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AGO 1991 No. 14 - March 28, 1991
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Ken Eikenberry | 1981-1992 | Attorney General of Washington

SUPERVISOR OF BANKING ‑- BANKS AND BANKING ‑- INSURANCE

The state Supervisor of Banking acted within his authority in adopting WAC 50-12-310 through [50-12]-370 which relate to insurance activities by state‑chartered banks and trust companies.

                                                             - - - - - - - - - - - - -

                                                                  March 28, 1991

Honorable Peter von Reichbauer
Chairman
Financial Institutions and Insurance Committee
408 John A. Cherberg Building
Olympia, Washington 98504

                                                                                                                 Cite as:  AGO 1991 No. 14

Dear Senator von Reichbauer:

            By letter previously acknowledged, you requested our opinion on a question that we paraphrase as follows:

            Did the state Supervisor of Banking act within his authority in adopting WAC 50-12-310 through [50-12]-370, relating to insurance activities by state‑chartered banks and trust companies?

            We answer your question in the affirmative.

                                                                     ANALYSIS

            On May 2, 1990, the state Supervisor of Banking adopted WAC 50-12-310 through [50-12]-370 (effective June 2, 1990).

            The rules relate primarily to three aspects of insurance agency activities on the part of state‑chartered banks and trust companies.  First, the rules clarify the scope of a bank's authority to conduct insurance agency activities under the "small town" provision in RCW 30.08.140(10), which allows a bank located in a city of fewer than 5,000 inhabitants to act as an insurance agent.  Second, the rules authorize a trust company to act as an insurance agent, relying on RCW 30.08.150(3).  Finally, the rules permit a bank to engage in insurance activities that have been  [[Orig. Op. Page 2]] determined by the federal reserve system or the United States Congress to be "closely related to the business of banking".  RCW 30.04.215(1).

            For convenience, we have enclosed with this opinion the Supervisor's notice of rule adoption, which includes the complete texts of the rules in question.  We will set forth in this opinion the various sections of the rules as we analyze each section.

            Other than asking us to compare the definitions in the Supervisor's rules with those in the state insurance laws (Title 48 RCW), your request does not raise a specific concern about the rules, but rather asks us generally to examine "whether the Supervisor of Banking has authority to adopt these regulations in light of existing provisions contained in Title 30 RCW as well as Title 48 RCW."1/

             We begin our legal analysis by setting forth the standards by which a court would be reviewing the validity of the rules in question.  These standards were summarized in Anderson, Leech & Morse, Inc. v. Washington State Liquor Control Bd., 89 Wn.2d 688, 575 P.2d 221 (1978), at 694-95:

            [A]n agency created by statute has only those powers expressly granted or necessarily implied from the statute.  Ortblad v. State, 85 Wn.2d 109, 530 P.2d 635 (1975); State v. Pierce, 11 Wn. App. 577, 523 P.2d 1201 (1974).  An agency cannot legislate, its rules must be within its statutory framework.  Kitsap-Mason Dairymen's Ass'n v. State Tax Comm'n, 77 Wn.2d 812, 467 P.2d 312, (1970);State ex rel. West v. Seattle, 50 Wn.2d 94, 309 P.2d 751 (1957).

                       . . .

                       . . .  Where, as in the instant case, the legislature has specifically delegated rule‑making power to an agency, the regulations are presumed valid.

             [[Orig. Op. Page 3]]

            Weyerhaeuser Co. v. Department of Ecology, 86 Wn.2d 310, 545 P.2d 5 (1976);Lindsay v. Seattle, 86 Wn.2d 698, 548 P.2d 320 (1976).  One asserting invalidity has the burden of proof, and the challenged regulations need only be reasonably consistent with the statutes they implement.  Weyerhaeuser Co. v. Department of Ecology, supra;Lindsay v. Seattle, supra.  The regulation will not be struck down unless 'compelling reasons are presented sufficient to show the scheme is in conflict with the intent and purpose of the legislation.'  Weyerhaeuser Co. v. Department of Ecology, supra at 317.

                       . . .  Furthermore, this court cannot be called upon to substitute its judgment for that of the administrative body acting within its statutory powers.  Weyerhaeuser Co. v. Department of Ecology,supra.

