Michigan Mutual Windstorm Co. v. Goodrich

Sharpe, J. Plaintiff, Michigan Mutual Windstorm Company, is a mutual insurance company, organized under laws of this State, doing the class of business indicated by its name. The total insurance in force *689 was $247,000,000. Defendant was a member, having policies aggregating $7,200. January 19, 1921, an assessment of 30 cents on each $100 of insurance was ordered. Due notice of assessment was given about February 3d. Members had 30 days in which to pay. The amount of defendant’s assessment was $21.60. He did not pay. He was sued in justice’s court. The cause was appealed to the circuit court, where a verdict was directed for plaintiff for the full amount of the assessment and judgment entered thereon. Defendant brings error. The defense was and is that the assessment was not made to defray losses and expenses of the company, but to create a surplus, and that it was grossly excessive and void. The articles of association and the by-laws in force in January, 1921, were not put in evidence at the trial, though brief excerpts from them appear to have been read into the record. The total of losses and expenses of the plaintiff on the day the assessment was ordered is not shown. The plaintiff was then obligated on notes for money borrowed to pay losses and expenses in an amount approximating $220,000, which it determined to pay. It is said that the amount of cash on hand December 31, 1920, was $12,557. There is some evidence that the purpose .of plaintiff in ordering the assessment was to provide funds to pay the notes, the then losses and expenses, if any, and to pay anticipated losses for the year 1921. A witness, said to be plaintiff’s bookkeeper, testified that on March 4, 1921, the “earned premium” on policies of insurance then in force was 10 cents, or one-third of the assessment ordered on January 19, 1921. We quote: “Q. Then figuring out really what Mr. Goodrich if you had been paying the losses on March 4th, at that time, it would have shown the assessment based on the losses when you call earned premiums you mean losses *690 at that time and expenses incurred, would have been approximately ten cents? “A. Yes, sir. * * * “Q. Would you tell us the amount of the assessment .that was spread against Mr. Goodrich? “A. $21.60. “Q. Seven dollars and twenty cents would have amounted to a ten cent assessment? “A. Yes, sir. “Q. That would have been practically the amount of his assessment, the earned premium on the fourth of March, or thirty days after that notice was given? “A. Yes, sir. “Q. Ten cents would have taken care of that? “A. Yes, sir. “Q. And twenty cents would have taken care of it for the entire year which would have been $14.40 ? “A. Yes, sir.” At the end of the year 1921, plaintiff, from, collections of such assessment and from cash on hand December 31, 1920, after payment of all losses and expenses, had a cash surplus of nearly $237,000. We quote what is said to be the provision of the articles of association respecting assessments: “Members shall be subject to ratable assessments based on the amount of insurance, to defray losses and expenses of the .company.” The statute, section 17, Act No. 82, Laws of 1873 (2 Comp. Laws 1915, § 9578), making certain assessments prima facie evidence of the regularity and correctness of all proceedings up to and including the assessment, discussed in Wardle v. Townsend, 75 Mich. 385 (4 L. R. A. 511), applied only to assessments made by receivers appointed by the court. We recognize the general rule of law that in making the assessment the plaintiff acted in a ministerial and not a judicial capacity; that there is no presumption in favor of the legality or regularity of its assessment; and that plaintiff has the burden of proving that the proceedings on which the assessment is based were regular. *691 19 R. C. L. p. 1261; Wardle v. Townsend, supra; Pacific Mutual Ins. Co. v. Guse, 49 Mo. 329 (8 Am. Rep. 132); 2 Bacon on Life & Accident Insurance (4th Ed.), p. 1097; Miles v. Life Ass’n, 108 Wis. 421 (84 N. W. 159). The mere passage of a resolution levying an assessment does not of itself create any liability. 3 Joyce on Insurance (2d Ed.), p. 2432. It was upon the plaintiff to show that the assessment was “to defray losses and expenses of the company.” But, if defendant relies upon fraud in levying the assessment, he has the burden of proving the fraud. 3 Joyce on Insurance (2d Ed.), p. 2450; Rosenberger, Light & Co. v. Insurance Co., 87 Pa. St. 207. Defendant and other members might have been assessed to defray losses and expenses of the company which would include the amount due on the notes. Plaintiff was not confined to an exact amount. Reasonable allowances may be made for expense of collecting, for probable failures in collection, and the like. But reasonable limits must not be disregarded. Pencille v. Insurance Co., 74 Minn. 67 (76 N. W. 1026, 73 Am. St. Rep. 326); 3 Joyce on Insurance (2d Ed.), p. 2433. And, under the quoted right to assess to pay losses and expenses, plaintiff may not assess to create a surplus or to pay anticipated Tosses. 2 Bacon on Life & Accident Insurance (4th Ed.), p. 1099; Detroit Manufacturers’ Mut. Fire Ins. Co. v. Merrill, 101 Mich. 393. If, when the assessment of 30 cents per hundred was ordered, approximately 10 cents per hundred was sufficient to defray the losses and expenses of the company, the assessment is without all reasonable limits and is absolutely void. See Pencille v. Insurance Co., supra; Farmers’ Mut. Fire Ins. Co. v. Knight, 162 Ill. 470 (44 N. E. 834). Such evidence as there is relative to the basis of the assessment being undisputed, whether the amount of the assessment was within reasonable limits was a ques *692 tion of law. 7 A. L. R. 187; 7 Words and Phrases, p. 5977. The court erred in instructing the jury that as a matter of law the assessment was valid and levied to defray losses and expenses of the company. The record before us would sustain a verdict directed for defendant. As to plaintiff’s right to re-assess, see Ionia, etc., Ins. Co. v. Ionia Circuit Judge, 100 Mich. 606 (32 L. R. A. 481), and to collect pro rata share of losses and expenses in case of cancellation, see Patrons’ Mut. Fire Ins. Co. v. Butler, 193 Mich. 648. Counsel for plaintiff says in his brief: “While it is true that ten cents should have been sufficient perhaps if he had surrendered his policy on March 31st (4th?), to have squared the defendant with the company, he failed and neglected to do this. When suit was commenced against him, September 26th of the same year, twenty cents would have been earned by the company.” If defendant’s policies had been properly canceled on March 4, 1921, he would have been indebted to the company in the sum of $7.20, a rate of 10 cents per hundred, and, had the policies been so canceled on September 26, 1921, the amount would have been $14.40, a rate of 20 cents per hundred. But that is not this case. This case is planted on the assessment of January 19, 1921, and the validity of the assessment must be determined as of that time. Judgment reversed, with costs to defendant, and a new trial granted. McDonald, Bird, Moore, Steere, Fellows, and Wiest, JJ., concurred. Clark, C. J., did not sit.