Court Opinion

ID: 4482299
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:25.336956+00
Date Added: 2024-06-11T14:54:01.650492
License: Public Domain

Disney, J., dissenting: The reserve in question in this case must be one “held for the fulfillment of” life insurance and annuity contracts. As I read the record in this matter, the reserve can not be said to be so here. The prime object of life insurance, I take it, is the safety of the policyholders. Therefore, reserves “for the fulfillment of such contracts” are required by section 201 (a). In my view, considering the object of life insurance to be as above seen, the reserve must be one exclusively held for the fulfillment of the life insurance contracts. I think the word “exclusively,” although not expressed in the text of the act, is, because of the nature of the legislation, a reasonable interpretation. The mortuary fund here, however, was held not solely for the fulfillment of the insurance policies, but for the paying of premium refunds, attorney’s fees, for the setting up of a legal reserve life insurance company, and for other expenses. Moreover, on the matter of premium refunds, it appears that any excessive premiums were returnable from the mortuary fund— although only 25 percent or 50 percent of the premiums of the first year of a policy, and 66% percent of the premiums in later years, went into the reserve, thus subjecting the reserve to a drain of a greater amount than ever went into it. As to attorney’s fees, not only was there no limit to the cost of litigation which might be taken from the fund under this item, but the expenses of attorney’s fees to contest insurance policies appears to me to be the antithesis of the “fulfillment of such contracts” — for which reserve funds must be held. I am altogether unable to comprehend how a mortuary fund which is subject to be drawn upon to set up a legal reserve life insurance company can be said to be held for the fulfillment of the insurance contracts. In my opinion, therefore, the mortuary fund here involved was held also for the payment of premium refunds, attorney’s fees, and formation of a legal reserve life insurance company, and therefore not “for the fulfillment” of life insurance and annuity contracts. I would not say that mere mistaken charges against the mortuary fund, due to error, would violate the statute, but any withdrawals except by such error, indicate that the fund was held for the purpose of such withdrawals, and not merely for the fulfillment of life insurance policies. The present question was not discussed or decided in Reliance Benefit Association, 2 T. C. 15, so that, if it in fact lurked in the record in that case, the opinion is not authority here. It involved only the manner of computing a reserve, and not whether it could be drawn upon for various and sundry matters aside from fulfillment of the contracts and still be within section 201 (a). I therefore dissent. Hill, J., agrees with the dissent.