Virginian-pilot. (Norfolk, Va.) 1898-1911, 1899-05-06
CONTRACTS CALL FOR 1T
Jndgo woodward, od Now York APP
peiIaio Court, Rem deTs Decision
which, If sustninc q, VIII Compel
Three Big Insurance Computes
TO Diatribute Enormous surplus
Among tho Policy Holders OF
these Companies.
The New York Herald says:

ward, In the Appellate Division on the
Second Department yesterday, changes
amounting almost to n revolution in the
conduct of life insurance business in
this State will result.
If this decision stands. persons hold
ing endowment policies i'll New York
companies will derive much larger ben
efits from their policies than they had
reason to expect, as each policy hold
ers share of the annual profits of the
company in which ne is insured will
be based on the total surplus of the
company. instead of on stated por
ton of that surplus.
Judge Woodward in his decision takes
the ground that directors of life insur
ance companies have no right to use
discretion in dealing with Il company's
surplus. He holds that the directors
cannot legally set aside certain por-
ton of the income as Il basis upon
which the earnings Of policies shall he
estimated.
He makes it clear that such earnings
must be based upon the total surplus of
the company.
In his decision Judge Woodward is
upheld by Judge Cullen and Judge
Hatch. Judge Goodrich dissents. he
Kidding that directors of insurance COM
panies nave the right TO exercise discre-
tion in the matter.
Judge Wnpdward's decision was in
the case of Emil Greet against the
Equitable Life Assurance Society.
Greet took out Il policy in that company
IN 1872. The policy was what ~ known
ms an endowment policy, to mature In
Hitcen years. 1t maturcd in May. 1891.
The charter of the company provides
That its business shall be conducted on
the mutual plan, and that each policy
holder shall be cedited with IN cquita-
BILE share of the surplus.
JUDGE WOODWARDS DECIsION.
After rccltirg these facts ludge
Woodward says:
1t is conceded that the plaintiff
stands In Il contract relation to the de
PENDANT. and that the defendant has
stipulated in It's contrast that the
plaintiff, during the continuance OF III e
policy. shall be entitled to participate
III the distribution Of the surplus ct
this society, but IL is urged on behalf
OF the defendant That the plaintim has
forfeited his right TO insist upon an
equitable distribution of all of he sur
plus BY the provision in the policy that
the distribution shall be made accord
Ing to such principles and methods as
may from time To time be adopted by
this society for such distribution. which
principles and methods are hereby rat
iicd and accepted.
NJ DIV ISlNN AtIIsEElJ UPON.
"Thc learned trial court has adopted
this view OF the question, but We are
unable 10 concur in the conclusion that
the minds OF the parties ever met in an
agreement that the defendant should
have the arbitrary power in dis.rhui-
ing this surplus of the society To take
ont twO-thirds Of The surplus and 10 di-
vide the remainder. The contract WAS
drawn by the defendant, and is there
fore To be construed most faNorably 10
the plaintiff where this construction
does no violence to the letter OF the
contract.
1T is not within reason to suppose
that the plaintiff. who was paying $l,+5I
per year for this INSURANCE.. VIII INC
inducement held out To him that he was
to participate in the distribution OF the
surplus of the society, mad any other
idea than that he was to participate
in the distribution of all OF the surplus
declared by the defendant. and the
waiver or ratification which the de-
PENDANT has inserted in its policies can
not be understood to go to the question
of determining what portion Of the sur
plus the society will distribute. but
to the principles and methods OF dis
tributinS the surplus when it has been
determined.
The charter of the company, which
As made public record by the provis-
ions OF the statute under which it is
organized may properly be appealed to,
at least for the purpose of aiding us in
the proper construction to put upon the
agreements contained in the policy and
in this it is provided that the officers
Of the company snail cause q. balance
TO be struck of the affairs of the COM
pany, which shall exhibit it's assets ana
liabilities, both present and contingent,
and also the net surplus. after deduct
ing sufficient amount to cover all out
standing risks and other obligations.
Each policy holder shall be credited
with an equitable share of the said sur
plus
TERMS ON WHICH 1T TOOK PRE-
NUNS.
"The affairs of the company were to
be conducted upon the mutual plan;
the stockholders were limited by law
TO semi-annual dividends of three and
one-half per cent, and each policy hold
er was to be credited with an equitable
share of the profits OF the company af-
ter the deduction of an amount suff-
Gent TO meet all of the obligations of
the company. This was the under
standing which tho company had OF Its
duties and obligations in accepting pre-
miums.
1T in effect stipulated with the State
as condition of its being that 1t would
place in the hands of its policy holders
n contract embracing these provisions.
and it cannot now be heard to say that
IL has, by mere jugglery of words,
kept this promise in form only to de-
feat 1t in substance. The substance of
the contract, as set forth in the policy,
construed, as 1t should be- in connec-
ton with the charter. is that the plain
tiif snail be entitled an equitable
share of the said surpiLs'
IF a grocer entered into q contract
with his customers to give them an
equitable share OF the net profits OF his