Dwinnell v. Minneapolis Fire & Marine Mutual Insurance Company
| Decision Date | 03 July 1902 |
| Docket Number | 12,978 - (164) |
| Citation | 91 N.W. 266,87 Minn. 59 |
| Parties | WILLIAM S. DWINNELL and Another v. MINNEAPOLIS FIRE & MARINE MUTUAL INSURANCE COMPANY and Others |
| Court | Minnesota Supreme Court |
Petition on Rehearing Filed October 8, 1902
Appeal by plaintiffs, as receivers of Minneapolis Fire & Marine Mutual Insurance Company, from an order of the district court for Hennepin county, Elliott, J., sustaining a demurrer to the complaint. Affirmed.
Insolvent Insurance Company.
The Mutual Fire Insurance Company of Minnesota was duly incorporated, under and pursuant to Laws 1895, c. 175, for the purpose of doing a general fire insurance business on the mutual plan. Thereafter an attempt was made to change the character of the corporation, by amendments to its articles to authorize and empower it to do a marine insurance business; but the statutes on the subject were not complied with, and the company was never legally authorized to issue marine policies. In connection with the attempted change in the character of the corporation, the officers undertook to create and provide a capital stock or guaranty fund; and defendants in this action, for that purpose, signed and delivered to the corporation a subscription contract whereby they promised to pay to the company the sums set opposite their names at such times and in such amounts as might from time to time be required by the company. Thereafter, for the purpose of giving standing and credit to the corporation and inducing persons to take its policies, the officers thereof represented by public advertisements, extensively circulated, that it possessed a capital or guaranty fund. But it does not appear that any of the present creditors of the concern were induced thereby to insure their property with the company; nor does it appear that the company actually engaged in a marine insurance business, or issued other than mutual policies, payable in case of loss by assessments upon policy holders in proportion to the amount of insurance carried by each. The company became insolvent, and this action was brought by the receivers to recover against the subscribers to the guaranty fund for the full amount subscribed. It is held:
Mutual Fire Insurance -- Guaranty Fund.
1. That a mutual fire insurance company is not authorized, as an incident to the exercise of the general powers and functions of such a corporation, to create or provide a capital or guaranty fund; nor is such a power conferred upon a mutual company by Laws 1895, c. 175.
Mutual Fire Insurance.
2. A mutual fire and marine insurance company may, under the provisions of that statute, provide such a fund in the manner therein directed; but it is held in this case that the complaint does not show that the company in question was ever organized as a marine company, or that it possessed, or ever exercised, the power to issue marine policies.
Subscription to Fund.
3. A subscription to such fund as provided by the statute is in the nature of a loan, or an agreement on the part of the subscriber to advance to the company from time to time money sufficient to enable it to pay current losses and expenses, the same to be refunded to them subsequently, with interest.
Estoppel.
4. That the facts pleaded in the complaint do not estop defendants from disputing their liability as subscribers to such fund.
William S. Dwinnell and John C. Sweet, for appellants.
Lane & Nantz, for respondent.
Action by the receivers of a mutual insurance company, appointed under G.S. 1894, c. 76, to wind up the affairs of the corporation, against the subscribers and contributors to what is described as a guaranty or subscription fund. The appeal is from an order sustaining a demurrer to the complaint.
It appears from the complaint that the Minneapolis Fire & Marine Mutual Insurance Company was incorporated in 1895, under and pursuant to Laws 1895, c. 175, for the purpose of engaging in a mutual fire insurance business. At the time of its incorporation the name of the company was the Mutual Fire Insurance Company of Minnesota. It was originally organized as a mutual insurance company, and continued in that sort of business from its organization until 1897, when the articles of association were amended so as to include the right to insure property against fire, lightning, hail, or tempest on land or sea. The amended articles read as follows:
"The object of this company shall be to effect insurance against loss or damage to property by fire, lightning, hail, or tempest on land and sea, on the principle known as the mutual plan."
At the same time the name of the corporation was changed to the Minneapolis Fire & Marine Mutual Insurance Company.
After this change in the articles of association, and to effectuate the objects and purposes thereof, certain of the officers of the corporation undertook to raise a fund of $200,000, evidently under the provisions of Laws 1895, c. 175, § 47, by causing subscriptions to be executed and delivered to the company by the defendants in this action; the subscriptions being in the form prescribed by that statute. The complaint alleges that thereafter the company represented and held out to the public generally that it was the owner and holder of a capital stock or guaranty fund to the amount of such subscriptions; but there are no allegations that any such representations were the cause of any of the present creditors becoming policy holders in the company
The company became insolvent and unable to meet its debts and losses, and plaintiffs were appointed receivers for the purpose of winding up its affairs, and they brought this action against the subscribers to the fund mentioned to recover the amount agreed to be paid by each. Plaintiffs contend: (1) That the corporation had the right to create and provide this guaranty fund as an incidental power inherent in the corporation; (2) that a fair construction of the statute under which the company was organized confers authority on mutual insurance companies to provide for such a fund; and (3) even if there be no such authority, either by force of the statute or as an incident to the corporation, that defendants are estopped from disputing their liability, since the fact that the fund had been provided was advertised by the corporation as a means or inducement to people to insure their property with the company.
1. The company was originally incorporated as a purely mutual insurance company, and it so continued until it became insolvent, unless the change in the articles of association extended its power and conferred upon it authority to issue marine, as well as ordinary, mutual fire policies. Treating it as a mutual company, the first question with which we are confronted is whether such an insurance company, incident to its general power to do an insurance business, has authority to create and provide a capital stock or guaranty fund for the payment of losses. The feature distinguishing a mutual insurance company from all others is that in the mutual company the policy holders are at once the insurers and the insured; in all others the policy holder is the insured and the company the insurer. Policies are issued to persons applying therefor, and expressly provide, in accordance with the requirements of the statute, that losses are to be paid by assessments upon the policy holders. There is no capital stock, none is provided for by statute, in a purely mutual company, and the policy holders well know and understand that they are liable for all losses and expenses in proportion to the amount of insurance carried by each.
The statute under which the corporation in question was created and formed expressly provides accordingly; and no provision is found therein which can be construed as authorizing a strictly mutual company to provide a capital stock or a guaranty fund to relieve the policy holder from assessments. And the question presented is whether the power to create such a fund is one of the incidental powers of such a corporation.
This question came before the supreme court of the state of Wisconsin in the case of Kennan v. Rundle, 81 Wis....
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