State v. Vandiver

• Decision Date: 13 May 1908
• Parties: STATE ex rel. SUPREME LODGE K. P. v. VANDIVER, Ins. Supt.
• Court: Missouri Supreme Court

111 S.W. 911

213 Mo. 187

STATE ex rel. SUPREME LODGE K. P. v. VANDIVER, Ins. Supt.

Supreme Court of Missouri.

May 13, 1908.

Rehearing Denied June 6, 1908.

Judgment Modified June 26, 1908.

1. INSURANCE—"DUES."

Rev. St. 1899, § 1408 (Ann. St. 1906, p. 1111), declared that a fraternal beneficiary association might make provision for the payment of benefits in the case of death, sickness, or disability from a fund to be derived from assessments of "dues" collected from its members. Held, that the word "dues" was not used in a technical sense, but to represent sums paid by members of the association toward its support, and did not indicate an intent on the part of the Legislature to permit such society to issue old line life insurance policies not otherwise authorized.

2. SAME—"RESERVE FUND."

The term "reserve fund" when applied to a level rate policy means a sufficient per centum of the annual premium to meet, when invested at a given rate of interest, all present and prospective liability on account of the particular policy. When applied to term insurance, it means the entire mortuary premiums collected for the particular term. It has no application to assessment insurance (quoting Words and Phrases, vol. 7, p. 6147).

3. SAME—"RESERVE"—STATUTES.

Rev. St. 1899, § 1408 (Ann. St. 1906, p. 1111), declares that any such fraternal beneficiary associations may create and maintain, disburse and apply, a reserve or emergency fund in accordance with its constitution or by-laws. Held, that the word "reserve" was not there used in its technical meaning, but as a convertible term with "emergency," and that the use of such word did not indicate a legislative intention to authorize such association to issue nonforfeitable policies and to do an old line life insurance business not otherwise authorized.

4. SAME.

Rev. St. 1899, § 1408 (Ann. St. 1906, p. 1111), provides for the formation of fraternal beneficial associations for the sole benefit of members and their beneficiaries, and not for profit, on the lodge system, and provides that they may pay benefits in case of death, disability, accident, or old age, in accordance with the constitution and by-laws, from funds to be derived from assessments, dues collected from the members, payments of benefits to be made to certain designated relatives, and that such association shall not be subject to the insurance laws of the state, etc. Held, that a beneficiary association under such section had no power to issue 20-year paid-up or nonforfeitable policies.

In Banc. Mandamus by the state, on relation of Supreme Lodge Knights of Pythias, against W. D. Vandiver, Superintendent of Insurance. Writ denied.

W. M. Williams, R. P. & C. B. Williams, and Carlos S. Hardy, for relator. The Attorney General and Frank Blake, for respondent.

VALLIANT, J.

Relator is a corporation organized as a fraternal beneficiary association under laws enacted by Congress for the District of Columbia. Its domicile is that district. It has in its organization an insurance department in which it insures the lives of such of its members as are eligible under its law and as desire such insurance. It has subordinate lodges established throughout the states and territories of the United States. The total number of members in all its lodges at the date of the institution of this proceeding was 671,162, of which 81,819 were covered by its life insurance. It has been doing a life insurance business in this state since 1877. It now has 247 lodges with 26,832 members, of which 3,848 are holders of policies of life insurance, or, as they are called by relator, benefit certificates. Since the passage of the act of the General Assembly entitled, "An act defining and regulating fraternal beneficiary societies," etc., approved March 16, 1897, the relator has received annually, until March 1, 1907, a certificate from the Superintendent of the Insurance Department authorizing it to do business as a fraternal beneficiary society in this state, but on that date, the Superintendent refused to give relator such certificate. This is an application for a writ of mandamus to compel him to do so. The Superintendent of Insurance in his return admits that he has refused to issue the certificate as alleged, and says in justification of his refusal that the relator is engaged in issuing policies of life insurance which the statute does not authorize a fraternal beneficiary society to issue. The point in controversy is the character of the policies the relator is issuing. There is no dispute of the fact, but the question is one of law.

