Pratt v. Mutual Life Ins. Co. of New York

• Decision Date: 22 January 1944
• Docket Number: 35940.
• Citation: 145 P.2d 113,157 Kan. 710
• Parties: PRATT v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: Kansas Supreme Court

145 P.2d 113

157 Kan. 710

PRATT v. MUTUAL LIFE INS. CO. OF NEW YORK.

No. 35940.

Supreme Court of Kansas

January 22, 1944

Syllabus by the Court.

An insurer's agent does not have authority to waive the provisions of a life policy, to make an oral contract contrary to the policy, or to change the policy.

In action to enjoin insurer from paying insured lower dividends on life policy providing for permanent disability benefits than insurer paid on life policies without such benefits refusal to admit testimony that insurer's agent had exhibited to insured a booklet showing that the two types of policies had paid the same dividends for some years and had represented to insured that insurer would continue to follow such plan was not error.

Courts of one state have no jurisdiction to exercise visitorial or supervisory power over management of the internal affairs of a corporation organized and domiciled under the laws of another state, but such powers belong to the state in which the corporation was created.

Where the act of a foreign corporation affects plaintiff solely in his capacity as a member of the corporation such action involves management of the internal affairs of the corporation, and the courts will not take jurisdiction, but where the act of the foreign corporation affects plaintiff's individual rights only, the courts will take jurisdiction whenever the cause of action arises in the state.

Kansas courts will not entertain an action to supervise the internal affairs of an insurance corporation organized and doing business under the laws of a sister state and under the supervision of the insurance department of that state.

A district court properly refused to restrain New York mutual insurer from determining dividends on plaintiff's life policy in such manner as to discriminate against plaintiff and in violation of the policy. Insurance Law N.Y. § 83.

1. In an action to enjoin the officers of an insurance company from paying insured lower dividends on a policy that provided for payment of permanent disability benefits than it paid on like policies without these benefits, the plaintiff offered to prove that the agent of defendant had exhibited to him a booklet which showed that the two types of policies had paid the same dividends for some years prior thereto and had represented to plaintiff that the company would continue to follow this plan -- held, that the booklet should not be considered as a part of the policy.

2. This court will not entertain an action to supervise the internal affairs of an insurance corporation organized and doing business under the laws of a sister state and under the supervision of the insurance department of that state.

Appeal from District Court, Sedgwick County, Division No. 4; Isaac N. Williams, Judge.

Action by Ernest S. Pratt against the Mutual Life Insurance Company of New York to enjoin defendant from determining dividends on plaintiff's life policy so as to discriminate against plaintiff and in violation of policy and to recover dividends. Judgment for defendant, and plaintiff appeals.

HARVEY J., dissenting.

Charles E. Jones, of Wichita (Mark H. Adams and J. Ashford Manka both of Wichita, on the briefs), for appellant.

William Marshall Bullitt, of Louisville, Ky. (Robert C. Foulston and George Siefkin, both of Wichita, and Louis W. Dawson, of New York City, and Henry I. Eager, of Kansas City, Mo., on the briefs), for appellee.

SMITH Justice.

This is an action to recover money and for injunctive relief. Judgment was for the defendant. Plaintiff appeals.

After the formal allegations, the petition alleged that on November 19, 1927, while plaintiff was a resident of Oklahoma he, relying on representations of defendant's agents, made application for an ordinary life insurance policy with double indemnity for death by accident and increasing total and permanent disability benefits; that on November 25, 1927, an ordinary life policy was issued to plaintiff, by which defendant insured the life of plaintiff for $5,000 or $10,000 for accidental death and agreed further that if plaintiff became totally and permanently disabled before becoming sixty years of age to pay him $50 per month. The petition then referred to a provision in the policy, as follows: "The share of the divisible surplus accruing on this Policy shall be alloted as a dividend annually on each anniversary of its date, the first such dividend being payable only if any premium due on the first anniversary be duly paid."

