The Herkimer County Mutual Insurance Company vs. Fuller

The Herkimer County Mutual Insurance Company vs. Fuller. The directors of a mutual insurance company do not act judicially in making assessments upon premium notes. Having ascertained that the company is liable for a loss, and that it has not sufficient funds to pay the same, the directors are to ascertain who were the members of the company at the time the loss occurred, and then their assessment is to be made upon each in the proportion which the amount of his deposit note bears to the amount of all the deposit notes. They have no right to take into consideration the length of time any person has been a member, in determining the amount of his assessment,- or whether he shall be assessed at all. If they omit to assess the deposit notes of any persons who are then members, and liable for their proportions of the losses; or if they include in the assessment the amount of previous assessments, from the payment of which the parties assessed have been released, the assessment is invalid. This action was brought upon a premium note executed by the defendant to the plaintiffs, on effecting an insurance with them. The note was for $441, dated January 81, 1848. The complaint alledged that the directors of the plaintiffs’ company, having received notice of certain losses and damage by fire, and having ascertained the amount of such losses and damages, did, on the 19th day of November, 1849, “ settle and determine the sums to be paid by the several members thereof, as their respective proportions of such losses, and that the amount which the defendant thus became liable to pay, was $35,28, which sum was in proportion to the amount of his deposit note.” The answer alledged, among other things, that the directors, when settling and determining the amount to be paid by the several members of the company, “ wrongfully omitted and neglected to assess the deposit notes of divers persons then being members of said company and liable for their proportions of said losses, by which omission and neglect the defendant was assessed more than his just proportion.” It was also alledged “ that the directors, in making the assessment, included therein certain sums which had before been assessed against divers persons, then being members of the company, and who had been released from the payment thereof.” The plaintiffs moved to strike out these portions of the answer, as irrelevant and redundant. W. Brooks, jun., for the plaintiffs. H. Baker, for the defendant. [MAJORITY — Harris, J.] Harris, J. It was insisted by the counsel for the plaintiffs, on the argument, that the directors, having acquired jurisdiction by ascertaining the loss, acted judicially in making their assessment; that it was for them to determine whether an assessment was necessary, and if it was, upon what members it should be made, and how much should be paid by each. But I do not so understand the requirements of the plaintiffs’ charter. The 8th section of the act to incorporate the Jefferson Mutual Insurance Company, (Laws of 1836, p. 44,) the provisions of which are adopted in the plaintiffs’ charter, (Id. p. 197,) declares that every member of the company shall be bound to pay for losses, &c. “ in proportion to the amount of his deposit note;” and the 10th section provides that the directors, having ascertained the loss, “ shall settle and determine the sums to be paid by the several members of the company, as their respective proportions of such loss.;” and declares that the sum to be paid by each member shall always be in proportion to the original amount of his deposit note or notes.” In pursuance of their duty, as thus prescribed, the directors having ascertained that the company is liable for a loss, and that the company have not funds sufficient to pay such loss, are first to ascertain who were members of the company at the time the loss occurred, and having ascertained this, their assessment is to be made upon each, in the proportion which the amount of his deposit note bears to the aggregate amount of all the deposit notes. I cannot agree with the plaintiffs’ counsel, that the directors have a right to take into consideration the length of time any person has been a member, in determining the amount of his assessment, or whether he shall be assessed at all. Whether he has been a member for a day or a year, and whatever the amount he has previously paid, but one rule of assessment is prescribed. It is the proportion which his deposit note bears to the amount of the deposit notes of all the members. If, therefore, the directors have, as the defendant has alledged in his answer, “ omitted to assess the deposit notes of divers persons, then being members and liable for their proportions of the losses,” and have thus increased the amount of the defendant’s assessment, they have done what I think they had no authority for doing, and the assessment is invalid. So, too, if they have included in the assessment the amount of previous assessments from the payment of which the parties' assessed had been released, it seems to me very clear that they transcended the power conferred upon them by their act of incorporation. [Onondaga Special Term, June 14, 1852. Harris, Justice.] The allegations in that part of the answer to which this motion applies are, therefore, not irrelevant. On the contrary, unless I am mistaken in the view I have taken of the provisions of the plaintiffs’ charter, in respect to the power of the directors to make assessments, these allegations, if sustained at the trial, will prove fatal to the plaintiffs’ action. The motion must therefore be denied, with $7 costs.