Court Opinion

ID: 7990607
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:30:36.756917+00
Date Added: 2024-06-11T16:35:20.769629
License: Public Domain

Whiteteld, O. J.,
delivered the following dissenting opinion :
This case cannot be clearly comprehended, except by a careful study of the agreed state of facts. That agreed statement is too long for insertion in this opinion, but the reporter is-hereby requested to set it out in full in his statement of this case.
The statute is as follows: “Every person who solicits insurance on behalf of any insurance company, or takes or transmits other than for himself, an application for insurance, or a policy of insurance, to or from such company, or who advertises or otherwise gives notice that he will receive or transmit the same, or who shall receive or deliver a policy of insurance of any such company, or who shall examine or inspect any risk, or receive,, collect or transmit any premium of insurance, or make or forward any diagram of any building, or do or perform any other act or thing in the making or consummation of any contract of insurance for or with any such insurance company other than for himself, or who shall examine into or adjust, or aid in adjusting any loss for or on behalf of any such insurance company whether any of such acts shall be done at the instance or request or by tire employment of the insurance company, or of or by any broker or other person, shall be held to be the agent of the company for which the act is done, or the risk is taken, as to all the duties and liabilities imposed by law, whatever conditions, or stipulations may be contained in the policy or contract.”' Code, § 2615.
The plan under which these lumber plants operated was this,, as shown by the agreed case: A number of lumber mill owners conclude that they can carry their own insurance at less cost than they can purchase it from public companies, and at the same time secure better and more certain indemnity. To accomplish this end, the mill owners enter into a private contract. *769whereby each agrees to indemnify tbe other in proportion as he receives indemnity. In the event of fire loss, each contributes his pro rata share, and this contribution is based on the indemnity that the one who suffers loss has agreed to indemnify each of the other contracting parties. If, at the expiration of the contract, no loss has occurred, the cost of carrying the insurance is nothing. The parties to the contract do not enter into the relation for profit. No person gets anything except Harry Nankin & Company, which receives a certain salary for the services it renders. The contract of indemnity is a mere incident of*the business, the lumber business, and an arrangement whereby they seek to secure themselves against a contingency of fire loss. No insurance is sold to the public, only lumbermen entering into the contracts, and only such of them as each of the contracting parties agrees to permit to enter. To be a little more specific, all these various lumber plants constitute Harry Rankin & Company their agent and attorney in fact, as a matter of convenience in practical administration of the business, to attend to this intfer-insurance. That company receives, not by way of profit, but by way of salary for services actually rendered, a certain per cent, of the moneys paid in.
(a) No contracts of insurance are written for the public. No person can participate in the benefits of inter-insurance except he be known to and accepted by all the others occupying the relation.
(b) In inter-insurance there is not, and cannot be, any profit. By its very nature it eliminates all possibility of profits, and hence there is withdrawn from it the very element which is seized upon by the legislature in prescribing the legal reserve for old-line companies.
(e)' This inter-insurance exists between those in the same business similarly situated, personally acquainted, and whose financial responsibility is not only well known, but made immaterial by reason of the premium deposit.
*770(d) The object is protection, not making money ont of the insurance business, as such. The apportionment of loss acr eurately admeasured by actual considerations, without payment of any profit.
(e) By this inter-insurance, protection only is guaranteed in its simplest form, each party being interested to the same extent and in the same manner as is every other party. And this premium deposit, paid by each, does not go- into- the treasury of any corporation or association, or individual doing the business of insurance, but remains the property of the persons making the premium deposit, who can withdraw at will, and withdraw his premium deposit, except the part of it that has already been earned in paying expenses, etc.
Let the following facts, deduced by learned counsel for ap>-pellee from the agreed statement of facts, be distinctly noted, that the exact case in hand may be clearly comprehended: I give them in counsel’s language:
“First. Contracts are exchanged wholly between lumber manufacturers, and the contracts are entered into by such manufacturers as are agreeable to all those who enter into these relations.
