21 N.Y. 157 | NY | 1860
The single point in the case is, whether the defendants’ loss, adjusted before proceedings were commenced to dissolve the company, can be set off against their premium notes given to the company, as a consideration for the policy on the “ Galena ” and other policies. If it can, it is because it is equitable and just to do so, and no rights of third persons intervene. .It may be conceded also, that the plaintiff, as receiver, stands in the same situation that the company itself * would, had the action been prosecuted by it (being in fact insolvent) to recover the amount of the notes.
I suppose, that, ordinarily, rvhen an insolvent insurance company (no mutual relations and obligations existing among its corporators) seeks to enforce payment of a debt owing to such company for insurance premiums or otherwise, the debtor is equitably entitled to set off an adjusted loss due to him against the claim of the company. It would be inequitable, to compel full payment by the
It is different, where the company is a mutual one, and the insured a member or corporator (an insurer as well as a party insured) and the association has no dealings in regard to insurances, except with its own members. The party has entered voluntarily into engagagements with others, modifying, or entirely changing, as between themselves, the effect or application of the general rules of law or equity in regard to set-off. In a company of mutual insurers, each sufferer is bound to make compensation as well as to receive it; he occupies a double relation of debtor and creditor, and it would be inequitable, to allow him, when the funds of the company are not adequate to pay all losses, to set off his entire demand; thereby getting more than his share of, and decreasing, a common fund to which all the creditors, pro rata, are entitled. Each member is interested in the premiums as well as losses of all the others, and the premium paid by each is saddled, as'it were, with its proportionate share of the claims of all others. The premium, -whether paid, or secured to be paid, is withdrawn from his control, in contemplation of law, and placed in a common fund, not subject to his claims only, but those of all others in the company; he, in turn, having a similar claim on the premiums of his associates. The members of the association virtual agree to insure each other, and provide a common fund to indemnify in case of loss. As all have contributed to this fund, they have a community of interest in it; and each member having his -proportionate share of the losses, is entitled to his proportionate share of the profits, if any are realized. It may be, that one member may draw from the • premiums paid by other members into the common fund, if the association be prosperous, not only the amount of his losses, but as lirge a
The defendants in this case became members of a mutual insurance company, by effecting insurance therein. It was one "^of that class- of mutual companies, authorized to commence and transact an insurance
The defendants, when they became dealers and members of the company, instead of paying the premiums in cash, as was contemplated by the charter, gave time notes for such premiums, which could only properly
There is no doubt, that in January 1854, when the loss on the Galena was adjusted, the company was unable to pay all its liabilities; the defendants, in fact, admitted this, by agreeing to be paid the return premium on the policy, “ ratably out of the assets of the company, when divided.” At that time, as members of the company, they contemplated a pro rata division of its means, and agreed to a cancellation of all the policies for which the premium notes were given (including that on the Galena), stipulating for a “ return premium ” on each. It is difficult, however, to perceive how the company could retain or pay back any portion of a premium never received or paid into the common fund. The agreement clearly imported that the defendants should pay their premium notes, or contributions to the common fund, in full, and were to bo entitled to a return of a stipulated amount of such contributions, to be paid, ratably with other credi
The referee therefore correctly decided, that the defendants could not set off in full their loss on the “ Galena,” but that they were bound to pay their premium notes, and como in, as they proposed to do in regard to their other claims, in a pro rata division of the assets of the company amongst all its members and creditors. What, as mutual insurers, they were ratably entitled to, could only be ascertained after all the means of this association were called in, and the demands upon it liquidated.
It is said, that the cases in the books relate to mutual fire companies and have no application to marine compa
The judgment of the Superior Court should be affirmed.
The original corporators of the General Mutual Insurance Company were the persons who should "^present to the commissioners named in the charter, applications for insurance to be effected, amounting to at least $500,000. When applications should be received to that amount, the company was allowed to organize by choosing .trustees; all persons ■taking policies were to become members, as well as all - persons holding certificates of losses under policies issued. The company was to have no subscribed capital; its entire capital was to consist of premiums on insurance, and the profits arising from the investment of those premiums; ’ the capital thus to be constituted could not be withdrawn, ■until it reached $500,000. All net profits over that amount were subject to division amongst those who took insurance and paid premiums thereon, and the division 'was to be made on fro rata principles; the share of each member being represented in certificates of profits. The net profits were to be arrived at, annually, by striking the balance between the premiums earned during the previous year, and the income from investments, on the one side, and the amount of losses and expenses during the same year, on the other. The certificates of profits •could not be redeemed, until the accumulated profits of the company should amount to half a million of dollars, and then only the excess could ever be applied to that ■purpose. All the net earnings of the companjT, there
The charter says nothing of subscription or premium notes or of notes of any kind; it speaks of premiums only; every person taking a policy was bound to pay the established rates of insurance. Doubtless, the company might give him a credit and take his time obligations; any insurance company can do so, if not prohibited by law. But if such was the course of dealing in this company, the notes taken nevertheless represented the cash which the insured was bound to pay as the consideration of his policy, and they constituted as much a portion of the capital of the company, as if the money had been paid. The notes were to be reckoned as part of the earnings in each' year, because they ^"represented the pre*miums of that year. Those who gave them were entitled to all the privileges of membership, as much as those who paid a cash consideration for their insurances. (Charter, Laws of 1841, c. 229; amended, Laws of 1842, c. 138.)
The defendants, in the year 1853, took various policies or renewals of policies from this company, the premiums on which amounted to $2422.50. Instead of paying these premiums in cash, their notes therefor, at one ye.ar, were accepted by the company. According to the principles of the charter, this sum "was the contribution made by them to the capital of the corporation; which, in the event of insolvency, all the creditors were equally entitled to. If the defendants had made this contribution in cash, it is quite clear, they could not withdraw any portion, to apply on the debt due from the company to them; they were creditors in respect to the losses sustained under their policies; they were also debtors in respect to their notes. But they held still another relation, to wit, that of members of the company and contributors to its capital; their notes
The result is, that the plaintiff was entitled to recover on the notes in question, without set-off for losses. The judgment should therefore be affirmed.
Judgment affirmed.