State v. N.J. Indem. Co.

• Decision Date: 08 April 1921
• Citation: 113 A. 491
• Parties: STATE v. NEW JERSEY INDEMNITY CO.
• Court: New Jersey Supreme Court

113 A. 491

STATE

v. NEW JERSEY INDEMNITY CO.

Supreme Court of New Jersey.

April 8, 1921.

(Syllabus by the Court.)

Appeal from District Court of Newark.

Action by the State against the New Jersey Indemnity Company for a penalty. From a judgment for plaintiff, defendant appeals. Affirmed.

Argued November term, 1920, before TRENCHARD and MINTURN, JJ.

Merritt Lane, of Newark, for appellant.

Thomas F. McCran, Atty. Gen., and William Newcorn, Asst. Atty. Gen., for the State.

TRENCHARD, J. This is the appeal of the New Jersey Indemnity Company from a judgment against it in the District Court in favor of the state, for the penalty of $500 provided for by section 89 of the General Insurance Act (chapter 134 of Laws 1902; C. S. p. 2867) for a violation of section 88 of the act.

Section 88 is as follows:

"No person or firm nor any company organized under the laws of this state or of any other state or foreign country, himself, itself, or theirselves, or by his, its or their brokers, agents, solicitors, surveyors, canvassers or other representatives of whatever designation, nor any such broker, agent, solicitor, surveyor, canvasser or other representative, shall solicit, negotiate or effect any contract of insurance of any kind, including all kinds of insurance described in this act, or sign, deliver or transmit, by mail or otherwise, any policy, certificate of membership or certificate of renewal thereof, or receive any premium, commission, fee or other payment thereon, on any property or thing, or on the life, health or safety of any person, or in any manner, directly or indirectly, transact the business of insurance of any kind whatsoever, within this state, unless such company, person or firm, shall be authorized to do the same under the provisions of the laws of this state."

The state of demand charged that the defendant, during the month of July, 1919, at the city of Newark, N. J., did solicit and effect contracts of insurance, and did sign and deliver the policies, and did receive premiums and other payments thereon, for insurance on property and things and safety of persons, and did directly and indirectly transact the business of insurance within this state without being authorized to do the same under the provisions of the laws of this state.

The court below found the defendant guilty, upon proof of its having effected insurance on motor cars by means of advertisements, applications, and policies hereinafter more particularly described. We are of the opinion that the judgment is right.

The defendant first contends that it was not engaged in the insurance business within the meaning of the statute. We are constrained to think that it was. The defendant was incorporated under the General Corporation Act (Revision of 1896; 2 Comp. St. 1910, p. 1592). Its certificate of incorporation discloses that among its objects is that of soliciting insurance. Of coursa, under its charter it could not conduct an insurance business. The power granted to it is to solicit business as an agent or broker, and, under the provisions of the General Insurance Act, it could not place the same except in an insurance company possessing a certificate of authority to do business within this state. Now the evidence shows that through the mails, and by advertisements in newspapers of state-wide and general circulation, it appealed to the general public for business. Under the plan set forth in the advertisements, an application, agreement, and power of attorney to the defendant were executed by the "subscriber," who, in fact, was an applicant for insurance, and a deposit was made by him of "approximately the same amount he would pay to a stock company for the same insurance." As a result of the application and deposit, a policy was issued to the applicant, who paid the premium there for. The deposit (says the advertisement)—"bears no relation to the ultimate cost, but is simply used as a basis against which the expenses and losses are charged during the policy year. * * * Our expense is limited to 25 per cent."

An inspection of the applications and the policies proved at the trial discloses that the unnamed "subscribers to Motor Car Underwriters at New Jersey Indemnity Exchange" severally agree to indemnify the subscriber named therein against certain specified losses, the amount of which shall be ascertained by the subscriber and the attorney (i. e., the attorney in fact), or, if they differ, by two appraisers, one named by the attorney and one by the subscriber. In the event of their disagreement an umpire is to be chosen, and the award in writing of two appraisers or an appraiser and the umpire is to fix and determine the amount of the damage. The Exchange and the subscriber are each to pay his own appraiser and to bear equally the other expenses of the appraisers and the umpire. No suit is to be brought until this condition has been complied with. Upon payment of any loss the Exchange is to be subrogated to the extent of the loss to all rights of recovery by the subscriber. The Exchange may take over and conduct, in the name of the subscriber, the defense or prosecution of any claim or suit for indemnity, damages or otherwise, against any third person. The contract may be canceled by either party upon five days' prior written notice to the other. Notice of cancellation mailed by either party to the others' address is declared to be sufficient notice. No action by a subscriber shall lie against the attorney or any of the subscribers at the Exchange to recover for any loss under the contract unless brought by the subscriber himself. To avoid a multiplicity of suits, no suit or other proceeding at law or in equity was to be maintained for the recovery of any claim upon, under, or by virtue of the contract, against more than one of the subscribers. Each subscriber agrees to accept and abide by the result as if he had been sole defendant in a similar suit or proceeding. The attorney is authorized to retain 25 per cent. of the money paid in by the policy holder, and is also authorized to receive and admit service of process. The policy declares that:

"The subscribers at the Motor Car Underwriters, herein called Exchange, are individuals, firms, and corporations that have each executed an agreement (hereby made a part hereof) which vests in the New Jersey Indemnity Company, herein called Attorney, power to issue the contract for them. It is understood and agreed that there is assumed by each subscriber, as if a separate contract were issued therefor, a sum which is the same proportion of the aggregate liability hereunder that each subscriber's advances bear to the aggregate of all subscribers' advances under all contracts in effect at the time of the loss."

The policy concludes with an attestation that the subscribers to Motor Car Underwriters at New Jersey Indemnity Exchange have caused these presents to be signed by their attorney, and then follows the signature, "New Jersey Indemnity Company, Attorney in Fact, by E. M. Carroll, President." There is nothing in the policy to indicate whether the Motor Car Underwriters at New Jersey Indemnity Exchange is a person, corporation or a partnership.

Without going into greater detail, we regard it as settled that the contract thus put in evidence was a contract of insurance. A contract exactly like the one in question was considered by this court in Solomon v. New Jersey Indemnity Co., 110 Atl. 813, and respecting it the court said:

"Looking at all these provisions [in the policy] in a broad way, to reach the real intent of the parties and not merely with grammatical, rhetorical, or even legal nicety, although these support the same view, we think the contract was meant to be a contract of insurance by the New Jersey Indemnity Company, acting not as agent for the subscribers, but as an insurance company, in which the subscribers were interested pretty much as stockholders, liable to contribute a certain amount by way of subscription to the liability of the indemnity company from time to time to the extent of a proportionate share of each separate loss as it occurred, and limited to an obligation to pay the proportion of the aggregate liability as set forth in paragraph 'O' of the policy. In this view the New Jersey Indemnity Company is the medium by which each subscriber fulfilled his obligation to indemnify each of his fellow subscribers who suffered a loss, and received from each of his fellow subscribers the indemnity to which he was entitled. The case differs from a Lloyds policy such as was before us in the Enterprise Lumber Company Case in that there each underwriter specified the amount he underwrote; here there must be an ascertainment of each subscriber's proportion of the aggregate liability; to ascertain that proportion there must be some machinery. We can find none provided unless it is the New Jersey...