Pratt v. Dwelling House Mutual Fire Insurance

Green, J.:

The defendant was organized as a mutual insurance company by virtue of chapter 362 of the Laws of 1880, as amended by chapter 171 of the Laws of 1881.

By section 7 of that act it is provided that “ every person * *' * so insured shall give his, her,.its or their contract or agreement, binding him, her, it, or them, their heirs or assigns, to pay their fro rata share to the company of all losses or damages caused by fire'or lightning, which may be sustained by any member or members thereof. He, she, it or they shall also pay such percentage in lawful money, and such reasonable sum for policies and expenses, and within such time as may be required by the by-laws of said company.”

It is over the construction of this section that the main contention of this appeal arises.

The appellant insists that this provision of the statute should be construed to authorize the company or its receiver to assess the solvent members of the company for the deficiency caused by nonpayment of assessments by insolvent members.

The words of the statute are direct, plain and unambiguous. A literal and unrestricted interpretation preserves the plain, paramount intention of the law-makers clearly expressed by the statute.

The title of the act under which this company was organized is “ An act to provide for the formation of county co-operative insurance companies,” indicating at the outset that those who organized themselves into a corporation under' the act were to operate jointly and together to the same end. It is provided by the statute that every person who becomes a member of the corporation shall pay his “pro rata share to the company of all losses or damages caused by fire or lightning, which may be sustained by any member or members thereof.” It surely would be a strained construction to say that it was intended by the use of these words to bind each member of the company to the payment of an entire loss, if all the other members should prove to be insolvent. If it were so intended, the words “pro rata” that is, a distribution proportionately, would not have been used in expressing the intention of the Legislature. There is nothing in the statute which indicates that the members of a corporation .organized thereunder are to indemnify those insured against loss by reason of the insolvency of a member, nor any obligation to pay the share or proportion of any other member who may become insolvent, or from any cause unable to pay his proportionate share of the loss. Under the construction contended for by appellant, a solvent member might be compelled to pay the entire loss and also the expenses of the company or receiver in ascertaining and determining the question of the solvency or insolvency of the other members. Will it be contended for a moment that any person would become a member of such a corporation, knowing that he might become liable individually to pay all the losses occurring in the class in which he was insured ? If such were the intention expressed in this statute, and so expressed as to be clearly understood and comprehended, there would be no corporation organized under the law, for no sane mail would venture upon so hazardous an undertaking. The regnant idea and intention of the statute are that each member of the company is to pay such proportion of the loss as the amount of his insurance bears to the whole amount of insurance in the same class. The liability of the member is not joint and several, but the principle is that each one contracts that, in respect of a certain sum or premium, to be levied by a pro rata contribution on the amount for which he himself is insured, he will contribute to pay any losses resulting from the happening of the contingency insured against, which may occur to any other member; but there is no participation by any member in respect of the liability of any other in regard to solvency, default or dishonor. No member insures the solvency, the honesty or good faith of other members. The question of contribution depends on the contract and not on equitable considerations. A- member undertakes.no liability other than .that of contributing his share of the losses, and is in no way a party to the debt or obligation of any other member to a suffering member. Each member, foreseeing the contingency of himself suffering a loss, took his chances with the rest. He knew when he executed his contract that if he suffered loss by fire his entire loss might not be made up to him, for the contract he and all other members executed provided that each member should pay only his proportionate share of such loss and not the share of a defaulting or dishonest member. Each man agreed to pay, but his. proportion was limited, and beyond that he could not be called upon.

In my opinion this is the true intent and meaning of this statute. Undoubtedly the receiver is authorized by statute to make the assessment, and to that end, to make application to the court setting out the necessity for levying assessments. . The petition is ex parte, the order granting permission to levy the assessment is an ex parte order, and the confirmation thereof is ex pernote. The members have no day in court and no opportunity of ascertaining the nature and extent of the indebtedness, or the amount-necessary to be assessed upon each member in order to pay the debts and liabilities of the company and the expenses of the receiver in collecting the assessment.

This was the course adopted in the proceeding upon making the assessment which has been .made, and the course adopted in the present proceeding. The members received no notice of the hearing before the referee who was appointed to take proof and report with his opinion as to whether a second assessment should be made. Such a course is obviously liable to abuse and provocative of litigation. Notice of the hearing before the referee should have been given by him to all members sought to be assessed, and they should have been allowed to contest the application and, if necessary, to except to the referee’s report and oppose its confirmation.

One assessment has already been authorized by the court and made by the receiver for the purpose of paying the indebtedness of the company to plaintiff. There was a deficiency caused, as plaintiff claims, by reason of the fact that some of those assessed as members contested the assessment and were successful, some were dead and some insolvent. The statement as to the cause of the deficiency is vague and indefinite. The record does not disclose how many members so assessed were insolvent, nor how many were dead, nor how many were successful in contesting the assessment.

The former proceeding was instituted solely in the "interest of plaintiff, who was a former officer of the company and a member of the same. It was his duty in such proceeding to have informed the receiver and the court of the members of the association liable to assessment for the j>ayment of his judgment, and, not having done so at that time, and not definitely informing the court upon this application, made by himself, as to who or how many of the members, he claims, are liable to assessment, he ought not to complain if he is now precluded from compelling the receiver to make another assessment.

The present proceeding is conducted by the plaintiff against the' opposition of the receiver, who insists that it is unauthorized, and that, if ordered, it will be resisted by the members assessed on the ground that they have already been assessed their rata share, as provided by their contracts, and are under no further liability.

This assessment should not be authorized by the court, under these circumstances, unless it clearly appears that the members are under further liability under the statute and their contracts executed in accordance with the statute. We think that this has not been shown, and that the order appealed from should be affirmed, with costs against the plaintiff.

All concurred, except Ward, J., who dissented.

Order affirmed, with ten dollars costs and disbursements.