Insurance Commissioner v. Provident Aid Society

| Me. | Dec 28, 1896

Strout, J.

When this bill was filed, October 18, 1895, the defendant company bad on deposit with the state treasurer, securities of the par value of seven thousand dollars, and on deposit in Portland Trust Company three thousand fifty-one dollars and sixty cents, and an unliquidated balance in the hands of B. N. Johnson. All of these funds belonged to the mortuary fund of the Society, and were charged with a trust for the security of its certificate holders.

In August, 1895, and before the filing of this bill, the Provident Aid made a contract with the Bay State Beneficiary Association of Massachusetts, by the terms of which the Provident Aid undertook to transfer to the Bay State all its risks, and all of its funds, including the mortuary fund; and the Bay State agreed to assume the liability of the Provident Aid upon its outstanding certificates then in force, and reinsure its members. This contract was approved by a two-thirds vote of those present and voting at a meeting of the insured in the Provident Aid, called to consider the same, on July 30, 1895, in accordance with § 5 of c. 237 of the laws of 1889. Thirty-eight voted to approve the contract and six voted against it. Although the contract bound the Bay State to reinsure all members of the Provident Aid who so desired, it became a contract only with such members as consented to the change, and accepted the liability of the Bay State in lieu of that of the Provident Aid. Those holding certificates in the Provident Aid, and not electing to accept the contract with the Bay State, had the right to retain their certificates in the Provident Aid, and rely upon its liability. The master has found that eight hundred and fifty-five members of the Provident Aid, accepted insurance in the Bay State, and paid to it the assessment due October 1, 1895; and that six hundred and seventeen members of the Provident Aid did not accept insurance in the Bay State, nor pay the assessment due October 1, 1895, to that company, but retained their standing in the Provident Aid. He has also found that the amount of insurance held in the Provident Aid by the eight hundred and fifty-five members who went into the Bay State, was $2,404,500, but the Bay State reinsured these for $2,328,500 only; and the amount held by the six hundred and seventeen members who did not go into the Bay State, was $1,635,500. The mortuary fund, being a trust security at the date of the contract of reinsurance for the entire fourteen hundred and seventy-two members of the Provident Aid, should now be apportioned equitably to secure protection to all. Of the amount of the mortuary fund which shall remain when final decree shall be entered, after payment of all death losses accrued before the filing of this bill and the expenses of this suit, there should be paid to the Bay State as a trust security for the eight hundred and fifty-five members of the Provident Aid reinsured by it, that proportion which the $2,328,500 of insurance of the eight hundred and fifty-five members who have gone into the Bay State, bears to the $1,635,500 of insurance of the six hundred and seventeen members who did not go into the Bay State.

The amount that will remain, after this payment to the Bay State, the Provident Aid having ceased business, belongs to the members of the Provident Aid who held certificates upon which all assessments had been paid.

The bill was amended, so that the rights of the parties are to be determined by the provisions of the charter of the company, § 8, and R. S., c. 49, § 67; and not by c. 237 of the laws of 1889. The funds are to be paid over to the certificate holders ratably.

Equity requires that this distribution should be in proportion to the assessments paid by the members. As the amount of assessment depends upon the age of the insured, it is manifestly unjust that one should receive back as much as another member whose assessment for the same insurance was much larger. To accomplish exact equity, the last assessment paid by each member should be returned to him, if the funds are sufficient ; and if not, the ratable share, based upon the amount of each, assessment. If the funds are sufficient to pay this assessment in full, and leave a balance, that balance should be applied to the next preceding assessment in the same ratio, and so continued till the fund is exhausted.

When the amount to be refunded to the members of the Provident Aid shall be ascertained, the master will determine and report the proper distribution upon the principle herein stated, and-final decree will then be entered.

Recommitted to the Master.