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I answer this question in the negative.

G. L. (Ter. Ed.) c. 175, § 132, as amended, provides that if the Com-
missioner does not approve the form of a contract of annuity, he is to
notify the insurance company that in his opinion it does not comply with
the laws of the Commonwealth and specify his reasons therefor.

Section 134 of chapter 175, as amendecl, contains no provisions which
relate to or are applicable to annuity contracts. Its standard provisions
are specifically made applicable to group policies of fife insurance. They
are not laws of the Commonwealth with which annuity contracts of any
type must comply.

No authority to make rules and regulations with regard to the form of
annuity contracts has been vested in the Commissioner -of Insurance.
Any so-called rules and regulations which may have been made in this
respect can be nothing but directives for the guidance of the department
and the insurance companies. They are not "laws of the commonwealth"
with which annuity contracts of any type must comply. It follows that
lack of conformity to the said provisions of section 134 or to the said
"rules and regulations" as such could not furnish proper "reasons" for
an opinion that a group annuity contract "does not comply with the laws
of the commonwealth," as the quoted words are used in said section 132.

3. You have informed me that a group annuity contract which has
been filed with you —

"contains a provision which has an option available to the annuitant
when he reaches age 60. By availing himself of this option when he
reaches the age 60, the annuitant, if he then retires from work, may have
the amount of the annuity to which he would otherwise be entitled at
that age increased by the amount which will be payable to him at age 65
under the Federal Social Security Act and a proportionate deduction
will be made to the amount otherwise payable to him under the group



P.D. 12. 39

annuity contract at a^e 65. The amount which will be payable to him
under the Federal Social Security Act caiuiot, of course, be known at the
time when the policy is issued, and the calculation of the .amount of the
annuity which will be paj^able should this option be adopted by the
annuitant in the future cannot be known at the time when the policy is
issued."

And with relation to this contract your third question reads:

"May the Commissioner approve a form of group annuity contract con-
taining such an option since the contract itself does not contain sufficient
information so that the annuitant can know at its date of issue the amount
of future benefits which will accrue to him if he adopts such an option when
he reaches the age 60?"

I answer this question in the affirmative.

The Legislature has not, as I have already said, made the standard
provisions concerning life policies in said section 132 or those relating to
group life policies in said section 134 applicable to annuity contracts.

It has set forth certain requirements with relation to the form and con-
tents of annuity contracts in general. G. L. (Ter. Ed.) c. 175, § 130,
prohibits incorrect dating of such a contract. Section 129 requires that
"a plain description . . . so fully defining its character, including dividend
periods and other peculiarities, that the holder thereof shall not be likely
to mistake the nature or scope of the contract," shall be borne in bold
letters on the face of the contract. Section 120 prohibits discrimination
"in favor of individuals between insurants of the same class and equal
expectation of life in . . . the dividends or other benefits payable thereon,
or in any other of the terms and conditions of the contracts." Section 22
forbids the inclusion in an annuity contract of certain provisions depriving
the courts of jurisdiction or limiting the time for commencing action against
a company to a period of less than two years or making the company's
agent the agent of the annuitant. Section 22B forbids the inclusion in a
contract of any provision for a waiver by an annuitant of any of the pro-
visions of said chapter 175, except as authorized therein.

There is no provision of the statutes that the applications and the con-
tract as written shall constitute the entire contract between the parties,
as has been specifically provided by said section 134 for group life insur-
ance policies, nor is there any statutory provision of similar import. Since
this is so, there is no requirement that- the form of an option, such as you
have described, in a contract of group annuity, should contain sufficient
information so that the annuitant can know at the date of issue the amount
of future benefits which will accrue to him if he later chooses to adopt the
option.

The option is plainly for the benefit of the annuitant and the amount
which will be received under the option is capable of being calculated at
the time when the annuitant considers whether he desires to avail himself
of it.

The provisions of this option do not appear to be contrary to any law
of the Commonwealth, and there does not appear to be anything in their
nature calculated to mislead the annuitant, or to lead to any discrimination
or to any unfair practice.

