The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1870-10-26
DAILY PRESS.
Wednesday Morning, October 26, 1870.
The Rights and Powers of Mutual, s..,,
ance 90 N, Danies
PoRI'I.ANU

pOrtant decision of the Supreme Court of th
State, in regard to the rights and powers o
Mutual Insurance Companies. This case o
been pending for number Of years, and it
adjudication removes from the Docket larg,
number of cases of SINH al nature
The opinion of the Court was drawn by
Judge Tapley, and is stated with his accus
toned cearness aud learning.
TAPLEY j. This is an action upon note
gwen for an insurance premium. The note
is payable in such portions and at such times
as the directors of said company may, agieea-
bly to their act of incorporation and bylaws
require.
Upon the 10th day of April, 1851, the d.
rectors ordered an assessment upon the note
of 500 OF, and this suit is to enforce the pay-
ment of that sum.
The defendant contends that this assess
ment is void by reason of the unauthorized /
acts OF the directors apparent from their own
| records.
By the terms of the plaintiffs charter every
member OF said company shall be, and hereby
is, bound and obliged to pay his proportion
OF all losses and expenses happening or ac-
cruing in and to the class in which his prop
erty is embraced (sec. ~ and every person
who shall become member of the company,
by effectng an insurance therein, shall before
he receives his policy, deposit his note for
| such sum OF money as may be determined by
the directors, a part, not exceeding ten per
cent, of which note shall be Immediately paid
for the purpose OF dscharging the incidental
| expenses OF the Institution, and the remainder
| OF said deposit note shall be payable in part
or the whole, at any time when the directors
shall deem the same requisite for the payment
OF losses or other expenses (sec6). All build
mgs and the land upon which they stand, and
| tue property insured therein, shall be held by
the company for any deposit note, (which
they may hold, of the member for whom they
nave insured; and the policy OF insurance to
| any member OF said company upon his build
ngs or other property shall, of Itself, create
a lien upon the same for the sum OF such de-
post note, and the cost which may accrue
collecting the same, and such lien shall con-
| tlnue during the existence of said policy and
| the llaDlllty OF the assessed thereon, not
| withstandiDg any transfer or alienation tsec
~
| These provisions substantially provide for
| the payment of losses and the expenses of
the institution in just and equal proportions
by the members, according to the amount
insured and character OF the risk. To secure
this result a note is required, and the proper
ty itself held as security for the payment in
|
dental expenses of the institution.
| Under these provisions of the charter the
assessment in question was made From
the records it appears that this class had sur.
fered losses amounting to 1,730,50, for
| which an assessment upon the notes of that
class was ordered. Having thus provided for
the payment of these losses, which are stated
in dollars and cents, not only in the aoore-
gate but in the detail of each individual loss,
Its date and amount and to whom payable,
| the directors then proceed to "vote to assess
| ninety-five per cent additional upol said
sums, on said premium notes in said
| third class of said company to meet estimat-
ed bad debts, interests, expenses and costs of
collectlons;; and the assessment in question
/ was made to cover, not only the actual exist
ing losses specified, but also the ninety-tlve
| per cent. for estimated bad debts, Interest,
expenses and cost Of collection. We think
sucs an assessment cannot be sustained
There IS no authority given by the charter
| and bylaws to the dir ectoTs to make such a
one. The provisions OF law before referred
to contemplate the assessment of the notes to
meet actual existing liabilities in just proper
| tl0ns, according to the amounts and character
| OF the several risks. To ascertain these pro-
| portions, the amounts of the several abli-
ties must be ascertained and determined.
| One class cannot be called upon to pay for
| the losses and expenses of another class
| What each class is chargeabe with musU be
ascertained, whether it be of loss OF one
character or of another, and what each note,
in the same class is chargeable with, must al
| SO be ascertained. No authority is conferred
upon the directors to estimate losses which
have and may occur, and estimate losses which
have and may accrue, and join them Ogether
with an estimated amount of interest not ac-
crued, but as yet only possibly necessary. As
ran,n lya1 fbo s..
meet existing Notwithstanding liabili-
| ties.
Ii made to meet possible contingencies for
| which if they did occur they would be prop
| erly charoeabe, fund might be raised which
might never be called for, inasmuch as the
estimated and anticipated losses may never
happen.
There can be no difficulty in ascertainng
| the liabilities after they have accrued; there
may be difficulty in doing so before. The
argument OF convenience is entitled to no
| consideration. The directors act under spe-
| citic powers and must act in obedience to
| them.
| 10 sustain such an assessment might do
| great injustice to the other members of the
company. 1t will be seen that this extraor-
| binary Overlay is by sweeping per cent.
without detail of estimate. How much for
bad debts, or how much tor interest, or how
much for expenses OF collection is not deter
mined but the whole is put in gross, at nine
ty-five per cent. and this too, while the char
4 ter charges each piece of property with the
cost which may accrue in collecting the as
sessment belonging to it, and gives a lien
thereon to secure it (sec. y. BY such a
the charges properly accruing against an
other.
| 1t no bad debts are actually made what be-
comes of the fund raised? If the amount es-
tmated tor interest proves to be too large
What is to be done with the surplus9
Why may not the directors estimate the
losses which may occur by fire during a Civ
en- period, and make an assessment for it, as
well as estimate other liabilities which may or
which may not accrue?
1t is quite apparent that such course is in
conslstant with the general purpose and de-
sign ofthe charter as well as being in conflict
with some of its specifci provisions
One serious objection to such a practice is
its great uncertainty in reaching the carninal
and fundamental end and aim of the institu-
tlon, w., just and equal sharing of the
losses, according to the amount insured and
character of the risk. 1t is not even reason
ably certain that such end will be thus at
tanned. The whole basis of the overlap lies
IN conjecture and unnecessarily so, Tor the
exact amounts may be known when they ac
crue. Good judgment and fidelity in the ex-
ecutl0n OF the trust committed to them would
1orbld such course even if 1T could be con-
sldered within the strict letter OF the charter
and bylaws.
Another objection, fatal to such an assess
ment, is the fact that it is in direct violation
OF some of the material provisions of the
charter. We have seen that provision is
made that each note shall pay the expense OF
collecting the assessments upon it. and, to Sc
cure this end, a lien is created upon the prop
erty not only TO secure the note, bnt the costs
of collecting the assessments thereon. This
general overay for estimated expenses of the
collection of the assessment in the aggregate
upon this class, imposes upon the policy hold
ers an unequal share of the expenses thus ac-
cruing, according to the amounts of their sew
era notes; and thus the delinquent is releas-
| ed from any greater expense than those who
pay upon first call, and those who are prompt
in the discharge of their liabilities are made
to contribute to the expense of collecting
from those VINO seek to avoid paying their
just share of the losses
| This objection is equally fatal if we assume
that good judgment and good faith was exer-
| cised in fixing the amount necessary to be ex-
pended in that way. We are, therefore, of
the opinion, that the assessment is invalid,
| and there must be
Judqment for the de, ,enddnt.
Walton, Dickerson, Barrows and Dantorth,
j. j., concurred.
ODD FELLowsHIP.-Several of the State
Grand Lodges of the ]. o. o. F. have just held