The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1891-08-19

sock companies5 Is Il not perfectly clear aud
beyond doubt that any company, corporation
or association" means any kind of an associa-
ton of individuals together for the pur-
pose OF transacting insurance businessf
suppose that q mutual insurance company
organized outside of the United States were to
make the deposit within the United States
required by section of our law, would the in
furance commissioner have any authority or
warrant whatever for Directing to the admis-
sion OF such company by claiming that
In order to come within the provisions
OF the law II must have its affairs con-
Quoted on the basis Of joint stock company
Such company could institute proceedings in
court and by writ OF mandamus compel the
insurance commissioner TO issue q license and
all that it woa d have 10 do would be to prove
that it had made the deposit of the securities
required by our law.
This brings US back to the original PROPOSE
ton set up by you in effect that mutual CON-
pany cannot have capital stock | wish to call
your attention to- May on Insurance. paragraph
$40. under title of Mutual insurance, Capital"
Although the members OF mutual company
are not usually nominated stockholders. and
are not stockholders in he usual sense of the
word. vet thew are in DO nj of faci stoek holfers
and in many OF the policies are recited
TO have taken portion OF the cap
ital stock This stock is usually taken
cash premium, aud the balance in what are de-
nominated premium notes: that is, notes given
for premiums, to form the basis OF assessments
for losses and expenses, and constituting the
capital or funds OF the company. The cqpftal
stock of mutual insurance company usually
consists in its cash assets, its premium aud de-
post notes, assessabie to pay losses, which are
usually denominated absolute funds, aud the
liability to fixed amount by statute or
charter, over and beyond these, to be
resorted to after the first are exhausted and
usually denominated conditional funds Some
times notes given to the company in advance
Tor premiums, called stock or advance notes,
and expressly made payable by insurance from
time to time, as the makers of the note may re-
quire, constitute portion OF the capital stock.
And between these latter notes and the ordinary
deposit notes, made payable from time 10
for losses, the distinction is to be
observed that whereas the former are payable
absolutely and at all events, without regard to
the question of loss and are therefore subject to
the statute of limitations, and are negotiable,
the latter are only payable at such times and in
such portions as may be necessary to meet losses
and expenses. Dana VS. Munro. IS Barb \.
Maine Mutual Insurance COMPANY VS.. scranton,
40 Me-, AS: Savage VS.. Medbury, 19 n. T., %;
brookmsn VS.. Metcalf, 81 n. Y, SOL
And quoting further from the same author
ity:
In some forms of mutual insurance the char
ter provi des substantially that when a person
becomes member he shall, in addition TO the
payment OF the premium, deposit his note Tor
IKE amount, as pant o. the capital stock OF the
company, to be assessed and collected by the di-
reetors in such sums and at such times as they
shau deem expedient: that all premiums and
deposits thus made shall be dominated
the absolute funds, to be applied to the
payment of expenses. borrowed money and
losses; ami If these funds should prove insult
hcienf, then the member is TO be liable to be
called upon to twice the amount oil the premium
and deposit In such case the amount of the
deposit note is colleetable at the discretion of
the directors, without assessment and the pro-
eeeds may be applied TO the payment of losses
accrued before the member became insured.
Quoting further from the same authority in
discussing the subject of mutual fire insurance,
security notes and insolvency:
In other forms of mutual insurance the COM
panies are authorized, for the better security of
dealers, to receive noies for premiums in adj
vance from persons intending to take out pol
lcles, and to negotiate such notes for the purpose
OF paying claims or otherwise in the
course OF its business; and on such portions of
said notes as may exceed the amount of pre-
miums paid by the respective makers, and on
new notes taken in advance from time to time,
annually TO allow compensation of q certain
per cent for their use. These are termed
security notes, and are In addition to the
notes given for premiums in advance in the usual
course OF business, and to be escorted to only in
cases OF insufficiency OF the latter to meet the
claims against the company. Under such
proviso the notes are negotiable by the presi-
dent without q vote OF the directors, under
his general authority to transact the
transferred to member of the company in pay
ment OF claim for loss, or for other purposes
even before loss or before any insurance has
been effected And transfer by act of law
without endorsement is effectual; but promise
by the president before its maturity, or at that
time, to give such note up, is one which he
has no authority 10 make. Nor is the surren-
der by the directors, without consideration,
binding upon the feeeiver And neither the
solvency OF the company, nor the fact that the
note is overdue, is defense If from an INSULT
cheney of other funds it becomes necessary 10
resort TO this further security. Nashua Fire
Insurance Company VS.. Moore, IS n H., As:
Aspinwail Va. Heyer,2 Sandf. IN Y. Superior
Ct.), $50: Brouwer VS.. Appleby, Saudf. IN. Y.
Superior Ct) 15s; Brouwer VS.. Hill, i sandf.
IN. Y superior Ctl Ga
From the foregoing it will be seen that the
courts have specified In unmistakable terms
just what constitutes the capital stock of
is susceptible OF being paid in in cash or its
equivalent; is also Susceptible of impairment.
and in fact every rule which we apply to stock
company, or which we might apply
under express language of the statute to an as
ISOLATION or co-partnership, is applicable with
equal force to a mutual company. This depart
ment has given the matter most careful atten-
ton, and ia satisfied that Notwithstanding the
assertions made by those who would sweep all
mutual companies out of existence if they
could, the only point which cur law
attempts to control Is that of the money or other
tankable capital which the company must en-
ploy. Notwithstanding We are perfectly will
ing to place the responsibility for the construc.
ton of this law upon the duly constituted legal
adviser OF the state. Very respectfully,
ALLEN WEIR,
Insurance Commissioner