The Plymouth tribune. (Plymouth, Ind.) 1901-1911, 1905-06-22
MUTUAL FIRE INSURANCE
TWO INDIANA MUTUAL COM
PANIES SUSPEND.
Mutual Fire Insurance Conceded to be
Impractical.

III HCl Oldlc AuU1lOA
d. Z. Sherrick has served notice upon
two mutual fire insurance companies
that they are not organized in accord
ance with the statutes of Indiana. and
requiring each to suspend business at
once. These concerns are the Mer-
chants Mutual Fire Ins. Co.. and the
Merchants National Mutual Fire In
surance Company, each of Indianapo-
lis.
The former began operations Sep
TENDER. 1904. and the latter in Janu-
airy 1905, since which dates they have
been doing a large business through
out Indiana. especially in its smaller
towns and cities. When these CON-
panies applied for authority to begin
business, each made affidavit to the
State Auditor that it had taken in -ex-
cess of one hundred thousand dollars
of bona fida premium notes as re-
CURED by law and over twenty thou
sand dollars in cash.
Early in the year an examination OF
each company by the Auditor of the
State disclosed the fact that neither
had cash In hand of the amount re.
quired to organize viz. 0,G00 and the
opinion of the Attorney General being
given that this amount must be re-
tanned AS cash reserve, the COM
panies were SO notified and after some
delay the promoters raised the requir-
ed funds.
1t was observed that the so-called
premium notes alleged to be held by
the companies, which are closely as
ISOLATED together. were each of un-
usually large amounts and in most
cases the note was given for exactly
the amount of insurance applied for.
In the Merchants Mutual the Vniire
Insurance in force at time of organiZa-
ton was $4,000 to secure which
premium notes were alleged to have
been given of s103,250. The Mer-
chants National Mutual had received,
according to its affidavit, $685. 500 to
secure the makers insurance in the
amount of only S129,SO0.
This condition was so peculiar that
the State Auditor on April 10Th adj
dressed an inquiry to the Attorney
General asking what in his opinion
would be considered a bona fida
premium note, or in other words would
a note for $4,000 for $4,000 of insur-
ance be considered a bona fida
premium note within the meaning Of
the statutes providing for the organiza-
ton of mutual fire insurance COM
panies. Attorney General Miller re-
sponded upon the next day in part as
follows:
"The notes must be not only bona
fida notes, but they must be good
faith premium notes given by solvent
parties. 1t is hardly necessary to dis
cuss that note of $4,000, if given by
solvent party, and such party re-
ceives only $4,000 insurance, is not
given purely as a premium note. as
any one knows that no person will
pay any such amount for such an
amount of insurance, or can Ii be con-
ceived how a premium note, for $4,000
given for $1,000 of insurance could be
enforced to its full amount. 1t Is
clearly my opinion that such a note
would not be bona fida premium
note"
The notes thus referred to were
made almost entirely by non-residents
of the State, mostly by citizens Of
North Dakota, with a number from
Minnesota.
Among the makers two other nnutu-
al fire insurance companies each for
$1,000, and by several clerks in the
Offices of these companies. 1t is stat
ed that the promoters who came from
North Dakota proposed to control
these companies and to operate them,
not upon the basis of purely mutual
II +I4
company as virtually the property or
the Originally note makers.
The insuring public throughout In
diana was urged to patronize these
companies upon the basis of the usual
yearly notes and premiums, but only
sixty per cent. of the years premium
was demanded in cash and premium
note given for the remaining forty per
cent. In many cases the insurer did
not fully understand the probability OF
assessment upon the note given. nor
did he know of the existence of a
special class of policyholders who
were to receive the large proportion
of profit earned as the virtual owners
of the company. A further opportunity
was given the companies to present
their claims as to why these premium
notes should be admitted as bona fida
premium note assets. but on May 10Th
the Acknowledgement after going into
the merits of the entire case, consid-
ering the forms of notes, contracts and
policies made as between the COM
panies and their two classes of men,
bers again ruled adversely as to the
admission of the premium notes offer
ed as the basis for organization. The
action of the Auditor in ordering the
discontinuance of business and revck-
Ing licences then followed.
Although business and income have
of course now ceased, no receivers
have yet been appointed for either
company An effort will be probably
made to organize stock company to
take the business of these concerns.
Several million dollars Of insurance
Is in force in these concerns and credi-
Tors are scattered throughout Indiana.