            These principles apply fully to administrative rules regulating commercial activities.   See Federated American Ins. Co. V. Marquardt, 108 Wn.2d 651, 741 P.2d 18 (1987).

            A section of the Administrative Procedure Act, RCW 34.05.320, requires an agency adopting a rule to cite "the statutory authority for adopting the rule and the specific statute the rule is intended to implement".  RCW 34.05.320(1)(b).  The Supervisor of Banking set forth his statutory authority for adoption of the rules as being RCW 30.04.030.2/

            RCW 30.04.030 provides:

            The supervisor shall have power to adopt uniform rules and regulations in accordance with the administrative procedure act, chapter 34.05 RCW, to govern examinations and reports of banks and trust companies and the form in which they shall report their assets, liabilities, and reserves, charge off bad debts and otherwise keep their records and accounts, and otherwise to govern the administration of this title.  He shall mail a copy of the rules and regulations to each bank and trust company at its principal place of business.

            The supervisor shall have the power, and broad administrative discretion, to administer and interpret  [[Orig. Op. Page 4]] the provisions of this title to facilitate the delivery of financial services to the citizens of the state of Washington by the banks and trust companies subject to this title.

            RCW 30.04.030 expressly grants the Supervisor of Banking "broad administrative discretion".  However, with regard to insurance activities by banks or trust companies, we note another statute, RCW 30.04.127, which reads:

            (1) A bank or trust company, alone or in conjunction with other entities, may form, incorporate, or invest in corporations or other entities, whether or not such other corporation or entity is related to the bank or trust company's business.  The aggregate amount of funds invested, or used in the formation of corporations or other entities under this section shall not exceed ten percent of the assets or fifty percent of the net worth, whichever is less, of the bank or trust company.  For purposes of this subsection, 'net worth' means the aggregate of capital, surplus, undivided profits, and all capital notes and debentures which are subordinate to the interest of depositors.

                        (2) A bank or trust company may engage in an activity permitted under this section only with the prior authorization of the supervisor.  In approving or denying a proposed activity, the supervisor shall consider the financial and management strength of the institution, the convenience and needs of the public, and whether the proposed activity should be conducted through a subsidiary or affiliate of the bank.  The supervisor may not authorize under this section and no bank or trust company may act as an insurance or travel agent unless otherwise authorized by state statute.

(Emphasis added.)

            Construing RCW 30.04.030 and 30.04.127 together, we conclude that RCW 30.04.030 does not, by itself, provide authority for the Supervisor to authorize a bank or trust company to act as an insurance agent.  Cf.Saxon v. Georgia Ass'n of Independent Ins. Agents, 3990 F.2d 1010 (5th Cir. 1968);Independent Ins. Agents of Georgia v. Department of Banking & Finance, 248 Ga. 787, 285 S.E. 2d 535 (1982).  The source of the Supervisor's authority to adopt WAC 50-12-310 through [50-12]-370 must be found in one of the three statutes which the Supervisor has indicated the rules are  [[Orig. Op. Page 5]] intended to implement.  See WSR 89-24-063 (December 20, 1989), WSR 90-10-074 (May 16, 1990), WAC 50-12-320.3/

             We will examine first the Supervisor's rules relating to banks acting as insurance agents in cities of fewer than 5,000 inhabitants.  The statute that these rules purport to implement is RCW 30.08.140(10), which reads:

            Upon the issuance of a certificate of authority to a bank, the persons named in the articles of incorporation and their successors shall thereupon become a corporation and shall have power:

                       . . .

                        (10) If the bank be located in a city of not more than five thousand inhabitants, to act as insurance agent.  A bank exercising this power may continue to act as an insurance agent notwithstanding a change of the population of the city in which it is located.

            With regard to banks in cities of fewer than 5000 people, RCW 30.04.127(2), providing that "no bank or trust company may act as an insurance . . . agentunless otherwise authorized by state statute" (emphasis added), poses no barrier so long as the Supervisor's rules are within his authority to adopt under RCW 30.08.140(10).

            WAC 50-12-350(1) provides:

            A bank located in a city of not more than five thousand inhabitants may act as insurance agent from an office in that city.  A bank exercising this power may  [[Orig. Op. Page 6]] continue to act as insurance agent notwithstanding a change in the population of the city in which it is located.

