Appeal
from Circuit Court, Jefferson County; Chancery Branch, Second
Division.
SETTLE
J.
It
appears from the record before us that this is an agreed case
between Chas. W. Bell, Insurance Commissioner of Kentucky
and the Louisville Board of Fire Underwriters, presenting for
adjudication, as allowed by section 637, Civil Code, the
question whether the Insurance Commissioner has a right, in
his official capacity, to examine the records, books, and
papers of the Louisville Board of Fire Underwriters. The
circuit court decided that the Insurance Commissioner did not
have such right; hence this appeal.
In
order that every aspect of the controversy may be understood
we here insert the agreement between the parties, which
includes the facts out of which it arose and the questions
submitted:
"Charles
W. Bell, Insurance Commissioner of the state of Kentucky,
hereinafter called 'plaintiff,' and the Louisville
Board of Fire Underwriters, hereinafter called the
'defendant,' state that there is a controversy
between them which might be made the subject of a civil
action; that the controversy is real, and that this
proceeding is in good faith to determine the rights of the
parties. The facts are as follows:
"Plaintiff
is the duly appointed, qualified, and acting Insurance
Commissioner of the state of Kentucky, and charged with all
the duties and invested with all the powers,
responsibilities, and obligations conferred upon that
officer by the laws of the commonwealth. Defendant is a
voluntary, unincorporated association, the organization and
purposes of which are shown by the Constitution, bylaws,
and rules of the organization. A copy of said constitution,
by-laws, and rules is filed herewith and made part of the
statement of facts in this case, the same as if fully set
out herein, marked 'Exhibit A.' The members of the
defendant organization have access to the surveys, books,
records, and papers of the defendant, and in the
transaction of their business as insurance agents have the
right to use, and do use, such of the surveys, books,
records, and papers as are of use or value to them in the
transaction of their business.
"Defendant
fixes the rates of fire and tornado insurance which it
considers proper to be charged upon property in the city of
Louisville, and exercises all the other powers and performs
all the other duties mentioned in its constitution,
by-laws, and rules, and in doing so uses its survey, books,
records, and papers, so far as relevant to such subject. No
insurance company is bound or is required to agree to
charge the rates thus fixed, or comply with the other
conditions imposed; but if any insurance company fails to
charge such rates, or comply with the other conditions
imposed, and does charge rates inconsistent therewith, or
act contrary to the other conditions imposed, then any
member of the defendant who is an agent of such company is
required, either to surrender
such company, or cease to be a member of defendant.
"Plaintiff
has heretofore demanded of defendant the right to inspect its
surveys, books, records, and papers which are used as
aforesaid; and he has also demanded of certain individual
agents licensed by the state, who are members of defendant,
that they permit him to inspect and examine such of the
surveys, books, records, and papers of defendant as are used
by them, as hereinbefore described. Said demands were
refused.
"Plaintiff
does not desire to make said examination because he believes,
or has reason to believe, that any insurance company, whose
agent is a member of defendant, is in an unsound condition;
but he desires to make said examination because complaint has
been made to him that the premium rates charged for insurance
by companies, whose agents are members of defendant, are
excessive, and he deems it prudent, therefore, for the
protection of the policy holders of this commonwealth to make
said examination. He has issued and published an opinion,
stating his views and purposes with reference to the proposed
investigation, which is filed herewith as part hereof, marked
'Exhibit B.'
"The
defendant has been an organization, doing business under its
present name, and with the same general purposes and of the
same general character, continuously since the year 1854
(except for a brief period during the Civil War), and within
this period of time no license has ever been issued to it as
an insurance agent, nor has any insurance commissioner or
public officer of Kentucky, so far as known to plaintiff or
defendant, or any of its officers ever asserted or demantled
the right to make an examination of the records, books, or
papers of defendant, until the present demand was made."
Upon
the foregoing statement of facts, the questions to be
determined are as follows: (1) Has plaintiff the right to
examine the surveys, books, records, and papers of the
defendant? (2) Has the plaintiff the right to require
individual agents, who are members of the defendant, to
produce for his inspection and examination any of the
surveys, books, records, or papers of the defendant?
It is
conceded by the parties that whatever right or power of
examination rests in the Commissioner is derived from section
752, Kentucky Statutes, which, together with section 753,
whose provisions throw light upon its meaning, we also insert
in the opinion.
Section
752: "Before granting certificates of authority to an
insurance company to issue policies or make contracts of
insurance, he shall be satisfied, by such examination and
evidence as he sees fit to make and require, that such
company is otherwise duly qualified under the laws of the
commonwealth to transact business therein. As often as once
in four years he shall personally or by his deputy or chief
clerk, or by some competent person appointed by him for the
purpose, visit each domestic insurance company and thoroughly
inspect and examine its affairs, especially as to financial
conditions and ability to fulfill its obligations, and
whether it has complied with the laws. He shall also make an
examination of any such company whenever he deems it prudent
to do so, or upon the request of five or more of the
stockholders, creditors, policy holders or persons
pecuniarily interested therein, who shall make affidavit of
their belief, with specifications of their reasons thereof,
that such company is in an unsound condition. Whenever he
deems it prudent for the protection of policy holders in this
commonwealth, he shall, in like manner, visit and examine, or
cause to be visited and examined, by some competent person he
may appoint for that purpose, any foreign insurance company
applying for admission, or already admitted, to do business
by agencies in this commonwealth. For the purposes aforesaid,
the Commissioner or his deputy, or person making the
examination, shall have free access to all the books and
papers of an insurance company that relate to its business,
and to the books and papers kept by any of its agents, and
may summon and qualify a witness, under oath, and examine the
directors, officers, agents and trustees of any such company,
and other persons, in relation to its affairs, transactions
and conditions; and such companies shall pay the proper
charges incurred in such examination, including the expenses
of the Commissioner or his deputy, and the expenses and
compensation of his assistants employed therein. Whoever,
without justifiable cause, refuses to appear and testify,
when so required, or obstructs the Commissioner in the
discharge of his duty, shall, for each offense, be punished
by a fine not exceeding $1,000.00, or by imprisonment not
exceeding one year; and if the directors, officers or agents
of any foreign insurance company shall refuse to appear and
testify when so required, the Insurance Commissioner shall
revoke the certificate of authority and license of such
company and its agents."
Section
753: "If he is of the opinion, upon an examination or
other evidence, that a foreign insurance company is in an
unsound condition, or if it has failed to comply with the
law, or if its officers or agents refuse to submit to
examination or to perform any legal obligation in relation
thereto, or, if a life insurance company, that its actual
funds are less than its liabilities, he shall revoke or
suspend all certificates of authority granted to it or its
agents, and shall cause...