“Second. Owing to the number who enter into this contractual relation, it is inconvenient for each to attend to' the necessary details pertaining to the contract; that is, in the event of a loss it would be inconvenient for each of the contracting parties to inspect the loss for the purpose of ascertaining the amount due. In order, therefore, to simplify the plan, each contracting party appoints a common agent, giving this agent a power of attorney authorizing him to do those things that the principal might have done for himself. It is understood that each contracting party appoints this common agent by a separate power of attorney. These powers of attorney are to the same effect and purpose.
“Third. For convenience the term ‘subscriber’ is used. This term simply indicates a contracting firm or individual.
*771“Fourth. A voluntary advisory committee is selected from among the ‘subscribers.’ This committee serves without pay and co-operates with-the attorney in carrying out the terms and purposes of the contracts.
“Fifth. The plan could very well be operated by advising •each ‘subscriber/ in the event of a loss, of the amount due from, him under his contract. To do this, however, would involve an enormous amount of detail work. In order, therefore, to ■simplify and promote prompt settlement, it is agreed that upon ■entering into this relation the ‘subscriber’ deposits with the attorney in fact a sum of money. This deposit is placed to the individual credit of the subscriber. There is no joint fund. As a means of arriving at a basis for a uniform and equitable ■deposit, the plan has been adopted of calling the deposit a ‘premium,’ and the premium is based upon the rating sheets of old-line companies. There should be no confusion as to the purpose of this so-called premium deposit. It is not a premium in the sense that the term is used by old-line companies. It is hut a term of convenience that is used to describe the amount of money that each subscriber deposits, and which is placed to the •credit of the subscriber. ' This money remains the money of the subscriber, which can be withdrawn at any time he sees fit ■to sever his contractual relations, and, as above suggested, this plan of deposit could be entirely abrogated and the general scheme go forward. As stated, these deposits are made so that in the event of loss the attorney has in his hands funds from which the prompt payment of losses can be made, and when, a loss does occur the account of each subscriber is chargéd with his pro rata share. A credit and debit account is kept for each subscriber.
“Sixth. One of the subscribers acts as treasurer, and these premium deposits are held by him in trust for all the subscribers -separately. Indemnity bonds are executed by the treasurer and .attorney in fact, which bonds run to the subscribers.
*772“Seventh. During the ten years that this plan bas been in operation among manufacturing lumbermen there has been saved to the lumbermen over $700,000; that is, by carrying their own insurance, they have been enabled to save this enormous sum of money, over and above that which they would have been compelled to pay old-line companies. In addition to- this saving it is proper to suggest that payments are made promptly,, and there has never been a liability denied. One can readily understand why this is so. These manufacturers know each other, and only those who have business integrity enter into this contractual relation. Therefore, when a loss occurs among such men, there is no disposition to quibble and delay. In the light of this agreed statement of facts, showing such a beneficent condition, is it not-pertinent to inquire: Why should the state desire to take from these men the opportunity of making this saving, and also the avoidance of vexatious litigation with old-line companies ?
“Eighth. The purpose of the plan, as shown by the agreed statement, is for each subscriber to keej> on deposit a substantial sum, and this is done for the convenience of all. There is annually returned to the subscriber the unused portion of the premium deposit, with the exception of the balance that is kept on hand, as above stated.
“Ninth. The attorney in fact is paid a salary for his services. In order that each subscriber may contribute to this expense in-a uniform and equitable way, it is arranged that the attorney be allowed a certain per cent, of the deposits made, as above outlined. From this per centum is paid also his office expenses.
“Tenth. There are no by-laws, no joint funds, no- capital stock, no organization.