4. You have also informed me with regard to the group annuity con-
tract which has been filed with you that —



40 P.D. 12.

"The group annuity contract form referred to above contains a pro-
vision whereby the annuity payments to individual employees in the upper
salary brackets may be reduced and the payments to individual employees
in the lower salary brackets may be increased proportionately if the con-
tract is discontinued in less than ten years. The amount of this reduction
cannot be determined at the time of issuance of the policy, and, therefore,
it cannot be known to or be computed by a proposed annuitant from any
terms appearing in the contract.

The reason for inserting this provision allowing for the reduction of some
of the annuity payments and the increase in others upon discontinuance
within ten years is that the Federal Government will not give credit to an
employer for his share of premium payments on the annuity contract as a
deduction from his income taxes unless the premium payments in such a
contract continue for more than ten years or unless the contract contains
this provision for the indicated redistribution of annuities upon such
discontinuance."

And with relation to this contract you have asked my opinion upon the
following question:

"May the Commissioner approve a group annuity contract allowing the
reduction of annuity payments to individual employees in the upper salary
brackets with a proportionate increase in the annuity payments to indi-
vidual employees in the lower salary brackets upon discontinuance of the
policy as outlined above?"

The fact that the amount of reduction in the annuity payments to indi-
vidual employees in the higher brackets which will occur if the contract is
discontinued within ten years cannot be computed at the time of issue
does not render its provisions unlawful since, as I have said, the statutes
do not require that an annuity contract must contain within the applica-
tions and the contract form all the provisions of the contract.

If the terms of the contract describing what will occur upon its discon-
tinuance within ten years are set out therein so plainly as not to fall
within the prohibition of said section 129 so "that the holders thereby
shall not be likely to mistake the nature and scope of the contract," it
would not appear to be contrary to any specific provision of law concern-
ing annuity contracts nor would it appear to be inequitable or discrimina-
tory since this mode of dealing with annuity payments upon a discon-
tinuance is a part of the agreement knowingly entered into by all the
parties at the time of its issue.

If the Commissioner determines upon an inspection of the contract, as
a matter of law, that its terms are set out in the manner indicated in the
preceding paragraph, and that no others of its terms are in violation of
statutory provisions, I am of the opinion that he may properly . approve
the contract.

Very truly yours,

Robert T. Bushnell, Attorney General.



P.D. 12. 41

Workmen's Compensation — Self- Insurance — Reinsurance — Catastrophe

— Service Company.

Dec. 13, 1944.
Department of Industrial Accidents.

Dear Sirs: — Yoii have informed me that your Department, acting
under the provisions of G. L. (Ter. l^xl.) c. 152, § 25A, recjuired a self-
insurer to furnish a poHcy reinsuring its compensation ristc against catas-
trophe in , accordance with subparagraph (r) of subsection (2) of said
section 25A.

You have laid before me a pohcy furnished b}^ the self-insurer in accord-
ance with your requirement containing an endorsement, and with relation
thereto you have asked my opinion upon two questions:

Your first question is:

"(1) Is the poHcy referred to one which 'reinsures self-insurers' com-
pensation risk against catastrophe' within the meaning and as required
by G. L. (Ter. Ed.) c. 152, § 25A, subsection (2), subparagraph (c) as
enacted by St. 1943, c. 529?"

I answer this question in the affirmative.

Your second question relates to the endorsement which is attached to
the policy laid before me, and is as follows:

"(2) If your answer to the foregoing question is in the affirmative, do
the provisions in the endorsement attached to said policy that the services
described in paragraph (2) and section J of the policy shall be performed
by the nominee of the reinsurer violate provisions of section 25D of said
chapter 152, as enacted by chapter 529 of the Acts of 1943?"

Mv answer to this question is in the negative.

(Ij G. L. (Ter. Ed.) c. 152, § 25A, subsection (2) subparagraph (c),
reads:

"As a further guarantee of a self-insurer's ability to pay the benefits
provided for by this chapter to injured employees, the department may
require that a self-insurer reinsure his compensation risk against catas-
trophe, and such reinsurance, when so required, shall be placed only with
an insurance company admitted to do business in this commonwealth."

