Wysong v. Auto. Underwriters, Inc.

• Decision Date: 13 March 1933
• Docket Number: No. 26124.,26124.
• Citation: 204 Ind. 493,184 N.E. 783
• Parties: WYSONG et al. v. AUTOMOBILE UNDERWRITERS, Inc.
• Court: Indiana Supreme Court

204 Ind. 493

184 N.E. 783

WYSONG et al.

v.AUTOMOBILE UNDERWRITERS, Inc.

No. 26124.

Supreme Court of Indiana.

March 13, 1933.

Appeal from Superior Court, Marion County; L. D. Hay, Judge.

Action by the Automobile Underwriters, Inc., against Clarence C. Wysong, etc., and others. From a judgment of permanent injunction, defendants appeal.

Affirmed.

Transferred from Appellate Court under Burns' Ann. St. 1926, § 1351.

Jas. M. Ogden, Atty. Gen., and Jos. Hutchinson and Earl B. Stroup, Deputy Attys. Gen., for appellants.

Fenton, Steers, Beasley & Klee and Thompson, Robb & Stevenson, all of Indianapolis, for appellee.

HUGHES, Judge.

This was an action begun in the Marion superior court by the appellee against the appellant, seeking to enjoin the appellant from promulgating, enforcing, or attempting to enforce a threatened order made by the insurance commissioner, prohibiting the issuance of contracts of insurance containing provisions against assessment liability, and limiting the liability of subscribers, and from preventing the execution of powers of attorney containing provisions as to the limitation of liability, and restraining and enjoining appellant from revoking the authority of appellee to do business in the state of Indiana.

The cause was tried by the court, upon a stipulation of facts and the testimony of one witness. A finding was made and judgment of permanent injunction was entered against the insurance commissioner.

The reciprocal contract of insurance in question limited the liability of the subscribers to the initial premium paid by them to the attorney in fact. The appellant contends that the provision limiting the liability of subscribers to the initial deposit premium paid by them to appellee, who is attorney in fact for the subscribers of the State Automobile Insurance Association of Indianapolis, Ind., are prohibited by the terms of the Reciprocal Insurance Act, and are also unlawful because they are represented as nonassessable. The appellee contends that the issuance of such policies is lawful.

Appellants rely for reversal of this cause upon the following errors as set out in the assignment of errors, to wit: (1) The Marion superior court erred in overruling appellants' separate and several demurrer to the complaint. (2) The Marion superior court erred in overruling appellant's separate and several motion for new trial herein for the reason that (a) the decision of the court is not sustained by sufficient evidence; (b) the decision of the court is contrary to law; (c) the finding and decision of the court is not sustained by sufficient evidence and is contrary to law.

The Legislature of Indiana passed a statute in 1919 which became effective May 15, 1919 (Acts 1919, p. 503, c. 102, sections 9308-9321, Burns' 1926), which regulates the business of reciprocal insurance. Section 1 of said act (Burns' 1926, § 9308), provides that the subscribers may make contracts with each other providing indemnity among themselves from any loss that may be insured against. Section 2 (Burns' 1926, § 9309) provides that such contracts may be executed by attorney duly authorized and acting for such subscribers. Section 3 (Burns' 1926, § 9310), among other things, provides that such subscribers so contracting among themselves shall file with the auditor of state (1) a copy of the form of policy contract or agreement under or by which such insurance is to be effected or exchanged; (2) a copy of the form of power of attorney, or other authority of such attorney under which such insurance is to be effected or exchanged. Section 6 (Burns' 1926, § 9313), provides that “there shall, at all times, be maintained as assets a sum in cash or securities *** amounting to fifty per cent. of the net annual deposits *** and *** there shall be maintained, in the case of automobile insurance, in cash or such securities, assets sufficient to discharge all liabilities on all outstanding losses arising under policies issued, same to be calculated on the basis of net premiums or deposits, as in this section defined, and in accordance with the laws of the state relating to similar reserves for companies insuring similar risks. For the purpose of computing said reserves and assets, net deposits shall be construed to mean the advance payments of subscribers after deducting therefrom the amounts provided in the subscribers' agreement for expenses; if, at any time, the assets so held *** or such securities shall be less than required above, or be less than twenty-five thousand dollars, the subscribers, or their attorney for them, shall make up the deficiency within thirty days after notice from the auditor of state.” Section 11 (Burns' 1926, § 9318) provides that “the penalty for failure or refusal to comply with any or all of the terms and provisions of this act, upon the part of the attorney, shall be the refusal, suspension or revocation of certificate of authority or license by the auditor of state, after due notice and opportunity for hearing has been given such attorney, so that he may appear and show cause why such action should not be taken.” Section 13 (Burns' 1926, § 9320), provides that “the attorney may insert in any form of policy prescribed by the laws of this state any provisions or conditions required by the plan of reciprocal or interinsurance, provided that same shall not be inconsistent with or in conflict with the law of this state.”