            WAC 50-12-330 contains the following definitions:

            WAC 50-12-330 INSURANCE AGENCY ACTIVITIES ‑- DEFINITIONS.  (1) 'Bank' means a bank chartered under the provisions of Title 30 RCW.

           . . .

                        (3) 'Insurance agent' means any person, including a bank, appointed by an insurer to solicit applications for insurance on its behalf and conduct such other activities and the subject to such restrictions of an insurance agent as authorized by the Washington insurance code, Title 48 RCW.
                        (4) 'City' means a city whose boundaries and powers of self-government are defined by Title 35 or 35A RCW.
                        (5) 'Located in a city' means operating a duly certificated full service branch within the city limits of the city.
                        (6) 'Act as insurance agent' means to exercise the full power of an insurance agent on all lines of insurance subject only to the limitations and requirements of Title 48 RCW.

            The rules adopted by the Supervisor address two issues that are not resolved by the express language of RCW 30.08.140(10).  First, the rules allow a bank to come within the small town provision if a full service certifiedbranch of the bank is operating within the city.  That is, the rules do not require the bank headquarters to be located in the city.

            Second, the rules provide that the bank service area is not limited to the city in question; that is, the bank's insurance activities are not limited to dealing with customers or property located in the city itself.

            Under the standard set forth in Anderson, 89 Wn.2d at 694-95, these rules appear to be "reasonably consistent" with RCW 30.08.140(10).  There appear to be no "compelling reasons" to show that the rules are "in conflict with the intent and purpose of the legislation."

            The first sentence of RCW 30.08.140(10) was enacted in 1919 and has remained unchanged since then.  Laws of 1919, ch. 209, § 8.  The second sentence of RCW 30.08.140(10) was enacted in  [[Orig. Op. Page 7]] 1986.  Laws of 1986, ch. 279, § 29.  We have examined the legislative history of both enactments and have found nothing addressing this question.

            RCW 30.08.140(10) is similar to provisions in the federal statutes on national banks, 12 U.S.C. § 92 (1988),4/
            and in the federal statutes dealing with bank holding companies, 12 U.S.C. § 1843(c)(8)(c).

            In his notice accompanying the adopted rules, the Supervisor of Banking stated that the intent of RCW 30.08.140(10) was two-fold and that his rules allowing banks with branch banks in small towns furthered both statutory purposes.  The Supervisor stated:

            The apparent legislative intent to allow insurance agency activities in small communities is advanced by the interpretations in the proposed rule.  Two possible explanations linking insurance agency powers to small communities have been asserted:  (1) provide for greater availability of walk-in insurance agencies in small communities; and (2) provide for greater availability of full banking services in small communities.  If the legislature intended to make insurance agencies more available to small communities, the legislative intent is advanced by the proposed rule.  The legislature may have wanted to encourage banks to deliver full banking services to small communities.  To encourage this activity, the legislature created a means whereby banks could obtain additional revenue in the form of insurance agency revenue if it located in a small community.  If the legislature intended to create an incentive for banks to deliver full banking services to small communities.  To encourage this activity, the legislature created a means whereby banks services to small communities, the legislative intent is advanced by the proposed rule.

WSR 90-10-074 (May 16, 1990), at p. 118.

            InSaxon, the United States Court of Appeals for the Fifth Circuit, in discussing the "small town exception" in the national bank law, noted that the purpose of such a provision was "to  [[Orig. Op. Page 8]] provide these banks located in small communities with an additional source of revenue" to ensure their profitability.  Saxon, 399 F.2d at 1015.

            With respect to branch banks, the United States Office of the Comptroller of the Currency has interpreted the "small town exception" in 12 U.S.C. § 92 as follows:

            12        U.S.C. 92 provides that national banks may act as agents for any fire, life, or other insurance company in any place the population of which does not exceed 5,000 inhabitants.  This provision is applicable to any office of a national bank when the office is located in a community having a population of less than 5,000 even though the principal office of such bank is located in a community whose population exceeds 5,000.

12 C.F.R. § 7.7100 (emphasis added).

            InIndependent Ins. Agents of America, Inc. v. Board of Governors, 835 F.2d 1452 (D.C. Cir. 1987), the United States District Court for the District of Columbia Circuit upheld a rule amendment by the Federal Reserve System under the federal bank holding company act deleting a requirement that in order to be eligible to conduct insurance activities in a "small town" the holding company had to have its principal place of business in the town.

