Fry v. Charter Oak Life Ins. Co.

• Decision Date: 11 June 1887
• Citation: 31 F. 197
• Parties: FRY v. CHARTER OAK LIFE INS. CO.
• Court: U.S. District Court — Eastern District of Missouri

31 F. 197

FRY v. CHARTER OAK LIFE INS. CO.

United States Circuit Court, E.D. Missouri, Eastern Division.

June 11, 1887

Geo. D Reynolds, for plaintiff.

J. S Fullerton, for defendant.

THAYER J.

This is one of several suits by attachment pending in this court brought by the policy-holders of the Charter Oak Life Insurance Company against the company, to recover the reserve value of their respective policies. The company is a Connecticut corporation. It became insolvent on or prior to September 21, 1886, and on that day the insurance commissioner of the state of Connecticut began proceedings against it in the supreme court of errors of that state, to arrest the further transaction of business, annul its charter, and wind up its affairs. In that proceeding receivers of all the corporate assets were appointed on September 22, 1886. On September 28, 1886, this suit was begun, and an attachment was levied on certain property of the corporation situated in Missouri. The suits in the form of a suit at law, and is brought upon the theory that, when a life insurance company becomes insolvent, each of its policy-holders may sue upon their policies as for a breach of the contract of insurance, whether it be a stock or a mutual company. The general question to be determined is whether the plaintiff can maintain the action, and obtain a preference over the policy-holders, or whether he should be remitted to the proceeding which has already been inaugurated by the state of Connecticut through its insurance commissioner, in behalf of all the policy-holders, to liquidate the affairs of the corporation.

It may be premised that the company, since its charter was amended in 1878, has been a mutual company, and has conducted all of its business on that plan through a board of directors elected by persons whose lives are insured. In the state of Connecticut laws have been enacted such as now prevail in very many states, whereby the commonwealth undertakes, through an officer known as the insurance commissioner, to exercise rigid supervision over the affairs of life insurance companies. All life companies are required to make annual reports of their condition to that officer, and to undergo periodical examinations as to their solvency. And, in the event that the capital of a life company becomes impaired at any time, it is made the duty of the insurance commissioner to take proceedings against it, with a view of annulling its charter and winding up its affairs. The scheme of liquidation provided by the Connecticut statute contemplates the audit and allowance, under the supervision of a court of general jurisdiction, of all demands against the corporation, including therein the reserve due on all outstanding policies, and an equitable application of all the corporate assets to the payment of the demands so audited. Vide Laws Conn. 1875, pp. 12, 13, Secs. 1, 2. Such is a general outline of the scheme, which does not differ essentially from the Missouri statute on the same subject. With respect to the Charter Oak Life Insurance Company, it is no doubt true that the act in question forms a part of its charter to the same extent as if it was expressly incorporated therein. It is a general law of the state from which the defendant derives its existence, and is in terms made applicable to every life insurance company chartered by the state of Connecticut. Now, although the defendant is a foreign insurance company, its Missouri policy-holders are conclusively presumed to be acquainted with its charter, and the laws of the state of Connecticut which determine and regulate its existence, whether as a 'going concern,' or as an insolvent company, and to have assented thereto when they became members of the company. They are accordingly bound by the term of its charter, and the laws regulating its existence, to the same intent as policy-holders residing in the home state, unless some special conditions were imposed by the state of Missouri for...