The insurer in this policy agrees, among other things, "to reinsure this
Self-Insurer against all loss in excess of seventy per cent (70) of the Self-
Insurer's 'Normal Premium,' or the sum of $7,000, whichever may be the
greater, for Workmen's Compensation ... by reason of his liability for
damages on account of such injuries to such of said employees as are
legally employed, and within the contemplation of the Workmen's Com-
pensation Law. ..."

This form of agreement is similar to that in a proposed policy form
considered by the Supreme Judicial Covu't in Friend Brothers, Inc. v.
Seaboard Surety Co., 316 Mass. 639. In its opinion in that case the court
held that such a form of agreement "is in reality a contract for reinsur-
ance," treated it as creating insurance against " catastrophe," and stated
that such a contract "is not offensive to our laws or public policy."

In the light of that opinion the policy which you have laid before me
must be taken to reinsure a self-insurer's compensation against catastrophe.



42 P.D. 12.

(2) The endorsement of the poUcy in question to which you refer in
your second question in its pertinent part reads :

"In consideration of the premium charged for this policy, it is under-
stood and agreed that the services described in paragraph 2 and section ' J '
of the pohcy to which this endorsement is attached shall be performed
by a nominee of the reinsurer."

Paragraph 2 of the policy referred to in the endorsement reads :

" That this contract is issued to the Self-Insurer on the express condition
that this Self-Insurer undertakes at all times to utilize the services of
- . . , hereinafter referred to as the 'Service Organization', which serv-
ices shall comprise, in accordance with their usual practices, the following
duties :

(a) The strict discharge of the Employer's Workmen's Compensa-
tion and/or occupational disease obligations to his employees;

(6) The maintenance of accurate records of all details incident to
such payments;

(c) The furnishing of complete inspection and safety engineering
services; and

(d) Furnishing of monthly claims' records on an approved form;

the acceptance of which services shall be a condition precedent to any
liability which may attach to the Company in accordance with the terms
and conditions of this Contract."

Section J of the policy referred to in the endorsement reads:

"J. The services contemplated under this Contract to be rendered
through the aforesaid Service Organization shall include frequent inspec-
tion of the Self-Insurer's plants; the rendering of adequate engineering
services; the compilation and hling of all notices and reports required
under the Workmen's Compensation and/or Occupational Disease Law;
the furnishing of a full and complete monthly report to the Self-Insurer
and to the Company of all accidents, and a tabulation of all payments
made and reserves set up for benefits and expenses on account of liability
for injuries sustained by employees; the attendance on behalf of the Self-
Insurer at all scheduled hearmgs befoi'e the Workmen's Compensation
Board; and a general administration of all other details looking to the
effectual discharge of the Self-Insurer's obligations towards his em-
ployees."

G. L. (Ter. Ed.) c. 152, § 25, inserted by St. 1943, c. 529, reads:

"Section 25D. No self-insurer or attorney acting in its behalf shall
engage a service company or like organization to investigate, adjust, or
settle claims under this chapter or to represent it in any matter before
the department. Any violation of this section shall constitute reasonable
cause for revocation of the license of a self-insurer under section twenty-
five A of this chapter."

The provisions of said paragraph 2 and of said section J of the policy are
broad enough to include within the work to be performed by the "Service
Organization," therein referred to, investigation, adjustment and settle-
ment of claims under said chapter 152. The performance of such acts on
behalf of a self-insurer by "a service company or like organization" are
prohibited by said section 25D. if the nominee of the insurer under the



P.D. 12.



43



endorsement is "a service company or like organization," its employ-
ment to do the work described in parafiraj)h 2 and section J of the pohcy
by the self-insnrer will be in violation of the terms of said section 25D,
and will require the revocation of the self-insurer's license.

Although the phraseology of said paragraph 2 and section J seems to
indicate that the employment of "a service company or like organization"
is contemplated by the parties to the contract, nevertheless the insurer
might, under the terms of the endorsement, choose to nominate for em-
ployment an individual who functions in such a maimer that he could
not be deemed to be "a service company or like organization." For this
reason the endorsement as it stands, even when read in conjunction with
paragraph 2 and section J of the policy, cannot presently be said to be
unlawful as requiring a violation of said section 25D.

