Partridge v. Michigan Mutual Windstorm Insurance

Lest on this rehearing the exact point in the case and the facts surrounding it be overlooked, I again call attention to reasons for reversal.

Plaintiffs, upon becoming members of this mutual company, were charged with knowledge of two things: (1) They were bound by the provisions of its charter and by-laws; and (2) that this mutual company only had power to insure property "subject to the terms and conditions of the articles of association and the by-laws of the company as they now exist and as theymay hereafter be amended." The quoted provision was plainly printed in plaintiffs' insurance policy; and in their application for insurance they agreed "to be governed in all cases by the charter and by-laws." Notwithstanding this, plaintiffs now come into court and deny they are bound by the amendment to defendant's by-laws which in effect requires them to fill their silo annually as a condition precedent to keeping in force the insurance thereon. I cannot concur in my Brother CLARK'S opinion on rehearing wherein he says: "Recital in the by-laws that they are subject to amendment is of no importance." As pointed out in our former opinion, that provision in connection with the further by-law provision that the risks carried by the company are all subject to the provisions of its present by-laws and "as they may hereafter be amended," is the very factor in this case which distinguishes it from Becker v. Insurance Co., 48 Mich. 610, and definitely brings it within the rule of our decisions which hold that the insured, because of his agreement to that effect, is bound by subsequent amendments to the company's by-laws. Wineland v.Maccabees, 148 Mich. 608; Williams v. Supreme Council C. M. B.A., 152 Mich. 1; Brown v. Great Camp K. O. T. M.M., 167 Mich. 123; DeGraw v. Supreme Court, I. O. F., 182 Mich. 366.

While it is by no means universally controlling, it would be fortunate if in the administration of the law courts would more often give consideration to the practical results of their adjudications. This is especially true in the instant case. If appellees' contention is well-founded, the defendant company would seem to have no way of relieving itself of undesirable risks on wood stave silos in its many policies outstanding before the amendment to its by-laws except cancellation of those policies; and wholesale cancellation of outstanding insurance by a company is plainly self-destruction of its business. Herein lies the justice and reason for allowing members of mutual companies, who are insurers as well as insured, to modify the character of the risks included in their policies, when as here the by-laws provide that the risks carried are "subject to the terms and conditions of the articles of association and the bylaws of the company as they now exist and as they may hereafter be amended."

Further, unless the defendant company cancels policies of this character antedating the amendment to its by-laws, the mutuality among the members of this mutual company is destroyed, because wood stave silos under all policies issued subsequent to the change in the by-laws are subject to the restriction or limitation embodied in the changed by-law, while those insured under policies issued before the change in the by-laws still have the broader protection that was formerly afforded by the policy. A mutual company, to be mutual, should afford to each of its members the same protection on each class of identical risks. Otherwise, the premium charged to some is relatively higher than that charged to others. Under appellees' contention in the instant case, members insured since the change in by-laws will pay for loss of prior members against which the more recent members are not insured at all; and those holding policies antedating the amendment to the by-laws will thus enjoy protection which they do not mutually afford to those who have become members of the company since the change in the by-laws. Thus the more recent members are subject to assessments to pay plaintiffs' loss and other losses of like character; but these more recent members do not have and cannot obtain like protection from the defendant company. In other words, as to this type of risk all semblance of mutuality is destroyed.

"Mutual insurance is essentially different from stock insurance, and much of the litigation that has grown out of this species of insurance has been owing to inattention to this difference. * * * And it is necessary and equitable that each person who gets insured in them should become subject to the same obligations towards his associates that he requires from them towards himself." Kamm Schellinger Brewing Co. v. St.Joseph, etc., Ins. Co., 168 Mich. 606.

In the instant case plaintiffs had the insurance policy in their possession for more than seven years before the loss.

"The by-law appeared upon the certificate of insurance issued in this case, and it is to be presumed the insured had notice of it. It has been repeatedly held that when a policy of insurance is effected in a mutual insurance company, the insured becomes a member of the corporation, and is bound by its charter and by-laws. The by-law is as much a part of the contract of insurance, and as binding upon the member, as the policy itself." Douville v. Farmers' Mut. Fire Ins. Co.,113 Mich. 158.

"Where there was an agreement with the member, at the time he became such, to the effect that he would be bound by future rates and liabilities to be put in force, and imposed from time to time as the company insuring deemed necessary, he was bound by such agreement and responsible for such increased liability imposed upon him thereunder." Mutual Fire Ins. Co. v. Brinker,236 Mich. 367.

Plaintiffs should be bound by the amended by-laws, not only because their contract of insurance so provides, but also by reason of the statutory provision authorizing mutual companies to make such amendments. Section 6, chap. 1, pt. 2, of the insurance code (3 Comp. Laws 1929, § 12293) provides:

"The directors or trustees of any, company organized under this act shall have power to make such bylaws, not inconsistent with the Constitution and laws of this State, or with their articles of association, as they may deem necessary for the government of the officers and members of the company, and the conduct of its affairs."

But entirely aside from the statutory provision, the rights of the parties to this suit are a plain matter of contract. In the application for insurance plaintiffs agreed to be bound by the provisions of defendant's by-laws. The by-laws were made a part of and printed in plaintiffs' policy, and therein plaintiffs agreed with the other members of this mutual company that all should be bound by the terms of defendant's by-laws"as they now exist and as they may hereafter be amended." The by-laws were amended, plaintiffs failed to comply with the requirement of the amended by-laws; and now, in violation of their contract to be bound by such amended by-laws, plaintiffs seek recovery for a loss not covered by their policy under the terms of the by-laws as amended. Such recovery should not be allowed, and the judgment entered in the circuit court should be reversed.

BUTZEL, J., concurred with NORTH, J. POTTER, J., did not sit.