Court Opinion

ID: 9601346
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:42:26.827341+00
Date Added: 2024-06-11T11:53:36.228266
License: Public Domain

McFADDEN, Justice
(concurring in part and dissenting in part).
I concur in the majority opinion insofar as it holds that the contracts in question are governed by the provisions of I.C. § 54—1117 through § 54-1120, and that such .sections of the statute are constitutional. I dissent, however, from that portion of the opinion which holds that the contracts in question constitute an insurance contract.
It is my conclusion that basically the contracts involved here are contracts providing for the purchase of services and merchandise, with delivery postponed until after death. It is recognized that under one of the contracts, even though less than the full amount of the contract has been paid at the time of death, if $373.00 has been paid within 31 days of signature of the -contract, the balance remaining will be paid -in full. In this instance, however, it must be emphasized that this additional payment comes, not by reason of the provisions of the contract itself, but by reason of an insurance policy being made a part of the contract. This insurance policy is issued by a regularly licensed insurance company with payments being made to the appellant. Another feature that has been considered is a supplemental provision to the “Family Security Agreement” which obligates the appellant to provide interment space free of charge in the event of the death of any of respondent’s unmarried children under the age of 21 years. This provision is the only obligation of appellant under the contracts wherein the appellant will not be fully compensated for the merchandise to be delivered and the services to be performed, and its importance is of such a relatively minor nature that this feature alone should not be the governing determination of the contracts as a whole.
The majority opinion in reaching the conclusion that such arrangement constitutes a contract for insurance refers to the following cases: State v. Smith Funeral Service (1940), 177 Tenn. 41, 145 S.W.2d 1021; Jordan v. Group Health Ass’n (1939), 71 App.D.C. 38, 107 F.2d 239; State ex rel. Fishback v. Globe Casket & Undertaking Co. (1914), 82 Wash. 124, 143 P. 878; Memorial Gardens Association, Inc. v. Smith (1959), 16 Ill.2d 116, 156 N.E.2d 587; Reserve Vault Corporation v. Jones (1962), 234 Ark. 1011, 356 S.W.2d 225. In addition reference is made to the annotations appearing at 63 A.L.R. 711, 100 A.L.R. 1449-1453, 119 A.L.R. 1241-1243.
In State v. Smith Funeral Service, supra, the Tennessee case decided in 1941, the *107Supreme Court of Tennessee, relied upon its prior decision of State ex rel. District Attorney General v. Mutual Mortuary Ass’n (1933), 166 Tenn. 260, 61 S.W.2d 664, and also upon the provisions of its statute § 6085, which provides:
“A contract of insurance is an agreement by which one party, for a consideration, promises to pay money or its equivalent, or to do some act of value to the assured, upon the destruction or injury, loss or damage of something in which the other party has an insurable interest.”
The court stated:
“The liability of an insurer is contingent. The contingency under our statutory definition is ‘the destruction or injury, loss or damage of something.’ Loss of life of the insured, of course, is the contingency in life insurance.”
In State ex rel. District Attorney General v. Mutual Mortuary Ass’n, supra, the question before the court concerned the nature of the business which the association conducted. There a member was issued a certificate under the terms of the payment of a fee and a promise to pay future assessments when levied. The certificate issued by the association entitled a member to receive a burial, including services and casket, although he had paid only one assessment. The court stated: “A member is entitled to such burial if he has only paid one assessment. Such member may be possessed of no estate, but, if he pays his assessments, he is insured a decent burial. This insurance is issued upon the life of the member and is payable at his death.” The court held that such association was engaged in the life insurance business.
In the case of State v. Smith Funeral Service, supra, the form of the certificate involved is not discussed in detail, nor is the consideration to be paid outlined clearly. It is pointed out, however, that:
“The substance of these certificates is an obligation on the part of defendant for the consideration stated [in consideration of an installment payment in a named sum, followed by weekly payments of named sums] to furnish its customer’s representative with a casket and grave clothes for the customer’s burial at twenty per cent (or other per cent) of the regular retail selling price of such articles. Instead of paying to the certificate holder’s representative a sum of money to be applied in payment of funeral expenses, the defendant in substance assumes the greater portion of the expense of the funeral. Save in one respect, hereafter to be noted [that purchaser may call upon defendant to furnish the casket and clothing at any time], the contracts issued by the defendant do not materially differ from *108those considered in State ex rel. [District Attorney General] v. Mutual Mortuary Association, Inc., 166 Tenn. 260, 61 S.W.2d 664. The contracts considered in that case were held to he insurance contracts and the association issuing them was held to be doing an insurance business * * * ”.
Again reiterating that in State v. Mutual Mortuary Ass’n, the rationale of the decision was that a member of the association was entitled to burial if he had paid only one assessment, the same provision must have been incorporated into the agreements before the court in State v. Smith Funeral Service, supra. In the instant case before this court, there is no obligation on the part of appellant until such time as the contracts have been paid in full.
The case of Jordan v. Group Health Ass’n (1939) 71 App.D.C. 38, 107 F.2d 239, has been quoted in the majority opinion. That case involved the question of whether a group health association was engaged in the insurance business contrary to the applicable provisions of the insurance code of the District of Columbia. The quotation in the majority opinion dealt solely with a determination of whether the association was one exempt under the provisions of the applicable statute. The ultimate holding of the court was to the effect that the particular association was one exempt under the applicable laws. It is interesting to note that as authority for the statement quoted from Jordan v. Group Health Ass’n, supra, the following appears.
