122 F. 853 | 8th Cir. | 1903
after stating the case as above, delivered the opinion of the court.
We are of opinion that, when the trial ended, all of the material facts in the case were practically confessed, and that the learned trial judge was right in holding that the only question involved was one of statutory construction arising upon the aforesaid statute.- All of the actuaries who testified in the case (and there were several) agreed that the net value of a policy at any time is the difference between the single premium necessary to purchase the sum assured, estimated on the age of the person at the time the policy is valued, and the then pres
The policy in suit contained a provision making it payable out of what is termed the “Death Fund” of the association, and a further provision that if, at such time as the directors of the association might fix for making an assessment, the death fund should be insufficient to meet existing death claims, an assessment should be made upon every member whose certificate was in force at the date of the death for which the assessment was made, said assessment to be made at such rates, according to the age of each member, as might be established by the directors, and that the net amount of such assessment, less 25 per cent, to be set apart for the reserve fund, should go into the death fund. The policy further stated that “no assessments will be made while there remains in the death fund a sum sufficient to pay the existing claims in full.” The constitution of the order, which was made a part of the contract, provided that on the 1st days of February, May, August, and November an assessment should be made upon the entire membership in force at the date of the last audited death claim prior thereto, for such a sum as the executive committee might deem sufficient to meet the existing claims by death, the sum to be apportioned among the members according to the age of each member as per the rates named in the certificates of membership, and that the net amount received from such assessments, less 25 .per cent, to be set apart for the reserve fund, should go into the death fund. Other provisions of the constitution declared that the interest on the reserve fund, as it accrued, should be placed to the credit of the death fund, to be used in providing for current death claims; that after the expiration of each period of five years, during the continuance of a membership certificate, a bond should be issued to the member, bearing interest at the rate of 4 per cent, per annum, for an equitable proportion of each member’s interest in the reserve fund, which bond
It is manifest, therefore, that, according to the contract existing •between the parties, the premiums payable were not to remain fixed or level during the life of the policy, but were expressly made indefinite in amount, and dependent upon the mortuary necessities of the company. This fact was disclosed by a table of rates of assessment indorsed on the back of the policy, which showed that the rates of assessment increased as the member grew older. In other words, the contract in suit was one whereby the member was required to pay from one assessment period to another the actual cost of insurance during that period, without paying an additional sum to be husbanded and accumulated to make up a deficit in future years, when the cost of carrying the risk on the member’s life became greater. All of the actuaries agreed that when insurance is conducted on this plan, which may be called either “term insurance,” or “insurance on the natural premium plan,” a policy can have no actual net value; and that fact is obvious, because, if an insurance company collects from its policy holders, from one assessment period to another, no more than is necessary to pay losses which occur in the meantime, it can have nothing in its treasury to reinsure outstanding risks, or give them a net value.
Only one of the actuaries who testified at the trial claimed that the policy in suit had a net value on November i, 1899, applicable to the purchase of extended insurance; and the net value which he assigned to it was not an actual net value incident to the payment of assessments previous to that time, but a theoretical net value, which, as he contended, might and ought to be given to it under the provisions of the Missouri statute, to wit, section 5983, Rev. St. Mo. 1879, above quoted, and section 5968 of the same chapter. The last-mentioned section (5968) provided, in substance, that it should be the duty of the State Superintendent of Insurance to make or cause to be made annually a valuation of the policies and all other obligations of insurance outstanding and in force on December 31st next preceding, of every life insurance company doing business in the state, and also provided that for the purpose of making such a valuation, and for making special examinations under the provisions of the laws of the state, in order to ascertain the solvency of insurance companies, and their eligibility to do business in the state, the rate of interest assumed should be 4yí per cent, per annum, and that the rate of mortality should be that established by the American experience table, in which 'table the numbers living and dying at each age, and the expectation of life from the ages of 10 to 95 out of 100,000 persons living at the age of 10, were as stated in a schedule appended to that section, which is quoted below in a note. While no rate of premium was prescribed by that section, but was apparently left to the agreement of the par
As there is no evidence in the record that the policy in suit had a net value, other than such theoretical net value as is last described, and as all the actuaries other than the plaintiff’s actuary declared that, owing to the method of levying assessments which had been prescribed and followed, it had no actual or computable net value, the question to be determined is whether the statute, means that all life policies of insurance on which premiums have been paid for as much as two years must be treated as having an arbitrary net value for the purpose of purchasing extended insurance, regardless of the amount that has been paid, and regardless of the agreement between the parties concerning the payment of premiums. We think that the statute will not fairly bear such a construction. It is a statute which is said to have been borrowed from the state of Massachusetts, where a very similar law was once in force. Laws Mass. 1861, c. 186. From the discussions which preceded the adoption of the statute in the state of Massachusetts, it is evident that it was passed to prevent the injustice of forfeiting policies for nonpayment of premiums due thereon when the insurer had in its hands, as the result of premiums already paid thereon, a sum of money, termed the “reserve,” representing what had been collected in excess of the actual cost of insurance up to the time of the default. It was this reserve—a sum actually paid, and equitably belonging to the policy holder—that the lawmaker intended to say should be applied to prolong the life of the policy. The same motives which led to the enactment of the statute in Massachusetts doubtless led to its enactment .in the state of Missouri; that is to say, the Legislature intended to secure to policy holders the benefit of the reserve on their policies if they had paid “two full annual premiums,” and not permit the reserve to be forfeited or appropriated by the insurer. It is a well-known fact that the forfeiture of such reserve values for nonpayment of premiums had become a source of great profit to insurance companies, because the premiums which they were in the habit of exacting from the insured on life policies were so fixed as to be considerably in excess of the cost of simply carrying the
Applying these rules of statutory construction to the statute in question, and considering the equitable object which it was intended to accomplish, and the conditions existing at the time it was adopted, we feel constrained to hold that it was enacted with special reference to that class of policies termed “ordinary life” or “endowment,” where the premium remains fixed or level during the lifetime of the insured, or so long as premiums are payable. It was framed, we think, on the assumption that the premiums on ordinary life and endowment
It results from these views that the judgment below was erroneous, and should be reversed, and the case remanded for a new trial. It is so ordered.
NOTE. '
Schedule—Table of Mortality Based on American Experience.