CHAPTER XXIII. MUTUAL INSURANCE. SEC. 509. Peculiar features of. SEC. 510. Liability beyond amount of note. SEC. 511. Premium notes. SEC. 512. Character of premium notes - Liability on. Peculiar features of. SEC. 509. The distinction between mutual and stock insurance is, that in the former the assured become members of the company, and stand in the relation of assured and insurers to each other, and liable to contribute to the loss of each member, as well as to their own, to the extent of the premium note given by them, while in stock companies, upon payment of the sum named as the premium, the company alone assumes the risk. It often happens that mutual companies combine both features, and give their customers the choice of becoming members of the company, or of paying a gross sum for insurance, without assuming any further liability. In the latter case, the assured does not become a member of the company, and is not liable to contribute to the losses of others.' When a premium note is given, and the assured becomes a member of the company, he is held chargable with notice and knowledge of the provisions of the charter and by-laws of the company, and is bound thereby,' but he is not affected by by-laws subsequently adopted, particularly if they conflict with the charter or the policy.' Liability beyond amount of note. SEC. 510. Whether the members of a mutual company are liable beyond the amount of their premium notes, for losses, will depend upon the provisions of the charter, but, in any event, there is no such liability until the premium notes are exhausted.* 'Illinois F. Ins. Co. v. Stanton, 57 Ill. 354. * Mutual Ass'n v. Korn, 7 Cr. (U. S.) 396. Premium notes. SEC. 511. Whether a premium note is valid or not, will depend upon the question whether the policy ever attached, or whether the company or its agent were guilty of fraud in procuring it,' as a policy that is invalid does not furnish a legal consideration for the note. But the fact that the company was in fact insolvent when the policy issued, does not invalidate the note, if the officers and agents were ignorant of the fact. If the policy ever attached, the note is valid,' but the fact that a note was given, and a policy made, does not fix the liability of the maker, the policy must have been delivered, or at least accepted, or the note is inoperative. The policy must have attached, and if it never became operative as an indemity, no portion of the premium is collectable.' Character of premium notes - Liability on. SEC. 512. Stock notes; that is, notes given to assist in the formation of the company, and as capital, as well as notes given for premiums, that are not subject to assessments, are absolute obligations and negotiable, and may be sued in the name of any bona fide holder." In all cases where the notes are subject to assessments, the assured is liable upon the notes in the manner and to the extent provided by the charter, or, in the absence of charter provisions, by the by-laws, and in no other way. If the charter provides that the insurer may, at its option, collect the entire amount of the premium note, of course it may do so, but if it makes the note payable by way of assessments, that is the only mode in which payments can be required, and only in that way, when assessments are necessary to meet actual losses,' and the assessments must be restricted to losses occurring after the premium note was given, and if it includes prior losses, it is void. The liability of the assured is not absolute, but contingent upon losses, to which he is liable to contribute; therefore, in order to recover an assessment, the company takes the burden of 1 1 Lynn v. Burgoyne, 13 B. Mon. (Ky.) 400; Russell v. De Grand, 15 Mass. 35. Lester v. Webb, 5 Allen (Mass.) 569; Alliance Ins. Co. v. Swift, 10 Cush. (Mass.) 433; Sterling v. Mercantile Ins. Co., 32 Penn. St. 75. 'Atlantic Ins. Co. v. Goodall, 25 N. H. 369. Real Estate Ins. Co. v. Roessle, 1 Gray (Mass.) 336. Homer v. Dorr, 10 Mass. 26; Merchants' Ins. Co. v. Clapp, 11 Pick. (Mass.) 56. 6 Rhinehart v. Alleghany Ins. Co., 1 Penn. St. 389; Dana v. Munro, 38 Barb (N. Y.) 528; White v. Haight, 16 N. Y. 310; Tuckerman v. Brown, 38 N. Y. 297 Sumissippi Ins. Co. v. Taft, 26 Ind. 240. ་ 8 Long Pond Mut. Ins. Co. v. Houghton, 6 Gray (Mass.) 177. establishing losses to which the assured is bound to contribute, and the necessity of such assessment, to meet such losses.' In order to establish losses, as a basis of assessments, the company need not prove losses in fact, in the first instance, but its record book of losses, in the first instance, is sufficient for that purpose, and if not contradicted is sufficient for all purposes.* The company is bound to regulate its assessments by the losses actually due, and must impose them upon all the premium notes. If any are intentionally omitted from its operation, the assessment is void.' Unless so provided in the charter, the premium note does not become inoperative upon a cessation of the risk; but the assured remains liable thereon during the entire period covered by his policy, even though the company declares the policy void for non-payment of assessments, or other breach of conditions. All assessments must be paid within the time prescribed by the charter or by-laws, or the policy becomes. void, if so provided in the charter, by-laws or policy. In all cases, the charter, by-laws and policy must be looked to, and the rights of the parties will depend upon the provisions or conditions thereof, and no general rules can be given applicable in all cases. Necessarily the measure of liability is to be determined by the charter and by the contract. In a recent Pennsylvania case' it was held that where a person is induced to insure in a mutual company through fraudulent representations of the agent, such fraud is a complete defense to an action upon the premium note or for assessments made on it. 1 Pacific Mut. Ins. Co. v. Guse, 40 Mo. 329; American Ins. Co. v. Schmidt, 19 Iowa, 502; Savage v. Midbury, 19 N. Y. 32; Atlantic Ins. Co. v. Fitzpatrick, 2 Gray (Mass.) 279; Bangs v. Gray, 12 N. Y. 477; Stair v. Wadleigh, 8 John. (N. Y.) 124; Bangs v. Duckingfield, 18 N. Y. 592. 2 People's Ins. Co. v. Allen, 10 Gray (Mass.) 297. 'Marblehead, etc., Ins. Co. v. Hayward, 3 Gray (Mass.) 208. Marblehead Ins. Co. v. Underwood, 3 Gray (Mass.) 210; Iowa, etc., Ins. Co. v. Prossee, 11 Iowa, 115. Marblehead Ins. Co. v. Underwood, ante. 6 Blanchard v. Atlantic, etc., Ins. Co., 3 N. H. 9; Hale v. Union Mut. F. Ins. Co. 32 id. 295. 'Lycoming Ins. Co. v. Woodworth, 83 Penn. St. 223. INDEX. A. ACCEPTANCE (see POLICY-INSURANCE). of risk binds company, 46. what constitutes, 46, 49. ACTION UPON POLICIES (see REMEDIES UPON POLICIES). provisions of policy relating to, valid, 754. effect of war on, 757. premature actions, rule as to, 757. what is commencement of action, 759. delay induced by insurer, effect of, 761. when provision attaches, 762. right of action accrues, 762. condition of policy as to, may be waived, 762. waiver may be implied, 762. rule when the contract is by parol, 758. when adjustment is a condition precedent to right of action, 758. who may bring, 817. how should be brought, 816. form of, 816. trover lies, when, 821. by insurer against wrong-doer, 821. ADJUSTMENT (see Loss-POLICY-EVIDENCE). only actual to be allowed, 764. extent of loss to be ascertained by value, at time and place of, 764. rule when property is damaged, 765. ascertainment by sale of, 775. in case of manufactured articles, 765. as to buildings, 765, 766. as to mortgage interests, 766, 767. |