Knott v. State Ex Rel. Guaranty Income Life Ins. Co.

• Decision Date: 31 January 1939
• Citation: 186 So. 788,136 Fla. 184
• Parties: KNOTT, Insurance Com'r v. STATE ex rel. GUARANTY INCOME LIFE INS. CO.
• Court: Florida Supreme Court

186 So. 788

136 Fla. 184

KNOTT, Insurance Com'r v. STATE ex rel. GUARANTY INCOME LIFE INS. CO.

Florida Supreme Court

January 31, 1939

Rehearing Denied March 10, 1939.

Error to Circuit Court, Leon County; J. B. Johnson, Judge.

Mandamus proceeding by the State of Florida, on the relation of the Guaranty Income Life Insurance Company, against W. V. Knott as Insurance Commissioner of the State of Florida, to compel the Commissioner to delete one paragraph from the certificate authorizing the relator, a foreign corporation, to do business in Florida. To review a judgment granting the writ the defendant brings error.

Judgment reversed.

BUFORD J., dissenting.

COUNSEL George Couper Gibbs, Atty. Gen., and John L Graham, Asst. Atty. Gen., for plaintiff in error.

H. H. Wells, Weldon G. Starry, and B. K. Roberts, all of Tallahassee, and Gamble & Gamble, of New Orleans, La., for defendant in error.

OPINION

THOMAS Justice.

The Judge of the Second Judicial Circuit issued an alternative writ of mandamus directing the State Treasurer, ex officio Insurance Commissioner, to delete from the following certificate authorizing relator, a foreign corporation, to do business in Florida, the paragraph shown in italics:

'Certificate of Authority

'State of Florida

'Office of the State Treasurer

'Tallahassee

'May 9, 1938.

'The Guaranty Income Life Insurance Company of Baton Rouge, Louisiana, having filed a satisfactory financial statement in accordance with the laws governing such company or association is hereby authorized to transact business in this State until the first day of March following date of this Certificate subject to compliance by said company with all the laws regulating such company or association in this State.

'It is expressly understood that this Certificate of Authority does not extend authority to the above named Company to issue its so-called policy, Endowment at Age 70, with Special Endowment Benefits, or any other policies of a similar plan in the State of Florida. The Company heretofore submitted this particular policy form for approval stating unless it could write this particular form of policy in Florida, application for authority to transact business in this State would not be made. The policy form and plan were disapproved.

'Application is now made to write a general life insurance business and permit is hereby granted, but expressly prohibits the writing of the aforementioned policy form or any other similar policies in the State of Florida.

'W. V. Knott (S)

'State Treasurer.' peremptory writ was, upon motion therefor notwithstanding the return, issued.

The portion of the proposed policy to which the Commissioner found objection is:

"14

Classification by Policies issued on this plan are

Entry Age and automatically placed into Classes

Calendar Year determined by two factors,

of Issue which are: (1) Entry-Age of the

policy holder (the age of the

insured at nearest birthday), and

(2) the Calendar Year in which

the Policy is issued. Policies

issued during the same Calendar

Year to persons of the same

Entry-Age shall constitute a

Special Endowment Benefit Class.

"15

Amount and The Special Endowment Benefit

Maturity of Special Fund available for policies in

Endowment this Class shall always equal the

Benefit Fund Face Amount of the Policy or

policies in this Class under

which the Company experiences

a mortality loss. Special

Endowment Benefit shall become

due and payable immediately

upon receipt by the Company of

due prooof of each such mortality

loss.

"16

Distribution of Policies in the same class shall

Special Endowment share in the distribution of the

Benefit Special Endowment Benefit Fund,

Fund each in proportion to its Face

Amount. This policy shall

receive its share of the Special

Endowment Benefit Fund (the ratio

of its Face Amount to the sum

of the Face Amounts of all

policies in the same class) upon each

maturity thereof for this class

to the End of the Endowment

Period, provided this policy shall

have been kept in force on a

premium-paying basis. In the

event of the death of the insured

hereunder while this policy is in

force on a premium-paying basis,

the beneficiary shall be entitled

to share in the Special Endowment

Benefit Fund then available

for this Class, in the ratio of its

Face Amount to the sum of the

Face Amounts of all policies in

the same class."

