The herald. [microfilm reel] (Los Angeles [Calif.]) 1893-1900, 1898-08-14
TONTINE POLICY HOLDERS AND
THEIR RIGHTS
TAX ON FOREIGN EXCHANGE
Stocks and Bonds in San Francisco.
Bids Opened for New York's
Big Bond Issue
OFFICE OF THE HERALD,


surance company, decided at New Haven
few days ago, describes the principles OF
life insurance, tells how net and gross pre-
miums are arrived at, and explains the
meaning of various terms usually found in
tontine policies. The plaintiffs contended
that certain specific promises as to the con-
stitution of the tontine fund were made by
agents in the USE of pamphlet issued by
another concern, and that the defendant
should have held all legal technical re-
serves on lapsed policies, improved at COM
pound In terest, for the benefit of survivors
of the fund. According to the court the
plaintiffs sought ito revise the methods by
which the defendant ascertained the divi-
dend it could properly declare and did de-
clare on the politics." The suit was test
case, involving the sttlement of forty sim
liar ones, and has attracted attention in
insurance circles.
After noting that the meaning of the ire
serve dividend PLAN was really the sole
contest, Judge Hamersley describes life In
surance as protection given to one per-
son against the damage he may suffer
through the death of another" He says:
"a mere wager on the accident of death Is
void In mutual life insurance the protec-
ton is furnished by the premiums paid by
policy holders. The duration of any par
ticular life is the merest chance. But the
average duration Of life from any particular
age approaches mathematical certainty.
Hence IL Is possible to calculate the sum
which, paid annually by a large number of
insured, will satisfy the Insurance. on
Those who may die each year. 1t Is the
yearly death claims which constitute the
cost of insurance that the premiums must
pay This cost of insurance, which for
a young man is small increases yearly I'M
til 1t becomes large, and to avoid the neces-
sity of an increasing premiums uniform
charge is collected, which, although more
than adequate during early years, be-
comes insufficient in later life. The por
ton of the premium not used for the
early yearly cost is reserved for use when
the premium will become sufficient. Judge
Hamersley adds: 1.-The part of the
premium intended to meet the cost
OF insurance, both current and fu-
ture, is called the net premium:
it is the sum paid yearly by each to
furnish the stipulated protection for ALL
But the policy holders must pay not only
for the cost of insurance, but also for the
MUM is added sum deemed sufficient to
pay expenses and provide for contingencies.
which is called the loading. In this way
the policy holders pay the sum necessary
for the cost of insurance and expense of
management"
After explaining how premiums are CAL
culated and describing the profits of a COM
pany as Surplus resulting from overpay-
r., @01l1 >tp;o
points out what is now held to be the equity
of policy holder in the cancelled reserves
of lapsed policies, and describes the ton
tine policy one which provides for the
retention of these lapsed reserves in the
hands of the company to be divided among
the survivors of the tontine fund.- 1t says
that a dividend In life insurance is not
matter of profit, strictly speaking but is
the saving from the over-payment of pre-
miums-the saving being by a less NOR
tally than is anticipat ted, or less expense
than is expected, or larger interest re-
ceipts than are assumed, and by reserves
cancelled which are not paid out in sur
render values. The opinion says: THE
company is the absolute owner of it's as
sets and within the limits of honest deal
ing has complete control Of the time and
manner of declaring dividend on its poll
cies. This time and manner, however, may
be controlled by law, its charter and by con-
tract. But no contract can make a 'divi-
dend' anything but the return to policy
holders Of funds derived from their pre-
miums not used and not needed for the pur
pose for which they were paid"
The court thinks the denial of the defend
ant that its agents used the book of the
other concern reasonable since it really
attacked the company, and contained
statements which could not be taken Sc
riously by parties to the contract. But
assuming the plaintiffs construction of the
hook to be correct, there would then be an
agreement between tontine policy holders
that the cancelled reserves on policies
lapsed by death or non-payment Of pre-
miums, must be kept, not as an asset of
the company, but as debt to be improved
at interest and divided among the sur
vivors without regard to the equities Of
the families of the deceased members, or
the equities of the members who have
Apsed while living The court holds that
such contract, If made. would be purely
gambling contract, because the members
of the tontine fund have no insurable inter-
even If the defendant company had made
(Which it did not make) would not be en-
forced by court of equity. because courts
of equity will not determine the respective
right of gamblers to fund In the hands of
a stakeholder. The court says 1t Is up-
usual to grant a new trial on account of
errors, where 1t appears from the record
that the new trial cannot produce DIFF
ferent result" but owing to errors in the
admission Of expert testimony the plaintiffs
are granted another trial of the case.
Decision on Foreign Exchange
The greatest interest was taken today.
says the New York Evening Post Of the
9Th inst, by foreign bankers as well as by
banks having current accounts in London
and other foreign cities in the decision of
the commissioner Of internal revenue based
on the advice of the attorney general. to
the effect that "bank checks drawn in this
country on a foreign bank or banker, pay
able on sight or on demand, are subject to
the same stamp tax as bank checks drawn
In this country upon a domestic bank, that
is, to two-cent stamp only.
Bankers said today that this decision Is
Of far-reaching Importance. not only to the
hankera In this countrv engaged In doing