Hind v. Cook & Co.

• Decision Date: 25 March 1924
• Citation: 260 S.W. 349,202 Ky. 526
• Parties: HIND ET AL. v. COOK & CO. ET AL.
• Court: Kentucky Court of Appeals

260 S.W. 349

202 Ky. 526

HIND ET AL. v. COOK & CO. ET AL.

Court of Appeals of Kentucky.

March 25, 1924

Appeal from Circuit Court, Kenton County, Common Law and Equity Division.

Action by W. N. Hind, receiver, and others, against Cook & Co. and others, From a judgment, the receiver appeals. Affirmed.

John H Klette and John E. Shepard, both of Covington, for appellant.

R. C Simmons, of Covington, and Heavrin & Martin, of Hartford, for appellees.

SAMPSON C.J.

Some time in 1915 the Indemnity Fire Insurance Company, a corporation organized under section 702 et seq., Kentucky Statutes, was, at the instance of its creditors, placed in the hands of a receiver, the appellant Hind being named by the court. That company was what is commonly known as a co-operative or assessment fire insurance concern. The section of the statutes under which it was organized reads in part:

"Twenty-five or more persons residing in any one or more adjoining towns or in any county, or in not exceeding ten adjoining counties, who collectively own property of the value of fifty thousand dollars or more, may become a corporation for the purpose of co-operative or assessment insurance against loss or damage of property by fire, wind, or lightning, or the explosion of natural or artificial gas by making and acknowledging a certificate setting forth their intention to form such a corporation, the county or counties, town or towns in which it intends to do business, its corporate name, and the place where its principal office is to be located. Every person insured in such a corporation who shall sign an application for insurance as required by the certificate of incorporation or the by-laws of the corporation shall thereby become a member thereof."

The next section of the Statutes relating to such insurance concerns provides that each corporation, if confined to the town, shall have not less than 5 directors, and, if in a county or county and town, not less than 11 directors, to be chosen from members of the corporation, and to have full charge and management of the affairs as a company for one year or more, but in no event beyond four years. The next section provides when business may be commenced, and the duty of the said insurance commissioner. The next section provides for books to be used by the concern, and what they shall show; the next section prescribes the character of contract and policies to be issued, and the amount of risk; the next, form of undertaking, notice of loss, and adjustment, and the next section, 708, relates to classification of property; the next, the right of the corporation to borrow money, and the next section to membership fees and policy fees and assessments, collection of; the next relates to reserve fund, uses and distribution; the next section to assessments, notice and requisites, which reads:

"Sec. 711. The secretary shall after any assessments have been made, notify every member of the corporation, by written or printed notice, bearing the name of the secretary, stating the amount due the corporation from the members, the time when and to whom it shall be paid, and the use to be made of the money collected. Such time shall not be less than thirty days nor more than sixty days from the service of the notice, which notice may be served personally or by mail, and, if by mail, service shall be deemed complete when deposited in the post office at the place where the principal office of the corporation is located, directed to each member at the last post office address given by the insured to the secretary of the corporation and postage prepaid."

Section 712 relates to assessment, penalty for failing to pay, action to recover, lien, exclusion of delinquent, and reads in part:

"An action may be brought by the corporation against any member thereof to recover all assessments which he may neglect or refuse to pay, made upon him under the provisions of this act, or the by-laws of the corporation."

Section 712a limits the liability of members, and reads in part:

"If the whole amount of the deposit notes and cash belonging to any such corporation shall not be sufficient to pay the amount due at any one time to the members of such corporation on account of losses occasioned by fire, lightning or wind, the limit of liability of each member of the corporation on account of any assessment that may be required to meet the deficit shall not exceed the following rates and amounts, to wit: Upon each member of a corporation having less than five hundred thousand dollars insurance in force, ten dollars for each one hundred dollars of insurance he has in said corporation. * * *"

This company had less than $500,000 insurance in force, and therefore comes within the above provision of the statutes.

Section 713 of the Statutes provides what property and the kinds that may be insured, and reads:

"No corporation formed for the purpose specified in this act shall insure any buildings or property out of the limits of the territory comprised in its certificate of incorporation, except when a member lives on or near the boundary line, and has property both within and without the prescribed boundary that without such boundary may also be insured."

Section 720, Kentucky Statutes, reads:

"Any such corporation doing an insurance business under the articles of incorporation issued to it by the insurance commissioner may by a majority vote of the membership of the company, or by a majority vote of the board of directors of such corporation, at any meeting thereof where there is a legal quorum of directors in session, change the territory in which it is incorporated to do business to as few or as many counties in Kentucky as they may see fit to include in their territory, and the change of territory shall be effective upon filing a proper certificate of such action by the members of board of directors with the insurance commissioner of Kentucky."

In its articles of incorporation the company set forth the following counties in which it intended to do business, as required under section 702, Kentucky Statutes: Kenton, Campbell Bracken, Pendleton, Owen, Mason, Fayette, Harris, Grant, and Scott. It never thereafter amended its articles so as to extend the territory in which to do business as it might have done under section 720, copied above. Notwithstanding this fact it soon began to do business in many other counties in the state by writing policies of insurance, receiving members into the corporation, and collecting premiums, dues, and assessments, until at the time the company went into the hands of the receiver it had a large amount of business in counties far removed from those named in its charter. After the appointment of the receiver and the ascertainment of the amount of the indebtedness of the concern, together with the number of policy holders and the amount of their several policies, the court directed the receiver to levy an assessment of 10 per cent., the maximum of assessments allowed on policies held by the members of the corporation, and this was done. Many of these policy holders denied liability, some upon one ground and some upon other grounds. Judgment was taken by default against a large number of them who did not defend in sums ranging from a few dollars up to $200 each. Those who failed to pay, but made defense, were included in a second group in which the receiver by affirmative pleading set forth all the facts...