Edwards, 040468 MIAGO, AGO 4614

• Case Date: April 04, 1968
• Court: Michigan

Hon. George H. Edwards AGO 4614 Opinion No. 4614 Michigan Attorney General Opinion April 4, 1968          BANKS: Agencies for insurance.          State chartered banks may be licensed to sell credit life insurance in the state of Michigan. Employees of federally or state chartered banks may receive limited licences to sell credit life insurance.          ADMINISTRATIVE RULES: Amendment of Existing administrative rules may not be amended by unpublished administrative guidelines which do not have the force of law.          LEGISLATURE: Revocation of administrative rules.          Committees of the House of Representatives do not have the authority to revoke a published administrative rule. Administrative guidelines which are unpublished and do not have the force of law need not be revoked by committee action.          Hon. George H. Edwards House of Representatives Lansing, Michigan                    You have requested my opinion on the following seven questions:          1. Is the Insurance Department permitted by law or through the Administrative Code to license banks as insurance agents?          2. May the Insurance Department license bank employees to sell any type of insurance?          3. Whether the insuring company working with a bank may pay any money to the bank for services rendered in behalf of the sale of insurance.          4. What is the legal status of "Guidelines" (copy attached) as used in conjunction with a recent memo issued by the Department of Commerce in comparison to Administrative Rules? How effective are "Guidelines"?          5. Interpreting the sections of the Administrative Code relative to agents selling credit life insurance, are the provisions of paragraph numbered 3 in the recent "Guidelines" issued by the Department of Commerce legal?          6. In the sections of the Administrative Code having to do with agents selling credit life insurance, what is the definition of the word "remuneration" in comparison with the word "reimbursement"? What specifically is the difference in the meaning of the two words?          7. Does any committee of the House of Representatives, whether it be a standing committee, one appointed as a result of a resolution, or a sub-committee of a standing committee, have the right to revoke an administrative ruling, a "Guideline," or do any of these committees have the right to request the "Guideline" or implementation to rulings as they appear in the 1944 Code be withdrawn?          In response to your request, it is necessary to consider the insurance code of 1956,1 and regulations, in order to determine whether banks would M.S.A. 1957 Rev. Vol. § 24.1100, et seq. qualify for agency licenses, and to consider the financial institutions act and the national bank act in order to determine whether banks have powers, either express or incidental, to act as insurance agents.          A. The Insurance Code and Regulations.          Pertinent parts of the insurance law before the adoption of the insurance code of 1956 were:          Section 8 of chapter III, part two of the 1917 insurance code (Act 256, P.A. 1917, as amended, being C.L. 1948 § 513.8), which prohibited "controlled business," provided:

         "The commissioner of insurance shall have power after a hearing to refuse to grant any license requested under the provisions of this subdivision should he be satisfied that the person, partnership or corporation for whom the requisition is made is not a proper or fit person, partnership or corporation to be permitted to transact such business within this state. In order to prevent indirect rebating of insurance premiums the commissioner of insurance shall likewise have power after a hearing to refuse to grant any license to a partnership or corporation if he be satisfied that the partnership or corporation was organized or is existing or is availed of for the purpose, among others, of writing insurance for the members of the partnership, stockholders of the corporation or for persons, partnerships or corporations represented by said members or stockholders. * * *." (emphasis supplied)

         and section 9a of chapter IV, part two of the 1917 insurance code was added in 1947 by Act 67, being C.L. 1948 § 514.9a, provided:

         "Henceforth it shall be illegal for any person, firm or corporation to require, as a condition precedent to the lending of money or extension of credit, or any renewal thereof, that the person to whom such money or, credit is extended, or whose obligation said creditor is to acquire or finance, negotiate any policy or contract of insurance through a particular insurance agent or with a particular insurer: Provided, however, That this section shall not be construed as forbidding the vendor or creditor from exercising a reasonable right to approve or disapprove the insurance selected by the debtor for protection of the property securing the credit or lien: Provided further, That nothing in this section shall forbid any insurer from requiring as a condition precedent for the lending of its own funds that the debtor insure his own life for a reasonable amount with such insurer. * * *." (emphasis supplied)

         The insurance code of 1956 expressly repealed the above provisions of the 1917 code. .However, these same provisions were adopted substantially by the insurance code of 1956, supra, specifically as section 1426 and section 2077 thereof.          Although the insurance commissioner was not expressly given general rulemaking powers until 1966 when section 210 was added to the insurance code of 1956 by Act 73, P.A. 1966, being M-S.A. 1968 Cum. Supp. § 24.1210, he did, prior to 1943, promulgate rules covering "controlled business," which rules were incorporated into the 1944 Administrative Code pursuant to section 2 of Act 88, P.A. 1943, being C.L. 1948 § 27.72; M.S.A. 1960 Rev. Vol. § 3.560(8). This section was later repealed by Act 161, P.A. 1964.          It must also be observed that Act 173, P.A. 1958, being C.L.S. 1961 § 550.601, et seq; M.S.A. 1968 Cum. Supp. § 24.568(1), provides for the regulation of credit life insurance. Section 19 of the act requires that all policies of credit life...