Hill v. Baker

205 Mass. 303 | Mass. | 1910

Sheldon, J.

When a mutual fire insurance company has become insolvent and a receiver has been appointed to settle its affairs under St. 1907, c. 576,. § 8, its outstanding policies cease to afford any protection to their holders, being cancelled as to any future losses, but the premiums which have been paid, for future as well as past protection, and the contingent liability to assessment upon premium notes which have been given by the policy holders remain as a fund for the payment of all the debts and liabilities of the company, including losses that have been incurred. Commonwealth v. Massachusetts Mutual Fire Ins. Co. 119 Mass. 45; S. C. 112 Mass. 116. As was' said by Wells, J., in the case last cited, “Each member is, at the same time, insurer and insured. In one aspect he is a mere holder of a policy, containing a contract of indemnity against loss by fire, with a specific and limited fund out of which that indemnity is to be made good. ... In another aspect he is a member of the corporation, made so by the very nature of the contract, and so declared by law. ... In this relation, he is an insurer, and is affected by another and very different class of obligations.” The deprivation of the right to recover for a future loss does not of itself terminate his membership in the company and his consequent liability to contribute, to the extent of his note, to the payment of losses. Cumings v. Sawyer, 117 Mass. 30. The fundamental question in this case is whether the same rule is to be applied to the mutual marine insurance company of which the plaintiff in the first five of these actions is the receiver; whether policy holders in that company are liable to the receiver upon their promissory notes given for insurance premiums, although the terms of the policies have not expired, and the total amounts of the premiums have not been earned, or in other words although they have not enjoyed the full benefit of the insurance for which their notes were given. This question is to be determined upon the several contracts of insurance and the statutes under which these contracts were made. Pendergast v. Commercial Mutual Marine Ins. Co. 15 Gray, 257.

In each of these cases the company has made a contract of insurance against definite risks for a fixed period and in consideration of a stipulated premium. In each case except the last the premium, was paid, in whole or in part, by a note given by the insured to the company. Each policy describes the insured as a member of the company. By the charter of the company, St. 1853, c. 262, it was to make “insurance against maritime losses on the mutual principle, with all the powers and privileges, and subject to all the duties, liabilities, and restrictions, set forth in the thirty-seventh and forty-fourth chapters of the Revised Statutes, and all subsequent laws in force relating to mutual insurance companies so far as applicable to ” this company. The by-laws of the company provide that all persons who have property insured with it shall be members of the company during the period of such insurance and shall have votes accordingly. And see Pub. Sts. c. 119, § 121, continued in force by R. L. c. 118, § 53, and St. 1907, c. 576, § 54. The by-laws also provide for the division of profits among policy holders upon terminated risks.

It seems clear to us that the effect of the policies under this provision of statute is that the policy holders must be treated as having taken their insurance strictly upon the mutual principle,- unless there shall be found to be something in subsequent legislation to alter this. But the decisions already cited did not rest upon principles applicable only to mutual fire insurance companies. They went upon broad rules which were to be applied to all cases of mutual insurance, although modified by our statutes as to the manner of enforcing the contingent liability upon premium notes given as additional security to the company and its policy holders. Those general principles have been applied and enforced in other States under statutes more or less similar to our own, without distinction as to the general doctrine between mutual companies, whether they issued insurance upon lives, against loss by fire, or upon marine risks. The cases as to fire insurance companies are of course more numerous. Mygatt v. New York Protection Ins. Co. 21 N. Y. 52. Lawrence v. Nelson, 21 N. Y. 158. Doane v. Millville Mutual Ins. Co. 16 Stew. 522. Hillier v. Allegheny County Mutual Ins. Co. 3 Penn. St. 470. Dewey v. Davis, 82 Wis. 500. Taylor v. North Star Ins. Co. 46 Minn. 198. But we find also decisions put upon the same grounds as to life insurance and marine insurance companies. Hone v. Boyd, 1 Sandf. 481. Vanatta v. New Jersey Mutual Life Ins. Co. 4 Stew. 15. Mayer v. Attorney General, 5 Stew. 815. The cases go on the general rule that there is no liability on the part of the insurance company for failing to continue the performance of its agreement when that performance has been made impossible by the action of the State under existing laws. People v. Globe Mutual Life Ins. Co. 91 N. Y. 174. Baylies v. Fettyplace, 7 Mass. 325. Wade v. Mason, 12 Gray, 335. Woodward v. Cowing, 13 Mass. 216. The fact that the insurance company has become insolvent, instead of being a reason against the full collection of outstanding premiums, furnishes a reason why they should be collected. Fogg v. Pew, 10 Gray, 409, 415. Alliance Mutual Ins. Co. v. Swift, 10 Cush. 433. Lester v. Webb, 5 Allen, 569. All these cases that have been referred to go upon the principle that the premiums paid or absolutely agreed to be paid by the members for their policies constitute a fund for the payment of losses; and the principle is the same whether the payment is in cash or by note, so long as the policy is issued upon the mutual principle to one who by accepting the insurance becomes a member of the insurance company. State v. Manufacturer's Mutual Fire Ins. Co. 91 Mo. 311. Ohio Mutual Ins. Co. v. Marietta Woolen Factory, 3 Ohio St. 348. Hart v. Achilles, 28 Barb. 576. White v. Havens, 20 How. Pr. 177.

