Coles v. Iowa State Mutual Insurance

Wright, Ch. J. 1. Insurance: annulling policy. Three pointsare discussed by appellant’s counsel, which they claim are legitimately raised by demurrer. Four grounds are stated in the demurrer, all'resolving themselves, however, into tjie pr0pOS¡tion, whether the company, according to the terms of the policy, the articles of incorporation and by-laws, had the power to pass the resolution set forth in the answer. And the point made therein, and the only one, is that, under the power to annul, the company could not conditionally deprive the assured of the benefits of tbe policy, or, in other words, could not debar him of the benefits of his insurance during the time he might make default in the payment of assessments. — 429 — This being the only question raised by the demurrer and determined by the court below, the-other apparently unimportant ones need not ánd indeed cannot be noticed.- It is our duty to pass upon the questions presented to and decided by the court below, and not upon those raised for the first time in this court. Whether the answer, therefore, was defective on the ground that the assessment of January 3d, 1863, was not such as to authorize the annulment-of the policy for its non-payment, or for not averring that said assessment was the only one for the preceding year, and other grounds presented in the second and third points of the argument of appellant’s counsel, we need not discuss nor determine. To our minds they present but little difficulty, and yet they are not before-us in such a manner as to demand further attention. The vital question in the case is, whether, under the conditions of the policy and the provisions of the articles of incorporation and by-laws, the company had the power to pass the resolution of March 3d, 1863. And here the argument is, that it was competent to “annul the policy,” or, in other words, to make it void — to nullify or abrogate it — for the default of plaintiff in paying assessments upon his premium notes; but that this power did not authorize a resolution declaring that he should be “excluded and debarred, and should lose all benefit of his insurance, for and during the term of such default;” at the same time holding him liable for assessments during the continuance of the policy. To the general proposition relied upon by plaintiff, that a corporation, as a mere creature of the law, possesses only those powers or properties which the charter of its creation confers, either expressly or as incidental to its very existence, we do not understand defendant to make any objection. (Upon this subject, see Head & Amory v. The Prov. Ins. Co., 2 Cranch, 127; Walden v. Louisiana Ins. Co., 12 — 430 — La., 135; Story on Cont., 312; Ang. & Ames on Corp., §256; 1 Phill. on Ins., § 11; 2 Kent, 298; City of Davenport v. Kelley, 7 Iowa, 102, and cases there cited.) Bat, conceding this rule even, it is insisted that the act of the company was within the scope of its granted powers, or was authorized by the policy or the contract upon which plaintiff relies, including in such contract the articles and by-laws which are referred to and made a part thereof. The action of the company is spoken of in argument as operating to suspend rather than annul the policy. In our opinion this is not the true meaning of the language used. It is rather a conditional annulment than a suspension of plaintiff’s right and liabilities. During the time of his default he is “excluded, debarred” and cutoff from all benefit and advantages under his policy. It must be remembered, as conceded by the appellant in his argument, that the absolute or unconditional annulment of the policy would not have deprived the company of the right to collect the whole amount of the premium note, and from the proceeds to pay future as well as past assessments. After thus annulling, it would have been competent, upon the paj’-ment of the delinquent assessment, to reinstate the assured so as to entitle him to all the rights and privileges of his policy or contract. This act of reinstating, after an absolute annulment, involves the necessity of the subsequent assent of the company. Suppose the assured is declared to be excluded and debarred, not for a certain number of days or months, but until he does a certain thing resting entirely with him and within his power, and that when he docs that he shall be restored to his former or original rights and privileges. What is the difference in principle between terms thus fixed in advance and those declared at the time or subsequent to the removal of the cause leading to the order annulling the policy? And especially is this inquiry just and pertinent, when it is borne in mind that — 431 — so much of the resolution under consideration as declares the liability of plaintiff for future assessments, is but the assertion of a liability which, as he admits himself, the law and his contract would affix without such declaration. Now, if the company had declared the policy annulled, without adding other words, the plaintiff might have said, the contract is entire; my liability on the premium note ends with the destruction or annulment of the policy. And, as we construe, one object was to remove all room for controversy on this subject, and to declare in advance the conditions on which he could revive his former relations to the company, and become reestablished in his rights and privileges. Not that he occupied strictly the relation of a suspended member, one whose relations ceased or were interrupted for a time, but that of one excluded and debarred absolutely unless he, by his own act, removed the bar or set aside the default which operated to exclude him from all benefits under his policy. 2. - mutual company: notice to members. Again, it must not be forgotten that plaintiff, by his policy, became a member of this company. This results from the nature of the organization; the policy so recites, the articles so declare, and it is admitted hr the petition. As such, he was bound to know ap the rules and laws of the company. (Angelí on Ins., § 146; Simeral v. Dubuque Mutual, ante.) Such companies depend almost exclusively for the payment of losses and expenses upon the premium notes of the insured. The prompt payment of assessments is necessarily essential to meet such claims and maintain the solvency and responsibilitj'- of the underwriters. Without the power to enforce prompt payment of such assessments, the company could not maintain its existence. All this the insured knows, and, as a member of the company, it is his duty to observe and comply with all proper rules made to enforce this obligation, and thus protect the company and those — 432 — insured from dishonor and loss. This is his contract, and his right and liabilities are to be tested or measured by the terms of this his voluntary undertaking. If one member can disregard these obligations so can all, and the company would cease to exist entirely, or be stripped of its ability to fulfill its contract. A member has no right to set at defiance a rule legally promulged wiLhout suffering the penalty annexed to such violation. He cannot, if he sustains a loss while excluded from benefit under the operation of such a rule, be heard to allege his own laches as a ground for a recovery.. He must be held to the same good faith which he would exact from the company. And he certainly ought not to complain if he is held remediless as a consequence of his own neglect and delay, for months and months, without apparent excuse, to meet and discharge a fair and legitimate assessment. To hold the company liable under such circumstances would offer encouragement to careless policy holders — a premium for bad faith. Or take the facts of this case as disclosed by the record. Plaintiff was advised in March, 1863, of the action of the board, and of the consequences to result if he failed to pay the assessment. Two months prior to this he had explicit notice of what was required of him. Again time is given, and he knows well the penalty attached to his default. And yet for eight months he knows he is in default, is fully aware of the consequences, as far as appears makes no effort to meet his liability, and then, when the loss occurs, insists that his remedy is as complete and undoubted as though he had met promptly the very letter of his obligations. This he does by maintaining that the act of the company is void for declaring a conditional instead of an absolute annulment of his policy. And it is granted that if there was no power to adopt such a rule, he is entitled to the full benefitof his position. We have séeu, however, that the resolution was fairly authorized. And hi orderiug — 433 — the affirmance of the judgment, we maintain the integrity of the contract, recognize no rule which improperly enlarges the powers of a corporation, and hold parties to good faith in the performance of their agreements. Affirmed.