“Eleventh. The contract entered into has, among other of its provisions, the following clause: ‘The undersigned persons, firms, and corporations, known as “Subscribers to Manufacturing Lumbermen's Underwriters,” each person or firm, or cor*773poration acting exclusively for sucli person or firm, or corporation, and not for any other or others, and each represented under separate power of attorney by Iiarry Nankin & Company, of Kansas City, county of Jackson, and state of Missouri, and it being understood that, wherever in this policy the word “company” occurs, it means and shall be taken and construed as meaning the persons, firms, or corporations whose names are subscribed to said policy by their said attorneys, and as a part of the contract contained in this policy that each of the .subscribers hereto has entered into an agreement with each of the other subscribers to insure property against loss or damage by fire to the several amounts respectively authorized by said agreement, upon the terms and conditions in said agreem nt expressed, which said agreement is hereby made a part of this contract, it being thereby provided that no- subscriber shall in any event be made jointly liable with the others, or with any one or any of the others, or otherwise than severally, in consideration of the stipulations herein named and of the payment at the rate of two and J5/100 dollars per annum per hundred dollars premium, does insure the Cotton States Lmnber Company for the term of one year from the eighth day of June, 1908, at noon, to tire eighth day of June, 1909, at noon, against all direct loss or damage by fire, except as hereinafter provided, to an amount in dollars and cents not exceeding for each subscriber the sum opposite his name on the reverse side hereof, to the following described property, while located and contained as herein described and not elsewhere, to. wit.’ On the back of the policy, as will be seen by Exhibit B, are set forth the names of each contracting party, and the amount each subscriber agrees to pay the holder of the contract in the event of loss. The language and form of his contract illuminate and make definite the whole contention.
“Twelfth. The jphrase 'Manufacturing Lumbermen’s Underwriters’ is used as a heading to this 'contract, and it is contended *774that this phrase demonstrates that this is an insurance association. ‘Manufacturing Lumbermen’s Underwriters’ is but a phrase used to indicate the place where the contracts are exchanged. ‘Manufacturing Lumbermen’s Underwriters/ as such, does not insure anybody. The subscriber to ‘Manufacturing Lumbermen’s Underwriters’ underwrites and signs the policy through his attorney, Nankin & Co.
“Thirteenth. Nankin & Co. do not indemnify anybody. Not a dollar of insurance could be collected from Nankin & Go. j but the indemnity is collected solely from subscribers. Insurance is not collected from ‘Manufacturing Lumbermen’s Underwriters,’ but from the subscribers themselves.
“Fourteenth. In order to avoid a multiplicity of suits, it is agreed that a judgment against any one subscriber will be binding upon all the other subscribers. Counsel for state make a point that the citizen would nevertheless be driven to a number of suits to collect this judgment against other subscribers. It is possible that some inconvenience might be suffered if business men were to forget their honor and integrity. But, even so, wherein has the state anything to do with that subject? It is further agreed that service may be had upon Nankin & Co., which will be sufficient service on all subscribers.
“Fifteenth. The power of attorney, marked ‘Exhibit A,’ evidences that it is given by the subscriber and appoints Nankin & Co. attorney in fact. Nankin & Co.’s authority is limited to the specific things set forth in the power of attorney.
“Sixteenth. The Cotton States Lumber Company, desiring to contract with subscribers, wrote Nankin & Co., asking that some one come to Meehan-Junction for the purpose of making an examination of the plant. Mr. Alley, who was in the employ of Nankin & Co., went to Meehan Junction in response to this request from the Cotton States Lumber Company. He made an inspection of the property and sent the report to Nankin & Co. in Kansas City, Mo. The Cotton States Lumber Company *775gave Mr. Alley a power of attorney running to Rankin & Go,, which Mr. Alley sent to Rankin & Go. by United States mail. Mr. Alley collected no premium, issued no contract to the Cotton States Lumber Company. The sole thing done by Alley is as above stated.”
In short, to sum up, there is no organization of any insurance company • there are no stockholders; there is no general fund. Harry Rankin & Company is nothing but a convenient agent for doing the necessary things to secure these mutual indemnity contracts. To my mind, this arrangement is nothing on earth but the exercise of the inalienable right of private contract, protected by the fourteenth amendment to the Constitution of 'the United States, whereby, for mutual protection, these various lumber plants seek to indemnify each other against loss. It seems to me to be a very wholesome arrangement. The only persons who could possibly object to it are the old-line insurance companies, and it is the premiums which these old-line companies have been exacting from persons who need fire insurance, which has driven different lines of business in the United States to enter into this sort of private contract for inter-insurance. This is no doing of insurance business, within the meaning of our statute on that subject. A business is some vocation which one follows, out of which to make profit — to make, as we say, his living. The only business done here is the lumber business. This inter-insurance is. a mere incident of that business. I regard .this case as settled thoroughly by the case of Farmers’ Mutual Fire Insurance Co. v. Dole, 90 Miss. 508, 43 South. 949. The learned counsel for appellant seems to regard this ease squarely against him, and it certainly is, if I understand what we held in that case. This court, dealing there with a mutual fire insurance company, without capital stock, incorporated under chapter 24, Code of 1906, and empowered by its charter to insure the property of its members only, distinctly said: “When the statute speaks of the right to *776transact tbe business of insurance in this state, it means the right to do a general business, and has no reference to the restricted right that a mutual insurance company has to' insure the property of its own membership.” How, in the face of the sentence just above quoted, it is possible for us to now hold that this inter-insurance of these lumber mills can be placed under the “department of insurance,” in the language of the statute, or held to be subject- to supervision by the insurance department, passes my comprehension, unless we are to overrule the case just cited. I think that case is perfectly sound, and controls this case.
