114 N.Y.S. 200 | N.Y. Sup. Ct. | 1908
Without going extensively into all the matters which have been discussed with much ability and research by counsel, it will be sufficient to say that all the objections to the confirmation of the report of the learned referee have been carefully considered, and that they must be overruled and the report confirmed, and the receiver directed to make an assessment as recommended. But some of these objections will be referred to briefly.
The American Underwriters Fire Insurance Company of Monroe County was incorporated Rovember 24, 1902, pursuant to section 263 and the other sections of the Insurance Law (Laws of 1892, chap. 690, as am’d), providing for the incorporation of town and county co-operative fire insurance companies. This company, by its original articles, was authorized to do business in the five counties of Monroe, Ontario, Seneca, Cayuga and Onondaga. In 1904 the business was extended to Steuben and Chemung counties, the certificate of extension being signed by the directors of the company under date of Rovember 12, 1904, and filed in the offices of the various counties affected on or about December fifth of that year. There are a large number of members reported to be subject to assessment, whose insured property is situate in Chemung and Steuben counties, and some of the reported liabilities of the company are for losses incurred in those counties; and a controversy has arisen as to the regularity of the extension of the business into those counties. That extension was illegal, unless the valid insurance issued by the company and outstanding at the time of the extension aggregated over two millions of dollars. After the filing of the referee’s report and the motion to confirm had been brought on, considerable evidence was taken at the Special Term, bearing upon the amount of insurance outstanding in Rovember and December, 1904, when the extension was perfected; and the question of fact turns upon the validity of a contract of reinsurance entered into
When this extension was brought about, section 278 of the Insurance Law provided as follows: “Any such corporation (town or county co-operative insurance corporation) so organized and so extending and doing business in five counties may extend its business into any number of adjoining counties, not exceeding that number in all, which shall be equal to one county for each full million of dollars of its insured property in force at the time of any such extension and. that extension, when allowable, had to be made by filing in the office of the clerk of each of such counties to which the business was to be extended a certified copy of the original certificate and statement filed at the time of the incorporation, and also by filing, in the office of the Secretary of State and of the county clerk of each county in its territorial limits, a certificate signed by at least two-thirds of its directors, stating the counties in which such corporation proposed to do business. The necessary papers were filed as the statute requires. It appears that the Eoyal Mutual paid to the American Underwriters for this rein-insurance the pro rata amount of the premiums received by the Eoyal Mutual upon the risks assumed by the American Underwriters for the unexpired term of those policies, or credited such sum upon the open account between these companies for reinsuring each other’s risks. ¡Now, unless the contract of reinsurance is valid and the insurable interest of the Eoyal Mutual covered by this reinsurance can be properly considered a portion of the gross amount of the property insured by the American Underwriters, as the word property is used in section 278 quoted above, then “ its insured property ” never amounted to two millions and so it was prohibited from extending its business into the addi
In respect to the extension of its business into Steuben and Chemung counties, the further objection has been raised that the resolution for the extension of its business was passed at a meeting of the directors at which only three were present, that number not constituting a quorum of the board. The by-laws provide for eleven directors. Certain of them had resigned and four new directors were elected at that meeting. The minutes of the meeting state that the president reported that the insurance in force amounted to over two millions of dollars; and a resolution was adopted by the said three old directors that the company extend its business into Steuben and Chemung counties, and that the officers take the proper steps to bring about such extension. A certificate for such extension was accordingly made out on the same day, and was signed and acknowledged by eight of the directors, including those newly elected, and filed in the county clerks’ offices of the various counties on or about December 5, 1904; and in the subsequent dealings of the company with the Steuben and Chemung county agents and insurers, covering a period of over three years, no officer or director ever questioned the regularity of the extension. The objection of no quorum comes too late to be seriously entertained.
Some of the policy-holders object to certain claims which have been allowed by the referee, upon the ground that they arose more than two years prior to the appointment of a receiver. This objection, based upon the wording of section 268 of the Insurance Law, hereafter quoted, cannot be sustained, although the result is to throw a burden of old debts upon new. members who have joined since the debts were incurred, and to relieve from responsibility those who were members when the losses were incurred, but are no longer members, the directors having neglected to assess them for" their full pro rata share of losses before their membership expired. It appears that the directors, not having cash on hand to meet the losses in full, borrowed money to make up the deficiencies; and the notes given for the moneys so bor
The contention, that no assessment can be levied to pay any claim originating more than two years prior to the assessment, is based upon the words quoted from section 268 empowering the directors to make an estimate and assess for losses and expenses for the current year and to supply “ any deficiency in the preceding year.” But these concluding words should not be so narrowly construed as to refer only to claims which had their origin in the preceding year. The deficit of the preceding year was the amount of valid outstanding claims of the company which had not been paid when the year closed. The directors are empowered at any time to levy an assessment sufficient to extinguish all the claims and deficiencies for which such a company is liable at any time, as well as to supply funds for carrying the company through to the end of any current year.