            We do not believe that the use of the word "bank" only in RCW 30.08.140(10) precludes the Supervisor from adopting WAC 50-12-330(5).  In RCW 30.04.010, "bank" and "branch bank" are defined separately:

            'Bank,' unless a different meaning appears from the context, means any corporation organized under the laws of this state engaged in banking, other than a trust company or a mutual savings bank.

            'Branch bank' means any office of deposit or discount maintained by any bank or trust company, domestic or otherwise, other than its principal place of business, regardless of whether it be in the same city or locality.

            We do not read these definitions as making "bank" and "branch bank" mutually exclusive.  Indeed, it appears from the definitions that the opposite of "branch bank" is not "bank", but rather the "principal place of business" of a bank or trust company.  In light of the federal authorities just discussed, we  [[Orig. Op. Page 9]] conclude that the Supervisor's rule, WAC 50-12-330(5), is "reasonably consistent" with RCW 30.08.140(10).

            With respect to the bank's insurance activities not being limited to dealing with customers or property located in the city, the Comptroller of the Currency has likewise interpreted the small town exception in 12 U.S.C. § 92 to allow insurance activities to be provided to customers outside the "small town" in question.  Comptroller of the Currency Letter No. 366 (1986), reported in 1986 Federal Banking Law Reports, para. 85, 536.  This rule was upheld inNational Ass'n of Life Underwriters v. Clarke, 736 F. Supp. 1162 (D.D.C. 1990).

            In addition, as the Supervisor of Banking has noted, WSR 90-10-074 (May 16, 1990), at p. 119, where the Washington Legislature has intended to place a geographic limitation on banking activities, it has done so explicitly.  See RCW 32.08.140(9), allowing a mutual savings bank to act as insurance agent to write fire insurance policies on property in which it has an insurable interest, said "property to be located in the city in which the bank is situated and in the immediate contiguous suburbs".  The absence of any similar language in RCW 30.08.140(10) is an indication that no geographic limitation to the bank's service area as an insurance agent was intended.  See National, 736 F. Supp. at 1168 (limitation in original version of 12 U.S.C. § 92 on loans by small town national bank to real estate located within 100 miles of bank but no similar limitation for insurance activities an indication that no geographic limits on insurance activities by small town bank intended).

            In light of these interpretations by federal regulatory agencies implementing "small town exceptions" in federal banking laws, the Supervisor's rules in this regard appear to us to be "reasonably consistent" with RCW 30.08.140(10).

            We will next consider the rule relating to a banking engaging in insurance activities that have been determined by the United States Congress or the federal reserve system to be "closely related to the business of banking."

            The state statute that this rule purports to implement is RCW 30.04.215(1).  RCW 30.04.215(1) reads:

            Notwithstanding any other provision of law, in addition to all powers enumerated by this title, and those necessarily implied therefrom, a bank may engage in other business activities that have been determined by the board of governors of the federal reserve system or by the United States Congress to be closely related to the business of banking, as of June 11, 1986.  At  [[Orig. Op. Page 10]] least thirty days before investment in corporations or other entities under this chapter, notification by letter shall be made to the supervisor in accordance with such terms and conditions as the supervisor might establish by rule.

(Emphasis added.)

            In his notice of adopted rules, the Supervisor of Banking refers to this statute as "the federal parity provision".  WSR 90-10-074 (May 16, 1990), at p. 117.  This appears to be an accurate statement of the legislative intent of this provision, which was originally enacted in 1983, namely, to ensure that state‑chartered banks were not disadvantaged in competition with national banks.  See Final Legislative Report on SB 3182, enacted as Laws of 1983, chapter 157, codified as RCW 30.04.215.  In connection with an amendment to the statute in 1986, the 1986 Final Legislative Report stated:

            The Supervisor of Banking may authorize banks to engage in activities authorized by Congress for national banks or the Federal Reserve Board for bank holding companies.

1986 Final Legislative Report on SSB 4917, enacted as Laws of 1986, ch. 279, codified as RCW 30.04.215, at p. 234.

            Pursuant to RCW 30.04.215(1) the Supervisor has adopted WAC 50-12-350(3) and (4), which read:

                        WAC 50-12-350 INSURANCE AGENCY ACTIVITIES ‑- EXCEPTIONS.

