Court Opinion

ID: 3499922
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:07:04.825401+00
Date Added: 2024-06-11T14:05:18.070177
License: Public Domain

Plaintiffs' rights and defendant's liability are fixed by the terms of their contract, so the controlling consideration is determination of the contract provisions. Justice CLARK interprets their contractual relation as one which does not provide that their respective rights and liabilities are subject to subsequent changes in defendant's by-laws. In this I cannot agree. This policy expressly provides that plaintiffs became members of the mutual defendant company "according to the charter and by-laws." The charter and by-laws are printed as a part of the policy. Article 12 of the charter empowers the directors "to make, alter, amend and repeal" the by-laws not inconsistent with the law or articles of association. When plaintiffs became members of this mutual company, article 1, § 1, of its by-laws read as follows:
                       "Corporate Powers"
"This company may insure against direct loss or damage by tornado, cyclone or windstorm the following described classes of property owned by members and situate within the State of Michigan, namely, dwelling houses, stores, and all other kinds of buildings, household furniture, goods, wares and merchandise, and any other property subject to the terms and conditions of the articles of association *Page 82 
and by-laws of the company as they now exist and as they mayhereafter be amended."
Plaintiffs' application was for insurance "in accordance with its (defendant's) charter and by-laws;" and in their application they agreed "to be governed in all cases by the charter and by-laws," which were made a part of plaintiffs' policy by being printed therein; and thus plaintiffs' policy provided that the insurance contract was subject to the articles of association and by-laws "as they now exist and as they may hereafter be amended." From the foregoing it seems clear to me by the very terms of plaintiffs' policy they agreed that this mutual company of which they became members had power to modify the risks it carried, because such risks (including plaintiffs') were subject to the terms of the by-laws "as they now exist and as they may hereafter be amended." The quoted provision of the by-laws certainly must be given some meaning and application. I think it puts the instant case on all fours with Livingstonn v. Cypher, 243 Mich. 500, where the insured was held to be bound by the provisions in his policy that he should be subject to "the charter and by-laws now in force or that may hereafter be in force." To that proposition Justice FELLOWS, writing for the court, cited Wineland v. Maccabees,148 Mich. 608; Brownn v. Great Camp K. O. T. M. M.,167 Mich. 123; DeGrawn v. Supreme Court, I. O. F., 182 Mich. 366;Williams v. Supreme Council C. M. B. A., 152 Mich. 1.
We think it may well be said in this case, as was said inBorgards v. Insurance Co., 79 Mich. 440:
"This policy was issued and received upon the express agreement that it was subject to all changes that should be thereafter made in the charter and by-laws. Such contract is valid. The defendant was a *Page 83 
mutual insurance company. The plaintiff, as a member, had an equal voice with the others in the management of its affairs. The by-law was regularly adopted. Under the charter, he could have had his policy canceled and withdrawn. By his conduct, he assented to the by-law, and the change in the terms of his policy caused thereby. This is not in conflict with the principle established in Becker v. Insurance Co., 48 Mich. 610. In that case there was no agreement in the policy that it should be subject to change. There the policy was declared to be subject to the charter and by-laws, which meant, of course, the charter and by-laws as they then existed."
It is true that in the Borgards Case there was an agreement in the application for the insurance that the insured would be bound by subsequent changes in the charter or by-laws. But, as noted, in the case before us plaintiffs' application was made by express reference in accordance with the then existing by-laws and these contained the provision that the insurance contracts to be issued would also be subject to the by-laws "as they may hereafter be amended." A case identical in this respect is reported in Hutchinson v. Supreme Tent, 68 Hun, 355 (22 N.Y. Supp. 801), where the member in his application expressly agreed that the constitution of the insurance order should be a part of his contract, and the constitution provided that it might be amended, a subsequent amendment was held to be binding upon such member.
The case of Becker v. Insurance Co., supra, is clearly distinguishable from the instant case, because by the Becker policy his insurance was controlled only by the then existing charter and by-laws. Nowhere in the opinion is there any intimation to the contrary. Examination of the briefs and record filed in the Becker Case discloses that the insured *Page 84 
planted his right to recover on that ground; and on page seven of his brief he said "but by its (application's) terms, it clearly does not refer to future by-laws but to 'the by-laws made,' that is by-laws already made." Decision in the case was based on this ground. That being true, it is clear the defendant company could not change the terms of its contract with Becker, and he rightly recovered. In the Becker Case, as noted, there is not a word in the opinion of the court, and so far as we can find there was no provision in the application for insurance, in the policy issued, or in the existing charter or by-laws of the insurance company from which it could be inferred that Becker's policy was subject to alteration by subsequent modifications of the by-laws. In fact, Justice CAMPBELL planted his decision squarely on the ground that Becker's contract of insurance was one "where there is no agreement that it shall be subject to change."
In the instant case the subsequently adopted by-law was neither unreasonable nor illegal. It did not destroy or nullify any vested rights. Instead the new by-law only modified the insurance contract exactly in the manner provided by the terms of the contract. The importance of vesting mutual companies with power to thus modify their insurance contract is emphasized by consideration of the self-evident fact that the directors or managers of such companies are in duty bound to save the members from continuing to carry risks of a character that are sure to lead to disaster. Any other course invites receivership. The right to exercise this power has been considered and approved by us in numerous cases.Wineland v. Maccabees, supra; Brown v. Great Camp K. O. T. M.M., supra; DeGraw v. Supreme Court, I. O. F., supra. *Page 85 
The judgment entered in the circuit court should be set aside and the case remanded, with direction to enter judgment in favor of defendant. Costs to appellant.
BUTZEL, C.J., concurred with NORTH, J. POTTER, J., did not sit.