Seamans v. Millers' Mutual Insurance

Winslow, J. The first and most important question on this appeal is as to the effect of the transaction of July, 1892, between the appellants, Kendall & Co., and the officers of the defunct insurance company, by which the appellants’ policy was surrendered to the company, their deposit note returned to them, and the assessment of July 7, 1892, paid, upon the assurance that they would not be called upon for any further assessment. It is argued that the effect of this arrangement was to terminate the contract of insurance for all purposes, and to release them from any future assessments. Were the case one where a person had bought his release from' the obligátions of an ordinary executory contract by a payment of money not then owing, the argument would be strong, but it is not such a case. One who is insured in a mutual insurance company, such as the one in question, occupies the double position of thé insurer as well as the insured. He has not only obtained a contract by which the other policy holders are obliged to indemnify him against loss, but he has bound himself to indemnify, up to a certain amount, his follow insurers against loss occurring during the term of his insurance. This obligation results not only from the terms of his policy and deposit note, but [495] also from tbe terms of the organic law under which the com-' pany is organized, as well as from the provisions of its charter and by-laws. Sec. 1941c, S. & B. Ann. Stats., under which this company was organized, provides that all persons insured by such company shall give their obligations, binding themselves-, their successors, heirs, and legal representatives to pay to such company their fro rata “ of the necessary expenses of such 'company, and of all losses by fire or lightning which may be sustained by any member thereof, upon property insured, during the time for which their respective policies shall continue in force.” The question simply is, whether the officers of the company can release a member from his contract and statutory obligations with other members, upon his payment of an insufficient assessment. If they can, there would seem to be no safety in mutual insurance. If they can release one, they can release all. If, upon payment of an assessment of seventy-five per cent, of the amount of the unpaid losses, they can release their policy holders, they may with equal reason release them upon payment of an assessment of five per cent. The absurdity of such a result is apparent. The statute (sec. 1941f) provides that a member may withdraw from the company by giving notice in writing to the secretary, and paying all dues and his ratable share of all losses up to the date of his withdrawal; and it is argued that the appellants’ transaction with the secretary constitutes, in effect, a withdrawal. It is sufficient to say of this that neither requirement of the statute was complied with. No notice of withdrawal was given, and it conclusively appears that the appellants did not pay their share of the losses outstanding at that time. That clause of the section above cited which gives the officers power to annul a policy has no bearing here, because there has been no attempt to annul any policy. The action of the directors of the company, in [496] substance, was simply a determination. to cease business, issue no further policies, make and collect an assessment to pay outstanding claims, and discharge such claims. It seems very clear to us that this action does not constitute an annulment of a policy. Our conclusion is that the appellants were' not released from further necessary assessments for losses occurring during the life of the policy by the arrangement of July, 1892. There are numerous adjudication which sustain this principle. Comm. v. Mass. Mut. F. Ins. Co. 112 Mass. 116; Ionia, E. & B. F. M. F. Ins. Co. v. Otto, 96 Mich. 558; Detroit M. M. F. Ins. Co. v. Merrill, 101 Mich. 393. As stated at the outset, this is the first and most important question in the case, and we think, also, the controlling question. Other objections were raised and discussed, but we regard none of them as well taken. It seems that by the payment of the assessment made by the company in July, 1892, a considerable number of the policy holders paid their deposit notes in full. Such policy holders were not included in the receiver’s assessment. Plainly, this was right. The amount of the note was the measure of the liability. This is the provision of the by-laws of the company, as well as the provision of the deposit notes themselves. It is said that no assessment could be made for the expenses of the receivership, nor for shrinkage and uncollectible assessments. This question was very recently examined and decided by this court in favor of such right. Davis v. Shearer, ante, p. 250. It is true that the assessment in this case makes a very large allowance for shrinkage and un-collectible assessments, but the court below approved the estimate upon testimony given by the receiver’s attorney, who has managed the receiver’s legal affairs from the beginning and has very complete knowledge of the probabilities of collection, and we cannot say that too great an allowance [497] was made. The receiver’s right to make an assessment cannot be questioned on this appeal. The order appointing him has not been appealed from. Davis v. Shearer, supra. Our conclusion is that the orders appealed from were rightly made. By the Gourt.— Orders affirmed.