                       . . .

                        (3) A bank may engage in insurance activities that have been determined by the board of governors of the federal reserve system or by the United States Congress to be closely related to the business of banking, as of June 11, 1986.  These activities include, but are not limited to:

                        (a) General insurance agency activities conducted by a bank with total assets of fifty million dollars or less, provided, however, that such bank may not engage in the sale of life insurance or annuities.  For purposes of this exception "total assets" is determined by the latest consolidated report of condition filed with the supervisor of banking.  This exception ceases when the value of the assets of the bank exceed fifty million dollars.  The insurance agency license must be  [[Orig. Op. Page 11]] surrendered and the assets sold or otherwise disposed of within three years unless otherwise extended by the supervisor of banking.

                        (b) A bank may act as agent for life, disability, and involuntary unemployment insurance if the insurance is limited to assuring the repayment of the outstanding balance due on a specific extension of credit by the bank.

                        (c) A bank may act as agent for property insurance on loan collateral, provided such insurance is limited to assuring repayment of the outstanding balance of the extension of and such extension of credit is not more than ten thousand dollars (twenty-five thousand dollars to finance the purchase of a residential manufactured home and which is secured by such home) increased by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published monthly by the Bureau of Labor Statistics for the period beginning on January 1, 1982, and ending on December 31 of the year preceding the year of the extension of credit.

                        (4) A bank or trust company may engage in any insurance agency activity lawfully engaged in by national banks located in the state of Washington.

            As noted in the 1986Final Legislative Report, the language in RCW 30.04.215(1) about "business activities that have been determined by the board of governors of the federal reserve system . . . to be closely related to the business of banking" refers to the federal statute dealing with bank holding companies, 12 U.S.C. §§ 1841-50.  The federal bank holding act, in general, limits the involvement of bank holding companies in nonbanking activities, with some exceptions.  The exception section, 12 U.S.C. § 1843(c)(8), provides, in pertinent part (recast for ease of reading):

            The prohibitions in this section shall not apply to

                       . . .

                        (8) shares of any company the activities of which the Board after due notice and opportunity for hearing has determined (by order or regulation to be so closely related to banking or managing or controlling banks as to be a proper incident thereto, but for purposes of this subsection it is not closely related to banking or managing or controlling banks for a bank holding company to provide insurance as a principal, agent, or broker except

             [[Orig. Op. Page 12]]

                        (A) where the insurance is limited to assuring repayment of the outstanding balance due on a specific extension of credit by a bank holding company or its subsidiary in the event of the death, disability, or involuntary unemployment of the debtor;

                        (B) in the case of a finance company which is a subsidiary of a bank holding company, where the insurance is also limited to assuring repayment of the outstanding balance on an extension of credit in the event of loss or damage to any property used as collateral on such extension [sic] of credit and, during the period beginning on October 15, 1982, and ending on December 31, 1982, such extension of credit is not more than $10,000 ($25,000 in the case of an extension of credit which is made to finance the purchase of a residential manufactured home and which is secured by such residential manufactured home) and for any given year after 1982, such extension of credit is not more than an amount equal to $10,000 ($25,000 in the case of an extension of credit which is made to finance the purchase of a residential manufactured home and which is secured by such residential manufactured home) increased by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published monthly by the Bureau of Labor Statistics for the period beginning on January 1, 1982, and ending on December 31 of the year preceding the year in which such extension of credit is made;

                        (C) any insurance agency activity in a place that (i) has a population not exceeding five thousand (as shown by the last preceding decennial census), or (ii) the bank holding company, after notice and opportunity for a hearing, demonstrates has inadequate insurance agency facilities;

                       . . .

                        (F) and insurance agency activity engaged in by a bank holding company, or any of its subsidiaries, which bank holding company has total assets of $50,000,000 or less:  Provided,however, That such a bank holding company and its subsidiaries may not engage in the sale of life insurance or annuities except as provided in subparagraph (A), (B), or (C) . . . .

            The Federal Reserve Board has adopted rules implementing this statute.  12 CFR § 225.25(a)(8).

