The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1891-08-19
RIGHTS OF MUTUALS.
Commissioner Weir Replies to
Mr.. Spencer.
REFERRED FOR LEGAL OPINION.
Misstatement OF Facts by Insurance Men
Many of the Oldest Companies In
America Are on Mutual Plan.

OLfMPiAf aug. o.-lSpec1al. Tine I0i.
lowing letter was made public today:
Mr.. D. A. Spencer, Secretary Home Fire In
surance Company of seattle-Dedr Sir. Re-
spending to yours OF the i4th instant, desire to
say first, that agreeable to your suggestion
therein viii be pleased to refer TO the honor
able attorney general of the state for bis opinion
theron, the point as TO whether an insurance
company organized on the basis of what is
termed the mutual " plan can be
Iegally admitted to do business in our
state or not Before doing so, how
ever, desire to submit for your consideration
lew OF the reasons deemed by this department
70 De sufficient warrant for its rulings upon the
question at issue. also desire to notice briefly
few OF the assertions contained in your letter,
as well as the astonishing statements quoted in
connection with your letter in the Seattle Posi-
INTELLIGENcER of August Is from Mr.. W. NJ.
Calhoun, an insurance agent of your city
Speaking in regard to the Seneca County Mutual,
Mr. Calhoun says:
According to his own circular Mr. Weir has
not complied with the law in his treatment of
this case, for he granted the certificate and then,
after receiving protest, suspended IL pending
an inquiry as to the cOmpanys assets: an In
curry which the law requires him to make be-
fore granting the certificate. He proceeds to
say that further investigation will be made with
view of obtaining satisfactory evidence
as to the value of the assets in question, thus
admitting that he has not even vet obtained the
before issuing his certificate. Meanwhile this
company MAJ do business in this state and
property owners may be induced to insure with
1t under the impression that, having Mr. Weir's
certlfirate, 1t meets the requirements of the
state law.
The absurdity of the above proposition lies In
the TACT that II its premises correct, the in
surance department having once icenced a
company TO do business in the state could not
afterwards inquire into the value of its assets
with view OF revoking such license, in case
they were found insufficient I again quote:
THAT the Seneca County Mutual has not
the 100000 paid-up cash capital required by the
law, as shown by the Insurance Year Book of 1891.
According to this authority il has $685. SO in cash
assets, sSl9,54 in deposit notes, and liabilities
amounting TO $4,000 Its premiums in 1890 were
$s,a68, and its total income s79,S37 Thus ii Sc
cured an Income of not quite Il, 900 from stock
notes, which shows what kind of assets ii has,"
The above proves absolutely nothing except the
ignorance of the writer thereof, or else
his lack of sincerity when the fact is
known that most of the stock notes in compan-
les (both mutual and joint stock companies) are
demand notes subject to collection at any time,
and bearing no interest. Speaking of the num-
Der Or proportion of mutual companies that fail
early in their existence, aud of the fact that in
the great Seattle fire about s225 600 of the losses
were insured in irresponsible companies which
settled for 40 to IS cents on the dollar, Mr.. Cal
houn says "that was one reason for the passage
of the insurance law, and Mr.. Weir is doing
everything it was intended to prevent" / am
aware that the state insurance law was enacted
for the protection of policy holders, and sets up
distinct standard of financial reliab lily as
necessary basis upon which to transact business.
am also aware that when the law took effect
there were four companies within the state do
ing business with less than the amount of cap
| ital prescribed by the act. Two of them were
stock companies and two were mutual COM
panies. The latter subsequently recognized
| on joint stock basis, but that the former were
already joint stock companies did not neces-
sarily bring them up to the required standard.
quote again:
These mutual companies are organized by
irresponsible parties without capital, for the
sake of getting the Offices. They have no CAPT.
tal stock but simply pay their losses out of their
premiums and any reserve they may accumu-
late. The stock companies must, according to
law, have 100000 capital stock in addition to
| mutual companies should accumulate any sur
plus there is nothing to prevent their dIstrlbut-
Ing il among their stockholders.
The above contains a sweeping assertion as to
mutual companies, wholly at variance with
facts, considering that many of the Oldest ard
most reliable insurance companies in the United
! States are mutual companies Among them
| may mention, Ho yoke Mutual, of ga en- Mass
| organized 1913, assets s5SS, $50: the Equitable
of Baltimore, organized 1894, assets 81, 263 5a2
| and many others that might be mentioned
| The statement that the earnings of mutual
| companies may be distributed among their
| stockholders and cannot be relied upon as capt.
tai stock is not necessarily true, and as matter
of fact l. not true in all cast by any means Ii
| is true in regard TO some mutual companies and
untrue in regard to Others, according as their
articles OF incorporation and bylaws may
specify. Iquote further from Mr.. Calhoun:
This is not the only case in which certificate
u ms
Minneapolis Mutual failed in June or July, only
short time after it had been granted certfh-
cate.
The Minneapolis Mutual was admitted to do
| business in this state on the 9Th day of August
1920, upon certificate from the insurance COM
missioner of Minnesota showing as follows:
Assets s426 pa SO: liabilities, including the re-
insurance reserve at 50 per cent, s65.005G2: net
assets, 1861 269.s7. It viii be seen by the items
above mentioned that according TO the certificate
the company was amply prepared for admission
! Into our state, and us our law presc lied that
this department shall accept certificates from
other insurance commissioners absolutely as
evidence of the standing of companies it will
be seen that we had 40 option bur 10 admit the
Minneapolis Mutual i may add that stock
conpan es fail sometimes, as we'll as mutual
companies, and II one were TO fail soon after
| procuring the certificate OF its in
surance commissioner showing il TO be I'D
10 the standard, its failure might indicate that
the insurance commissioner had been imposed
upon, or that the company had suddenly met
with losses greater than it could iquidate.
mention these facts about the Minneapolis
Mutual SIMPLY 10 show that this department
has done and is doing its duty carefully and
thoroughly and is not deteliet as might be in
ferred from the criticisms
Now. Mr. Spencer, 10 your own letter, un-
derstand that the entire gist OF your claim is
stated by you In the following words: THE law
hat
surance companies" You also say that the
legislature fully intended that it should. and
mittee / beg TO say that / have no means of
Judging as to what the legislature intended, ex-
cept by what il actually said in the statute
nacted. Let Us see.
Section OF the law provides:
If incorporated under the laws OF any other
state or country. copy Of It's articles of incorpar
alton and charter duly certified by the officer
having the custody CT such articles, that such
company Is organized under the laws Of such
state or country, with the amount of capital
stock and assets required ny this act: third il
not incorporated, q certificate setting forth the
nature and the character OF the bushes, the To-
cation of the principal office, the names of the
persons composing the association, the amount
of capital employed therein snd the names OF
the officers OF the association.
You will notice that according 10 the above
our law does not even require SIS Il condition
precedent 10 the admission OF sn insurance com.
pany from another stste that IL shall even
be incorporated II might be simply on the
basis OF a eo-psFtnership. The use Of the
words ''the amount OF capital en-
ploysd therein" is notice 20 the world that
instead OF prescribing the form OF organization
ar basis of ia business operation, our law sim.