Taggart v. Wachter, Hoskins & Russell, Inc.

• Decision Date: 11 July 1941
• Docket Number: Nos. 13, 14.,s. 13, 14.
• Citation: 21 A.2d 141
• Parties: TAGGART, Ins. Com'r v. WACHTER, HOSKINS & RUSSELL, Inc. WACHTER, HOSKINS & RUSSELL, Inc. v. TAGGART, Ins. Com'r.
• Court: Maryland Court of Appeals

21 A.2d 141

TAGGART, Ins. Com'r

v. WACHTER, HOSKINS & RUSSELL, Inc.

WACHTER, HOSKINS & RUSSELL, Inc.

v. TAGGART, Ins. Com'r.

Nos. 13, 14.

Court of Appeals of Maryland.

July 11, 1941.

On Motion for Clarification of Opinion Aug. 13, 1941.

[Copyrighted material omitted.]

Appeals from Baltimore City Court; Rowland K. Adams, Judge.

Suit by Matthew H. Taggart, Insurance Commissioner of Pennsylvania, against Wachter, Hoskins & Russell, Incorporated, to recover judgment against defendant as member of dissolved reciprocal or interinsurance exchange, wherein defendant claimed set-off. From a judgment for defendant, plaintiff appeals, and defendant cross-appeals.

Reversed and judgment directed for plaintiff.

Argued before BOND, C. J., and SLOAN, DELAPLAINE, COLLINS, and FORSYTHE, JJ.

H. Vernon Eney, of Baltimore (Armstrong, Machen & Allen, of Baltimore, Orville Brown and Frank L. Shallow, Deputy Attys. Gen., and Ralph P. Dunn, of Washington, D. C, on the brief), for plaintiff.

Roszel C. Thomsen, of Baltimore (Walter L. Clark, of Baltimore, on the brief), for defendant.

BOND, Chief Judge.

Wachter, Hoskins & Russell, Inc., is one of 4,818 residents of the state against whom assessments have been made to meet the obligations of a dissolved reciprocal or inter-insurance exchange of Pennsylvania, and this suit against it is brought in advance of others in order that questions of law presented may be settled now for all.

The plaintiff, who is the insurance commissioner of Pennsylvania, is the statutory liquidator of such organizations upon their dissolution; the defendant is a subscriber to this exchange and member of it; and the assessment has been levied under the order of a court of Pennsylvania. The Baltimore City Court rendering its verdict on a stipulation of the parties to the facts, accompanied by exhibits, allowed the plaintiff the amount of the assessment recoverable on three policies, and allowed a set-off claimed by the defendant, which gave the net verdict for the defendant for $165.12.

After picas had been filed to the declaration, the parties agreed upon a case stated, under the provisions of section 133 of article 75 of the Code of 1939, for the settlement of questions of law in dispute, and drew up a stipulation of facts to be taken as proved except as otherwise indicated, and accompanied it by numerous exhibits agreed upon. After delivery of the court's opinion on the questions, the pleadings were completed, and the case brought to an issue. The court, by agreement, then rendered its verdict on the stipulated facts, and extended judgment for the amount allowed. On cross-appeals the principal questions are of the nature and domicil of the Exchange and the bearing of the foreign laws, the effect of the judicial proceedings in Pennsylvania, the right of the liquidator to bring suit in this state, the proper period of limitations, and the right to set off in this liquidator's suit a claim of the defendant on a loss covered by its insurance in the Exchange. There are some subordinate questions.

The Keystone Indemnity Exchange, organized under the laws of Pennsylvania (Act of June 27, 1913, P.L. 634), was a reciprocal automobile insurance exchange composed of subscribers who undertook to pay each other's losses by premium deposits made according to the contract of membership, or by additional amounts paid under assessment for the purpose by a corporation of Pennsylvania, the Keystone Indemnity Company, designated attorney in fact for the membership and for the Exchange as well. Upon application by the attorney in fact this Exchange secured from the Insurance Commissioner of Maryland authority to transact business in this state, first on February 3, 1922, and in each succeeding year until dissolution. It was listed by the Commissioner as a reciprocal or inter-insurance exchange of Pennsylvania, with its home office in Philadelphia, also the place of the home office of the attorney in fact. A branch office, denominated the "Maryland Main Office," was maintained in Baltimore City. All policies were accepted, written and executed at the home office, and frequently mailed from it to a branch office and then physically delivered to the policy holder, but no employee at a branch office had authority to accept applications or to write or execute policies. Whether the particular policies concerned in this case were delivered to the defendant by mail from Philadelphia or by mail from the Baltimore office, the parties were unable to prove, and hence have not stipulated.

