Wolcott v. State Farmers Mutual Insurance , 77 Neb. 742 ( 1906 )

Jackson, C.

The defendant is a mutual insurance .company organized under the law of Nebraska. One February 21, 1902, the plaintiff made written application to the defendant for a fire insurance policy covering a hay barn and its contents. The application contained this printed memorandum: “I hereby agree to be governed by the articles of incorporation, by-laws, and rules now in force or that shall hereafter be adopted by said company.” On March 4 following defendant issued its policy, one of the conditions of which is: “It is agreed and understood that this policy or certificate of membership is issued and remains in force on the condition that said applicant complies with the by-laws, rules and regulations that are now in force or that may hereafter be adopted, and are made a part of this certificate.” On the back of the policy is printed what purported to be a copy of the by-laws of the company.. The only provision for assessments in the by-laws as they appear on the policy is: “In case of an assessment each member assessed shall be notified by letter post paid, by the secretary, to the address named in his application, and if the insured shall refuse or neglect to pay such assessment within thirty days after mailing the notice as above specified, then this company shall not be liable in case of loss under his certificate until such payment is made; if the loss is approved by the board and such loss exceeds in amount the cash fund on hand of the company, the secretary shall assess all who are members at the date Of said loss, and prorate according to the amount of insurance.” On August 28, 1904, plaintiff sustained a loss of the barn covered by the policy and its contents, due notice of which was given to the defendant, resulting in a refusal to pay the loss. Suit was instituted in the district court, where the judgment was favorable to the plaintiff, and the defendant appeals.

The defense was grounded on the claim of a suspension of the policy by reason of the nonpayment of an assessment. At the trial the defendant offered to prove that its by-laws had been amended on April 3,1901, to provide that assessments should be made by order of the board of directors and prorated according to the time the insurance bad been in force, and at the same meeting a resolution vas adopted requiring members, to pay an assessment of 10 cents a month on each $1,000 for combined insurance, and 5 cents a month on single, on memberships that had been in force over two years. About June 20, 1904, the plaintiff received from the defendant the following notice: “State Farmers Mutual Insurance Company, South Omaha, Nebraska, June 17, 1904. E. M. Wolcott, Archer. Dear Sir: You are hereby notified that the assessment against your policy No. 7207, in force 24 months, is $3.75, on combined. Total $3.75. Which amount please remit by money order or draft payable to the State Farmers Mutual Ins. Co., South Omaha, Neb. If by personal check, add 10 cents for exchange. Betum this notice with remittance. Your policy will lapse in 60 days from the date of this notice unless assessment is paid. March assessment. B. E. Stauffer, Secretary.” • It is admitted that this assessment was not paid at the time of the loss, more than 60 days after the receipt of the notice.

By section 12, ch. 33, laws 1891, it is provided with reference to mutual insurance companies: “Whenever the amount of any loss shall have been ascertained, which exceeds in amount the cash funds of the company, the sec-rotary shall make an assessment upon all of the property insured by the company; Provided, that any company may provide in its by-laws for making assessments at stated intervals only, and may also provide that assessments shall he made by the board of directors.” Section 13 is: “It shall be the duty of the secretary, Avhenever such assessment shall have been made, to immediately notify every person composing such company, personally, or by a letter sent to his usual post office address, of the amount of such loss, and the sum due from him as his share thereof, and of the time and to whom such payment is to be made; but such time shall not be less than twenty (20) nor more than forty (40) days from the date of such notice.” By section 19 it is provided: “Such mutual insurance companies shall never make assessments upon tlieir members, as provided in section twelve (12) of this act, until loss has first occurred, unless the directors by a two-thirds (2-3) vote order an assessment. They shall never make any dividends.”

It will thus be seen that there are two methods allowed by statute for making assessments in mutual insurance companies: First, where a loss has actually occurred and the cash on hand is insufficient to make payment thereof; and, second, by a two-thirds vote of the board of directors after being duly authorized by the by-laws. The record contains no proof, or offer of proof, to show that an assessment was necessary to pay the losses of the company, so that the assessment and failure to pay the same constitute no defense to the plaintiff’s action, unless it can be sustained under that provision of the statute authorizing assessments by a two-thirds vote of the directors. It is evident that the minutes of the meeting of the board of directors, by which the defendant offered to prove the assessment, were insufficient for that purpose. An assessment, in the absence of loss could only be made by a two-thirds vote of the board of directors. It does not appear in the record, or in any proof tendered, how many members constituted the board of directors, nor does it appear bow many voted for the assessment and how many against it. There is a memorandum in the minutes that the motion to adopt the plan of assessment was carried, but it is not disclosed in the record that the minutes were approved by the board of directors. While, ordinarily, in an action between a corporation and one of its members the records kept by a proper officer are admissible in evidence, yet, where, as in this case, it is sought by the record alone to avoid a contract, we think the record should show affirmatively that the statute has been complied with.

The errors, if any, in excluding the evidence offered were without prejudice, and we recommend that the judgment of the district court be affirmed.

Duffie and Albert, CO., concur.

By the Court: • For the reasons stated in the foregoing opinion, the judgment of the district court is

Affirmed.