The Montgomery advertiser. [volume] (Montgomery, Ala.) 1885-1982, 1907-04-26

before me that the two propositions
must be kept separate and distinct be-
cause the life insurance company and
the stock agency company are sep
crate and distinct because the life in
surance company and the stock agency
company are separate legal entities.
But on account of the relations they
sustain to each other, In my opinion,
the plans must be considered together.
AND, therefore. / advise you that in
every such case the terms and condi-
lions relative to the sale of the stock
should be plainly expressed In the poll
icy issued by the company. This,
OF course, Is equally applicable to those
companies that propose to sell their
own stock In connection with insur-
ance.
The method of selling stock by
tne insurance companies, or their sub
sidiary or auxiliary companies above
referred to. does NOT involve a rebate
OF premium payable on the policy as
the term rebate Is used in Sub-di-
vision of Section 26O2 The most
that can be said .of the plan in this
connection Is that the holder of the
agency stock is entitled to the divi-
dends earned thereon by the agency
company or In the case of the life in
surance company, the dividends earned
by that company. In each case the
holder of the stock pays for the right
to participate in such dividends in ad-
dftfon to paying the premium on the
life insurance policy.
Meaning of word "Class.s
1t only remains to be determined
whether or not the option to purchase
stock offered to certain insurants would
constitute such holders of stock a
class within the meaning of Sub-di
vision of Section 1902.
The word class as used in the stat
ute, In my opinion. seems simply a dis
tinct and separate group or set of IN
surants who pay uniform premiums
proportionate to age or whose policy
contracts are similar in respect of
their essential basic or elemental fea-
lures. But this does not mean that an
insurance company can constitute at
Will class by varying the policy con-
tract slightly. or by modifying 1t in
some collateral feature, not effecting a
change In its basic or elemental char
acteristics. Hence, 1 hold that there
must of necessity be some other dis
tinction in class than the mere en-
joyment by one of an option or privi-
Iege to purchase stock not enjoyed by
another
The suggestion that If the contract
of one policy holder contains the op-
ton and the contract of another policy
holder does not contain the option to
purchase stock there Is equality among
the persons holding contracts contain
ing the option thus constituting one
class and among those whose con-
tracts do not contain the option thus
constituting another class Is incon-
sistent with the purpose of the stat
ute and with my construction and
understanding of the word class
Must BE Printed In Policy.
80 that If the option to purchase
the agency stock is printed in and
made part Of every policy of insur-
ance and is given alike to every pol
icy-holder, the statute will be complied
with. In order that this may be done,
1t is not sufficient for the agent of
the company merely to offer insurance
and the agency stock, giving the per-
son to whom the stock is offered the
right to decline to make the purchase,
but the right or option to purchase
must be printed in every policy, wheth-
er previously accepted or rejected by
the policy holder. any other require
ment than this would leave the mat
ter open to evasion.
In addition to the requirement that
the option shall be printed in each pol |
Icy. the stock must be offered for sale
TO every person upon the same terms
both as to number of shares and pay
ment for same and there must be no
reduction in the price of the stock con-
uitiOHtu on the prospective pOIlCy nOIQer
taking out policy
THE question here presented Is the
subject of comment and criticism in
many of the documents handed me by
Mr.. Sexton when begun my investi
cation. and 1t seems that many of the
insurance commissioners over the
country are opposed to similar plans;
this. on the general principles that It
is violative of public policy to permit
inducements of any nature to be Of
fered in connection with life insurance
and, principally, however, for the rea-
son that the prospective dividends to
accrue on the agency stock are very
much inflated impossible of realiza-
ton and. therefore, deceptive and
fraudulent. but this is matter for
the prospective shareholde to settle
for himself. He may or may not real
ize the results claimed by the agency
company.
Must Obey Spirit of Law.
life insurance has become a busi-
ness of such vast and wonderful pro-
portions and is regarded in the light
of such a necessity. that the State has
assumed the duty and the right of
regulating and controlling 1t in order
that its citizens shall be fairly treated
by insurance companies. Such was the !
purpose of the law in vesting you with
authority of general supervision over
your duty. within the scope of your
authority. to see that no insurance
company adopts any plan of insurance,
although 1t may be within the letter |
and form of the statute, which is in
effect and result in a violation of its |
spirit and intent and thus in violation |
of public policy and to the injury of
its patrons within the State
The subsidiary companies above re-
ferred to whose stock Is proposed to |
be sold in connection with life insu- |
rance are creations of the insurance
companies and organized primarily to
serve the Insurance companies. They
occupy the most intimate relation to
each other. although 1t is true they
possess separate entities and are dis
tinct corporations, having only con-
traotual relations with the insurance
companies.
You will observe, however, that in
requiring the option or right TO pur
chase stock to be printed in the policy |
contract. I have proceeded upon the
theory that in each case the insurance |
company and the subsidiary company
are so intimately connected that the
Insurance contract and the stock OPP
ton must be construed as an entire /
contract; and therefore, 1t is of obvious
importance that the contracts between |
such companies should be carefully ex-
amined by you and the stipulations
and agreements closely scrutinized to
prevent such exactions and terms IN
the contract as would result in palma