             [[Orig. Op. Page 13]]

            WAC 50-12-350(3) follows the federal statute and rules with respect to what has been determined by the Board of Governors of the Federal Reserve System to be "closely related to the business of banking" and accordingly is "reasonably consistent" with RCW 30.04.215(1).5/

             We do not find RCW 30.04.127(2) a barrier to the Supervisor's adopting WAC 50-12-350(3), even though RCW 30.04.215(1) is much less explicit than RCW 30.08.140(10) (the "small town exception").  The prohibition in RCW 30.04.127(2) against a bank or trust company acting as an insurance agent "unless otherwise authorized by state statute" does not, in our opinion, require the "other" statute to expressly use the words "insurance agent".  As long as the other statute, in this case RCW 30.04.215(1), does allow the bank or trust company to act as an insurance agent, this is sufficient to meet the requirements of RCW 30.04.127(2).

            Accordingly, WAC 50-12-350(3) appears to us to be within the authority of the Supervisor of Banking to adopt.

            We next consider WAC 50-12-350(4), which reads:  "A bank or trust company may engage in any insurance agency activity lawfully engaged in by national banks located in the state of Washington."  RCW 30.04.215(1) allows banks to engage "in other business activities that have been determined . . . by the United States Congress to be closely related to the business of banking . . . ."  This statute is intended to put state‑chartered banks on a par with national banks.  1986 Final Legislative Report at p. 234.  In a section of the National Bank Act, Congress has given national banks "all such incidental powers as shall be necessary to carry on the business of banking . . . ." 12 U.S.C. § 24 (Seventh).  This appears to be what the Washington Legislature was referring to in RCW 30.04.215(1).

            Thus, we conclude that WAC 50-12-350(4) was within the authority of the Supervisor to adopt.6/

             As with WAC 50-12-350(3), [[Orig. Op. Page 14]] we do not find RCW 30.04.127(2) a barrier to the adoption of WAC 50-12-350(4).7/

             We turn next to the Supervisor's rules relating to insurance activities by trust companies.  These rules purport to implement RCW 30.08.150(3), which reads:

            Upon the issuance of a certificate of authority to a trust company, the persons named in the articles of incorporation and their successors shall thereupon become a corporation and shall have power:

                       . . .

                        (3) To transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness andto act as attorney in fact or agent of any corporation, foreign or domestic, for any purpose, statutory or otherwise.

(Emphasis added.)

            The rule adopted by the Supervisor in this regard, WAC 50-12-350(2), reads:

            A trust company may act as an insurance agent pursuant to its powers under RCW 30.08.150(3) 'to act as attorney in fact or agent of any corporation, foreign or domestic, for any purpose, statutory or otherwise.'

            In a statement accompanying the notice of adopted rules the Supervisor stated:

                        a.  The proposed interpretation of the trust powers provision authorizing a trust company to act as agent for any purpose to include acting as an insurance  [[Orig. Op. Page 15]] agent is a reasonable interpretation of the literal language of RCW 30.08.150(3).  As with the small town exception, the trust powers provision does not contain any limiting language concerning types of agency relationships.

                        b.  The proposed interpretation is consistent with past interpretations from the state of Washington.  By letter signed by deputy commissioner of the insurance department, Mr. F. T. Houghton and dated April 19, 1935, the then Insurance Commissioner, William A. Sullivan, in consultation with the then Supervisor of Banking, Mr. Hanson, ruled in favor of Seattle Trust and Savings Bank's (a Title 30 RCW commercial bank) application to renew its insurance license.  The statutes and authorities which were the basis for the favorable determination in 1935 are, based on the supervisor's research, the same that currently apply and were a result of Seattle Trust's status as a trust company and its authority to act as agent for any purpose.  This authority remains codified in RCW 30.08.150(3).

WSR 90-10-074 (May 16, 1990), at p. 119.

            While we would not consider authorizing trust companies to act as an insurance agent to be the primary purpose of RCW 30.08.150(3), there is authority for construing such a statute as allowing a trust company to act as an insurance agent.  InSaufley v. Botts, 272 S.W. 408 (Ky. App. 1925), the Kentucky Court of Appeals considered whether a trust company had authority to act as an insurance agent under a statute that read:

            Any trust company organized under this article may be appointed and act as guardian of infants, executors, administrator or curator of estates of decedents, committee of persons of unsound mind, receiver or trustee for persons or estates; and may act as agent or attorney for the transaction of any business or the management of estates, the collection of rents, accounts, interest, dividends, notes, bonds, securities for money and debts, and demands of every character; may receive on deposit and for safe‑keeping, gold, silver, jewelry, money and other personal property of every kind, and shall have a lien upon all personal property deposited with it for its charges.

