White v. Havens

Weight, J. The case of Mygatt v. N. Y. Protection Ins. Co., 21 N. Y. 52, is decisive of the present one. That case turned upon the legality of the act of a company organized under the act of 1849, c. 308, in issuing policies of insurance in part for cash premiums, advanced in full for insurance, and [583] in lien of premium notes. This court was of the opinion that there was nothing in the act of 1849, either in terms, or in its design or intention, which prohibited a company, formed on what is called the mutual principle, from issuing policies on the receipt of cash premiums, if its charter and by-laws authorized and provided that it might do so; and that such policies wTere valid and binding, though issued to mere outside parties, without any reference in themselves to the principles of mutuality. But that if this were otherwise, it was indispensable that the mutual principle should be observed in all policies issued by a mutual company, the result would not be different, as the holders of cash policies were members of the corporation and mutual contributors to a common fund for the payment of losses; the cash premium as well representing the insured in the common fund as the premium note. The charter of this company in the present case, like that in Mygatt v. N. Y. Protection Ins. Co., provided for receiving premium notes for insurance from the insured, payable at such time or times, and in such term or terms, as the corporation should from time to time require ; and any person applying for insurance, so electing, might pay a cash premium in addition to a premium note, or a definite sum in money, to be fixed by the corporation, in full for insurance, and in lieu of a premium note. The company, during its existence, issued about two thousand five hundred cash policies, and about two thousand policies founded on premium notes. The sum of forty-three thousand dollars was paid to the company in cash premiums, and the entire amount expended by it in-payment of its liabilities. A policy was issued to the defendant about January 23, 1852, and he gave his premium note for one hundred and twelve dollars, paying an assessment thereon of fifteen dollars and forty-seven cents, and this was all that he ever paid or was called upon to pay. In June, 1853, all the money of the company had been expended in the payment of losses, and no assets came into the receiver’s hands but the premium notes, included in which was that of the defendant. The company seems to have been peculiarly unfortunate ; for when it became insolvent, in June, 1853, there was due from it for losses on policies founded on premium notes, [584] an amount between twenty thousand and twenty-five thousand dollars ; and there was claimed to be due for losses on cash joolicies an amount exceeding thirty thousand dollars, and this in addition to the sum of forty thousand dollars previously paid. There was sixty thousand dollars of preminm notes in the commercial department to which the defendant belonged. The receiver, acting in pursuance of an order of the supreme court, assessed the premium notes in the commercial department (including that of the defendant), to meet losses and liabilities incurred in that department, part of which losses ¿happened upon risks taken upon cash premiums. The defendant had .notice of this assessment, and it was subsequently confirmed by the supreme court, and the receiver authorized and directed to bring suits to enforce the collection of such assessment. The defendant raised but a single point against a recovery, on the trial, viz : The illegality of the assessment to pay losses -arising on the policies of insurance based on the cash advance premium, and for which policies no premium note was made. This is no ground of defense. The cash policies were not issued by the company without authority or in contravention of law; but in doing so it did not lose its character of a mutual company. The cash policy-holders were members of the corporation as much as were the holders of policies based on a premium note. They were contributors to a common fund, as the capital ,of the company, to meet losses that might occur. They paid their premiums in cash, instead of notes or promises to pay. The premiums were to be first applied to the payment of liabilities, and no part of them could ever be withdrawn, though they should not have been all expended. In this case over forty thousand dollars of cash premiums was expended for paying liabilities, thus relieving the premium note of the defendant and others. If this company had been reasonably prosperous, the cash premiums would nearly or quite have paid its losses; calling for no assessment on the premium note-holders of policies. But it was not, and the cash-being exhausted, the premium notes must bear the burden of- the losses of the company, whether occurring on cash policies, or those founded on [585] premium notes. This should be so on the plainest principles of justice. I think the judgement of the supreme court should be affirmed. All the judges-concurred. Judgment affirmed, with costs.