The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1898-01-04

While 1t is certainly the duty of a COM
pany to carefully scrutinize and investigate
as to the va idity of all claims that may have
the appearance of being suspicious or fraud
ulent, still, whenever such suspicious are
based upon alleged fraudulent statements in
the application, it would appear that the
management OF the company is seriously at
fault in not instituting their investigations
when the applications were originally re-
ceived. 1t is clearly evident that this precau-
ton has not been generally observed. AS
an indication Of what might be termed some
OF the comPanys peculiar methods, it's de-
MA OF liability, under d policy contract is
sued to Robert G. Osborn, of Sulphur Rock.
Ark, in 1895, which became claim upon
his death in June, 1897, is a fair Illustration.
The company's defense in this case is alleged
drunkenness. The records show that in No
Vember, 1895 subsequent to the date that the
policy was issued, the company wrote TO the
assured calling attention 10 alleged habits
of intemperance, and stating if such were the
facts it did not desire to longer continue the
policy in force. Under date OF November,
80, 1895, Mr.. Osborn answered the companys
communication. stating that he was not in
temperate, but took an occasional glass of
whisky. On Jan. %. 1896, Mi. Osborn again
wrote stating these facts, and that he had not
received a reply to his previous letter, and
also ca ling attention to the fact that on Jan.
Is, 1896, the company had drawn on him for
his premium. A further communication, adj
dressed to said Osborn by Nj. Dorr on Feb.
l, 1896, advised that in view of his Osborn 81
statement, contained in his letter of Nov. 80,
1885, on the assumption that he was sober
and temperate, and could continue so, the
company would continue the policy in force.
and did so. continuing to receive his premium
until his death. By this peculiar agreement
the company practically waived its right to
contest the payment of this claim upon the
ground of intemperance.
LOSS AND CLAIM REGISTER.
In this connection it is proper to state that
in checking through the loss and claim reg
lister, the entries indicated that several of
the losses, which were omitted from the com
pany's last annual statement, were not re
ported to the company until the list and I'd
of January, 1897, while the proofs of loss
covering these particular cases showed the
same to have been reported, proofs filed,
and the claims duly approved by the proper
officers during the months of November and
December, 1896. Through this discrepancy
we learned that the loss and claim register
now in use is a new record, opened since
the first of the present year, and is presumed
to be a correct transcript Of the original
entries contained in the old register. We
were, however, unable to verify this fact,
owing to the absence of the leaves of the
old register containing this data, which had
evidently been destroyed; at least no one in
the office was able to produce them. Presi-
dent Scott explained that the old book was
being used for another purpose and the
leaves covering entries Of losses and claims
had been extracted, as it was considered
they could no longer be of any use to the
company, the new register contained an
exact transcript thereof.
The existence OF loss, however. was dis
covered that did not appear upon the new
register, this being the Altschuler claim, upon
which a judgment has been secured against
the company in the sum of $500. Other
than this, no evidence Of any claims was
discovered but what were duly accounted for
in the new register. Surely the parties re-
sponsible for the destruction of this old rec
ord are subject to criticism equally as severe
as if any other important books Of record
had been copied and the original destroyed.
The examiners found 1t necessary to ques-
ton the proprfety Of a practice recently in
augurated in respect to the use Of the Gin
surance fund" Of the company. This fund
consists of a stipulated portion of the pre-
MUM on dividend accretion policies, which,
after providing for the losses is annually
ON the first of the calendar year, allotted
as a bonus credit to policy holders whose
policies have been in force for two full years.
Recently the practice was adopted where a
contested claim was settled for less than the
amount of the claim, Of charging against the
insurance fund the full amount OF the claim,
and crediting the salvage to surplus, thus
making any salvage in the settlement of
claims inure to the benefit of the expense
funds, instead of the insurance fund" from
which the bonus credits to policy holders are
derived. Upon the expression of disapproval
of this practice by the examiners, the amount
of such salvages was at once credited back
to insurance fund" The total amount OF
these credits was S2,03667. In addition to
this amount it was found that S41SS.G1 OF the
balance remaining in insurance fund.- at
the END OIL 1876 naQ Deen placed TO the CrGQlt
of surplus at the time the bonus allotments
for Jan. 1, 1897, were determined. This
amount was Also during our examination.
credited back to insurance fund" 1t is not
easy to find proper reason for the transfer
of this latter amount to surplus from "insur-
ance fund.- 1t could not have been done on
the theory that unpaid losses should be pro-
vided for out Of insurance fund.- before
making division by way of bonus credits.
because the total unpaid losses at this date
largely exceeded that amount. and upon sub
sequent settlement Of claims chargeable to
insurance fund no such amount was charged
to surplus or general fund.
Another change in respect to the use Of
this insurance fund is also to be noted.
year OF dividend accretion policies were
charged to general fund, inasmuch as the
first years premiums on such policies are
wholly credited to such fund. Upon advice
of the consu ting actuary of the company that
the true intent, purpose and meaning OF
the policy contract on the dividend accreton
plan that all losses, including losses
under the first policy year. shall be paid out
of the insurance fund" the rule of charging
these first years losses to general fund is
not adhered to, and first years losses have
been charged to insurance fund" This, Of
course, operates to diminish the amount divis-
ible from that fund to policy holders. In
view of this the board decided, by resolu
ton passed Jan. 49, 1896, to convert bonus
additional paid-up insurance until the hold
ers of such policies shall have been reim-
bursed by way of increased indemnity for
the amount contributed by them towards
policy year. The further effect of this Is to
leave a larger amount in the general fund
applicable to expenses. These contracts pro-
vide that the policy shall become full paid
endowment as soon as the dividends equal the
face value of a stipulated amount. If 1t Is
intended that the dividends thus converted
shall not be counted towards maturing
the policies as endowments, this action is at
variance with this provision Of the contract.
We have not been able to find any expressed
authority for converting these dividends into
paid-up insurance.
It appears that not all the policy holders
who were entitled to share in the bonus con-
tribution of January, 1897, were given the
information necessary to avail themselves of
snch benefit. A number of policy holders
whose policies lapsed between Jan. l. 1897, and
the date the distribution was completed, were
not notified Of the amount OF their credit or
the reversion purchased thereby. Under the
resolution of Jan. 26, 1886, before referred to.
they were clearly entitled to the amount of
paid up insurance which their share Of the
been made on the bonus ledger of these
amounts. but notice was not given the as
sured. However. one case was found where
no entry even had been made. AS conse-
ouence of this, policy holders who lapsed their
policies during this period and took paid-up
insurance instead, received no paid-up in
surance for the bonus dividend made ma for
holders who died during this period received
no additional benefit which this dividend
should have purchased under the resolution
mentioned, and to which they were entitled
We are compelled to regard this as unfair
treatment of policy holders.
UNDERGROUND BUSINESS.
The fact was disclosed that the company
is receiving business, or, in other words,
issuing policies, in several states wherein
1t has no license or certificate Of authority.
While a company. whose business is secured
or written mainly through agents OF other
companies might be deemed excusable