Gem State Mut. Life Assn v. O'Connell

• Decision Date: 12 March 1958
• Docket Number: No. 8588,8588
• Citation: 79 Idaho 535,322 P.2d 1039
• Parties: In the Matter of the Disapproval by the State Insurance Department of a Policy Form Designated '$500.00 Funeral Benefit' Form FB Submitted for Approval by GEM STATE MUTUAL LIFE ASSOCIATION, Inc., Pocatello, Idaho, Plaintiff-Respondent, v. Leo O'CONNELL, Commissioner of Insurance of the State of Idaho, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 1039

322 P.2d 1039

79 Idaho 535

In the Matter of the Disapproval by the State Insurance Department of a Policy Form Designated '$500.00 Funeral Benefit' Form FB Submitted for Approval by GEM STATE MUTUAL LIFE ASSOCIATION, Inc., Pocatello, Idaho, Plaintiff-Respondent, v. Leo O'CONNELL, Commissioner of Insurance of the State of Idaho, Defendant-Appellant.

No. 8588.

Supreme Court of Idaho.

March 12, 1958.

Graydon W. Smith, Atty. Gen., Elbert E. Gass, Edward J. Aschenbrener, Asst. Attys. Gen., for appellant.

Carl C. Christensen, Pocatello, for respondent.

SMITH, Justice.

Respondent is a mutual benefit life association organized and existing pursuant to Idaho Code Title 41, Chapter 31. It cannot issue a policy unless the form be first approved by appellant, hereinafter called the Commissioner.

Respondent in this proceeding made application for the Commissioner's approval of a proposed form of policy, hereinafter referred to as the proposed policy, differing mainly from respondent's form of approved 'standard' policy, issued upon the assessment plan, in that the phrase, '$500.00 Funeral Benefit' appears on the first page of the proposed policy, and it has appended a form of assignment for contemplated use by the beneficiary after the death of the assured, and a form of appellant's consent 'to any valid assignment which may be made of this policy by the beneficiary hereof.'

The Commissioner, after a hearing on the application, entered an order disapproving the proposed policy. Respondent's appeal to the district court resulted in a judgment reversing the Commissioner's order, and ordering the Commissioner to approve the proposed policy, from which judgment the Commissioner appealed. The Commissioner assigns error of the district court in entering the judgment.

Respondent issues its approved standard form of life policy for natural death benefit in multiples of $100 up to the statutory limitation of $5,000 to any one member; and it may include specified additional benefits, requiring payment of additional premiums, for specific accidents, accidental death and total permanent disability, not exceeding, additionally, the amount of the natural death benefit. I.C. § 41-3117.

Respondent desires to issue the proposed policy because its relatively small benefit will render it readily adaptable for payment of funeral expenses of a deceased assured, and easily serviceable. Respondent will issue it as a natural death benefit policy, included within its statutory limitation of the natural death benefit.

Respondent asserts in effect that the proposed policy is a departure from the standard life term policy in that the present policy is designed and intended as a funeral benefit or burial policy.

Respondent shows that the statute requires its approved standard policy, and will require its proposed policy, to be issued both as annual renewable term contracts, under the graded premium factor plan, (I.C. § 41-3115), and that the sum required to be placed in the natural death benefit fund and the basis of computing the mean reserve will be identical as to both policies (I.C. § 41-3113); that for the purpose of paying natural death benefit claims, it maintains only the one benefit fund, as required and computed by statute (I.C. § 41-3113); that premiums contemplated to be exacted under the proposed policy, and payments from such premiums into the natural death benefit fund, will be on the identical statutory basis as applicable to the approved standard policy for natural death benefit; and that if no assignment of the proceeds of the proposed policy be made by the beneficiary after death of the assured, then the proceeds will be paid to the beneficiary as under the standard policy.

The benefit intended by the proposed policy is simply and exclusively a natural death benefit, identical to that of the approved standard policy.

The form of the proposed policy in all respects is identical or substantially so with respondent's standard policy. Respondent by the proposed policy contract will agree to pay the amount of the policy, as the natural death benefit, to the named beneficiary, upon death of the named assured. Clearly the proceeds of any policy under the natural death benefit plan, upon death of the assured, is payable to the named beneficiary, or to his order either by use of an assignment attached to the policy or by an extraneous assignment to be supplied,--in either instance an instrument enforceable by the assignee. Our attention has not been directed to any statute which, either directly or by implication, prohibits, or in anywise limits, the right of a designated beneficiary, to assign his interest in the policy under the facts shown in the present case; for here, the form of assignment attached to the proposed policy contemplates the beneficiary's exercise of the right of assignment only after the event of death of the assured, at a time when the beneficiary's interest no longer is an expectancy by virtue of the annual renewable term of respondent's insurance contracts, (I.C. § 41-3113), but when, by reason of the assured's death, the beneficiary's interest has become vested and absolute. 45 C.J.S. Insurance § 413, p. 38; 29 Am.Jur., Insurance, p. 404, sec. 494.