We find nothing to alter the general principle in the legislation which followed the charter of this company. The definition of the “ net assets ” of a mutual marine insurance company in B. L. c. 118, § 1, St. 1907, c. 576, § 1, can have no such effect. We have been referred to no statute giving the right to the return of any part of a premium or to an allowance of any part of a note given for a premium in a ease like this ; and we find no such statute. No such right is created by the stipulations of the policies or the by-laws of the company. The notes were given in payment of premiums absolutely due; they were to be paid in full, either in money or by the application of anticipated profits; each policy holder was a member of the company.. The members were not to be sure to be assessed like policy holders in a mutual fire insurance company, for the very reason that it was expected that ultimately, in the one way or the other, their notes would be paid. And each policy upon which a note was taken provides that when a loss occurs, the amount of any unpaid premium note without discount is to be deducted from what the insured is entitled to receive. This shows the understanding of both parties that the premium note was absolutely payable. The language of Pub. Sts. c. 119, § 128, still in force as we have already seen, points in the same direction.

We cannot accede to the contention made for the policy holders that this company was not a mutual company.

It follows that in the action of Lothrop judgment must be entered for the defendant. In the cases against Baker and Donnell respectively, the plaintiff is entitled to judgment.

In the action against the River Plate Shipping Company, the policy was sent to the company on March 14, 1908, for cancellation, and on March 16 the president of the company wrote in reply that the policy was cancelled as requested. The plaintiff was appointed temporary receiver of the company on March 19, and permanent receiver on March 27, of the same year. We have not the date of the filing of the bill on which this was done, and must take the date of the appointment as fixing the rights of the parties. Merrill v. Commonwealth Fire Ins. Co. 171 Mass. 81. Attorney General v. Massachusetts Benefit Life Association, 171 Mass. 193. We are of opinion that we must treat the policy as cancelled on the day when the president wrote his letter saying that it was cancelled. There is no intimation that this was not done in good faith on both sides in ignorance of the insolvency, and such ignorance was possible, even in the president of the company. Furber v. Dane, 204 Mass. 412, 418. The case differs in this respect from Doane v. Millville Mutual Ins. Co. 16 Stew. 522. Accordingly the defendant is entitled to have a proper deduction made from the amount of its note for the period after March 16, 1908, when its policy was surrendered. Fayette Mutual Fire Ins. Co. v. Fuller, 8 Allen, 27. In this case there must be a new trial.

In the case against Hodsdon, the insured requested on March 26, 1908, that the policy be cancelled. This was after the appointment of the receiver, who answered that the matter would have his attention. But the rights of the parties had already been fixed. The plaintiff is entitled to judgment.

In Wing’s case the premium was agreed to be sixteen per cent for two years. But the policy provided that the premium should be returned for months not entered upon, with a warranty of twelve per cent. This is not like the case of an ■ordinary open policy, in which the insurer is held only for such risks as are subsequently assumed and ' indorsed upon the policy. If that were so, the company and the receiver in its right would be entitled in an action like this to recover the amount only of the premiums upon such risks as had been so assumed. Maine Ins. Co. v. Stockwell, 67 Maine, 382. Elwell v. Crocker, 4 Bosw. 22. But under this policy the term of insurance had been entered upon, and it would continue to run until stopped by a written request from the insured. As it does not appear that any such request was made, in this case also there must be judgment for the plaintiff upon his declaration.

Ordered accordingly.