Schmidt v. German Mut. Ins. Co. of Indiana

• Decision Date: 12 April 1892
• Citation: 4 Ind.App. 340,30 N.E. 939
• Parties: SCHMIDT v. GERMAN MUT. INS. CO. OF INDIANA.
• Court: Indiana Appellate Court

4 Ind.App. 340

30 N.E. 939

SCHMIDT

v.GERMAN MUT. INS. CO. OF INDIANA.

Appellate Court of Indiana.

April 12, 1892.

Appeal from superior court, Marion county; L. C. WALKER, Judge.

Action on an insurance policy by Elizabeth Schmidt against the German Mutual Insurance Company of Indiana. Defendant had judgment on demurrer, and plaintiff appeals. Reversed.

A. C. Harris and J. B. Bridges, for appellant. S. Seidensticker and Duncan & Smith, for appellee.

CRUMPACKER, J.

The German Mutual Insurance Company is a fire insurance corporation organized under the laws of this state, upon the premium note and assessment plan. It issued a policy of fire insurance to Elizabeth Schmidt on the 16th day of October, 1886, covering certain buildings and personal property, for a term of six years. On October 12, 1888, a portion of the insured property was destroyed by fire, and this suit was brought to recover indemnity for the loss. The policy, upon which was printed a copy of the articles of association and by-laws of the company, was filed with, and by appropriate reference made part of, the complaint. Sections 4 and 5 of article 3 of the articles of association are as follows: “Sec. 4. In case the funds in the treasury are not sufficient to meet the losses, the directors shall make an assessment on the members of the association, based upon their respective premium notes. The treasurer shall notify the members of such assessment, and the members shall be bound to pay the same within thirty days after receiving notice thereof. Sec. 5. In case any member refuses or neglects to pay such assessment within thirty days, the directors may bring suit for the whole amount of the premium note, and collect the same, or the directors may cancel the policy of such member, and collect the assessments due thereon up to the time of such cancellation.” Section 22 of the by-laws is as follows: “Whenever the directors shall make an assessment upon the members for the payment of losses or current expenses, notice thereof shall be given by publication in one or more newspapers.” These are all the provisions respecting assessments, notice, and forfeiture contained in the articles of association or by-laws, which affect the questions involved in this case. The defendant answered that an assessment was duly made on the 2d day of July, 1888, and notice thereof was given by publication in two newspapers printed and published in the city of Indianapolis, and also by mailing a notice of such assessment to the plaintiff; that she failed to pay the same within 30 days after such notice, and the directors of the company, by resolution duly adopted, canceled her policy, and the secretary mailed a notice of such cancellation to her several weeks before the loss. It is also shown by the answer that policies and premium notes are divided into three classes, designated “A,” “B,” and “C,7D' and that plaintiff's policy belonged to class “B.” The plaintiff replied that she had no notice or information of the alleged assessment or the cancellation of her policy before the loss, and that she did not receive either of said notices alleged to have been mailed to her by the defendant; that she did not see, or have any information whatever of, the notice published by the defendant until some days after the loss, and that she was always ready and willing to pay any assessment regularly levied upon her note upon notice of the same; that said notice published by the defendant contained no request or demand upon the members to pay said assessment within 30 days, except the following: “Resolved, that the executive officers and agents of the company are requested to look after the prompt collection and payment of this assessment within thirty days, and to take all necessary steps for that purpose; that said notice was not given by the treasurer of said defendant alone, but it was signed by the president, secretary, and treasurer.” A demurrer for want of sufficient facts was sustained to the reply, and the plaintiff refused to amend or plead further; whereupon judgment was rendered in favor of the defendant upon the pleadings. From this judgment the plaintiff appeals, and assigns for error the decision of the court in sustaining the demurrer to the reply.

The solution of the question presented by the appeal must depend upon the construction given the contract respecting the kind of notice members are entitled to, whether actual or constructive. Counsel for appellant contends that the contract, correctly interpreted, provides for actual notice, while, upon the other hand, it is insisted that notice by publication is stipulated for. A certificate of membership in a mutual insurance company is a contract for insurance, and in most respects should be construed in the same manner as an ordinary insurance policy. While the insured is a member of the company, and entitled to a voice in its management and control, the promise of indemnity is based upon a valuable consideration, and the company, in respect to the insurance, is a distinct legal entity, occupying the contractual status towards the member. Supreme Lodge v. Knight, 117 Ind. 489, 20 N. E. Rep. 479; Holland v. Taylor, 111 Ind. 121, 12 N. E. Rep. 116; Presbyterian, etc., Fund v. Allen, 106 Ind. 593, 7 N. E. Rep. 317; Association v. Houghton, 98 Ind. 149. Every member, however, is bound to know the contents of the articles of association and by-laws, and his policy must be construed with reference to them. They enter into and become part of the contract to the same extent as if they were expressly written therein. Pfister v. Gerwig, 122 Ind. 567, 23 N. E. Rep. 1041; Gray v. Supreme Lodge, 118 Ind. 293, 20 N. E. Rep. 833; Bauer v. Samson Lodge, 102 Ind. 262, 1 N. E. Rep. 571. Where a policy in a mutual insurance company provides for notice of assessments to its members, such notice must be in substantial accord with the requirements of the contract, or it will be ineffectual. Even where constructive notice is provided for, it seems that personal notice will not be allowed as an efficient substitute. Sands v. Graves, 58 N. Y. 94;Insurance Co. v. Sanders, 36 N. H. 252;Railroad Co. v. Dummer, 40 Me. 172;Tomlin v. Railroad Co., 23 Ill. 429;Pennsylvania Training School v. Independent Mut. Fire Ins. Co., 127 Pa. St. 559, 18 Atl. Rep. 392; Insurance Co. v. Stewart, 39 N. J. Law, 486. Where one is entitled to notice by the terms of a contract, and has not stipulated that it may be given through the mails or some other mediumship, he is entitled to actual notice, and anything short of this is equivalent to no notice at all. This rule is firmly intrenched in the jurisprudence of this country. Burhans v. Corey, 17 Mich. 282;Mullen v. Insurance Co., 121 Mass. 171;Hermann v. Insurance Co., 100 N. Y. 411, 3 N. E. Rep. 341; Wachtel v. Society, 84 N. Y. 28;Siebert v. Chosen Friends, 23 Mo. App. 268.

It is insisted by counsel for appellee that the articles of association, and the by-laws upon the subject of notice, should be construed together, and, when so considered, the notice by publication provided for in section 22 of the by-laws must be held to prescribe the kind of notice which shall afford the basis of a forfeiture under the articles of association. It will be noticed that no time or place is designated in the by-laws for publishing such notice, but that it may be published at any time, in any newspaper in the state. If appellee's theory of construing the contract shall prevail, however, the judgment must be upheld; for it is entirely competent for the parties to contract for that kind of notice, and, where they have so contracted, such notice will be conclusive upon the members, regardless of whether they actually knew of the assessment or not. Upon the other hand, it is maintained that the articles of association provide for actual notice by an assessment before there shall be a...