Cutting v. American Ins. Co.

• Decision Date: 01 January 1908
• Citation: 197 Mass. 131,83 N.E. 396
• Parties: CUTTING v. AMERICAN INS. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

197 Mass. 131

83 N.E. 396

CUTTING v. AMERICAN INS. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

January 1, 1908

COUNSEL

Dana Malone, Atty. Gen., and Jas. C. Curtis, Asst. Atty. Gen., for informant.

Herbert Parker and Peabody & Arnold, for respondent.

OPINION

HAMMOND J.

This is an information brought by the Insurance Commissioner under the provisions of Rev. Laws, c. 118, § 7, in which the informant states that he is of opinion that the company is insolvent and that its condition is such as to render its further proceedings hazardous to its policy holders and to the public. The respondent filed an answer denying that it was insolvent or that its condition was such as to render its further proceedings hazardous to its policy holders or to the public, and averring that it was 'no longer proceeding with its business as an insurance company and had long since ceased to write or issue policies of insurance.'

The case was heard by a single justice of this court upon the informant's exceptions to the master's report and the respondent's motion for further modification of the interlocutory injunction which had been theretofore issued. The judge sustained the fourth and the eighth of the informant's exceptions, overruled all the others, denied the respondent's motion for a modification of the injunction and ordered the injunction to be made perpetual and receivers to be appointed, and then reserved the case for the full court upon the pleadings, the master's report the informant's exceptions and the respondent's motion.

The fourth exception raises the question whether the master's finding that the respondent was not insolvent is correct. Upon the theory adopted by the master the excess of assets over liabilities on November 16, 1906, the date of the filing of the information, was $39,291.55, and on January 31, 1907 (the date agreed upon by the parties as convenient for a computation of the assets and liabilities in case the financial condition should be considered as of some day since the information was filed), was $31,052.78.

In reaching this result the master disregarded a class of claims aggregating over $300,000. If these claims are to be upon the debit side of the account, then it is plain that the master's conclusion is wrong and the exception must be sustained. As to this matter the master reports that as a result of the great fire in San Francisco of April, 1906, 'about 580 claims, aggregating in amount about $1,100,000 were made against the respondent; that all but about 70 of these had been compromised and settled on November 16, 1906; and that all but about 60 had been settled on January 31, 1907. Most of these settlements were made on the basis of 40 per cent. of the face of the policy. In some cases, however, the respondent paid larger amounts (in one case as much as 90 per cent. of the face of the claim), because it considered it expedient to placate certain claimants.' He further finds, if the facts are in any way material, as follows: 'There are also in the hands of attorneys in Boston about 112 claims against the respondent, aggregating over $300,000. These are claims of policy holders in California, who allege that settlements made by them with the respondent, under which they received 40 per cent. of the amount of their claims, were obtained by false representations of an agent of the respondent. The claims, or many of them, were solicited by attorneys in California (but not by those in Boston) who agreed to pay the expenses of enforcing them in consideration of agreements by the claimants to pay said attorneys one half the amounts recovered. No suits have yet been brought on these claims. The informant offered to prove that agents or officers of the respondent, after the San Francisco fire, made false statements as to the respondent's financial condition, for the purpose of inducing policy holders in San Francisco to accept less than the amounts due them under their policies, and that certain policy holders relied and acted upon said statements. I excluded such evidence, except so far as it tended to show admissions of insolvency by authorized agents of the respondent, as being immaterial to the issues before me under the terms of the order of reference and the memorandum of decision therein referred to. I therefore make no finding as to the validity of the above claims.'

It is not explicitly stated in the report whether these claims in the hands of the Boston attorneys are included in the 500 claims aggregating $1,100,000 previously mentioned in the report as, with a few exceptions, compromised and settled. That question, however, is immaterial, because, even if they are included, it is...