If and when by force of the terms of the endorsement the self-insurer
employs, directly or indirectly, a "service company or like organization"
to perform the services described in said paragraph 2 and section J an
unlawful act will have been committed and the self-insurer's license will
be subject to revocation.

Very truly yours,

Robert T. Bushnell, Attorney General.



Conservation — Shellfish — Permits — Municipal Leases — Non-residents
— Director of Division of Marine Fisheries.

Dec. 14, 1944.
Hon. Raymond J. Kenney, Commissioner of Conservation.

Dear Sir: — You have asked my opinion on three questions with re-
lation to so-called leases from the Commonwealth to cities and towns in
Essex County "of the right to control and regulate the taking of clams
from all flats within" the borders of such municipalities under the provi-
sions of St. 1912, c. 710, as amended by St. 1927, c. 307. You state that
your request for an opinion is occasioned by a controversy over the rights
of certain shellfishermen holding "master digger's permits" to take shell-
fish in contaminated areas from the waters of cities and towns to which
such leases have been issued.

Your first two questions are:

"Has such a city or town the right to exclude non-residents of its city
or town holding the tj^pe of permits heretofore mentioned fi'om taking
clams from the waters of said city or town?

Has the Director of the Division of Marine Fisheries the authority to
issue valid permits of the type above mentioned to non-residents of any
city or town in Essex County holding such a lease to take clams from
contaminated areas in said city or town?"

I answer your first question that by virtue of such a lease such city or
town has the right to exclude non-residents, with the exception of those
mentioned in section 6 of said chapter 710, as amended, from taking
clams from its waters, except that when an area within its borders lias
been determined by the State Department of Pul)lic ncalth to be a co7i-
taminated area under the terms of G. L. (Ter. Va\.) c. 130, § 74, it may
not exclude any person to whom a "master digger's permit" or a "dig-
ger's permit" to take shellfish from such a contaminated area has been



44 P.D. 12.

issued by the Director of Marine Fisheries under the provisions of G. L.
(Ter. Ed.) c. 130, § 75.

I answer your second question to the effect that the Director of Marine
Fisheries has authority to issue permits to take clams from an area deter-
mined to be contaminated by the State Department of PubUc^ Health to
non-residents of a town in Essex County within whose borders the area
lies irrespective of the fact that the town has a lease issued under said
St. 1912, c. 710, as amended.

St. 1912, c. 710, in its applicable parts, provides:

*' Section 1. Any city or town in the county of Essex may take from
the commonwealth a lease of the right to control and regulate the taking
of clams from all the flats within its borders.

Section 2. The commissioners on fisheries and game shall issue a lease
as aforesaid to each city or town in said county which makes application
therefor, for a term of ten years, at an annual rental of five dollars a year,
to be paid into the treasury of the commonwealth.

Section 4. All rights granted to a city or town under a lease as afore-
said shall be held by the city or town for the benefit of its citizens.

Section 5. After acceptance of this act, cities through their city gov-
ernments and towns at any annual or special meeting duly called for the
purpose, may make rules and regulations in regard to the taking of clams,
and may authorize the granting of permits to citizens of such cities and
towns to take clams, and may prescribe the time and methods of such
taking.

Section 8. All acts and parts of acts incoQsistent herewith are hereby
repealed.

Section 9. This act shall take effect in any city upon its acceptance
by the city council or corresponding body of such city, and in any town
upon its acceptance by a majority of the voters of such town present
and voting thereon at any annual town meeting, or at any special town
meeting duly called for the purpose."

Section 6 of said chapter 710, as amended by St. 1927, c. 307, reads:

"Section 6. Any inhabitant of the commonwealth may, without a
permit, take clams, not exceeding one bushel, including shells, in any one
day, for the use of his owii family from the waters of his own or any other
city or town in the county of Essex, and may so take from the waters of
his own city or town clams for bait, not exceeding three bushels, includ-
ing shells, in any one day, subject to the general rules and regulations
adopted by cities and towns, respectively, in the manner specified in the
preceding section as to the time, place and methods of taking clams.
Whoever, without a permit, takes any clams from the flats within the
borders of any city or town holding a lease from the commonwealth under
section two, except as permitted by this section, shall forfeit not less than
five nor more than fifty dollars for such offence."

