Case Name: George L. Pratt, Appellant, v. The Dwelling House Mutual Fire Insurance Company of Orleans, Niagara and Monroe Counties, N. Y., Defendant; John E. Didama, as Receiver of The Dwelling House Mutual Fire Insurance Company of Orleans, Niagara and Monroe Counties, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1896
Citations: 7 A.D. 544
Docket Number: 
Parties: George L. Pratt, Appellant, v. The Dwelling House Mutual Fire Insurance Company of Orleans, Niagara and Monroe Counties, N. Y., Defendant; John E. Didama, as Receiver of The Dwelling House Mutual Fire Insurance Company of Orleans, Niagara and Monroe Counties, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 7
Pages: 544–550

Head Matter:
George L. Pratt, Appellant, v. The Dwelling House Mutual Fire Insurance Company of Orleans, Niagara and Monroe Counties, N. Y., Defendant; John E. Didama, as Receiver of The Dwelling House Mutual Fire Insurance Company of Orleans, Niagara and Monroe Counties, Respondent.
Mutual insurance company —its members are liable only, for a pro rata share of the-. loss — they a/re not liable for the defaiclts of the other members — notice to the members of an application for an assessment—Laws 1880, chap. 362, § 7 ; 1881, chap.. 171, § 5. '
Upon an application made by a policyholder of a mutual insurance company for an order requiring its receiver to make a reassessment upon its members, it-appeared that the court, upon the application of the plaintiff, who had sus-’ tained a loss covered by his policy, had already ordered the receiver to malteone assessment upon the members of the company to meet the loss; that if all of the members had paid their pro rata share, enough would have been realized, upon this assessment to pay the plaintiff’s claim, but that as some of the members were for various reasons unable or unwilling to pay the assessment, the.' plaintiff only succeeded in getting about two-thirds of his claim. The reassessment was asked for the purpose of realizing the remainder of the claim.
The act under which the company was organized provided that “every person * * * so insured shall give his, her, its or their contract or agreement, binding him, her, it or them, their heirs or assigns, to pay their pro rata share to the company of all losses or damages caused by fire or lightning, which may be sustained by any member or members thereof. He, she, it or they shall also pay such percentage in lawful- money, and such reasonable sum for policies and expenses, and within such time as may be required by the by-laws of said company.”
Held, that the obligation imposed by the statute upon a member was merely that he should pay his pro rata share of any losses, and that he did not indemnify the insured against a deficiency arising out of the insolvency of a member, nor did he incur any obligation to pay the proportion of any other member who became insolvent, or who was, from any cause, unable to pay his proportionate share of the loss.
Semble, that in such a proceeding the members of the company to be assessed should have notice of the hearing before the referee appointed to take proof and to report whether a further assessment should be made, to the end that they might contest the application, and, if necessary; except to the referee’s report and oppose its confirmation.
Appeal by the plaintiff, George L. Pratt, from an order of the Supreme Court, made at the Erie Special Term, and entered in the office of the clerk of the county of Orleans on the 26th day of February, 1896, denying his application for an order requiring the defendant receiver to make a reassessment upon the members of said defendant.
The defendant was a mutual insurance company, organized under chapter 362 of the Laws of 1880, as amended by chapter 171 of the Laws of 1881. July 27, 1892, the plaintiff recovered.a judgment against the defendant, on account of a loss by fire, covered by a policy of insurance issued by defendant, for the sum of $2,601.30 damages and $800.94 costs and disbursements. An execution was issued thereon, and returned wholly unsatisfied. Thereafter an action was instituted for the appointment of a receiver of the defendant corporation, and a judgment was obtained appointing a receiver, who duly qualified, and is still acting as such. The company had no assets, and the only person having a claim against the company is this plaintiff. The only mode of paying plaintiff’s judgment was by assesssment of the members. The court, upon an application on behalf of plaintiff, granted an order allowing the receiver to make an assessment upon the members of said corporation.' Said receiver made such assessment, and the same would have been sufficient to pay said; judgment, expenses and fees, had all the persons assessed paid their assessments. This was not done, and the receiver has paid on' such judgment the sum of $2,200, leaving a balance unpaid of about $1,200. The plaintiff again applied for an order that the receiver make a reassessment upon the solvent members of the defendant, to pay this deficiency. It was claimed that some of the members assessed were insolvent, that some claimed to have been assessed erroneously, and some, that they were not members of the defendant at the time of the loss by fire, and, therefore, the assessments could not be collected in full. Upon the application a reference was ordered, and the referee required to take proofs, and report to the court on the propriety and legality of making a reassessment against the members of the company who have already paid an assessment for the purpose of paying said claim against the company. The referee reported in favor of such reassessment. The court -refused to confirm the referee’s report, and denied the application for the order permitting the receiver to make such reassessment, and from that order this appeal was taken. The receiver opposes the application, and alleges that there are no assets in his hands as such receiver, and demands that, if he be ordered to make á second assessment, plaintiff be required to indemnify him for all costs and expenses which hé may incur in an attempt to enforce such an assessment.
John J. Ryan, for the appellant.
Edmund L. Pitts, for the receiver, respondent.

Opinion:
Green, J.:
The defendant was organized as a mutual insurance company by virtue of chapter 362 of the Laws of 1880, as amended by chapter 171 of the Laws of 1881.