Appellant further contends that issuance of the proposed policy will destroy the principle of mutuality that must exist between members of a mutual benefit association. Appellant urges, in support of such contention, that benefits under the approved standard form of policy are paid to beneficiaries other than undertakers for purposes other than burial of the insured, while under the proposed policy the real beneficiary generally will be the undertaker for burial purposes.

Respondent shows however that appellant's argument is not applicable to the proposed policy, in that the beneficiary is not contemplated to be a person furnishing burial services. Respondent's undisputed statement of its position in that regard is: 'That the evidence * * * and the policy form submitted both show that this policy will be issued as a straight life insurance policy, and that it can only be used for the payment of funeral benefits after the death of the member and then only if the beneficiary so elects, and makes an assignment accordingly. Furthermore, the proceeds of any life insurance policy ever issued by Gem State Mutual Life Association, Inc., can be transferred by assignment to anyone at the option of the beneficiary of such policy, and after the death of the insured.'

The proposed policy will not constitute 'burial insurance', which consists of a contract between an assured and one engaged in the undertaking business, whereby the latter, for a consideration, agrees to furnish burial services for the assured. Oklahoma Southwestern Burial Ass'n of Ardmore v. State, 135 Okl. 151, 274 P. 642, 63 A.L.R. 704; State ex rel. Fishback v. Globe Casket & Undertaking Co., 82 Wash. 124, 143 P. 878, L.R.A.1915B, 976; State ex rel. Landis v. De Witt C. Jones Co., 108 Fla. 613, 147 So. 230; South Georgia Funeral Homes v. Harrison, 182 Ga. 60, 184 S.E. 875; Annotations, 63 A.L.R. 723, 100 A.L.R. 1453, 119 A.L.R. 1243.

The mutuality essential to a mutual benefit association consists of the reciprocal rights and obligations that exist between the members inter sese. Mutual Life Ins. Co. v. Phinney, 178 U.S. 327, 20 S.Ct. 906, 44 L.Ed. 1088, 1096; United Order of Foresters v. Miller, 178 Wis. 299, 190 N.W. 197, 29 A.L.R. 1526; Petition of Charlton Bros. Transp. Co., 181 Md. 253, 30 A.2d 538; Gaston v. Keehn, 69 Ga.App. 500, 26 S.E.2d 107; Fidelity Mut. Life Ins. Co. v. Sims, 140 W.Va. 49, 82 S.E.2d 312; Commonwealth ex rel. Chidsey v. Keystone Mut. Cas. Co., 366 Pa. 149, 76 A.2d 867; 29 Am.Jur., Insurance, p. 86, sec. 52; 38 Am.Jur., Mutual Benefit Societies, p. 529, sec. 120; 44 C.J.S. Insurance § 104, p. 644. Clearly, respondent's issuance of the proposed policy in accordance with its proposed plan will not interfere with the mutuality required to exist between its members.

The business of insurance is affected with a public interest and is subject to regulation by the state in the exercise of its police power. Gem State Mutual Life Insurance Ass'n, Inc., v. O'Connell, 79 Idaho ----, 320 P.2d 329, 331, but such regulation must be exercised in accordance with recognized rules, set forth in the aforesaid decision as follows:

'* * * a regulation abridging or restricting freedom of contract or the right to engage in any lawful business in a lawful manner must be reasonable and must reasonably tend to accomplish or promote the protection and welfare of the public. Regulations which are arbitrary or capricious and which unreasonably restrict or interfere with the liberties of the citizen, without accomplishing or promoting a legitimate object of the police power, are invalid violations of the fundamental law. State v. Finney, 65 Idaho 630, 150 P.2d 130; Rowe v. City of Pocatello, 70 Idaho 343, 218 P.2d 695; Continental Oil Co. v. City of Twin Falls, 49 Idaho 89, 286 P. 353.

* * *

* * * 'The insurance code (Title 41, I.C.) creates the office of commissioner of insurance with broad powers to secure the effective administration of the insurance laws, and all of the regulations contained therein are primarily intended to effect the protection of the people, and to promote their general welfare in relation to insurance. § 41-101, I.C. The police regulations therein contained must be so construed and applied by the commissioner as to attain that purpose, without unnecessary limitations upon the constitutional rights of the parties involved, and with a minimum interference with the free exercise of such rights. City of Twin Falls v. Harlan, 27 Idaho 769, 151 P. 1191; O'Connor v. City of Moscow, 69 Idaho 37, 202 P.2d 401, 9 A.L.R.2d 1031; Carpenter v. Pacific Mut. Life Ins. Co. of California, 10 Cal.2d 307, 74 P.2d 761; National Automobile Underwriter's Ass'n v. Day, 348...