183 Iowa 489 | Iowa | 1917
Age Rate
18'. , .$1.00
19 . . 1.03
20 . . 1.05
21. . . 1.08
22. . 1.10
23 . . 1.13
24 . . 1.17
25 . . 1.21
26. . 1.24
27. . 1.28
28 . . 1.32
29 . . 1.37
30 . . 1.41
31 . . , 1.45
32 . . . 1.50
33 . . 1.55
34. . 1.62
Age Rate
35 . . 1.68
36 . . 1.74
37. . 1.81
38 . . 1.88
39 . . 1.95
40. . 2.03
41 . . 2.12
42. . 2.21
43 . . .2.31
44 . . 2.41
45 . . $2.52
46 . , , .2.63
47 . . 2.75
48 . . 2.89
49 . . 3.04
50'. . 3.20
51 . . 3.36
53.................. 3.73
54.................. 3.94
55................... 4.20
56.................. 4.39
57.................. 4.66
58................... 4.95
59.................. 5.29
60 .................. 5.64-
61.................. 6.02
62................... 6.43
63.................. 6.85
64.................. 7.30
65.................. 7.94
66.................. 8.29
67.................. 8.82
68.................. 9.31
69.................. 10.00
70.................. 10.64
Over 70, at 70.
Tlie existing membership was thereafter known as Division A, and continued to pay assessments according to the rates established in 1901, which were as follows:
Class. Ages. Assessment Rates $ 1000 $2000
1 — 18 to 24 years inclusive............$ d35 $1.30
2 — 25 to 29 years inclusive..............75 1.45
3 — 30 to 34 years inclusive..............80 1.65
4 — 35 to 39 years inclusive.............95 1.90
5 — 40 to 44 years inclusive............. 1.15 2.25
6 — 45 to 49 years inclusive............. 1.45 2.90
7 — 50 years and over.................. 1.95 3.85
The table of rates adopted for the new class was what is known as “the level rate plan.” The rate of assessment of a member was determined therein by the age attained by him at the time he became a member, and such rate would continue unchanged thereafter; whereas the rate of assessment for a member in Division A increased with advancing age, and was determined by the age of the member at the time of the assessment. Theoretically, at first, any proposed member had the option of joining either division. As a matter of fact, the officials favored Division B. They invited all new membership into such division. The division was also open to a transfer by the membership of Division A.
From 1911 to February, 1916, the officials of the order in effect operated two independent companies, side by side. The death losses in Division A were charged .against that division alone, and those of Division B were charged against it alone. The 1901 table of assessment rates was applied to Division A, and the 1911 table was applied to Division B. The monthly assessments in Division A were not sufficient to pay all the death losses therein, so that the reserve was encroached upon, and the insolvency of the division increased. In Division B, only ten monthly assessments were made each year, and the amount thereof paid all death losses and built up a’ reserve fund of more than $350,-000. In February, 1916, further amendments were hdopted at a special session of the Grand Lodge, which were intended to end pretense, and to heal the dripping wound by removing the seat thereof. By these amendments, the members of Division A were peremptorily required to transfer to Division B. Upon such transfer, they were given the option of two courses: . '
(1) They could maintain their insurance, by paying the Division B rate, which we have above set forth; or
(2) They could continue to pay their assessments according to the 1901 table of rates of Division A, and submit to a scaling of their certificates down to an amount com
The table of sealing thus presented as an alternative was as follows:
Age Rate Rate Rate Rate $1.00 1.95 2.95 2.85
50...... .$305 $610 $915 $1220
51...... . 290 580 870 1160
52...... . 275 551. 826 1102
53...... . 261 523 781 1016
51..... . 217 195 712 990
55...... . .232 161 696 928
56...... . 222 111 666 888
57..... . .209 418 627 836
58...... . 197 391 591 ' 788
59...... . 185 369 551 738
60...... . 173 346 519 692
61..... . .162 321 486 648
62...... . 152 303 155 606
63...... . 113 285 428 570
61...... . .131 267 101 534
65..... . 123 246 369 492
66...... . 118 235 353. 170
67...... . 111 221 332 412
68 . . . . ..105 209 311 118
69...... . 98 195 293 390
70 or over . 92 183 275 366
Under the first option, a member 70 years of age, though he had been such member for 40 years, would be required to pay, upon transferring to Division B, precisely the same rate as a new member of such age, namely, $10.61 per assessment for $1,000 insurance. For the holder of a $2,000 certificate this would be $21.28 per month. Under the second option, such member must consent to a scaling down of his certifi
'in the pioneer days of this state, there was extant a boy story of two hunters, Caucasian and Indian. In the ■ division of game, the Caucasian said to the other: “I’ll take the turkey and you take the buzzard; or if you would rather, you take the buzzard and FU take the turkey.” The Indian grunted his reply: “You never said turkey to me.” This resembles the situation of the members of Division A'as they see it. They see nothing but “buzzard” in either alternative.
