37 F. 530 | U.S. Circuit Court for the District of Kansas | 1889
This case, in its facts and in the relief sought, is of a .novel character. It is before me for final hearing on the pleadings and proofs. The complainants are policy-holders in the insurance company defendant, which was both a mutual and stock company. Their policies were taken out in the years 1872 and 1873, and they are all of • the class known as “Registered Tontine Policies, Class A.” At that -Time the company had a capital stock of $500,000, and was doing, for a company of its years, a large and prosperous business. Pamphlets ..and circulars were issued by it, picturing in glowing colors its prosperity, and the advantages of insuring with it. Some of these came into the hands of the complainants prior to their application for policies. -As a matter of fact only $115,000 of the capital stock had been paid in:,. 'The financial" panic of 1873 impaired the business of the company, ..and subsequent financial troubles in Kansas continued to interfere with •it, so that about the close of 1877 the company withdrew all its agents from the field, and ceased to solicit insurance. Its capital stock was reduced from $500,000 to $100,000, and the effort of the company has ,'sincp.been to wind up its business. The effect of this has been that . -through lapses, purchases of policies, and sqttlements with parties, the ...number of policies—at one time over 6,000—has been so reducecl that
•Jan. 1, 1878, $7,562,360 00
Dee. 31, 1874, 6,566,785 00
Dec. 31, 1875, 5,207,771 00
Dee. 31, 1876, 4,397,187 00
Dec. 31, 1877, 2,832,250 00
Dec. 31, 1878, 2,387,309 66
Dee. 31, 1879, 1,080,642 00
Dec. 31, 1880, 823,716 00
Dec. 31, 1881, $734,192 00'
Dec. 31, 1882, 648,551 80
Dec. 31, 1883, 501,913 16
Dec. 31, 1884, 446,713 21
Dee. 31, 1885, 405,761 16
Dec. 31, 1886, 370,941 89
Dec. 31. 1887, 317,212 86.
The. receipts have diminished in something like the same proportion, so that now the premium receipts do not pay the running expenses of the defendant. Since 1877 it has practically done no now business. It is in no just sense a going concern. While its corjiorate existence lias been maintained, it has been simply maintained for the purpose of winding up its business. It is true that its assets, according to insurance tables, are sufficient to pay the policies in force, as according to the laws of mortality they are likely to mature, so that it cannot be held that the company is actually insolvent. Now upon these facts 1 remark that, confessedly, the complainants have no remedy at law. The obligation of the company to pay arises only on the death of tiie insured, and that event has not transpired. And again, as the company is not technically insolvent, it is at least doubtful whether proceedings could be sustained looking to a receivership and the immediate winding up of the affairs of the company; so that the complainants’ remedy, if any they have, is, in a case like the present, in a court of equity to enforce the termination of their contracts, and tlic payment to them of the present value of their policies. Tt is, I think, one of tho^seltled propositions of law that when an insurance company becomes insolvent, and its assets are taken possession of by the court for distribution among its creditors, that policies not yet matured will bo adjusted at their surrender value, and to that amount established as present obligations against the company. Is the right to do this limited to cases of insolvency, or may it be extended to those cases in which the situation of the respective parties renders it inequitable to compel the further continuance of the contractual relation ? I think the answer to this must be that when the situation of the parties, even without any wrong on the part of either, becomes so changed that the continued enforcement of the contractual relation works peril to the one party without benefit to the other, a court of equity may interfere, and declare the contract at an end. There is underlying every contract of insurance between the insured and the insurance company a just expectation that the company will continue the insurance business, adding to its assets by new insurance, and from the premiums thus received diminishing the pro raía of expense upon each policy-holder. True, nothing of the