As aiding this view, the caption of o-ur chapter on insurance is as follows: “An act to establish a separate and distinct department of insurance, to create the office of insurance commissioner, and to regulate insurance- companies and fraternal orders doing an insurance business in this state, and to provide for the investigation of incendiary fires.” 'Section 2550 provides : “There is hereby established in this state a separate and distinct department of insurance, which - shall be charged with the execution of all laws now in force or which may be enacted hereafter, relative to insurance companies, corporations, associations, or orders placed under this department.” And it is added, elsewhere in the chapter: “Nothing in this chapter shall be construed to extend to benevolent associations that only levy an assessment upon their members to create a fund to- pay to the family of a deceased member* and make no profit therefrom.” Section 2637. This last-quoted provision shows clearly the purpose of the legislature to exclude from state supervision of the insurance department inter-ins-urance, which provides for no profit. If the whole chapter on the insurance department is carefully analyzed, this intent is plainly apparent throughout. In other words, the legislature recognizes the universal principle that no state insurance department has any right to supervise inter-insurance created by purely private *777■contract, without capital stock, without stockholders, without •organization, without any feature of profit, and created solely for the mutual protection of its members against loss by fire. Eight of private contract is a most valuable and sacred right; it is an inalienable right; it is protected by the_fourteenth ■amendment to the Constitution of the United States from being in any way interfered with; and to say that any number of lumber plants, or any number of other business concerns of any kind, may not, because of the outrageous extortions practiced by old-line companies, by private contract, agree to inte-r-insure each other, is to deny the right of private contract and to infringe the protection guaranteed by the said fourteenth amendment.
It is argued in a sort of misty fashion, for the appellant, that public policy in some way requires inter-insurance to- be subjected to the supervision of the state insurance department. ■So far as I am able to understand inter-insurance, as manifested by the particular contracts before us in this case, it is a great help to the citizenship of the state, engaged in the business of these lumber mills; a vast saving in the cost of insurance is thereby guaranteed; prompt settlement of losses se■cured, and the demands of these, old-line insurance companies, as shown in the recent insurance scandals in New York and ■elsewhere, made impossible. Surely public policy favors this' inter-insurance having these objects in view. Those only who have business integrity are allowed to enter this inter-insurance; these private contracts have a guaranty that every contracting party, as shown by the agreed statement, is familiar with the business integrity and financial standing of those with whom he ■enters into the contractual relation. This principle of inter-insurance was well understood at the time of the making of these contracts in this ■ case. The supreme courts of other states have passed upon this question, and it has been very ■clearly pointed out in many of them that a state insurance de*778partment is created for tbe purpose of the regulation of the-, general business of insurance, as well understood; and they point out that where the statute of a particular state does not cover the particular form in which an insurance business is-conducted, the state insurance department has nothing to- do-with such inter-insurance as this. See Hoadley v. Insurance Commissioner, 37 Fla. 564, 20 South. 772, 33 L. R. A. 288; State v. Campbell, 17 Ind. App. 443, 46 N. E. 944; Barnes v. People, 168 Ill. 425, 48 N. E. 91; Fort v. Georgia, 92 Ga. 8, 18 S. E. 14, 23. L. R. A. 86; Commonwealth v. Reinoehl, 163 Pa. 287, 29 Atl. 896, 25 L. R. A. 247.