At the time of the adoption of this last amendment, 7,000' members remained in Division A. The immediate result was that thousands of them lapsed, and other thousands of them submitted to the compulsion of a transfer; so that now, as already indicated, only 115 remain.
In order to accomplish this amendment, which Avas an amendment of the constitution, a two-thirds vote of the representatives at the'special session was required. This Avas accomplished by counting only the votes representing Division B. The only questions litigated herein are those involving the rights of the 115 remaining members. Four of them are the plaintiffs herein. These have been members of the order, in good standing, for from 25 to 30 years. They challenge the legality of the purported amendments of 1911 and 1916; they challenge the p,ower of the Grand Lodge to establish two■ so-called divisions to occupy the same field' of insurance; they challenge its power to charge the mortality of the order against the older membership; they challenge its power to make an amendment so fundamental as to change the essential character of the order, by converting it from a mutual assessment company, paying death losses AVhen they occur, to what, in practical effect, is
“Section 1741. All insurance companies or associations shall, upon the issue or renewal of any policy, attach to such policy, or indorse thereon, a true copy of any application or representation of the assured which, by the terms of such policy, are made a part thereof, or of the contract of insurance, or referred to therein, or which may in any manner affect the validity of such policy. The omission so to do shall not render the policy invalid, but if any company or association neglects to comply with the requirements of this section it shall forever be precluded from pleading, alleging or proving any such application or representations, or any part thereof, or falsity thereof, or any parts thereof, in any action upon such policy, and the plaintiff in any such action shall not be required, in order to recover against, such company or association, either to plead or prove such*500 application or representation, but may do so at his option.”
“Section 1826. All such associations shall, upon the issue or renewal of any beneficiary certificate, attach to such certificate or indorse thereon a true copy of any application or representation of the member which by the terms of such certificate are made a part thereof. The omission so to do shall not render the certificate invalid, but if any such association neglects to comply with the requirements of this section it shall not plead or prove the falsity of any such certificate or representation or any part thereof in any action upon such certificate, and the plaintiff in any such action, in order to recover against such association, shall not be required to either plead or prove such application or representation.”
II. We come to the ultimate question whether the amendments promulgated by the Grand Lodge in 1911 and 1916 were, in a legal sense, unreasonable, and therefore ineffective. In reaching a general conclusion upon this question, three particular features of these amendments stand out prominently. They are: (1) The separation of the membership of the order into two distinct divisions; (2) the alleged change of the fundamental nature of the insurance; (3) the discrimination made against the older members in the adoption of the 1911 table of rates, by refusing them recognition of their existing membership, and by applying the rate to them as of the age attained by them when they should transfer to Division B, instead of as of the age attained by them when they joined the order.
