Evening star., 1902-04-25
IMPORTANT OPINION
THE RESERVE FUND
IN INSURANCE.
Solicitor Duval1 Holds It Should Begin
From Time Of Issuance
Of Policy.

MIR. A. B. Duvall. the city solicitor this
afternoon rendered to the District Com
missioners an important opinion on certain
questions submitted by the superintendent
OF insurance, relating to the reserve fund
required of insurance companies doing busi-
ness in the District Of Columbia by section
64S of the code. The opinion also deals
with the treatment of preliminary term in
surance.
ut appears that prior to the enactment OF
the CODE" Mr.. Duvall says, ''the law reg
ulating insurance In the District Of Colum-
bia was the act approved January 28, 1857.
BY the provision of that law every life in
surance company. except those organized
upon the plan of assessments on their mein-
bers, was required to have assets equal to
its liabilities, including a reserve liability
computed upon the basis Of the American
experience mortality, at Az per cent In
te1est. -.'s, E
''The same subject Is covered by section
64S Of the code which, after providing for
q paid up capital Of 100000, provides as
follows: All life and fire insurance COM
panies or associations licensed to do busi-
maintain reinsurance reserve fund omit
ting, however, the specification of the
basis of the reserve fund, such as was pre-
scribed in the act OF 1887
Repealed by Implication.
Mr.. Duvall refers to the creation of the
department of insurance by the code and
says the subchapter is intended to cover
the entire subject matter of the regulation
of insurance in the District of Columbia !;
and. therefore. whether the law Of 1887
were repealed by the repeating clause OF
the code or not, 1t is repealed by implica-
ton, the code having covered the entire
subject. Continuing, he says:
"a reserve fund being required by Sec
ton 64S Of the code. and the basis Of the
same not being specified. 1t remains to be
determined what Is reinsurance reserve
fund within the meaning of the code. 1t
appears to me that this is a matter which
is to be determined by the superintendent
OF insurance, governed by the general prac-
tfce and customs Of insurance companies
Another question is presented by the
letter of the superintendent of insurance
In relation to the treatment Of preliminary
term insurance. and accompanying his let
ter Is a form of policy used by an insurance
company, by which 1t appears that when
the policy is issued the contract in form is
made to appear to be contract for one
year. with the option Of applying for con-
tract for life upon the payment of the an
nual premiums.
'The evident purpose Of this is to exclude
the contract for the first year from that
class of insurance requiring reserve fund,
and thus allowing the company to retain
and use the entire premium for the first
year. This is clearly an attempt Of an eva
sion Of the law requiring a reserve fund.
which l understand Is made up from the
premiums paid.
When Reserve Fund Begins.
"It is my opinion that however the poll
cy may read, 1t Is subject to the provisions
Of the law requiring reserve fund from
the time It is issued. This view Is support
ed by a decision Of the supreme court of
Massachusetts, In the case Of the Provident
Savings Life Assurance Society against
Cutting, insurance commissioner. copy
of the opinion In that case is with the pa
pers referred to me.
'The consent of the assured cannot
change the obligation of the insurance
company under the law. It is my opinion,
therefore, that whatever the form of the
policy, the reserve fund should begin from
the time Of the issuance Of the policy"
The Commissioners have approved the
opinion.