The objection to the policy raised by the plaintiff in error is that one feature of it described in the above quoted portions is a wagering contract.

The contract provides for paying to insured the sum of one thousand dollars upon his reaching the age of seventy or, upon his death, the same amount to the beneficiary. In addition it contains the provisions above set out, and objected to by the plaintiff in error, whereby insured receives upon the death of each policy holder of his age and insured in the same year a sum equal to the ratio the face amount of the policy bears to the total of the face amounts of all policies in the same class. Thus if all policy holders in the same class except one should die before reaching the age of seventy years the sole survivor would have received his proportionate share on each death and the beneficiary of the first to die would have received only the first allotment.

We have examined the case discussed by counsel for the respective parties, Colgrove v. Lowe, 343 Ill. 360, 175 N.E. 569, and do not find where the policy there declared to be against public policy differs in principle from the one we are considering. The Supreme Court of Illinois condemned an insurance contract whereby a definite number of persons took out policies naming a trust company as beneficiary trustee. It was agreed by all that premiums would be paid for five years. In the event of death of any one of the group his insurance was to be paid 75 per cent. to the beneficiary, and 25 per cent. to the beneficiary trustee for proration among the survivors. As in the instant case, the policy studied by the Illinois Court contained certain provisions which were unobjectionable. It was said there that:

'it has been uniformly held that a contract of insurance upon a life in which the insurer has no interest is a pure wager, that gives the insurer a sinister counter-interest in having the life come to an end.' 175 N.E., text 571.

Clearly, the holder of one of the policies of defendant in error would profit by the death of another in his class as did a contract holder under the Colgrove system, and it is plain, too, that here, as there, the one policy holder in the same group has no more interest in the continuance of the life of the others.

The above cited case was determined by the public policy of the State but it is maintained by defendant in error that public policy does not forbid the issuance of policies containing the above quoted 'Special Endowment Benefit' clause.

A discussion of the subject 'public policy' may be found in Atlantic Coast Line R. Co. v. Beazley, 54 Fla. 311, 45 So. 761, text pages 785 and 786. To be void because of this infirmity the agreement must appear 'injurious to the public' interest or have 'a bad tendency' or contravene established interests of society.

We think a wagering contract is against the public policy of the State of Florida despite Chapter 17947, Acts of 1937, giving to Fraternal Benefit Societies the right to fix classes and provide benefits from special funds to the oldest member of the class upon death of another member.

The following is quoted from the statute of 14 George III, Cap. XLVIII (see Summary of British Statutes, part of the Common Law of Florida under Section 87, C.G.L.1927, Published Under Supervision of the Attorney General State of Florida, January, 1931):

'Whereas it hath been found by experience, that the making insurances on lives, or other events, wherein the assured shall have no interest, hath introduced a mischievous kind of gaming: For remedy whereof, be it enacted by King's most excellent majesty, by and with the advice and consent of the lords spiritual and temporal, and commons, in this present parliament assembled, and by the authority of the same, That from and after the passing of this act, no insurance shall be made by any person or persons, bodies politick or corporate, on the life or lives of any person or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and that every assurance made, contrary to the true intent and meaning hereof, shall be nul and void, to all intents and purposes whatsoever.'

In considering a fire insurance policy, Phenix Ins. Co. v. Hilliard, 59 Fla. 590, 52 So. 799, text page 801, 138 Am.St.Rep. 171, Mr. Chief Justice Whitfield wrote:

'Wager policies are not approved and should be avoided.'

Having concluded that the 'Special Endowment Benefit' is a wagering contract, hence contrary to public policy in this State, we pass to the remaining question whether the State Treasurer as Insurance Commissioner had power to insert in his certificate the restriction that no policy should be issued containing this plan.

We do not find in Section 6197 et seq., C.G.L.1927, specific power given the State Treasurer to pass upon the type of contracts to be issued but they do confer upon him supervision of companies engaged in the insurance business, and prohibit them from selling insurance without having first obtained his permission to do so. He must be furnished with a sworn statement on a form 'adopted by the National Covention of Insurance Commissioners'.

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