“Care must be taken to distinguish mere contracts to render service on the happening of a contingency from true contracts of insurance. * * * The cases have failed to declare a satisfactory rule for distinguishing between the two types of agreements, but it would seem that the contract should not be classed as insurance if the paramount purpose in its formation was to be the rendition of the services rendered. * * * (1936) 3 U. of Pittsburg L.Rev. 250, 251-252 and notes 7-12; (1939) 52 Harv.L.Rev. 809, 814, n. 37.”
In State ex rel. Fishback v. Globe Casket & Undertaking Co., (1914) 82 Wash. 124, 143 P. 878, the issue before the court was whether the appellant should be enjoined from conducting its business and have its corporate affairs wound up and its charter forfeited. The company had been organized under the laws of Washington with its purposes outlined in its charter. It had a 50 year existence, and engaged in selling of certificates to provide for burial services. From the opinion it appears that upon the first installment payment being made after the purchaser’s application was approved, the appellant was bound to furnish the services in full. When the installments are *109fully paid, a certificate incorporating all the agreements is issued. The cost of the certificate is not shown. The court in determining that the company was engaged in an insurance business, held that the contracts had all the elements of a life insurance contract. Further the court pointed out that the contract is not one the courts will strain to uphold. “ * * * It is freighted with the greatest possibilities for fraud. * * * Its duration is limited to 50 years. * * * It is certain that many of these certificates will not be ripe for redemption for a number of years, and it is reasonably certain that some of them will survive the life of the corporation itself. If, therefore, the company were permitted to continue the business, and all or any considerable proportion of these certificates were ever redeemed, it will be a consummation unique in human experience.”
In Memorial Gardens Association, Inc. v. Smith (1959), 16 Ill.2d 116, 156 N.E.2d 587, the question before the Supreme Court of Illinois was not a question of whether pre-need burial contracts were a form of insurance, but simply whether such contracts were within the purview of a legislative enactment entitled “An Act concerning agreements for furnishing or delivery of personal property, merchandise or services in connection with the final disposition of dead human bodies and regulating use or disposition of funds paid on said agreements and providing penalties for violation thereof.” In the body of the opinion, by way of analogy, the Court discussed the nature of the contracts as being analogous to a form of insurance. But that Court did not hold such contracts to be insurance contracts and the statements quoted in the majority opinion from that case, in my opinion, are merely dicta used as an analogy in determining that contracts were within the provisions of the adopted act. The decision was not a determination that such contracts were a form of insurance. Indeed, the Court itself stated “There is no performance by the company until full payment is made under the contract.”
In Reserve Vault Corporation v. Jones, (1962) 234 Ark. 1011, 356 S.W.2d 225, the Supreme Court of Arkansas quoted at length from the Illinois case of Memorial Gardens Association, Inc., v. Smith, supra, in holding that the legislative act in question was constitutional. Again the question of whether the contracts involved constituted insurance was not in issue.
It is my conclusion that the authorities, relied upon by the majority opinion in determining that these contracts are a form of insurance, are not applicable to the case at bar. In the instant action there is no performance required of appellant until such time as the contracts have been paid in full by the purchaser. There is no question but what there is a final, fixed, and completed *110price to be paid. It is my further conclusion that the reasoning of the Supreme Court of Georgia in the case of South Georgia Funeral Homes v. Harrison (1936), 183 Ga. 379, 188 S.E. 529, is correct. In that case the Supreme Court of Georgia held that a contract wherein a corporation, for a fixed sum paid in cash, or in installments, agreed to render funeral services to a purchaser or a member of his family and to allow the purchaser to buy funeral merchandise for definite price, did not constitute a life insurance contract, notwithstanding that performance was contingent on death and the consideration was payable in installments. In coming to that conclusion the court stated:
“ * * * It will thus be seen that no definite line of demarcation can be arbitrarily drawn, but each contract must be construed unto itself, together with evidence dehors the contract itself, in order to ascertain whether the particular contract under consideration is one of life insurance or otherwise. We think it can safely be said, however, that a contract of life insurance must contain an element of risk in so far as the particular individual contract is concerned. The contract now being sold by the defendants, and by reason of the sale of which this contempt proceeding arose, is one wherein the defendant corporation, for a fixed and definite sum in hand paid or payable in installments, agrees to render and perform or cause to be rendered and performed, for the purchaser or any one member of his family, certain funeral services, with the additional obligation to allow the purchaser to buy funeral merchandise in connection with the funeral, for a price definite and ascertainable. While the performance of the contract is contingent upon death, this in and of itself does not make it a contract of life insurance, nor does the fact that the fixed sum is payable in installments. There is nothing in the contract itself nor is there any evidence to show that the amount paid by a purchaser is less than the value of the funeral services contracted to be performed, or that there is any element of risk involved, either on the part of the purchaser or the defendant corporation. The contract on its face does not appear to be one of life insurance. * *”
It is my conclusion that these are not contracts “ * * * to indemnify another or pay * * * a specified or ascertainable amount or benefit upon determinable risk contingencies,” as insurance is defined by I.C. § 41-102, but are in the nature of installment contracts for purchase of merchandise and services. It is my further conclusion that the trial court erred in determining this to be a form of insurance. *111The cause should not be reversed, however, for this form of contract is within the purview of I.C. §§ 54 — 1117 to 54-1120, which is a constitutionally enacted law.
TAYLOR and SMITH, JJ., concur.