272 S.W. at 409-10 (emphasis added).  The court in that case concluded that this statute was broad enough to allow a trust company to act as an insurance agent.  The court stated, "[t]he words, 'and may act as agent or attorney for the transaction of any business,' are comprehensive. . . .  [T]he language is  [[Orig. Op. Page 16]] sufficiently comprehensive to include the power to act as insurance agent."  272 S.W. 2d at 410.  Accord,Saufley v. Lincoln Bank & Trust Co., 275 S.W. 802 (Ky. App. 1925).

            We believe the statute construed by the Kentucky court in the case just discussed is sufficiently similar to RCW 30.08.150(3) for the result in that case to apply equally to our state's statute.  We have located no case authority contrary to the above cases.8/

             We have located no legislative history concerning RCW 30.08.150(3) that discusses a trust company acting as an insurance agent.  In his rule adoption notice, the Supervisor noted that in 1935 the Insurance Commissioner, in consultation with the Supervisor of Banking, had granted an application of a trust company to act as an insurance agent, based on the language in RCW 30.08.150(3).  An administrative construction of a statute by the agency charged with its enforcement is entitled to great weight.  See, e.g., Cosro, Inc. v. Liquor Control Bd., 107 Wn.2d 754, 757, 733 P.2d 539 (1987).

            Accordingly, we conclude that WAC 50-12-350(2), allowing a trust company9/

            to act as an insurance agent pursuant to RCW 30.08.150(3), is "reasonably consistent" with that statute and is a valid exercise of the Supervisor's authority.10/

             Having dealt with the principal rules adopted by the Supervisor, we finally consider the remaining rules.

            In your request letter you specifically asked our opinion on whether the Supervisor's definition of "insurance agent" is consistent with this term as used in Title 48 RCW.  WAC 50-12-330(3) provides:

             [[Orig. Op. Page 17]]

            'Insurance agent' means any person, including a bank, appointed by an insurer to solicit application for insurance on its behalf and conduct such other activities and be subject to such restrictions of an insurance agent as authorized by the Washington insurance code, Title 48 RCW.

            We note that title 48 RCW does not define the term "insurance agent".  In RCW 48.17.010 the term "agent" is defined as follows:

            'Agent' means any person appointed by an insurer to solicit applications for insurance on its behalf.  If authorized so to do, an agent may effectuate insurance contracts.  An agent may collect premiums on insurances so applied for or effectuated.

(Emphasis added.)

            "Insurer" is defined in RCW 48.01.050 as follows:

            'Insurer' as used in this code includes every person engaged in the business of making contracts of insurance, other than a fraternal benefit society.  A reciprocal or interinsurance exchange is an 'insurer' as used in this code.  Two or more hospitals, as defined in RCW 70.39.020(3), which join and organize as a mutual corporation pursuant to chapter 24.06 RCW for the purpose of insuring or self-insuring against liability claims, including medical liability, through a contributing trust fund shall not be deemed an 'insurer' under this code.  Two or more local governmental entities, as defined in RCW 48.62.020, which pursuant to RCW 48.62.040, 48.62.035, or any other provision of law join together and organize to form an organization for the purpose of jointly self-insuring or self-funding shall not be deemed an 'insurer' under this code.

(Emphasis added.)

            "Person" is defined in RCW 48.01.070 as follows:

            'Person' means any individual, company, insurer, association, organization, reciprocal or interinsurance exchange, partnership, business trust, or corporation.

(Emphasis added.)

             [[Orig. Op. Page 18]]

            A bank is a "corporation".  RCW 30-04-010.  Thus, we find nothing inconsistent between the Supervisor of Banking's definition of "insurance agent" in WAC 50-12-330(3) and these definitions in Title 48 RCW.

            WAC 50-12-360 provides:

                        WAC 50-12-360 INSURANCE AGENCY ACTIVITIES ‑- SUBSIDIARY.  A bank or trust company may conduct insurance agency activities that are authorized to be engaged in by the bank or trust company through a subsidiary of the bank or trust company as authorized by RCW 30.04.125(8).