By section 7 of that act it is provided that " every person ' * so insured shall give his, her,.its or their contract or agreement, binding him, her, it, or them, their heirs or assigns, to pay their fro rata share to the company of all losses or damages caused by fire'or lightning, which may be sustained by any member or members thereof. He, she, it or they shall also pay such percentage in lawful money, and such reasonable sum for policies and expenses, and within such time as may be required by the by-laws of said company."
It is over the construction of this section that the main contention of this appeal arises.
The appellant insists that this provision of the statute should be construed to authorize the company or its receiver to assess the solvent members of the company for the deficiency caused by nonpayment of assessments by insolvent members.
The words of the statute are direct, plain and unambiguous. A literal and unrestricted interpretation preserves the plain, paramount intention of the law-makers clearly expressed by the statute.
The title of the act under which this company was organized is " An act to provide for the formation of county co-operative insurance companies," indicating at the outset that those who organized themselves into a corporation under' the act were to operate jointly and together to the same end. It is provided by the statute that every person who becomes a member of the corporation shall pay his "pro rata share to the company of all losses or damages caused by fire or lightning, which may be sustained by any member or members thereof." It surely would be a strained construction to say that it was intended by the use of these words to bind each member of the company to the payment of an entire loss, if all the other members should prove to be insolvent. If it were so intended, the words "pro rata" that is, a distribution proportionately, would not have been used in expressing the intention of the Legislature. There is nothing in the statute which indicates that the members of a corporation .organized thereunder are to indemnify those insured against loss by reason of the insolvency of a member, nor any obligation to pay the share or proportion of any other member who may become insolvent, or from any cause unable to pay his proportionate share of the loss. Under the construction contended for by appellant, a solvent member might be compelled to pay the entire loss and also the expenses of the company or receiver in ascertaining and determining the question of the solvency or insolvency of the other members. Will it be contended for a moment that any person would become a member of such a corporation, knowing that he might become liable individually to pay all the losses occurring in the class in which he was insured ? If such were the intention expressed in this statute, and so expressed as to be clearly understood and comprehended, there would be no corporation organized under the law, for no sane mail would venture upon so hazardous an undertaking. The regnant idea and intention of the statute are that each member of the company is to pay such proportion of the loss as the amount of his insurance bears to the whole amount of insurance in the same class. The liability of the member is not joint and several, but the principle is that each one contracts that, in respect of a certain sum or premium, to be levied by a pro rata contribution on the amount for which he himself is insured, he will contribute to pay any losses resulting from the happening of the contingency insured against, which may occur to any other member; but there is no participation by any member in respect of the liability of any other in regard to solvency, default or dishonor. No member insures the solvency, the honesty or good faith of other members. The question of contribution depends on the contract and not on equitable considerations. A- member undertakes.no liability other than .that of contributing his share of the losses, and is in no way a party to the debt or obligation of any other member to a suffering member. Each member, foreseeing the contingency of himself suffering a loss, took his chances with the rest. He knew when he executed his contract that if he suffered loss by fire his entire loss might not be made up to him, for the contract he and all other members executed provided that each member should pay only his proportionate share of such loss and not the share of a defaulting or dishonest member. Each man agreed to pay, but his. proportion was limited, and beyond that he could not be called upon.
In my opinion this is the true intent and meaning of this statute. Undoubtedly the receiver is authorized by statute to make the assessment, and to that end, to make application to the court setting out the necessity for levying assessments. . The petition is ex parte, the order granting permission to levy the assessment is an ex parte order, and the confirmation thereof is ex pernote. The members have no day in court and no opportunity of ascertaining the nature and extent of the indebtedness, or the amount-necessary to be assessed upon each member in order to pay the debts and liabilities of the company and the expenses of the receiver in collecting the assessment.
This was the course adopted in the proceeding upon making the assessment which has been .made, and the course adopted in the present proceeding. The members received no notice of the hearing before the referee who was appointed to take proof and report with his opinion as to whether a second assessment should be made. Such a course is obviously liable to abuse and provocative of litigation. Notice of the hearing before the referee should have been given by him to all members sought to be assessed, and they should have been allowed to contest the application and, if necessary, to except to the referee's report and oppose its confirmation.
One assessment has already been authorized by the court and made by the receiver for the purpose of paying the indebtedness of the company to plaintiff. There was a deficiency caused, as plaintiff claims, by reason of the fact that some of those assessed as members contested the assessment and were successful, some were dead and some insolvent. The statement as to the cause of the deficiency is vague and indefinite. The record does not disclose how many members so assessed were insolvent, nor how many were dead, nor how many were successful in contesting the assessment.
The former proceeding was instituted solely in the "interest of plaintiff, who was a former officer of the company and a member of the same. It was his duty in such proceeding to have informed the receiver and the court of the members of the association liable to assessment for the j>ayment of his judgment, and, not having done so at that time, and not definitely informing the court upon this application, made by himself, as to who or how many of the members, he claims, are liable to assessment, he ought not to complain if he is now precluded from compelling the receiver to make another assessment.
The present proceeding is conducted by the plaintiff against the' opposition of the receiver, who insists that it is unauthorized, and that, if ordered, it will be resisted by the members assessed on the ground that they have already been assessed their rata share, as provided by their contracts, and are under no further liability.
This assessment should not be authorized by the court, under these circumstances, unless it clearly appears that the members are under further liability under the statute and their contracts executed in accordance with the statute. We think that this has not been shown, and that the order appealed from should be affirmed, with costs against the plaintiff.
All concurred, except Ward, J., who dissented.
Order affirmed, with ten dollars costs and disbursements.