237 Pa. 375 | Pa. | 1912
Opinion by
The plaintiff is a policy holder in the defendant company. He carried to maturity two endowment policies, one for ten thousand dollars, taken out November 28, 1871, which ran for thirty-eight years, and became payable November 28, 1909. The other policy was for five thousand dollars, taken out January 18, 1889; ran for twenty years, and became payable January 18, 1909.
As appears from its charter, the defendant company is authorized to carry on not only the business of life insurance, but also that of a trust company, and to receive deposits of money and other property and to act as trustee, guardian, executor, administrator, &c. But the , charter contemplates that its life insurance business shall be conducted separate and apart from its other' business, and upon a purely mutual basis. The stockholders of the company as such are to derive no profit from the insurance business. The Act of February 18,
The term “net profits” as applied to the business of life insurance is not strictly accurate, but its use by the framers of the law was evidently meant to apply to such funds as might arise from the receipts of the company in excess of the cost of doing business, and of the maintenance of a reserve fund, which will provide for the payment of claims on account of deaths, or the maturing of the policies. The surplus is a fund entirely apart, from the reserve. The solvency of the company depends upon maintaining the integrity of the reserve fund, but the surplus may be distributed without in any way affecting the ability of the company to meet its obligations upon its policies as they mature. When therefore the law requires all the net profits to be divided pro rata among the policy holders, it obviously refers to items of surplus. These items arise from savings upon the assumed rate of mortality, from the excess of interest received over the assumed rate, from the loading for expenses, and the gains from lapsed and surrendered policies. All such items we understand go to make up the surplus, or the so-called net profits of the business and it is from this source that all so-called dividends and returns to the policy holders, in excess of the face of the policy, are made.
In the present case it appears that upon the date of the maturity of the plaintiff’s policies, the defendant company had, in addition to its lawful reserve, a surplus fund of nearly eight million dollars. The plaintiff claims that under the law it became the duty of the directors to ascertain and report the pro rata share of
The answer filed on behalf of the company admitted that the appellant was the holder of the policies maturing as alleged in the bill; that under its charter the company was required to divide among the policy holders the profits from insurance as set out in the bill, and that its surplus was about eight million dollars. But that appellant was entitled to anything more than had been offered and paid to him without prejudice, was denied. It was further asserted that the action of the directors in dividing, or in refusing to divide, the surplus, Avas not subject to review or modification by the court. Upon issue joined, the case was heard in the court below, and it was held that the appellant was not entitled to the relief for which he prayed, and that the bill should be dismissed. No opinion was filled. Exceptions filed by the plaintiff to the findings of the trial judge were overruled, and a decree was entered, dismissing the bill. Plaintiff has appealed, and assigns for error the overruling of various exceptions filed in his behalf, and the entry of the final decree.
The law clearly directs that the net profits are to be divided among the policy holders, equitably and ratably, and it clearly contemplates that the directors shall from time to time ascertain, determine and report what such an equitable division should be. It appears from the testimony of the president of the company, Mr. Wing, that when appellant’s policies matured in 1909, no attempt was made to ascertain in any accurate way the amount of net profits then subject to equitable division, or to fix the amount of his proprotionate share thereof. All that was done with respect to the matter was under the terms of a general resolution passed by the board
Appellant contends that the amount which the directors thus arbitrarily allotted to him was not based upon any reasonable calculation as to the amount of his share in the net profits, and did not therefore constitute such an equitable and ratable division of the profits as is contemplated by the terms of the charter of the defendant company.
Counsel for appellee cite in their argument the case of Provident Life & Trust Co. v. Durham, 212 Pa. 68, to sustain their contention that the “surplus and contingency fund” belongs to the company and not to the policy holders. The distinction is not important here, for appellant does not claim to be the owner of any particular part of the surplus fund, but he contends that the directors are bound to ascertain the amount if any of his interest in the “net profits,” and to award to him such dividend as he is entitled to. It will be remembered that the president of the company, in his evidence, disclaimed any disposition to dispute the fact that this so-called surplus belongs to the policy holders, when the directors can determine the proportion in which it shall be divided. The decision in the case cited involved nothing but the question of the right of the State to tax the company’s reserve, as a fund held in trust for the .policy holders. It was held that in so far as the right of taxation was concerned, the title to the insurance assets was vested in the company, in its own right. The principle there announced has no bearing upon the question now under consideration.
In the case of Equitable Life Assurancé Society v. Brown, 213 U. S. 25, the holder of the policy was entitled to participate in, the distribution of the surplus “according to such principles and methods as may from time to time be adopted by this society for such distribution, which principles and methods are hereby ratified and accepted, by and for any person who shall have or claim any interest under this contract.” Mr. Chief Justice Peckham held that the terms of the contract prevented the policy holders from claiming the right to an accounting, or to compel the distribution of the surplus fund in any other manner than that provided for in the contract.
The case now before us is clearly distinguishable, in that the policy contains no such provision as that upon which the decision in the Brown case turned. And further, in the fact that in the present case the directors of the company awarded merely an arbitrary percentage determined without accurate calculation.
The decision in Mutual Insurance Co. v. Trust Co., 100 Pa. 172, has no bearing upon the question here involved. It was there held that the law would not apply an undivided surplus, out of which the insured might
In Uhlman v. Insurance Co., 109 N. Y. 421, which Avas a suit for an accounting under a tontine policy, Mr. Justice Peckham said (p. 432) : “We do not, however, accede to the claim of the defendant herein to its full extent, ...... which is, that the apportionment, as made by the defendant, is absolutely, and at all events, conclusive upon the policy holders. We hold that, under the terms of this policy, the apportionment was to be equitably made, and, in the first instance, by the defendant’s officers or agents. But, inasmuch as the agreement is that the apportionment shall be an equitable
Counsel for appellee suggest that a mathematical method of computing the equitable and ratable division of net profits among policies, as they mature, would be impracticable. Why this should be so is not apparent. A mutual insurance company is essentially a great savings institution, and its methods of accounting might follow those of other savings institutions, in keeping an account with each policy holder, so that a statement of the condition of the policy might be furnished when required. Or the policies might be grouped into classes of those issued in the same form, and accounts kept with the classes. This is a matter for accountants to determine. Surely the business of insurance is not one which is beyond the methods of accuracy in the keeping of its accounts with its policy holders, or in the determination of their fair share of the savings of the business.
We are of opinion that the plaintiff is entitled to a decree requiring the defendant corporation to state an account showing the net profits it held, derived from its business of life insurance at the time of the maturity of his policies, and to ascertain the amount of and pay over to him his equitable and ratable proportion thereof.