Hartford Life Insurance Company v. Eliza Ibs
| Decision Date | 01 June 1915 |
| Docket Number | No. 213,213 |
| Citation | 237 U.S. 662,35 S.Ct. 692,59 L.Ed. 1165 |
| Parties | HARTFORD LIFE INSURANCE COMPANY, Hartford, Conn., Plff. in Err., v. ELIZA IBS |
| Court | U.S. Supreme Court |
Messrs. Frederick W. Lehmann, James C. Jones, John M. Holmes, and George F. Haid for plaintiff in error.
Messrs. O. E. Holman and C. D. O'Brien for defendant in error.
[Argument of Counsel from pages 663-664 intentionally omitted] Mr. Justice Lamar delivered the opinion of the court:
On April 4, 1885, the Hartford Life Insurance Company issued to Herman Ibs a certificate of membership in its Safety Fund Department which was conducted on the mutual assessment plan. The certificate provided that if the policy was kept in force, by the payment of all assessments duly levied upon all the members to create a mortuary fund, his wife should be entitled to receive at his death an indemnity of $2,000, payable out of such mortuary fund.
On May 2, 1910, under call 127, he was assessed $35.95 to meet 145 claims which matured during the quarter ending March 31. He failed to pay and his policy was canceled June 23, 1910. He died June 27, and thereafter his wife brought suit in a Minnesota court against the company. It defended on the ground that the policy had been forfeited by reason of Ibs's failure to pay the assessment levied to meet the 145 claims. To this the plaintiff replied that most of these claims had been paid out of the mortuary fund during the quarter, and that the balance of cash on hand March 31 was sufficient to have paid all of the other claims. Because of these facts she claimed the assessment of May 2 was both unnecessary and void.
In answer to this the company insisted that the fund was maintained as a source from which to make prompt settlement of claims, but that such advances did not prevent the levy of the quarterly assessment, which, when collected, was to be used in replenishing the fund. In support of this defense it offered a certified copy of the decree of a Connecticut court, in the case of Dresser v. Hartford L. Ins. Co. in which it was adjudged that the company had the right so to maintain and use the fund. The plaintiff objected to the admission of this decree on the ground, among others, that she was not a party to the proceeding in which it was rendered. The court sustained her objections, excluded the decree, and directed a verdict in her favor. That ruling having been affirmed by the supreme court of the state (121 Minn. 310, 141 N. W. 289, Ann. Cas. 1914C, 798), the case was brought here by the insurance company on a record which raises the sole question as to whether the Minnesota courts failed to give full faith and credit to the judicial proceedings of another state, as required by art. 4, § 1 of the Constitution.
In order to answer that question it becomes necessary to make a brief statement of the facts giving rise to the suit and to the terms of the decree,—not for the purpose of determining whether the decision was correct, but in order to decide whether the Connecticut court had jurisdiction to enter a decree binding on a beneficiary who was not a party to the proceeding.
The Hartford Life Insurance Company, though a stock corporation under the laws of Connecticut, had what was known as the 'Safety Fund Department,' conducted on the mutual assessment plan. The company kept the books, levied the assessments, deposited the collections in the mortuary fund, and paid claims therefrom as they matured. It was not otherwise liable on the policies.
The mutual insurance plan contemplated the creation of a safety fund of $1,000,000 from membership fees. In addition to this there was to be a mortuary fund, raised by graduated assessments levied on all the members for use in payment of death claims. These assessments were levied periodically and provision was made that in fixing the amount to be levied an allowance should be made 'for discontinuance in membership.' It so happened that the lapses were not so numerous as had been estimated, and consequently each assessment realized something more than was needed to pay the matured claims. This difference between the collections and the insurance paid was retained in the mortuary fund, and, in time, the 'excess margins' amounted to nearly $400,000.
In 1908 the Hartford Life Insurance Company determined to discontinue the Safety Fund Department and to write no more insurance on the assessment plan. Thereafter no new members were admitted. This change of policy was the occasion of a disagreement between the certificate holders and the company. Accordingly, Dresser and thirty other members, residing in different states, brought suit in a Connecticut court, 'in their own behalf and on behalf of all others similarly situated,' against the company, its directors and trustees. The bill attacked the management of the company, and, among other things, insisted that it had been and was still levying assessments too many in number and too large in amount. The bill also alleged that the company had recently decided to discontinue writing insurance on the assessment plan, and was endeavoring to induce members to surrender their certificates and to take out ordinary life policies in the company's stock department. By reason of this change of policy and the consequent decrease in membership in the Safety Fund Department and the increase in assessments the bill alleged that the present certificate holders, who had created the mortuary fund, were entitled to an immediate distribution of the moneys therein.
The company's demurrer was sustained and the bill dismissed. Dresser and the other certificate holders then took the case to the supreme court of Connecticut, where the judgment was reversed. 80 Conn. 681, 70 Atl. 39. The case having been remanded there was an answer and a hearing. On March 23, 1910, the court made findings of law and fact, many of which are not material to the matter involved in the present litigation. In reference to the mortuary fund, the trial court found that, though acting in good faith, the company, in making assessments, had overestimated the number of lapses in membership, and, consequently, the assessments had raised more than was needed to pay claims; that these excesses or margins had accumulated and amounted to many thousands of dollars; that these excess collections were in the mortuary fund and
'are now in constant use in the prompt payment of losses in advance of the receipt of the moneys to pay the same from the regular assessments—by which receipts the fund is constantly reimbursed.
'The plaintiffs claimed it was improper and wrongful to accumulate these margins and to carry this balance in said mortuary fund, and claimed that said balance of margins should be distributed among the outstanding certificate holders; but it is held that it is proper and reasonable that the company should hold such fund for the purpose of enabling it to pay losses promptly, but that it was not necessary to hold more than the amount of an average quarterly assessment for the previous year.
'. . . The mortuary fund arising as above described or from any other source, together with all income or interest thereon, belongs to the men's division of the Safety Fund Department, and the insurance company is reasonably entitled to hold the same as a necessary and proper fund for the settlement of death claims on the certificates of insurance in said department, and that any excess above the average of the quarterly assessment for the previous year shall be distributed in diminution of assessments by crediting and applying such excess on account of the next succeeding assessment.'
From other evidence in the present case it appeared that 145 members died during the quarter which ended March 31, 1910. Their certificates amounted to $323,919.95. The cash in the mortuary fund was sufficient to meet all of these claims, and out of it $198,994.19 had been paid prior to March 31, leaving therein more than enough to settle the remaining certificates,...
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