaid balance, or remaining payments proposed to be made, in connection with the purchase of merchandise or securities, and where no commission or other compensation is payable on account of such insurance to such person.

            "(4) Any person violating this section shall be liable to a fine of not to exceed five hundred dollars and imprisonment for not to exceed six months for each instance of such violation."  (Emphasis supplied.)

            A close reading of the statute reveals that for its prohibition to apply to the situation described in your question, the automobile dealer must act as or hold himself out to be an agent, broker, solicitor or adjuster without being licensed.   [[Orig. Op. Page 3]] RCW 48.17.060 (1),supra.  However, in the case of group insurance covering the purchase of merchandise (with which we are directly concerned), the mere securing and forwarding of information does not run afoul of the statute.  In addition, commission or other compensation must be paid on account of such insurance.  RCW 48.17.060 (3), supra.

            Our initial inquiry is whether the more favorable discount rate given by the bank as to a commercial paper which is accompanied by an insurance application is a commission or other compensation on account of such insurance within the meaning of RCW 48.17.060 (3).  Patently it is not a commission.  The question remaining, then, is whether this discount differential is "other compensation" under the statute.  If it is, then the automobile dealer would be required to be licensed as an insurance agent in order to gather and forward information for group insurance.  If this discount differential is not "other compensation" the automobile dealer would not be required to be licensed as an insurance agent in order to gather and forward this information to the bank.

            In determining whether the discount differential is "compensation" within the meaning of RCW 48.17.060 (3), supra, we must apply the following fundamental rules of statutory construction:  The purpose in construing a statute is to ascertain and give effect to the intention of the legislature in enacting a particular statute.  Martin v. Aleinikoff, 63 Wn.2d 842, 389 P.2d 422 (1964).  Where a statute does not define a word, it must be given its plain and ordinary meaning.  Crown Zellerbach Corp. v. State, 53 Wn.2d 813, 328 P.2d 884 (1958).  The courts will construe the language of a statute to make it purposeful and effective rather than futile and meaningless.  Davis v. Wash. Toll Bridge Auth., 57 Wn.2d 428, 357 P.2d 710 (1960).

            Webster's New World Dictionary, Unabridged, 1961 Ed., defines compensation as

            ". . . both the act or action of making up, making good, or counterbalancing . . . something that constitutes an equivalent or recompense."

            In our opinion, the lower discount given to the automobile dealer by the bank is "other compensation" within the meaning of RCW 48.17.060 (3).  The lower discount the dealer receives,  [[Orig. Op. Page 4]] or is in a position to receive, is a recompense or remuneration for the insurance purchased by the buyer of the automobile.  Furthermore, the dealer receives this remuneration solely on account of the insurance that is purchased by such buyer.

            Any other conclusion than this would permit an automobile dealer without an insurance license to do indirectly what he could not do directly.  Such a situation, in our opinion, would be contrary to the obvious legislative intent expressed in RCW 48.17.060 (3), and render that section of the statute futile and meaningless.

            In reaching the conclusion that the automobile dealer in your question is required to be licensed as an insurance agent, we should emphasize that the prohibition of RCW 48.17.060,supra, is not simply directed to duly appointed agents of insurance companies.2/   The prohibition applies as well toany person who holds himself out to be an insurance agent (or broker, solicitor, or adjuster) without being licensed therefor by the state.  It would be quite unreasonable to assume any other interpretation, for otherwise the statute would penalize duly appointed agents of companies who solicit applications for insurance without a license but would not penalize persons who do so with neither a license nor an appointment.

            Thus, we need not be concerned with whether the automobile dealer in your question is a duly appointed agent of an insurance company.  It is sufficient that the automobile dealer solicits an application for the insurance coverage of an insurer in connection with the gathering of insurance information and the sending of same to the bank which holds the  [[Orig. Op. Page 5]] master policy.3/   This, in our opinion, would constitute holding himself out to be an insurance agent in violation of RCW 48.17.060,supra.

            Accordingly, it is our opinion that where, in the process of selling an automobile on a conditional sales contract, a dealer solicits and obtains an application for group credit life and/or health and accident insurance from the automobile purchaser which the dealer then forwards, together with an assignment of the conditional sales contract, to a bank which holds the master group insurance policy, the dealer is required to be licensed as an insurance agent under RCW 48.17.060 if by arrangement the assignee bank discounts the conditional sales contract at a more favorable discount rate than when the conditional sales contract is not accompanied by an insurance application for coverage under the bank's master group insurance policy.

            We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

MILTON C. SMITH
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

1/Except, of course, to the extent that RCW 48.34.010 expressly makes such insurance subject to the general provisions of the insurance code‑-including, thereby, RCW 48.17.060.

2/RCW 48.17.010 defines "agent" as follows:

            "'Agent' means any person appointed by an insurer to solicit applications for insurance on its behalf, and if authorized so to do, to effectuate and countersign insurance contracts except as to life or disability insurances, and to collect premiums on insurances so applied for or effectuated."

3/We recognize that such compensation as he receives flows not from the insurer to the automobile dealer but from the bank to the dealer.  This is not the usual situation between agent and principal.  However, as already discussed, RCW 48.17.060, supra, does not require that the automobile dealer actually be an agent of the insurance company.  Furthermore, the fact that the compensation is paid by someone other than the principal does not necessarily govern whether an agency relation exists.  See,Abelson v. Fidelity & Casualty Co., 164 Wash. 20, 2 P.2d 272 (1931).

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