The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1899-06-13
ON SPECIAL CONTRACTS
INJUNCTION BROUGHT AGAINST
STATE LIFE BY POLICY HOLDER.
still Violating State Audit
or's Recent Order-An An
swer Filled.

on special contract insurance in this safe Is
TO be tested in the Supreme Court. Attorney
General Taylor some weeks ago sent al
opinion TO the auditor of state. declaring
that special contracts were illegal as insur-
ance features, and that companies had 10
right TO issue them. Auditor Hart at once
sent out notice that insurance companies
would no longer be permitted to make
these contracts. The State Life Insurance
Company. of this city, is one Of the insur-
ance concerns having a special contract
feature, and yesterday a suit for injunction
was brought against the company. The ac-
ton was commenced in Room 2, Superior
Court. by Robert Lowry. who is represent
ed by Attorneys Hefron and Carbon.
Mr.. Lowry says he is a policy hc,der in the
State Life Insurance Company, but has no
special contract. He shows that the COM
pany was so organized that IL might be
able TO issue special contracts to certain
policy holders. The plaintiff AYERS that in
view of the attorney generals decision this
feature of the company's business is being
carried on in violation of the State laws.
He further claims that it Is in derogation
Of the rights of policy holders who do not
have such contracts. The special contracts
provide that those who hold them shall
perform certain service for the company,
and receive compensation therefor according
TO the terms of the contracts. The plaintiff
AYERS that the special contracts are really
insurance contracts issued under the guise
Of service contracts" and furnish insur-
ance to holders OF the same at a smaller
cost than TO those who have no such con-
tracts. This, II Is averred, Is unfair dis
elimination between members. The plaintiff
further alleges that the State Life Insurance
Company has ignored the order of the audi
tor of state and is still issuing special con-
tracts. He asks that these contracts be de-
clared void, and that the company be en-
joined from issuing more of them. The
court Is also asked to enjoin the company
from paying out money on contracts already
issued.
Within an hour after the suit was filed
Charles f. Coffin, attorney for the insurance
to file. The answer in defending the action
of the company AYERS that among the pro-
visions Of the act under which Ii is organ
ized and Is transacsing business Is one 10 %
doing business under the law in question
may. by its board Of directors. trustees or
managers. make bylaws and amendments
thereto not inconsistent with the constitu-
ton and laws of this State, or of the United
States, which bylaws. If of a mutual COM
pany, shall define the qualifications and
privileges of the members and policy hold
ers thereof" The answer then sets out
Section % Of its constitution and bylaws
as follows:
I'm order TO promote the growth of the
company and TO reduce TO a minimum the
cost OF procuring and maintaining It's busi-
ness the executive committee may employ
by written or printed contract local agents,
assistant agents, advisers or representatives
in the various States and communities in
which it does, or may hereafter do, bust
ness, and In such numbers as IN the Juog-
ment of said committee shall be deemed adj
visable. For the purpose of compen-
sating said local agents, assistant agents,
advisers or representatives. and all holders
OF contracts of a similar general character
heretofore issued the company is authorized
to use from the expense fund or element OF
its premiums a sum not TO exceed In any one
calendar year So per thousand on the amount
of insurance in force at the end of the pre-
ceding calendar year"
STILL ISSUING THEM.
The answer admits that the company has
issued a number of vice counselor con-
tracts of the kind referred to in the plain
tiff's complaint. and that 1t is still issuing
and intends to issue these contracts and
employ agents designated as vice counselors
until the entire number of one thousand
have been employed. The answer AYERS that
'all of these vice counselor contracts have
been issued in accordance with the authority
conferred by statute and by Sections is and
% Of the bylaws of the company, and that
the purpose of issuing such contracts Is to
- u III -
agents and representatives in the various
communities Throughout the State who will
be able TO furnish the company with such IN
formation as Is necessary to enable IL 10
safely place its risks and 10 secure as its
soliciting agents men OF good reputation and
recognized ability"
The answer insists that the experience Of
the company has demonstrated that this
method of securing the cooperation and
friendly assistance Of representative men in
different communities of the State Is the
most effective and economical method OF Sc
curing and maintaining the business of the
company the concern has yet been able tC
devise. II Is averred that 1.-The compensa-
ton paid the holders of vice counselor con-
tracts is paid entirely out Of the expense
fund of the company and In no way inter
feres with the insurance element of the pre-.
miums paid the company and imposes no ad-
ditional burden on any member Of the COM
pany." II is insisted that by the method
above referred to the company has been able
TO build up and maintain its business at a
smaller cost TO its policy holders than any
other irst-class insurance company in the
country 1t is claimed that as a result OF
the method set out the company has now or
hand in Understanding securities and In
cash $11 for every 800 of its insurance liza.
bility. The answer further AYERS that the
vice counselor contract is not intended to be
an insurance contract. but Is simply a con.
tract for services to be rendered the COM
pany by holders of these contracts.
1t is understood that a demurrer to the
answer will be filed this morning. and tina
Judge feathers will hear argument on tbs
case and give a decision at once so thai
the case may be speedily prepared for the
Supreme Court.