Board of Insurance Com'Rs v. Guardian Life Ins. Co.

• Decision Date: 07 June 1944
• Docket Number: No. A-99.,A-99.
• Court: Texas Supreme Court
• Parties: BOARD OF INSURANCE COMMISSIONERS OF TEXAS v. GUARDIAN LIFE INS CO. OF TEXAS et al.

Page 906

180 S.W.2d 906

BOARD OF INSURANCE COMMISSIONERS OF TEXAS v. GUARDIAN LIFE INS CO. OF TEXAS et al.

No. A-99.

Supreme Court of Texas.

June 7, 1944.

Appeal from District Court, Travis County.

Suit by the Guardian Life Insurance Company of Texas against the Board of Insurance Commissioners of Texas to restrain the Board from enforcing an order requiring all insurance companies to set up a special reserve on policies issued upon military and naval personnel when such policies fail to contain a war clause limiting liability of company for war casualties to return of premiums or cash value, with or without interest, wherein the Century Life Insurance Company and another intervened as plaintiffs. From a judgment for plaintiffs granting a temporary writ of injunction, the defendant appeals directly to the Supreme Court under Vernon's Ann.Civ.St. art. 1738a; Rules of Civil Procedure, rule 499-a.

Affirmed.

Grover Sellers, Atty. Gen., and Ardell Williams, James W. Bassett, Geo. W. Barcus, and Ocie Speer, Asst. Attys. Gen., for appellant.

Chrestman, Brundidge, Fountain, Elliott & Bateman and O. D. Brundidge, all of Dallas, Rawlings, Sayers & Scurlock and Nelson Scurlock, all of Ft. Worth, and J. Hardy Neel, of Dallas, for appellees.

FOLLEY, Commissioner.

This suit was filed by the Guardian Life Insurance Company of Texas in the 53rd District Court of Travis County seeking an injunction against the Board of Insurance Commissioners, to restrain the board from enforcing an order issued by it requiring all insurance companies to set up a special reserve upon policies issued upon military and naval personnel when such policies failed to contain a war clause limiting the liability of the company for war casualties to the return of the premiums or the cash value, with or without interest. The Century Life Insurance Company and the Pioneer Life Insurance Company intervened in the cause seeking the same relief. After a hearing the trial court granted a temporary writ of injunction restraining the Board of Insurance Commissioners from enforcing the order. From that judgment in the trial court the appellant Board of Insurance Commissioners has prosecuted an appeal direct to this court under and by virtue of the provisions of article 1738a, Vernon's Ann.Civ.St., and Rule 499-a, Texas Rules of Civil Procedure.

The appellee insurance companies have issued a large number of life insurance policies to certain classes of the armed forces of the United States. These policies each provided for the payment to beneficiaries of $1000, and no more, in the event of death of the insured, and the premium stipulated was the standard or published rates of the respective companies. Before the policies were issued the forms used were submitted to the appellant board in compliance with the requirements of article 4749, Vernon's Ann.Civ.St. The policies did not contain any war clause, that is, there was no condition in the policies limiting liability on the part of the company in the event the insured died while in military service.

Prior to the issuance of the order by the appellant the three appellee insurance companies had each issued in excess of $20,000,000 of such insurance to selected classes of men in the armed forces, for which there was no extra premium charged in excess of their published rates. It was stipulated that for each of these policies the appellees had set up reserves on the basis of the American Experience Table of Mortality with 3½% interest per annum, which is in compliance with the provisions of article 4688, Vernon's Ann.Civ.St., and in accordance with the provisions of the policies issued by each of the companies. On December 21, 1943, the order under attack was issued by appellant which required the appellees to set up an additional reserve of $10 per $1000 upon all policies issued to members of the armed forces subsequent to December 7, 1941. The effect of the order, if the same is enforced, will be to require each of the insurance companies to set up an additional reserve in excess of $200,000.

The essential portion of the board's order in question is as follows:

"Finding that the writing of insurance on the lives of members of the armed forces by any company without the safeguard of a restrictive war clause and without setting aside any extra hazard reserves is a practice that is dangerous and misleading to such companies own policyholders, to the general civilian public and especially to the members of the armed forces, and that it is a matter of paramount interest to the company and to the insurance buying public that the continuation of such practices be restrained.

"Therefore, the Board is of the opinion and so orders:

"That an extra hazard reserve be charged against all life insurance policies issued subsequent to December 7, 1941, and originally issued on the lives of military or naval personnel or on the lives of students actually enrolled in military or naval officers training courses; provided such policies were issued without a war clause which limited the liability of the company in time of war to the return of premiums or the cash value, with or without interest.

"The minimum extra hazard reserve charged against each such policy shall be computed at the rate of $10.00 for each $1,000.00 of insurance in force with respect to such extra hazardous risks, or one-half of the extra premium charged therefor, whichever is greater. Such extra hazard reserve shall be shown as a liability in any published financial statement of any life insurance company that has issued such policies and which operates under the supervision of this Board, and shall be so shown in the annual statement submitted by each such company to this Board. This extra hazard reserve shall be maintained on each such policy until the policy has been terminated, until six months after insured has been released from military or naval service, or until this order has been rescinded after suspension of hostilities, whichever occurs first."

Section 3 of article 4682, Vernon's Ann. Civ.St., makes it the duty of the Board of Insurance Commissioners to calculate the net value as of December 31 of...