Franklin C. Elder, Plaintiff, v. Bankers' Life Insurance Company, Defendant

Franklin C. Elder, Plaintiff, v. Bankers’ Life Insurance Company, Defendant. First Department, February 15, 1907. Insurance — reserve fund — determination of amount thereof — when section 52 of the Insurance Law applies. When 'an insurance company originally organized as a fraternal organization has thereafter successively incorporated as a mutual company and as a stock" company, under chapter (390 of the-Laws of 1893, the valuation of- policies issued when the corporation was a mutual company for the-purpose of ascertaining, the amount of reserve, should be made under section 52 of the Insurance Law, if such valuation does not violate, any provision, express or implied, of the original contract of insurance. The reserve need not be determined by valuing such policies as .whole life policies under section 86 of the Insurance Law. In the absence of any contract between the parties as to how a policy shall be valued in order, to estimate the amount of reserve to be carried-, the Legislature may determine the method of arriving at such valuation. - This controversy, is submitted under section 1279 of the Code of Civil Procedure upon an agreed statement of facts, as follows: The Bankers’ Life Insurance Company of tlie City of Hew York is a corporation originally 'organized as a fraternal organization March 24,1869, under the name of “ Bank Clerks’ Mutual Benefit Association of the City of Hevv, York.” Oil the 15th day of August, 1884, it was formally incorporated -under the same name and was thereafter on June 28, 1893, reincorporated under article 6 of chapter 690. of the Laws of 1892, known as the “ Insurance Law,” for the purpose, of'doing business on the Regular assessment or co-operative plan under the same'name... By an order of the Supreme Court of the State of Héw York, made on'April 27, 1894, its name was changed to the Bankers’ Life Insurance Company of the City of Hew York. Pursuant to the provisions" of "chapter 693 of the Laws of 1893, entitled’ “ An act-authorizing all insurance companies, transacting business on the cooperative or assessment plan to re-incorporate as a stock corporation under its existing corporate name,” it reincorporated as á stock corporation on the 2d day of August, 1899, .with a capita;! stock of $100,009, and has ever since been doing business, as .a stock company. At the time of' this reorganization there was no statute in the State which laid down a definite rule for the valuation of such policies as had been issued by the Bankers’ Life Insurance Company as an assessment company organized under article 6 of the Insurance Law, and these policies were valued by the Department of Insurance of the State of New York as ordinary life policies. In 1901, however, section 52 of the Insurance Law was amended so as to provide for a valuation by adding the following clause: “ This section shall apply to insurance corporations organized under or subject to article six of the Insurance Law as well as to insurance corporations organized under special charters or articles two and ten of the Insurance Law; all contracts,.policies and certificates issued by such corporations prior to accepting the provisions of this chapter shall be valued as one year term insurance at the ages attained, excepting when such contracts, policies or certificates shall provide for a limited number of specified premiums or'for specified surrender values, in which case they shall be valued- as provided in article two, section eighty-four of the Insurance Law.” Section 52 under the last amendment reads as follows: “In the case of any corporation organized-under or subject to article six of the Insurance Law, which corporation has amended its charter and is now operating under article two of the Insurance Law, all contracts, policies and o'ertificates issued prior to its reincorporation, shall be valued as one year term insurance at the ages attained excepting when such-..'contracts, policies or certificates shall provide for a limited number of specified premiums or for specified surrender values, in which case they shall be valued as provided in article two, section eighty-four of the Insurance Law.