The petition then alleged that for a long time prior to the issuance of the policy defendant's agents, being duly authorized to do so, made statements to plaintiffs that of the total premium to be paid on this policy $115.70 was for ordinary life, $5 was for double indemnity and $17 was for disability; that these amounts were more than the actual cost of the insurance and each year there would be dividends to be disposed of at the option of the plaintiff; that if plaintiff would permit these dividends at the rate defendant was then paying to be retained by the company, plaintiff's policy would be paid up in twenty-three years; that the annual dividend would be determined from the profits on all ordinary life policies (whether containing disability or double indemnity benefits or not); that defendant furnished to its agents a booklet, which purported to show the results of paying the dividends in cash or permitting them to be retained by the company and that this booklet classified ordinary life policy contracts with and without disability benefits in the same class. The petition then alleged that from the time plaintiff's policy was issued until 1937, defendant made no distinction in the determination of dividends from its divisible surplus between ordinary life policies with the special benefits and those without them and each year from 1929 to 1936 it credited plaintiff with dividends of never more than $39.94 and never less than $30.22; that for the years 1937 to 1939, inclusive, the defendant credited plaintiff's policy with dividends as follows: For 1937, $18.80; for 1938, $16.27; for 1939, $7.60, or a total of $42.67, while for the same years the dividends credited to policies without disability benefits amounted in the aggregate to $85. The petition alleged further that in December, 1939, plaintiff was advised that defendant had introduced into its actuarial calculations a new disability factor and had made a distinction between ordinary life policies with disability benefits and those without disability benefits. The petition then alleged that this action on the part of the defendant was without notice to or consent of plaintiff and in violation of the contract and the representation made by defendant already alluded to in this opinion and caused plaintiff to pay an additional premium to defendant in the sum of $42.32 for those years and plaintiff had been advised by defendant that it would continue to use that method of calculation in the future for the determination of dividends on his policy unless enjoined. The petition further alleged that defendant had advised plaintiff that if he would cancel the disability benefit provision of his policy he would be credited with dividends at the same rate as was credited on other policies without disability benefits; that defendant was solvent and able to pay dividends on plaintiff's policy according to the contract; that the actual result of defendant's acts was to increase the rate of plaintiff's policy in violation of its terms; that plaintiff desired to keep the policy in force as it was written, and that if defendant was permitted to discriminate against him in the allocation of dividends, plaintiff would suffer irreparable loss; that he had no adequate remedy at law and the district court by taking equitable jurisdiction of the case would prevent a multiplicity of suits. The prayer of the petition was that defendant be enjoined from determining dividends on the policy in such a manner as to discriminate against plaintiff and in violation of the contract, for judgment against defendant in the sum of $42.32 and for other equitable relief.

The first defense pleaded in the answer was a specific denial of each allegation of the petition amounting in reality to a general denial of everything except that the policy was issued to the plaintiff and that a change had been made in the method of computing the amount of dividends to be credited on plaintiff's policy.

For a second defense, the answer pleaded an action in the name of William H. Ellis and others similarly situated against this defendant wherein the court of last resort of the state of Alabama held that the courts of New York, not those of Alabama, had power to supervise the action of this defendant in appropriating its dividends to policyholders. The answer pleaded that this judgment was entitled to full faith and credit by the courts of this state and if that was given it would require the dismissal of this action.

For a third defense, the answer pleaded that the cause of action involved questions relating to the internal affairs of the defendant; that they were all governed by the laws of New York over which the government and the courts of New York had exclusive jurisdiction and that the defendant had returned to its policyholders the surplus of the company in proportion to the contribution which the policies had respectively made to it; that for fifty years or more in the ascertainment of the distribution of its surplus the defendant had employed a calculation which was set out in detail in the answer.

For a fourth defense, the defendant pleaded that the matter of apportionment of its divisible surplus was solely a matter of its own internal affairs and by the...