On January 1, 1907, relator established what it calls the fifth class of insurance which provides four plans called "Plan A," "Plan B," "Plan C," and "Plan D." The objection of the Superintendent of Insurance is to Plans A, B, and D; Plan C is not criticised. The objection made to Plan B is that a policy issued under it is a 20-year paid-up policy, and the objection to Plans A, B, and D is that a policy issued under either of them is nonforfeitable after 36 months' payments of premiums. Of Plan B it is said that under it the relator issues 20-year paid-up policies. Relator, as to Plan B, says that the policy issued under it does not require all the payments to be made within 20 years, but that it provides "that the monthly assessments upon members shall be paid in the first twenty years of his membership and the assessments and dues under said plans are so arranged as to permit such payments, but that said association reserves the right to levy upon all members holding certificates under Plan B, special and extra assessments and dues, if the experience and necessities of the society shall in the future require the same to be done." Relator admits that a policy issued under Plans A, B, and D is by its terms nonforfeitable after the payment of 36 months' premiums. Relator does not use the word "policy" or "premium" but uses, instead, the words "benefit certificate" and "assessments" but we treat them as meaning the same thing. But relator draws a distinction between such a policy issued by it, and one by an old line insurance company, in this, to wit, that a benefit certificate is issued only to a member of the fraternity who is subject to its by-laws, and it points out certain bylaws which authorize the relator to alter the assessment from time to time as it may see fit, and requires an accounting every year to see if, when tested by the year's experience, the assessment is greater than it should be or less than is necessary, and if greater the surplus is distributed to the members of the class by crediting the proportionate share to the next monthly assessment, and if less the assessment may be increased. The bylaws quoted require that the amount ascertained by the accounting as a basis to determine if the assessments shall be increased or reduced shall be sufficient to provide "for mortality, expense and reserve." In January, 1907, when the relator established this fifth class of insurance it adopted the American Experience Table of Mortality as the basis for its assessments which is a higher rate than the National Fraternal Congress Table under which relator formerly did business.

The question for our consideration is: Is it lawful for a fraternal beneficiary society to issue policies of life insurance of the kind above mentioned? The business of life insurance is of such great importance, such great magnitude, and so intricate in its operations that our General Assembly has taken it in hand and given it especially in the care and under the supervision of an officer selected for his learning in that art. When we come to the consideration of a case involved in the intricacies of that art we immediately encounter technical terms and theories which are not familiar to any but men engaged in that business, and we are sometimes misled as to the meaning of those terms. We will encounter in this case some terms and theories with which we will have to be careful. Our law recognizes that the business of life insurance may be conducted by what is called "old line companies," who are in the trade for profit, and who issue all kinds of legitimate policies, also what are called "assessment companies" who issue only a policy, the payment of which is to some degree at least dependent on the collection of an assessment on persons holding similar contracts, also companies organized to do what is called insurance on the "stipulated premium plan," and, lastly, fraternal beneficiary associations, who are authorized (section 1408, Rev. St. 1899 [Ann. St. 1906, p. 1111]) "to make provision for the payment of benefits in case of death, and may make provision for the payment of benefits in case of sickness," etc. "The fund from which the payment of such benefits shall be made and the fund from which the expenses of the association shall be defrayed shall be derived from assessments or dues collected from its members."

Whilst these different kinds of corporations are authorized to do life insurance business in this state, yet they are not placed on the same plane before the law. The burdens are heavier on one than on another, therefore the Legislature would have no right to give to each the same privilege, to confer on the fraternal society the right to do the same character of business that is granted the old line company, while it imposes on the old line company, as a condition precedent to doing business, heavy duties and restrictions not imposed on the other. Life insurance is a business, whatever may be the motive of the insurer, and where two men or two concerns are licensed to do the same business, everything else being equal, the license cannot be given to one on easier terms than it is given to the other. But the General Assembly may give to a certain class a fairly restricted license without impinging the constitutional demand of equality before the law. It is therefore lawful for the General Assembly to...