Susq. M. Fire Ins. v. Stauffer

Opinion, Mr. Justice Mitchell : The only point of contention in this case is the validity of the assessment made by the plaintiff in error, and that depends on the true construction of the by-law of the company, subject [423] to which the policy was issued, and defendant’s premium note given. The by-law reads as follows : “ Sec. 27. If at any time hereafter, an assessment shall be made, the amount to be levied on premium notes, or policies of insurance, shall be rated according to the following classification, to wit: “ First. All members whose policies are in force at the time the assessment may be declared, shall be liable to assessment for all losses, adjusted, unadjusted, and unpaid, and all other liabilities then existing against the company, subject to abatement as hereinafter specified. “ Second. All members whose policies have expired, and are not in force at the time such assessment is declared, shall nevertheless be liable to assessment for all unpaid losses, and other liabilities, which existed at the time of the expiration of such policy or policies, pro rata with those then in force, and the amount thus ascertained and levied upon such expired policies, to be deducted from the gross amount of liabilities of the company for which such assessment is to be made, and balance of liabilities, then remaining, to be assessed upon the policies then in force.” The wording of this by-law is confused and obscure, but the general scheme intended, is reasonably clear. It is that all policies which were in force at the time of the assessment, or at the time of the loss, both or either, shall be liable for the loss, but the assessment shall be laid, in the first instance, upon the policies in force at the time of the loss, whether since expired or not, and the policies issued subsequent to the loss, and remaining in force at the time of the assessment, are to be assessed only for the balance if the first branch of the assessment should be insufficient. In pursuance of this general intent, the first clause directs, not that all members whose policies are in force at the time the assessment is declared, shall be assessed, but that they shall be liable to assessment, and qualifies this liability by making it subject to a specified abatement. The second clause then proceeds to define the abatement, which is that policies now expired, but which were in force when the liability accrued, shall be assessed, pro rata with all the policies then in force (i. e., at the time of the loss or liability incurred), and this first branch of the assess [424] ment shall be deducted from the total of liabilities, and the balance only be then assessed upon the other policies “ then in force,” i. e., those which were in force at the time of the loss, and which have not yet expired. A considerable part of the ambiguity arises from the use of the words, “ then in force,” in two different places. In the first, they clearly refer to the expiration of the policy (or practically to the date of the loss to be assessed for). In the second, their application, just as they stand in the sentence, would be very uncertain, but a reference to the plain general intent of the section, shows that they must refer to the same time as the first, to wit, the date of the loss. The section takes up the policies in force at the time of a loss, and divides them into two classes, the expired and the unexpired, but directs that they shall both be assessed at the same rate. The expired policies are first assessed their pro rata, and then the unexpired, and the words “ then in force,” twice used, refer to these two classes, the time applicable to both of which is, however, the same. Thus, we may take the schedule of the assessment in the present case for an example. The assessment was made June 6, 1885; the first loss included in it, amounting to $296.53, occurred September 27, 1875. The assessable basis of policies which had been in force on that day, whether since expired or existing on June 6, 1885, amounted to $21,866.60. On this an assessment was made of two per cent, which produced a sum large enough to pay the losses in full, with a margin for expenses and loss in collection. The class primarily liable to pay, thus furnishing a sufficient fund, there was no necessity to resort under the first clause of the by-law to the policies issued after the loss. Proceeding then to the next loss, September 15,1876, amounting to $1,764.25, the assessable basis of policies in force on that day, amounting to $41,391.55, an assessment of 5^ per cent was made to cover that loss, with margin for contingencies. And so on through the schedule, practically making a new and separate assessment for each loss, on the policies in force at the date of its occurrence. If the proportion of the losses to the assessable sum total of the policies in force at any particular date, had been so large, or the number of insolvent [425] members so great, that the policies in force at that date could not be assessed for a sufficient amount, then resort would have been had to the reserve class of subsequent policies ; but failing such necessity, the by-law did not require that they should be called on, and they were not. The assessment was at the same rate on all the policies in force at each date of loss, but as some policies were subject to assessment for a greater number of losses than others, their aggregate rate would of course be larger. This is necessary to be noticed, as it explains sotne apparent contradictions in the testimony of the witness Huntzinger. On this point he says: “ Q. You levied 2 per cent for policies in force September 27, 1875, didn’t you ? A. Yes. Q. And you undertook to collect that 2 per cent on policies then in force ? A. Yes; on policies that were then in force, but expired before the next loss incurred. Q. Then upon the next policies that were in force at the time the 5\ per cent was levied, you levied a percentage of 51 per cent upon all the policies that were in force at that time? A. Yes; now, then, if there was a policy in force when the first was levied, which still remains in force, then it was levied the 2 per cent in the first loss, and the 5} per cent, making 7£ per cent. Q. So that the policies that 'were in force on September 15, 1876, and that also had been in force September 27, 1875, were subjected to the 2 per cent and the 5J per cent ? A. Yes.” Thus considered, the plan prescribed by the by-law is clear and consistent, and has the merit of departing very little from the general rule of the law, that losses shall be paid by the policies in force at the times of their occurrence. This by-law simply adds to that general rule, that if the assessment upon such policies proves insufficient, then all existing policies, even though issued subsequently to the losses, shall be liable to make up the deficiency. Such a provision is both a burden and a protection. It imposes on a person taking out a policy, a liability for past losses, which he would not otherwise incur, and it gives him the security of all future policy holders to make good his losses, though they may have occurred before such policies were issued. The case is like that of a new partner coming into an established business. Ordinarily, and in the absence of a special contract, he is liable [426] only for debts incurred subsequently, but if he chooses to come in on the same footing as the others, and take his share of the old debts with the old profits, there is nothing unlawful in his doing so. Nor is there anything unlawful in the members of a mutual insurance company doing what is practically the same thing. There is nothing in the case of Insurance Co. v. Toy Co., 15 W. N. 306, to impugn this view. Whatever may have been the wording of the by-law there in question, which does not clearly appear in the report, it did not call for such an assessment, for, speaking of the notice, Trtjnkey, J., says, “ prima facie it evidenced a wrongful assessment in violation of the contract.” In the present case such an assessment, if it had been required, would have been within the express terms of the contract. The result thus reached in the present case, is at variance with the construction given to what was intended to be the same by-law in Susq. M. F. Ins. Co. v. Gackenbach, 115 Pa. 492. But it is entirely clear that the court was misled in that case by the inaccuracy of the record. In the first clause of the by-law, as there given, the word “ unadjusted ” was omitted, and the words “ shall be ” inserted, so that it read, “ all members, etc., shall be liable to assessment for all losses adjusted properly and unpaid, and all other liabilities.....shall he subject to abatement,” etc. The insertion of the words “ shall be ” before the words “ subject to abatement ” divided the sentence into two clauses, made the direction to assess all policies for adjusted losses, absolute, and limited the abatement to “ other liabilities,” whatever they might be. On the by-law then before the court, the decision was clearly right, but it is not authoritative on the present case. The learned judge below noted the difference, but preferred to have this court declare the effect. Though the examination of the secretary at the trial was very long, and his answers to frequent repetitions of the same question not entirely clear or consistent, yet we gather from it as a whole, that the assessment was declared and levied, substantially, upon the basis of the by-law as construed herein. It was therefore a regular and lawful assessment, and entitled the company to a verdict, unless defendant could make out a good defence on other grounds. Judgment reversed, and venire facias de novo awarded.