Funk v. Stevens

Cornish, J. The Ancient Order of United Workmen, a fraternal life insurance company, originally fixed assessments at $1 each on death of a member, regardless of age. The plaii in this particular was improvidential, unscientific. The average age of members increases. Twice in its [682] history during the plaintiffs’ membership, and before the change in rates of assessment, which is the subject of this controversy, it became apparent to the membership that the organization could not survive under the old rates. Accordingly, changes in rates of assessment were made more in consonance with the necessities of the case, making the rate correspond more nearly to the risk carried as affected by the member’s age, which changes were. acquiesced in by the members, including the plaintiffs. But' still it was found that a sufficient, increase in rates, adjusting them according to age, had not been made if the obligations of the' order were to be kept. The directors rightfully called a session of the grand lodge, which amended the law fixing assessments as the law now reads. Afterwards, at the regular meeting of the grand lodge, a majority voted to repeal the previous law as amended. Later the body voted to reconsider this action. A motion to table was lost and a motion to finally adjourn carried. This situation left the law as adopted at the' earlier meeting in force, whether or not its repeal required a two-thirds vote, unless it is invalid for other reasons. The objection made to it by plaintiffs is that it-fixes the assessment on an aged member so high as to make it unprofitable, and might, in instances, make it financially impossible for him to remain a member. If past 60 years old, he has to pay $11.20 a month on a $2,000 policy. The increase on older members was, in the earlier increases above mentioned, in greater proportion than that on younger members. Is this permissible? The laws of the order have always fixed the rate and contained a provision for their amendment. The member’s certificate left the order’s obligation subject to these amendments. By acquiescing in the previous' amendments, the plaintiffs agreed that the contract'permitted a burden increasing with- age. [683] Courts will not undertake to direct or control the internal policy of such societies. It is only when there is an abuse of their discretionary powers — an unreasonable and arbitrary invasion of private rights — that the courts interfere. Now, if there is any obligation of the society more binding upon it or its members than another, it is the promise made in the statement of the objects of the order to pay each member’s beneficiary $2,000 upon his death. In morals and -in law that promise must, if possible, be kept. The member must not-forget that he is an insurer as well as an insured. When the order is faced by inevitable financial ruin for want of funds impossible to be. raised under the existing rule of assessment, no member can disassociate his certificate or contract and insist that the object of the fraternity is to pay him in full without reference to his fellow members. To increase the number of assessments, or, which is the same thing, to increase assessments proportionate to amount being paid, does not at all reach the difficulty. The original assessments were unscientific and, in fact,’ inequitable. The members did not appreciate how. the average age and cost of insurance would increase, and the infusion of new blood would not prevent it. In its appeal to the young man, even fraternal objects must be just as well as generous. The scheme contemplated continuous additions as old members died. If ten men mutually promise to pay each other $10,000 at death, the $10,000 must be gathered from the promisors if all' are to be paid. Under such circumstances, in order to keep the pact to prevent the deficit and meet the obligation, what proposition could be more equitable than this: Henceforth each member shall pay according to the cost of his insurance to the society and the value of it to. him? This is the • proportion which should not be violated — each pay in proportion to what he is [684] getting. This is what the National Fraternal Congress rates, based upon actual experience, and adopted by the society, attempts to accomplish. Shall we say that the society ever undertook to insure its members at less than cost? The plaintiff Hallgren joined when 39 years old and has been a member for 25 years. He has had his insurance for 82 cents per month per thousand. This has not been a bad bargain and is not much, if any, above cost of insurance. The . same is true of the other plaintiff. Can they complain, even though it is true, that when they joined they paid slightly more than cost? If advancing age increases cost of insurance, justice requires this fact to be considered. But, say the plaintiffs, if this is so, then we and others have been grossly deceived. Such extreme rates were never contemplated in the early days of the order. The answer is that this may be true. It was a common blunder. The plaintiffs were deceivers as well as deceived, and, so long as the rate of increase is necessary and reasonable and proportionate, the young and the old members contributing according to the risk assumed in carrying each, without arbitrary discrimination, they ought not to make this fact an excuse for taking an attitude which must bring ruin to the order and prevent its meeting its obligations. If following the rule that each member must pay from year to year according to his age and risk results (as it probably will) in making fraternal insurance less desirabló as old-age insurance, it leaves it what has always been its chief attraction — the more desirable as young men’s insurance." The young man, possibly with wife and little children, the calamity of whose death is greatest of all, will still be able to get his insurance at cost, or nearly so, during the youthful period of his life when the cost is trifling compared to' what it is in old age. This view, we believe, is in accordance with the [685] prevailing opinion of the courts. Farmers Mutual Ins. Co. v. Kinney, 64 Neb. 808; Fisher v. Donovan, 57 Neb. 361; Thomas v. Knights of Maccabees of the World, 85 Wash. 665, L. R. A. 1916A, 750, and note; Supreme Lodge, K. P., v. Knight, 117 Ind. 489; Supreme Lodge, K. H. v. Bieler, 58 Ind. App. 550; Reynolds v. Supreme Council, Royal Arcanum, 192 Mass. 150; Uhl v. Life & Annuity Ass’n, 97 Kan. 422; Clarkson v. Supreme Lodge, K. P., 99 S. Car. 134; Strauss v. Mutual Reserve Fund Life Ass’n, 126 N. Car. 971, 83 Am St. Rep. 699, and note. The' plaintiffs rely somewhat .upon the decisions in Tusant v. Grand Lodge, A. O. U. W., 163 N. W. (Ia.) 690, and Wagner v. Supreme Lodge, Knights of Pythias, 116 N. E. (Ind. App.) 91. In the Tusant case the older members were, as that court held, arbitrarily placed in a distinct class and denied the benefit of the insurance carried by other members. Here also the order undertook to reduce the amount of insurance that should be paid to the beneficiary of the owner, so that, for instance, at the age of 70, years the beneficiary would receive only $366 on a $1,000 certificate. The court held that the member had a vested right in the amount of his certificate. In the Wagner case the organization undertook to make the aged members pay an increased amount for the cost and expenses of investigating and adjusting death claims, so that, whileat the age of 21 years this charge would be only $3.03, at the age of 82 it was $18.17. This, it would seem, was an altogether arbitrary discrimination against the aged member. In the instant case no such attempt is made to, classify or penalize according- to -age. Affirmed. Morrissey, C. J., not sitting.