There are two main questions involved in this case: (1) Whether a limitation of liability on the part of the subscribers at the State Automobile Insurance Association to the initial deposit and application fee is a valid one; and (2) if so, whether under the terms and provisions of the power of attorney executed by each subscriber at said association and under the policy issued in pursuance thereof the policies of the subscribers are really nonassessable. In order to pass upon these questions, we must consider the nature of reciprocal insurance and the foregoing provisions of the Indiana statute with reference thereto.

“By reciprocal or inter-insurance is meant that system of insurance whereby several individuals, partnerships or corporations underwrite each other's risks against loss through an attorney in fact, common to all, under an agreement that each underwriter acts separately and severally and not jointly with any other. The individuals interested appoint an attorney in fact for their particular purpose and business and he takes the place of an insurance company in every particular. The power of attorney is the charter, so to speak and limits the rights and powers of the attorney in fact, prescribes his duties and provides for his compensation. The power of attorney directs what particular provisions the policies must contain, or must not contain. The attorney in fact is forbidden to make the liabilities of any insurer joint with other inter-insurers and is forbidden to make the liability of inter-insuring underwriters, as such, greater than a specified amount.” Central Law Journal, April 22, 1904, p. 323.

The appellee for more than ten years has been attorney in fact for the insurance association subscribers who, at the institution of this action, numbered more than 100,000, and hold policies aggregating a coverage of several million dollars. Prior to July, 1929, the subscribers' agreement and power of attorney provided that “My liability shall be fixed and limited to an amount which shall in no event exceed one full additional annual premium deposit during any one year,” and the policy or reciprocal contract of insurance issued provided that “Subscribers liability shall be fixed and limited to an amount which shall in no event exceed one additional annual premium payment during any one year, and neither our attorney, deputy, or any subscriber, nor any other person shall have authority to bind or obligate us for any amount in excess of the above fixed limited liability.”

In June, 1929, the appellee, for the subscribers, submitted to the insurance commissioner an amended power of attorney which contained the following: “Liability under this policy shall be fixed and limited to the amount of the premium deposit and the application fee provided for in this policy.” To this amendment the insurance commission made no objections, but suggested that the amendment be changed (and it was changed) to read as follows: “But the maximum amount to be paid and my liability shall be fixed and limited to the amount of the premium deposit and the application fee provided for herein.” Thereafter the policy or reciprocal contract of insurance issued provided that “The subscribers liability under this policy shall be fixed and limited to the amount of the premium deposit and application fee provided for in the policy,” and printed in the back of the policy in red type was the word, “Non-assessable.”

After the new forms of power of attorney and policy had been filed with the insurance commissioner and after more than sixteen thousand of the new form policies were written on which $648,102 were collected in premium deposits and membership fees, the insurance commissioner reversed his ruling and advised appellee that it could no longer issue policies and the subscribers could no longer execute powers of attorney in the amended form theretofore approved by the commissioner.

There is a limitation under the power of attorney, as set out, which is notice to every subscriber that beyond the premium deposit and application fee the subscribers will not be bound. The liability of any subscriber is determined by the terms of the power of attorney executed by and the policy issued to a subscriber. These constitute the contract of each subscriber with all other subscribers. The power of attorney is the controlling factor. The attorney in fact cannot go beyond the powers granted in the power of attorney creating his appointment. He cannot bind the subscriber beyond the limitations expressed in the...