Physicians' Defense Co. v. Cooper

• Decision Date: 07 October 1912
• Docket Number: 2,068.
• Parties: PHYSICIANS' DEFENSE CO. v. COOPER, State Ins. Com'r.
• Court: U.S. Court of Appeals — Ninth Circuit

199 F. 576

PHYSICIANS' DEFENSE CO. v. COOPER, State Ins. Com'r.

No. 2,068.

United States Court of Appeals, Ninth Circuit.

October 7, 1912

In consideration of the printed application and the sum of $15 being the consideration of one year's defense, and the further payment of $15 annually during the life of the contract, the Physicians' Defense Company agrees to defend the legally qualified physician 'against all suits for damages for civil malpractice, based on professional services rendered by himself or his agent during the term of this contract, at its own expense, not exceeding $5,000 in defense of any one suit, nor exceeding in the aggregate $10,000 in defense of suits based on services rendered by the holder hereof, or his agent, within one year from the date of this contract, or within any one year for which this contract shall be renewed, all in the manner and upon the conditions hereinbelow stated. ' After providing for notice to the company of suit brought against the physician for malpractice, the agreement further provides: 'Upon receipt of notice from the holder hereof that a suit has been commenced against him for damages for civil malpractice, the company will employ a local attorney, in whose selection the holder hereof shall have a voice, who, together with the company's attorney, will defend the case without expense to the holder hereof. Such defense will be maintained until final judgment shall have been obtained in favor of the holder hereof, or until all remedies by appeal, writ of error, or other legal proceedings shall have been exhausted or until the above mentioned sums shall have been expended in said defense, providing that this contract does not cover suits based upon criminal acts or suits involving the collection of fees for services. Said company does not obligate itself to pay or to assume or to secure the payment of any judgment rendered against the holder hereof, in any suit defended by it. * * * Each consecutive full year's renewal of this contract shall add five per cent. (5%) of the principal sum to the amount for the defense of any one suit and to the amount for the defense of any number of suits within one year, conformably with the table of accumulations indorsed hereon, but such addition shall never exceed fifty per cent. (50%) of the aforesaid principal sums. This contract shall not lapse at the end of the time as stated above, if the holder hereof shall pay the annual consideration in advance at the home office in Ft. Wayne Indiana, or to an authorized agent of the company, in exchange for the company's receipt, signed by the president and secretary, and countersigned by the agent, but shall continue in force for the term or terms for which such annual consideration shall be paid.'

The plaintiff, the appellant here, by its bill of complaint shows that it commenced operations in California in September, 1902, and has since so continued, building up a large and remunerative business, but that it has not filed the bond provided by section 623 of the Political Code of the state, nor has it procured the certificate of authority required by section 596 of such Code to be obtained by companies transacting an insurance business within the state, nor any certificate or certificates of authority to do business within the state, other than the annual certificates issued by the Secretary of State to foreign corporations upon payment of the license tax imposed thereon by the laws of the state. It is further shown that the defendant, being the Insurance Commissioner of the state, claiming that plaintiff is engaged in insurance business, asserts that plaintiff has no right nor authority to transact such business within the state without first filing a bond as required by said section 623 of the Political Code, and having issued to it a certificate of authority under section 596 of such Code, and threatens to prevent plaintiff from further transacting business within the state unless it complies with the provisions of said sections. An injunction is prayed against the threatened acts of the Insurance Commissioner. The sufficiency of the bill was tested by a demurrer thereto, which was sustained, and, a decree having been given and entered dismissing the bill, the plaintiff appeals.

Stanley Moore and Goodfellow, Eells & Orrick, all of San Francisco, Cal., for appellant.

U. S. Webb, Atty. Gen., and E. B. Power, Asst. Atty. Gen., both of San Francisco, Cal., for appellee.

Before GILBERT and ROSS, Circuit Judges, and WOLVERTON, District judge.

WOLVERTON District Judge (after stating the facts as above).

But one question is presented on this appeal, which is whether the plaintiff is transacting an insurance business within the meaning of the statutes of California relating to the subject. If it is, it is admitted that the Insurance Commissioner's position is the correct one. If not, then the Commissioner should be restrained from interference with plaintiff's continuing to transact business with the state.

All persons and companies are prohibited from transacting insurance business within the state of California without first obtaining a certificate of authority from the Insurance Commissioner, and filing a bond as may be required by such Commissioner. Sections 596 and 623, Political Code. The Civil Code of the state, under chapter 1 of title 11, 'Insurance in General,' defines insurance to be:

'A contract whereby one undertakes to indemnify another against loss, damage or liability arising from an unknown or contingent event. ' Section 2527, Pomeroy's Civil Code of California.

Section 2531 declares what events may be insured against, namely:

'Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him.'

But the provisions of the chapter (section 2532) do not authorize insurance pertaining to a lottery or lottery drawing a prize. It is further declared (section 2534) that:

'All kinds of insurance are subject to the provisions of this chapter.'

A person or company engaging in such business as is here attempted to be defined may be said to be transacting insurance business.

The statutory definition of insurance does not differ greatly from that usually given by lexicographers, text-writers and judges, and yet it is practically as comprehensive as any. Webster defines it as:

'The act of insuring against loss or damage by a contingent event; a contract whereby one party undertakes to indemnify or guarantee the other against loss by certain specified risks. ' Webst. Dict. 'Insurance.'

The Standard Dictionary defines it as:

'An act or system of insuring or assuring against loss; specifically, the system by or under which indemnity or pecuniary payment is guaranteed by one party or several parties to another party, in certain contingencies, upon specified terms.'

And the Century Dictionary:

'In law, a contract by which one party, for an agreed consideration, which is proportioned to the risk involved, undertakes to compensate the other for loss on a specified thing from specified causes.' As to the text-writers, May defines insurance as:

'A contract whereby one, for a consideration,...