(1) We think it was an abuse of power to divide the membership of the order into two divisions, upon the basis which was actually adopted. There was no legitimate reason for such division. The two divisions thus created occupied the same field of insurance, and were necessarily competitive and hostile. No set of officials could consistently serve both of them. To serve one was to neglect the other. The law is deep-written in the nature of things and in human nature that “no man can serve two masters, * * * else he will hold to the one and despise the other.” This law has had its exemplification in the history of these two divisions. The amendment of 1911 purported to create Division B for the purpose of nene members, the entire existing membership of the order being left as Division A. This was pure indirection. Though indirection it was, it had the paradox
(2) Turning now to another phase of the discussion, much is said in the argument for the defendant as to the alleged insolvency of the defendant, and the necessity of adopting some means to save its existence. We are by no means satisfied that the question of solvency or insolvency of the defendant order has much pertinency to the case, if, indeed, it can be said in any case that a strictly mutual assessment company is either solvent or insolvent. This company existed originally as a purely voluntary association, without even the formality of incorporating. Tt was formally incorporated in 1911, as already indicated. It was purely a mutual assessment company, imposing and collecting assessments from its surviving members for the payment of death losses after they had occurred. It gave no guarantees. It came into being nearly fifty years -ago. It has always paid its death losses. The claim of insolvency is based upon the figures of the actuaries, from which it is deduced that, with the prospect of future mortality, it cannot continue forever to pay its death losses upon the rate of assessments obtaining prior to 1911. Up to 1901, a uniform assessment of one dollar per month had been made upon all members, regardless of age. In 1901, the differential rate was adopted which we have hereinbefore set forth, wherein a heavier rate was charged upon older members than upon the younger. This rate has always been acquiesced in by the membership, and we assume its reasonableness, for the purpose of this discussion. While the by-laws prior to 1911 fixed a rate of assessment, there never was any limitation in the bylaws as to the number of assessments which might be levied at such rate. So far as the constitution and by-laws were concerned, the only limitation upon the number of assessments was determined by the number of deaths. The power of the order, therefore, to make sufficient assessments to cov
“You shall constitute a little company of your own. You shall pay your own death losses. We shall assess you sufficiently to pay such death losses and to accumulate a reserve sufficient to pay the loss of the last man. Be thou faithful unto death, and we will give you a reward of life.”
The net result is a little insurance company of 115 old men, who exhibit staying qualities comparable to those of some distinguished creatures in the animal world. This result has been brought about intentionally, though circuitously. The creation of the divisions A and B had no other function or purpose than to accomplish just this result. Is it a fair observance of the obligation implied by this order to its membership? Cheap insurance is a pressing inducement to a young man. But what is cheap insurance worth, even to a young man, if, after he has carried it all his life, he may be walled off in old age with a few other old men, and thereby separated from all the benefits of the growing order? True, old age is a liability, but it is the very liabil
We are not unmindful of the warning contained in the briefs that an affirmance of this case will take the life of the defendant. We would fain believe otherwise. If, however, such be the result, it will be not because of the conclusions herein, but because its life has already been taken. If it may by this process become rid of its liabilities by the overthrow of its old membership, it has made a great discovery. It may adopt the same course five years hence, and every four or five years thereáfter. True, it promises otherwise henceforth, but new promises are no better than old ones. These plaintiffs had promises. Future plaintiffs will have nothing more. This course furnishes a sure door of escape from the very substance of insurance liability. It is the door of repudiation, and nothing less. What is the life of the order worth, if its insurance fails ? ■ When a human being makes the saving of his life the chief end of his existence, he has already lost it. “Whoso will save his life shall lose it.” If the past officials of this order had directed their solicitude less to the saving of the life of the order, and more to the faithful performance of its obligations, the life of the order would probably have been secure. No reason is apparent in this record why it should not have prospered indefinitely. The life-saving proceedings which are herein considered form the greatest menace which it has ever confronted. If they shall prove fatal, it must be charged up as a. lifesaving fatality. If the order can be saved, its honor must be reasserted and redeemed. No insurance company can live in the dishonor of any form of repudiation.