In 1912, when chapter 710 was enacted, the statutes of the Common-
wealth provided that the State Department of Public Health might de-
termine that areas of tidewater and flats were contaminated ; that the Com-
missioners on Fisheries and Game should prohibit the taking of shellfish



P.D. 12. 45

from such areas, and that anyone taking shellfish from such areas might
be punished by a fine, R. L., c. 91, §§ 113, 114.

The authority of the State under the police power to make and enforce
a plan established by the Legislature whereby contaminated areas might
be determined by a State department and tlie taking of shellfish from such
areas prohibited has been held to be constitutional. Commonwealth v.
Feetiey, 221 Mass. 323. Such a plan was in existence when St. 1912, c. 710,
was passed by virtue of the provisions of II. L., c. 91, §§ 113, 114, and said
chapter 710 should be interpreted in the light of the then existing legislation.
As so construed, said chapter 710 constitutes a grant of regulatory powers
to cities and towns, subject to the paramount authority of the Common-
wealth under its police power to regulate contaminated areas for the
protection of the ])ublic health.

This general plan was reenacted in various forms and now appears in
G. L. (Ter. Ed.) c. 130, §§ 74, 75, as most recently amended by St. 1941,
c. 598. Specific provision is now made in said section 75 for the granting of
permits ("master digger's permits" and "digger's permits") by the Direc-
tor of Marine Fisheries to persons to take s-hellfish from areas determined
to be contaminated upon condition that such shellfish be purified in an
approved plant. See G. L. (1921) c. 130, §§ 137-140; St. 1926, c. 370;
St. 1928, c. 266; St. 1929, c. 372, § 25; G. L. (Ter. Ed.) c. 130, §§ 137, 138,
prior to amendment by St. 1941, c. 598.

The provisions of said section 75, whereby permits may be issued by
State officials authorizing persons to take shellfish from contaminated
areas upon condition of the purification of the shellfish in approved plants,
are mere details incident to the plan for state regulation of the taking of
shellfish from contaminated areas as a public health measure under the
police power.

The authority of the State under the police power to make all laws
necessary to secure the health of the community can neither be abdicated
nor bargained away. Accordingly, anj^ grants and all contract rights are
held subject to its exercise. Opinion of the Justices, 261 Mass. 523, 553.
Instruments containing a grant of power from the Commonwealth, such
as the leases authorized by St. 1912, c. 710, should, as a general principle
of IsiW, be construed if possible so as to preserve their validity as impliedly
reserving the right to the State to exercise its police power. Boston EI.
Ry. v. Commonwealth, 310 Mass. 528, 552. See Commonwealth v. Alger,
7 Cush. 53, 84, 85; Commonwealth v. Bailey, 13 Allen, 541, 544. Moreover,
it is a principle of law that a grant from the State is to be construed strictly
against the grantee. Attorney General v. Jamaica Pond Aqueduct Co.,
133 Mass. 361, 365, 366; Stoneham v. Commonwealth, 249 Mass. 112, 117.

In so far as the regulation of uncontaminated area.s or of contaminated
areas as to which the authorized State officials have made no determination
is concerned, a city or town may make, and enforce- under a lease, regula-
tions relative to the digging of shellfish, and may exclude non-residents
from so digging except for the particular purposes set forth in said St.
1912, c. 710, § 6, as amended bv St. 1927, c. 307. SeJe Commonwealth v.
Hilton, 174 Mass. 29.

Your third question is:

"Whether or not the Department of Conservation or the Division of
Marine Fisheries has authority to execute new leases including renewal of
existing leases under the provisions of chapter 710 of the Acts of 1912 in



46 P.D. 12.

view of the General Laws, chapter 130, section 104, as inserted by chapter
598 of the Acts of 1941?"

I advise you that the Director of the Division of Marine Fisheries is
now the officer authorized by the statutes to execute leases and renewals
under St. 1912, c. 710.

The offices of Commissioners on Fisheries and Game, who were em-
powered by St. 1912, c. 710, to issue the leases under consideration, were


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Online LibraryMassachusetts. Office of the Attorney GeneralReport of the attorney general for the year ending .. (1945) → online text (page 5 of 10)