Ionia, Eaton & Barry Farmers' Mutual Fire Insurance v. Davis

Hooker, J. The Ionia, Eaton & Barry Company, above named, is a mutual fire insurance company, organized and doing business under the laws of this State. In the year 1889 it had losses and expenses, and an assessment was made for the purpose of providing a fund with which to discharge its liabilities. Relators allege that this assessment was insufficient to cover all of said liabilities exist- ing for that year, and that a large indebtedness existed that they did not attempt to assess. The amount of the indebtedness unprovided for consisted of— 1. Undisputed losses and expenses in excess of the assessment. 2. Two losses, unadjusted, which were subsequently litigated, known as the “Van Alstine and Towle Losses.” 3. Costs and expenses of such litigation. 4. Interest upon the amounts mentioned. An assessment was made to raise a fund to pay this indebtedness, and upwards of $5,000 was paid upon it. Such assessment being declared void, no further effort was made to collect it, but the money collected had been used [609] in payment of the obligations of the company. Thereupon a new assessment was ordered for an amount sufficient to coyer the sums mentioned, and 30 per cent, additional, to cover expenses of collection, and shrinkage. One William D. Place, who from January, 1884, until the date of filing his bill,1 was a member of, and insured in, said company, filed a bill of complaint, stating the facts hereinbefore outlined, and praying an injunction restraining the levy of such assessment, which he asserted would be a cloud upon his title. The bill alleges the following grounds for the claim that such assessment should not be made, viz.: First. The Towle and Yan Alstine losses did not become a liability during the year 1889, inasmuch as they were not adjusted, but were subsequently litigated, and were therefore not chargeable upon policy-holders for that year. Second: The costs and expenses incident to that litigation were not chargeable to policy-holders of that year, as they were incurred later. [610] Third. The amount voluntarily paid upon the void assessment of 1892 could not be lawfully assessed to reimburse those who had paid it, who were to be credited such amounts upon the new assessment. Fourth. There was no authority to assess 30 per cent, for contingencies. An injunction pendente lite was issued, a motion to dissolve which was denied, whereupon this proceeding was instituted to compel such dissolution. Ordinarily, this Court does not review the action of the circuit judge in injunction cases. Where, however, as in this case, the return shows the question in dispute to be one of law, merely, it will consider the case. The points raised by the bill are those which will be discussed. Questions arising over matters involved in this case were considered in the case of Ionia, etc., Ins. Co. v. Otto, 96 Mich. 558; and it was there held, in substance, that, where an assessment was made to cover certain losses and expenses, subsequent assessments, made necessary by a failure to collect, could not be levied upon those whose policies had been canceled previous to the former assessment. But it was plainly intimated in that case that a member could not avoid his liability upon accrued losses and expenses by cancellation and payment of assessments theretofore made. He who insures obligates himself to pay a proportionate share of the losses and expenses for the period during which he is insured; and, as said in the Otto case, if the liability has not been covered by assessment, it continues, though he may have meanwhile ceased to be a policy-holder. Much can be said against the doctrine that such member should not be liable for deficiencies arising from failure to collect assessments, but we think that question settled by authorities cited in the Otto case. We consider it clear, however, that until the assessment has been once made the liability continues. [611] The Otto case, page 561, expressly states that the Towle and Van Alstine losses were existing liabilities at the time of their occurrence. We think it cannot be said that the managers of a company of this kind can relieve present policy-holders, and burden future ones, by delay in adjusting, or by litigating, losses. These losses were a part of the legitimate cost of insurance for that year, whenever and however adjusted. The subject was again alluded to, and the validity of these claims recognized, on motion for rehearing of the Otto case. 97 Mich. 525. In the case of Union Mut. Fire Ins. Co. v. Spaulding, 61 Mich. 80, cited by counsel, the assured had surrendered his policy, and paid an assessment which not only covered all existing losses, but also a large sum for contingencies. The Court said that— “ There can be no doubt, on the findings, that defendant did pay in full all that was his proportion of any existing losses of the company, as well as of any assessment levied. Whatever losses subsequently arose from failures to collect, or from any other cause, were not existing losses.” No assessment having been made for these losses, or for the amount of liability for 1889 not covered by the first assessment, the directors might legitimately make an assessment to cover them, with interest and expenses incident thereto, including costs of litigation. It was the duty of the company to pay all of this within 60 days. It chose to do otherwise, and interest, and money spent in trying to avoid the payment of a lawful obligation, can hardly be chargeable to subsequent policy-holders, who have no interest in, or liability upon, such obligations. The assessment of 1892 was void. Being void, it was no impediment to a new assessment, in making which the officers of the company have reassessed the amounts paid upon those who paid them, and propose to credit on such [612] assessments such sums. This is equity, and we see no reason for complaint on the part of those who did not pay their void assessments. Certainly, equity has no injunctions for those who seek to escape honest liabilities by imposing undue burdens on others. May, Ins. § 559; Insurance Co. v. Allen, 10 Gray, 300; Nelson v. Milford, 7 Pick. 18. The,assessment of a sum for contingencies is not uncommon; and where, as under our decisions, a new assessment for a deficiency arising from a failure to collect cannot be made, it is proper to include a liberal sum. It is usually within the discretion of the directors. Insurance Co. v. Babbitt, 7 Allen, 235; May, Ins. § 559; Bangs v. Gray, 12 N. Y. 477. Thirty-three and one-third per cent, was held reasonable in Re People’s Mut. E. F. Ins. Co., 9 Allen, 319. In view of the probabilities of litigation, we are of the opinion that 30 per cent, was not unreasonable. See Wardle v. Townsend, 75 Mich. 385. There is another reason why we think that the circuit judge should have dissolved the injunction. The complainant’s bill shows that he has been a member of said company from 1884 until he filed the bill, and therefore liable for his proportion of all these liabilities. We fail to discover any reason why he should complain of an assessment to pay debts which the company is legally bound to pay. Writ granted. The other Justices concurred. Footnotes [1] The bill was filed April 20, 1894.