313 Mass. 165 | Mass. | 1943
The bill alleges that between January 1, 1934, and May 1, 1939, the plaintiff was the holder of various policies of insurance in the defendant mutual insurance company. These policies were of the types known as workmen’s compensation, public liability, products liability, and automobile public liability and property damage. The plaintiff paid premiums on these policies to the total amount of $70,899.39 and received dividends at the rate of twenty per cent of the premiums, amounting to $14,179.87. It is alleged that the amounts paid by the defendant in dividends to policyholders on policies expiring during the foregoing period were "very much less than the net earnings of the defendant after setting up all reserves required or permitted by law”; that during approximately that period the defendant increased its surplus in various surplus funds
It is the contention of the plaintiff that a mutual insurance company is a strictly cooperative enterprise established for the mutual benefit of its existing policyholders; that all profits earned belong to the policyholders for the time being and must be paid to them as dividends or otherwise reserved to them; and that a mutual company cannot, consistently with its very nature, accumulate out of premiums paid in by policyholders a general surplus which will redound to their benefit only if they continue to be policyholders, and otherwise will benefit only subsequent policyholders who may have contributed little or nothing to the fund. See Commonwealth v. Massachusetts Mutual Fire Ins. Co. 112 Mass. 116, 120-121; Baxter v. Chelsea Mutual Fire Ins. Co. 1 Allen, 294, 296-297; Smith v. Hunterdon County Mutual Fire Ins. Co. 14 Stew. (N. J.) 473; Penn Mutual Life Ins. Co. v. Lederer, 252 U. S. 523, 525. Compare Huber v. Martin, 127 Wis. 412, 437-438.
It is the contention of the defendant, on the other hand, that the statutes now in force recognize the policy of the accumulation of surpluses by mutual casualty companies and permit such accumulation beyond the calculated policy reserves, even though subsequent policyholders may largely benefit therefrom; and that the by-laws of the defendant and the policies themselves, all of which by stipulation have been treated as set forth in the bill, expressly provide for the accumulation of such surplus.
The question decisive of the case is whether a mutual
General Laws (Ter. Ed.) c. 175, § 90, provides that mutual companies, other than life, transacting business of the kinds here involved, and their officers, directors, agents and members, shall, with exceptions not now material, “be subject to all the provisions of this chapter relating to mutual fire companies and their officers, directors, agents and members, so far as applicable.” Turning to the provisions relating to mutual fire companies, we find in § 80, among other things, provisions that “From time to time the directors of a mutual fire company may by vote fix and determine the percentages of dividend or expiration return of premium to be paid on expiring or cancelled policies,” which may in their discretion be different for the different kinds of risks against which the companies are authorized to insure; that “any such company may accumulate and hold profits, but only until such profits equal four per cent of its insurance in force”; and that “Such accumulation may be used from time to time in the payment of losses, dividends and expenses.” In our opinion § 80 was intended to subject the payment of dividends in mutual fire companies to the sound discretion of the directors. The word “may” is appropriate to this purpose. Brennan v. Election Commissioners of Boston, 310 Mass. 784, 785-787. Section 80 also expressly permits mutual fire companies to “accumulate and hold profits,” within the limitation there laid down, — in other words, to establish a permanent general surplus. There is nothing to the contrary in the statutory provisions for different rates of dividends upon different classifications of risks such as are found in § 80 and in G. L. (Ter. Ed.) c. 152, § 53.
Both parties in their carefully prepared briefs have traced
The plaintiff argues that the provisions of § 80 to which attention has been called above are not “applicable” under § 90 to a company like the defendant, since the accumulation of profits under § 80 is to be limited to “four per cent of its insurance in force,” and it is impossible in workmen’s compensation and liability insurance to fix upon any sum as the amount of insurance in force, as can be done in fire insurance. We do not accede to this argument. The provisions of § 80 relative to dividends and accumulations are so important in the scheme of powers and obligations of mutual companies that if such companies doing a workmen’s compensation and liability business would not, apart from § 80, have the powers in these matters there set forth (which we do not decide), only the strongest reasons would persuade us that these provisions were not intended to be made applicable to such companies. Evidence that they were intended to be so made applicable is furnished by the provision in § 54 (e) that any mutual company transacting the kinds of business there mentioned may accumulate the
We may add that the discretion of the directors in these matters is, of course, not an absolute one, but is subject to the requirements of good faith and obedience to law established as generally controlling the decisions of directors of corporations in like situations. Morse v. Boston & Maine Railroad, 263 Mass. 308, 311. Anderson v. Bean, 272 Mass. 432, 444. Joslin v. Boston & Maine Railroad, 274 Mass. 551, 555. There are in the present bill no sufficient allegations of fact to show bad faith or abuse of discretion by the directors.
Since in our opinion the applicable statutes gave the defendant power, acting in good faith, to accumulate a surplus and to withhold distribution from the plaintiff of any part of it, we are not called upon to decide whether such power has been created or could be created by the terms of the defendant’s by-laws and of the several contracts of insurance. It is enough to say that the by-laws and the policies recognize the existence of the power and contain no qualifications limiting its exercise.
No such question is here presented as was involved in the tontine provisions of the policy passed upon in Pierce v. Equitable Life Assurance Society, 145 Mass. 56. See Peters v. Equitable Life Assurance Society, 200 Mass. 579, 587. See generally New York Life Ins. Co. v. Burbank, 209 Iowa,
Interlocutory decree sustaining
demurrer affirmed.