-” The policies issued by the Bankers’ Life Insurance Company as a mutual company all called for a stipulated premium and for .the payment of a definite amount of insurance'known as “face'.value.” .But they also contained an additional clause known in mutual insurance as a “ safety clause,” by the terms of which it was agreed that “ should an emergency arise through epidemic or otherwise, whereby the said premiums, supplemented by the Reserve or Emergency Fund, are insufficient, to meet the mortality requirements of the company, additional premiums equitably adjusted may be levied by the Board of Managers to meet such an emergency,” and when the company reincorporated as a stock company in August of 1899, it waived this “safety clause,” agreed to pay the “face; value” of these policies, and sent a written waiver to that effect to each policyholder. . . • ' The new charter of the stock company contained the following assumption of liability: “ The Bankers’ Life Insurance Company of the City of Mew York reincorporated, shall be subject to the existing liabilities of tliepresent company, including all contracts, policies or' cei;tificates with its members, and.to the same-extent as though not reincorporated as a stock corporation.” ' ■ The plaintiff, being of full age, is the holder of- defendant’s two policies, Mo. 2614 and 2615, for Twenty-five hundred ($2,500) .dollars each, issued on the 30tli day of December, 1895, calling for the payment of annual premiums or considerations aggregatipg One hundred thirty-nine 84/100 ($139.84) dollars, which were issued .by the defendant when operating as a mutual company, which were assumed by defendant pursuant to section 52 of the Insurance Law when it reincorpórate! as a stock company, and which are now in full force and effect. Defendant deeming that it holds as a liability an excessive reserve on policies written between June of 1893- and August of 1899, lias declared its intention, of. valuing these policies under section 52 of the Insurance Law as one-year term policies, and to keep on hand as a reserve therefor only the amount. required for one-year term policies. The plaintiff, deeming that-these policies should be valued as whole life policies, because of the fact, that on assuming the business of ’thelmithaT -company the stock company waived the extra assessment provided in' its assessment policies, seeks to enjoin the defendant from so doing, and that it be directed to hold as reserve liability the reserve called for by whole life policies under- section 8.6 of the Insurance Law. Plaintiff demands judgment that thé defendant be enjoined from valuing policies issued by it'as an assessment corporation between June, 1893, and August, 1899, in any other way but as whole life policies, and for a mandatory injunction directing it to keep a reserve on such business equal to whole life reserve on such policies. Defendant prays for judgment that the submission of the plaintiff be dismissed, and that it be decreed that a reserve on policies issued by it when it was an assessment corporation, between June of 1893 and August, 1899, equal to one-year term policies, is in compliance with section 52 of the Insurance Law. George W. Carr, for the plaintiff. D. Cady Herrick, for the defendant. Sic. Laws of 1893, chap, 690.— [Rep. This section was amended by Laws of 1893, chap. 735, and Laws of 1901, chap. 733.— [Rep. See Laws of 1905, chap. 574, and Laws of 1906, chap. 326.— [Rep. This section has been amended by Laws of 1901, chap. 514; Laws of 1903, chap. 566,; Laws of 1904, chap. 468, and Laws of 1905, chap. 113.— [Rep. [MAJORITY — Scott, J.:] Scott, J.: The defendant comes within the express terms of section 52 of the Insurance Law, and unless there is something in the contract between plaintiff and defendant which would be violated if the section is to be applied, we can see no reason why the section should not be complied with. We are unable to find, from anything contained in the agreed statement of facts, that the contract between the parties, or the statute at the time that contract was made contained any provision^ relative to the valuation of policies such as plaintiff holds. Iii the absence of any contract between the parties as to how an insurance policy shall be valued in order to estimate the amount of reserve to be carried, the Legislature has the right to determine how such valuation shall be arrived at. It is not said that a' valuation according to the method prescribed by the Legislature will result in the maintenance of an insufficient reserve, although it is averred that a valuation upon some other basis would result in the establishment of a larger reserve. If the basis of valuation fixed by the Legislature is improper or unwise it is to the ^Legislature that appeal should be made for the establishment of a different basis. All that we can do is to determine whether section 52 of the Insurance Law applies to the policy which plaintiff holds, and, if so, whether it is violative of the contract between plaintiff and the defendant. We are of opinion that the section does apply to plaintiff’s policies and that it does not violate any provision, express or implied, in the contract between the parties hereto. It follows that the judgment must be entered, without costs, in favor of defendant; that the plaintiff’s policies, issued by the predecessor of the present defendant find assumed by the latter upon its reincorporation, are subject to valuation as one-year term policies under section-52 of the Insurance Law. Pattebson, P. J., Ingbaham, .Laüghlin and Clabke, JJ.,. concurred. ’ Judgment ordered for defendant, without costs, as stated in opinion. Settle order on -notice. '