            RCW 30.04.125(8) provides:

            Unless otherwise prohibited by law, any state bank or trust company may invest in the capital stock of corporations organized to conduct the following businesses:

           . . .

                        (8) A corporation in which all of the voting stock is owned by the bank and that engages exclusively in nondeposit-taking activities that are authorized to be engaged in by the bank or trust company.

            We find that WAC 50-12-360 is "reasonably consistent" with RCW 30.04.125(8).

            Finally, WAC 50-12-370 provides:

                        WAC 50-12-370 INSURANCE AGENCY ACTIVITIES ‑- ENFORCEMENT.  It shall be considered an unsafe and unsound practice in conducting the affairs of the bank or trust company if in the opinion of the supervisor the insurance agency activities of the bank or bank subsidiary are:

                        (1) A violation of any applicable state or federal consumer protection law; or
                        (2) A violation of any applicable state or federal statute prohibiting anticompetitive activities.

 [[Orig. Op. Page 19]]

            This rule appears to be within the Supervisor's power "to govern the administration of this title [30 RCW]."  RCW 30.04.030.11/

             In summary, we conclude that the Supervisor of Banking acted within his statutory authority in adopting WAC 50-12-310 through [50-12]-370.12/

             We trust the foregoing will be of assistance to you.

Very truly yours,

KENNETH O. EIKENBERRY
Attorney General

SPENCER W. DANIELS
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

1/Your request inquires about the substantive authority of the Supervisor to adopt the rules in question.  You did not inquire about, and we have not examined, whether the rules were properly adopted from a procedural standpoint.  For the purposes of this opinion, we will assume that the Supervisor complied with the Administrative Procedure Act in adopting the rules.

2/See WSR 89-24-063 (December 20, 1989), WSR 90-10-074 (May 16, 1990); WAC 50-12-310.

3/There may be statutes other than those listed by the Supervisor in his notices of rule proposal and adoption that would authorize the Supervisor to adopt the rules in question.  Since we have concluded that the Supervisor had authority to adopt the rules pursuant to the statutes he in fact cited, we will not consider whether other statutes would also provide authority to adopt the rules.  Nor have we considered whether any other statutes may be looked at for authority to adopt the rules, in light of RCW 34.05.320, requiring the agency to cite the statutory authority for adopting the rules and the specific statute the rule is intended to implement.

4/Some question exists as to whether 12 U.S.C. § 92 is properly part of the United States Code.  Compare discussion at 12 U.S.C.A. § 92 and AGO 1927-28 p. 450 with discussion at 12 U.S.C.S. § 92.  We have found no cases holding that 12 U.S.C. § 92 is not part of the federal statutes, and several cases discuss this statute, impliedly recognizing its continued existence.

5/WAC 50-12-350(3)(a) expands on the federal provisions by defining "total assets" and in other regards.  These additional provisions also appear to be "reasonably consistent" with RCW 30.04.215(1).

6/Under RCW 30.08.150(1) trust companies have "all the powers and possess all the privileges conferred on banks."  Accordingly, since the Supervisor had authority to adopt WAC 50-12-350(4) with respect to banks, he had authority pursuant to RCW 30.08.150(1), to make the same provision for trust companies.

7/Since WAC 50-12-350(4) is broadly phrased, we do not need to consider in this opinion what are the specific insurance agency activities that may be engaged in by national banks under 12 U.S.C. 24 (Seventh), and hence by state banks.

8/In his rule‑making notice the Supervisor of Banking also notes a 1936 opinion of the Missouri Attorney General's Office reaching the same result.  WSR 90-10-074 (May 16, 1990), at p. 119.  See 1936 Missouri AGO No. 27.

9/In WAC 50-12-330(2) the Supervisor defines "trust company" as "a trust company chartered under the provisions of Title 30 RCW."  We find no problem with this rule.

10/We conclude also that RCW 30.04.127 poses no barrier to the adoption of WAC 50-12-350(2) for the same reasons discussed in connection with WAC 50-12-350(3).

11/The remaining rules, WAC 50-12-310 and [50-12]-320 are not substantive in nature.

12/Like a reviewing court, we express no opinion on the wisdom of the Supervisor's rules or of the statutes pursuant to which they were adopted.  Anderson, 89 Wn.2d at 694-95.

 

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