The morning news. [volume] (Savannah, Ga.) 1887-1900, 1899-05-05
MAY MEAN MILLIONS.
An Important Decision Respecting
Mutual Life Insurance.
From the New York Herald.

From the New York Herald
If the court of appeals suslains decision
handed down by Judge Woodward, In the
Appellate division of the Second depart
ment yesterday, changes amounting al
most TO revolution in the conduct of life
insurance business in this state will re-
suit.
If this decision stands. persons holding
endowment policies in New York COM
panies will derive much larger benefits
from their policies than they had reason TO
expect as each policy holders share of
the annual profits of the company in
which he is insured win be based on the
total surplus of the company, instead of
on a stated portion of that surplus.
Judge Woodward in his decision lakes the
ground that directors of life insurance
companies have no right to use discretion
in dealing with a company's surplus He
holds that the directors cannot legally set
aside a certain portion of the income as
basis upon which the earnings of policies
shah be estimated.
He makes it clear that such earnings
must be based upon the total surplus OF
the company.
In his decision Judge Woodward is up
held by Judge Cullen and Judge Hatch.
Judge Goodrich dissents, he holding that
directors of insurance companies have the
right to exercise discretion in the matter
Judge Woodward's decision was in the
case of Emil Greeff against the Equita-
BILE Life Assurance Society. Greeff took
out policy in that company in 1882. The
policy was what is known as an endow,
ment policy to mature in fifteen years. II
matured in May 1897. The charter of the
company provides that it's business shall
be conducted on Che mutual plan, and
that each policy holder shall be credited
with an equitable share of the surplus.
After reciting these facts, Judge Wood
ward says:
1t is conceded that the plaintiff stands
in contract relation to the defendant. and
that the defendant has stipulated in its
contract that the plaintiff, during the con-
tinuance of the policy, shall be entitled 10
participate in the distribution of the sur
plus of this society, but it is urged on be-
half of the defendant that the plaintiff
has forfeited his right to insist upon an
equitable distribution of all of the surplus
by the provision in the policy that the dis
tr1bution shall be made according to such
principles and methods as may from time
90 time be adopted by this society for such
distribution, which principles and methods
are hereby ratified and accepted
The learned trial court has adopted this
view of the question, but we are unable
to concur in the conclusion that the minds
OF the parties ever met in an agreement
that the defendant should have the arbi-
trary power in distributing this surplus of
the society to take out two-thirds of the
surplus and to divide the remainder. The
contract was drawn by the defendant.
and is therefore TO be construed most IA
vorably to the plaintiff, where this con-
struction does no violence to the letter of
the contract.
1t is not within reason to suppose that
the plaintiff, who was paying 81 ,457 per
year for this insurance, with the induce
ment held out to him that he was to par
ticipate in the distribution of the surplus
of the society, had any other idea than
that ne was to participate in the distribu-
ton of all of the surplus declared by the
defendant; and the waiver or ratification
which the defendant has inserted In its
policies cannot be understood TO go to the
question of determining what portion of
the surplus the society will distribute. but
to the principles and methods of distrib-
uting the surplus when il has been deter
mined.
The affairs of the company were to be
conducted upon the mutual plan ;the stock
holders were limited by law to semi annuaI
dividends of three and one-half Der cent.
and each policy holder was 10 be credited
with an equitable share of the profits of
lne company a1Ief the deduction of an
amount sufficient to meet air of the obliga-
tons of the company. This was the under
standing which the company had of its
duties and obligations is accepting prem
iums.
ut is not part of the surplus. but the
surplus an which the policy is to share"
This company, organized in 1859 with
a capital of 100000 has a surplus of over
&3000,00 coo. If this surplus is not to be divi-
ded among those who have paid the prem
iums, but is to go eventually to the stock
holders, the institution is builded upon a
false pretence, for ii has held out to it's
policy holders the promise that this fund
should be distributed among them, and il
has avoided its taxes to the state upon
the proposition that the fund was held
for the exclusive benefit of the assur-
ed"
Judge Woodward concludes:
THE pleadings clearly indicate that the
defendant owes the plaintiff an amount
equal TO that which is claimed, and it
does not the matter may be determined
upon the trial of the action Conceding
the facts stated in the pleadings. the
plaintiff is entitled to judgment, and we
conclude. therefore, chat the interlocu-
tory Judgment appealed from should be
reversed and the demurrer overruled.
with costs"
Judge Woodward in this decision over
rules a decision handed down by former
Greeff when the case first came before the
Supreme Court.
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III