Putting together the plan heretofore in operation and the new plan to be in operation hereafter, it would cost Barlow more than $3,000 to mature his $2,000 policy. Consistently enough, the experts of the defendant testified, in Barlow’s case, that his present policy had no value, -because the future payments necessary to mature it would, with interest, amount to its full face value. This furnishes a concrete illustration of the defendant’s theory that old men who have outlived their expectancy have already cost the defendant order more than the value of their insurance. Such theory is manifestly unsound, and it devolves upon the order to find some other cause or source of its trouble. Barlow’s membership has cost nothing, so far, to the defendant order, nor will.it ever cost anything if his expulsion is to stand. He has paid out $998, for which, as yet, he himself has received nothing. True, the money so paid has been expended by the defendant order for the purposes for which it was paid. But the only possible consideration for Barlow was that similar expenditures would be made in behalf of his beneficiary at the maturity of his certificate. This consideration being repudiated, he has nothing. The rates tendered to him are precisely the same as they would be if he were joining as a new member. Surely, a correct theory of insurance ought to find some present value in a certificate fully maintained for 30 years, which had cost
We quote from the Ebert case as follows:
“It is evident that the contract contemplated an unsteady and varying death fund from which to pay death claims, and that the amount of the assessments would vary*511 according to the number of deaths, the growth of the association in membership, and earning capacity of the reserve fund. It is also clear that the law of self-preservation applied, and if, at any time, in order to meet maturing claims, it should become necessary to levy a larger amount than that stipulated as the maximum rate of the table, the power so to do was inherent in the association, and the di: rectors would have authority to pass suitable rules and regulations for that purpose. But it is equally clear that neither by the contract of insurance, in contemplation of the laws of New York, the constitution and by-laws, nor from the natural, inherent power of the association, based upon the doctrine of the general good, does there exist authority to arbitrarily determine in favor, of one class of members and against another class.”
Wo quote also from the Ebert case, as follows:
“The old members joined the association upon the theory that it was to be a living institution, — as old members drop out and are paid off, hew ones come in, younger in years, thus adding strength, and keeping up the vitality of the association. The new members entered upon the same basis and with the same expectation, yet they continue to be assessed as of the age of entry on the 1889 table. There has been shown no reason for drawing an arbitrary line as of January 1, 1890. If the board of directors could advance the age of all members who joined prior to 1890, they can keep on setting out classes according to some certain year of entry, and advance its members, also as to age. And, if the board can advance the members who joined prior to 1890 to the current rates of the 1889 table, they can for the same reason advance them to years ahead of the current age. The board of directors had no authority to levy such an assessment as Gall No. 96,- and the act' of the defendant in cancelling plaintiff’s policy for nonpayment of the call made upon such basis was void.”
“The essential principle upon which co-operative associations like that of the defendant is based is that there will be a constant invigoration of the association by the accession of new members; that it shall be in fact a going concern for the advantage of all; and that every member of the association will be given the benefit of the average mortality of the entire membership in force at the last death prior to an assessment, resulting from this constant addition of new members. And it was necessarily upon this • theory that the earlier members of the association joined it. They anticipated the benefit which would result from a lower average mortality through the constant accession of these new members, and it was this benefit which was secured to Benjamin as one of the earliest members, by the provision in his contract which called for an assessment ‘upon the entire membership in force at the date of the last death claim, the saíne to be apportioned among the members according to the age of each member.’ He was entitled to this benefit which would accrue from the constant accession of such members. This accession would naturally create a lower average mortality among the entire membership, and consequently a smaller cost would have to be sustained by each member, where the assessment to meet death claims was distributed over the entire membership, equally apportioned as to amount according to the respective ages of the members.”
Authorities are brought to our attention by the defendant holding contrary to the views herein expressed. Practically all of such decisions, however, are based either upon statutory provisions of the respective states or upon by-laws of the order, none which are applicable here.
By way of recapitulation, what we do hold is: That the creation of Classes A and B was a mere fiction, and was ulterior in its purpose and unreasonable in its result; that the purported partition wall between such divisions must be ignored; that the entity of the defendant is one, and not