My view of this matter is well expressed in a quotation in the brief of the learned counsel for appellee from Hon. Edward 0. Tates, as follows: “The question propounded to me is this:: Is a subscriber to a voluntary association, designated as ‘Manufacturing Lumbermen’s Underwriters,’ who exchanges insurance with other subscribers to said concern, binding himself' in his individual capacity only, binding himself and not jointly, engaged in the business of insurance within the meaning of the statutes? And if it be further determined that he is so-engaged in the business of insurance, is he subject to the control and regulation of the insurance laws of the state? The. two propositions shall be discussed in the order stated. I observe in the first place that the subscriber does not exchange-insurance for the purpose of profit, or as a means of livelihood; but for the purpose of protecting himself against loss- by fire-he exchanges with each individual subscriber a proportionate amount of insurance for which such other subscriber becomes liable to him in turn. I think it may be laid down as an indisputable proposition that, if A. and B. both own property of the value of say $2,000, A. may undertake with B. to indemnify him in the sum of $2,000 upon the destruction' of' his property by fire in consideration of a like undertaking to A. entered into by B., without it being considered that either-*779one in tbe transaction indicated is engaged in tbe business of' insurance. To my mind tbe Manufacturing Lumbermen’s Underwriters is but an elaboration or broadening of tbis idea. It can make no possible difference because A. exchanges insurance with a thousand people instead of one only. Indeed, I think it must necessarily be deduced from all tbe authorities that the state has no more attempted to place an embargo upon tbe exchange of insurance between two individuals than it has to prohibit tbe exchange of butter and eggs between neighborly housewives, nor do I think it could do so; for, if it may not prohibit the exchange between two .individuals, it clearly has no greater right when more than two are involved in the exchange. If this be not true, where do we reach the point where the state-may assume powers of regulation, and, if we reach it at all, why ? I know of no state that has attempted to interfere with the rights exercised by individuals in a similar plan to that, under consideration. It has been followed in the great commercial states for many years, notably New York, Pennsylvania, Illinois, and Missouri, and no question has thus far been raised with reference thereto.”
Not to protract this opinion, I summarize my conclusions as follows: First, that there is no statute in our state prohibiting this sort of inter-insurance set up in the agreed statement of facts; second, that in the absence of such statute these parties have a perfect right of private contract, to do the things they are here doing; third, that the business which these p-arties-are conducting is a lumber business, and not the general business of insurance; fourth, that our state insurance department,, as held in Farmer’s Mutual Insurance Co. v. Cole, supra, has nothing to do in the world with the supervising of inter-insurance, which has no capital stock, no organization, no profit, no stockholders, and exists merely for mutual protection; fifth, that, so far from being contrary to public policy, this sort of insurance should be fostered by public policy, as a wholesome *780tiling for the citizens of the state; sixth, that the right by private contract to enter into the particular sort of inter-insurance disclosed by this agreed statement of facts is a right guaranteed by the fourteenth amendment of the Constitution of the United States; and, finally, as a consequence, that the court below acted correctly in discharging the defendant, Alley.
The case of State v. Stone, 118 Mo. 388, 24 S. W. 164, 25 L. R. A. 243, 40 Am. St. Rep. 388, is a case where the kind of insurance known as Lloyd’s was involved. Lloyd’s insurance 'is simply one of the many kinds of general insurance. That sort of insurance is conducted for profit. Corporations engaged in the Lloyd’s insurance sell insurance to the public; hence that case has no application here whatever.
I regret the necessity of differing from my Brethren in this ■case. I am wholly unable to see any scheme here, or strategy, or trick, seeking to evade our insurance laws. The whole plan of inter-insurance, as here disclosed in the agreed statement of facts, appears to me plainly as simply an effort on the part of the lumber interests to secure insurance amongst themselves at a reasonable rate, and to escape the old-line companies. If any business, the lumber business, or any other line of business, chooses to exercise the right of private contract by inter-insurance, simply to protect itself against loss by fire, at a reasonable cost, getting rid of the enormous salaries and other extraordinary expenses incident to the present-day operation of the old-line companies of insurance, I fail to see, in that sort of procedure, an effort to evade the rightful exercise of the power of our insurance department. If, in one word, all the different businesses in this country could, by inter-insurance, such as is set forth in the agreed statement of facts in this case, secure protection against loss by fire, there would be no further need for paying tribute to old-line insurance companies, in the enormous sums which are annually poured into their coffers.