By section 268, it would seem that the Legislature has restricted the power of the directors to make an assessment to members owning property insured at the time of the
Under section 261 of the Insurance Law, it is provided that: “ Every person insured in and by any such corporation shall give his undertaking in such form as the corporation may prescribe, to pay his fro rata share to the corporation of all losses or damages sustained by any member thereof from any cause specified in the policy, which undertaking shall be filed by the secretary in the office oí the corporation. He shall also pay such reasonable sum for policies and expenses, and within such time as may be required by the by-laws.” Ho such formal undertaking was given, it would seem, by any of the policy-holders of this company. The power of a member to withdraw before his policy expires, and thereby free himself from obligation to pay further assessments, is provided for in section 214, which states that: “Any member of any such corporation may withdraw therefrom at any time by ten days’ notice in writing to the secretary and paying his share of all claims existing against the corporation, and surrendering his policy or policies.”
The scheme outlined by the Legislature for these eg
In respect to the question whether the policy-holders knew that they were becoming members of a co-operative company when they took out insurance in the American Underwriters, it is shown that it was not the practice of the agents of the company to require the applicants for insurance to sign written applications. It seems that these applications were generally signed by the agent, using the name of the applicant for that purpose. The applications contained a clause promising that the insured will pay his pro rata share of all losses or damages caused by fire or lightning which may be sustained by any member or members thereof during his continuance in the company. The policies issued by the American Underwriters to all its policy-holders were similar to the Perry Policy, which begins as follows: “American Underwriters Fire Insurance Company of Monroe County,
Article IX of the by-laws is as follows: “ Sec. 1. Every person who shall sign an application for insurance as required by the certificate of incorporation, or by the by-laws of said Company, shall become a member thereof. Sec. 2. Application for membership in this Company shall be made in accordance with the rules prescribed by the Executive Committee. Sec. 3. Such membership shall begin at noon on the day specified in said application. Sec. 4. Any member of this Company may withdraw therefrom at any time by giving ten days’ notice in writing to the Secretary, paying his share of all claims then existing against the Company and surrendering his policy or policies. See. 5. Such membership may also be terminated by the cancellation of the policy or policies of such member, in the manner prescribed by law.” And article XII as to the duties of members is as follows: “ Sec. 1. This Company requires of its members strict conformity to the following regulations, viz.: to adjust all stoves and pipes so as not to come in contact with wood or any combustible matter,” etc. (Here follow other directions as to safeguarding buildings).
While the fact is not stated, in so many words, on the face or back of the policy, that the American Underwriters Fire Insurance Company is a co-operative company, a careful reading of the entire instrument, including the by-laws on the back, would disclose to one familiar with the statute that such is the fact. In my opinion, the failure of the insured to sign an undertaking, or sign the written application for insurance, does not relieve them from the obligations of membership. The requirement of section 267 of the Insurance Law that “ Every person insured in and by any such corporation shall give his undertaking, etc.,” is for the protection of the company, and may be waived by the company without losing its right to assess.
It has been suggested that this company might have issued two classes of policies, one to members and one to nonmembers; the latter class of policies being issued for a flat rate premium, without liability to assessment on the part of the person insured; and the practice which has been followed by mutual fire insurance companies, and has been sanctioned by the courts as to" such companies, has been referred to as analogous and as warrant for the contention that those who did not sign a formal application for membership should be treated as nonmembers holding policies for a flat rate, with no further liability. But, if the cases justifying such practice on the part of mutual fire insurance companies be examined carefully, such as Mygatt v. New York Protection Ins. Co., 21 N. Y. 52, it will be seen that the right to issue both kinds of policies was found in the breadth of the statutes providing for the organization of mutual fire insurance companies, and in the language of the charters of the companies under examination. But in the Insurance Law now in force, under which this company was formed, a distinction is drawn between mutual fire insurance companies and town and county co-operative insurance corporations. Mutual companies are provided for and regulated in article III; and the right of a mutual company to issue a policy for a
In respect to the policy-holders who are reported as liable to assessment by the referee, there is nothing in the evidence to show that any deception was practiced upon them as to the character of the insurance which they were taking out; and such defense, if any exists, would have to be affirmatively established.
An order may he made confirming the referee’s report and directing the levying of the Assessments by the receiver in accordance with the recommendations contained in the report.
Ordered accordingly.