Subsection 3 of the Division of Insurance’s Regulation 3.11, which defines “replacement of life insurance” is in compliance with Section 374.045(1), (3), RSMo 1969, because such regulation is reasonably related to Section 375.936(5), RSMo 1969.

INSURANCE: Subsection 3 of the Division of Insur- ance ' s Regulation 3 . 11, which defines "replacement of life insurance" is in compliance with Section 374 . 045( 1 ), (3) , RSMo 1969, because such regulation is reasonably related to Section 375 . 936(5), RSMo 1969. OPINION NO. 23 Honorable Eric F. Fink State Representative Forty- sixth District May 5 , 1971 Room 2028, Capitol Building Jefferson City, Missouri 65101 Dear Representative Fink: FILE 0 ~~ This official opinion is issued in response to your request concerning the following: "[W]heter or not Sec . 3 of this regulation [Regulation 3. 11] is in compliance with paragraph 374 . 045, RSMo, subsection 1 , Subdivision 3." The specific language involved in this regulation is as follows: "Section 3. Replacement of Life Insurance Defined "The replacement of life insurance \'lhich, as used in this Regulation includes annuity contracts, is defined as any transaction, not exempted in Section 4, below, "(A) Wherein new life insurance is to be purchased and it is known to the agent that , as part of the transaction, existing life insurance has been or is to be; 11 (B) Or it is known to the agent that, as part of the transaction, existing life in- surance has been or is to be: Honorable Eric F. Fink "1) Lapsed or surrend~red; "2) Converted into paid-up insurance, continued as extended term insurance or under another form of non-forfeiture benefit; "3) Converted otherwise so as to effect a reduction either in the amount of the existing life insurance or in the period of time the existing life insurance will continue in force; "4) Reissued with a reduc tion in amount such that substantial cash values are re- leased. ('Substantial cash values' in- ' elude all transactions wherein an amount in excess of 50% of the tabular cash value is to be released on one or more of the existing policies .), or "5) Assigned as collateral for a loan or subjected to substantial borrowing of the loan values whether in a single loan or under a schedule of borrowing over a period of time . ' Substantial borrowings' includes all transactions wherein an amount in excess of 50% of the tabular cash value is to be borrowed on one or more existing policies." Section 2 of Regulation 3.11 states: "Section 2 . Purpose "The purpose of this Regulation is: "1) To implement the Insurance Laws of Missouri by regulating the acts and practices of insurers and agents with respect to life insurance replacing life insurance. "2) To protect the interes ts of the life insurance public by establishing minimum standards of conduct to be ob- served in the replacement of proposed replacement of life insurance policies; by making available full and clear in- formation on which an applicant for life insurance can make a decision in his own -2- Honorable Eric F. Fink best interest; by reducing the opportunity for misrepresentation and incomplete com- parison in replacement situations; and by precluding unfair methods of competition and unfair practices . " Section 37~ . 0~5, RSMo 1969, authorizes the Superintendent of Insurance to make rules and regulations. Section 37~.045(1) states: "1 . The superintendent shall have the full power and authority to make all reasonable rules and regulations to accomplish the following purposes: "(3) To effectuate or aid in the in- terpretation of any law of this state pertaining to the business of insurance. II The regulation mentioned in your request defines replacement of life insurance . The authority of the Divi sion of Insurance t o promulgate such a regulation comes from Section 374.045, RSMo quoted above. The validity of this regulation mus t be ascertained relative to both provisions of the general law governing administrative re- gulations and the statutory provision enacted by the legislature creating and detailing the duties and powers of the Division of Insurance. As the court said in the case of Senter v. Colarelli, 145 F.Supp. 569 (U.S. D. C.E.D. Mo. 1956): "It is a familiar principle, both of common sense and of statutory con- struction , that a catch- all phrase of this sort [providing that an ad- ministrative office may issue reason- able regulations] must be read in the context of the general purpose of the statute, ... " Id. at 576. Section 375 .936, RSMo 1969, defines unfair methods of com- petition and unfair and deceptive acts or practices in the business of insurance. Subsection 5 of this section defines "misrepresen- tations and false advertising of policy contracts." It states a s follows: "'Misrepresentations and false adver- tising of policy contracts', making , issuing, circulating , or causing to be made, issued or circulated, any es- timate, illustration, circular or -3- Honorable Eric F. Fink statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading state- ments as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresen- tation as to the financial condition of any insurer , or as to the l egal reserve system upon which any life insurer operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresen- tation to any policyholder insured in a company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance; .. . " Clearly, the Division of Insurance enacted Regulation 3.11 subsection 3 to eliminate potentially unfair practices. The Divi- sion, itself, states this in subsection 2(2) of this regulation as quoted above. The questioned regulation meets all the general standards prescr ibed for valid regulations. These standards are set out, in part, in 73 C.J.S. Public Administrative Bodies and Procedure, §94 as follows: 11 .A public administrative body may make only such rules and regulations as are within the limits of the powers granted to it and within the boundaries established by the standards, limitations, and policies of the statute giving it such power, and it may go no further than to make administrative rules and regulations which fill in the interstices of the dom- inant enactment. It may make only rules and regulations which effectuate a law already enacted, and it may not make rules and regulations which are inconsistent with the provisions of a statute , par- ticularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute, and it may not; by its rules -4- Honorable Eric F. Fink and regulations, amend, alter, enlarge, or limit the terms of a legislative enactment . u CONCLUSION Thus, it is the opinion of this office that Subsection 3 .of the Division of Insurance's Regulation 3.11, which defines "replacement of life insurance" is in compliance with Section 374.045(1), (3), RSMo 1969, because such regulation is reason- ably related to Section 375.936(5), RSMo 1969 . The foregoing opinion, which I hereby approve, was prepared by my Assistant, Harvey M. Tettlebaum. '):~r~lyr yJ-/-ZP JOHN C. DANFORTH Attorney General - 5-