First applications for the insurance were regularly accompanied by written powers of attorney making the Indemnity Company attorney in fact for the subscriber, but as the first application of the defendant has not been found it cannot be said that it executed one. It was not customary to execute and file others upon renewals or extensions of the insurance. However, as the policies to the defendant all recited that the Indemnity Company had power to execute contracts with other subscribers as attorney for the holder of these indemnity contracts, and was authorized "to do any act with reference to the subscriber's liability under said indemnity contracts which the subscriber could do, with power of substitution," the possible lack of a separate written power is taken by both parties to be immaterial in the case.

The first policy of the defendant, in 1928, contained a contractual limitation of one year upon liability to assessment, and the trial court held that in an extension of the insurance for the succeeding year, executed on April 8, 1929, this limitation was still effective, and only the assessment on policies of the three following years was allowed in the verdict. Each of the policies was to run one year from April 24.

There is a difference in provisions for contributions to losses or assessments in these several policies. Earlier policies issued by the Exchange or company had provided for a contingent liability, over and above the premium deposits, of the same amount, but in the form used from 1924 to 1929 this provision had been omitted, and a provision inserted to relieve subscribers of any payment beyond the first premium deposits. A dispute of the power of such an organization so to limit payments, begun in 1926, resulted in an opinion of the Attorney General of Pennsylvania in 1928 that it was unlawful, and a statute of the state passed on April 9, 1929, required that subscribers should make provision for contingent liability equal to not less than the one additional premium. In 1929, a certificate of extension of the defendant's previous policy recited that the contingent liability of the subscriber for the additional amount was insured against by the Indemnity Company as attorney in fact for the subscribers; the 1930 policy, however, written on an older form, provided only that the original premium amount should be applied to payment of losses and adjustment payments. The 1931 and 1932 policies conformed to the requirement with a provision that: "In the event that the premium herein provided for, together with the premium deposits of other subscribers, and the reserve and surplus funds maintained by the Keystone Indemnity Exchange shall be insufficient to pay the losses incurred, Assured shall be contingently liable for an additional amount, not to exceed, however, the annual premium or deposit charged herein."

The recited insurance against payment of the additional contingent liability, was lost by the insolvency of the insurer.

In March of 1933, the Exchange was found to be insolvent because of depreciation in values of securities and defalcations, and at the instance of the Insurance Commissioner of Pennsylvania, and after a hearing, insolvency was adjudged by the Court of Common Pleas of Dauphin County, Pennsylvania, and the property of the Exchange and the Indemnity Company was placed in the hands of the commissioner for liquidation of its business and affairs because of the insolvency. A subsequent order on motion of the Attorney General of that state declared the Exchange to be dissolved; and notices of the dissolution and discontinuance of the business were sent by mail to all policy holders and claimants including the defendant, directing that claims be filed by August 10, 1936.

These proceedings were in accord with the statute of Pennsylvania, Act May 17, 1921, 40 P.S.Pa. § 206, which provided that liquidation in such case should be made by and under the direction of the Insurance Commissioner, and that he should "be vested by operation of law with title to all of the property, contracts, and rights of action" of such an exchange.

The liquidator filed in court his report of the condition of the Exchange, and upon his petition, and after a hearing of some intervening members and subscribers other than the defendant here, the Court of Common Pleas on September 12, 1938, ordered that each subscriber holding policies between April 9, 1929, the date of the statute of Pennsylvania on contingent liability, and May 18, 1933, the date of institution of proceedings for winding up, should pay an assessment equal to one deposit premium. This was the whole amount of the contingent liability specified in the later policies, and the minimum prescribed in the statute. The total of claims thus far allowed or pending in the liquidation proceeding is approximately $300,000, of which $50,000 represents claims of persons or corporations in Maryland. The total assessments under the decree of the Pennsylvania court would be $2,843,233.23, and this total amount is ordered to provide for failures in collections, and for expenses. Members assessed number altogether 27, 182, and of those 4,818, as stated, reside in Maryland; and among them are the members with claims amounting to approximately $50,000.

The defendant claims the right to set off $750 because of a judgment against it for damages caused by its truck in a collision prior...