State v. Alley

Mayes, T.,

delivered the opinion of tbe court.

Tbe facts of tbis case need no restatement, since counsel have entered into a written agreement fully covering same and filed it of record. Tbe consideration of tbe case is not an involved or difficult task, since every feature of it lies wholly witbin our statutes regulating insurance, being chapter 69, p. 766, of tbe Code of 1906.

Tbe first section bearing upon tbe question here presented is section 2606, which prohibits any foreign insurance, indemnity, or guaranty company from doing business in tbe state until it shall have complied with its provisions in tbe following ways; that is to say: By depositing with tbe commissioner of insurance, first, a certified copy of its charter, etc., and1 a statement of its financial condition, etc., and paid tbe fees therefor; second, by satisfying tbe commissioner that it is fully and legally organized under tbe laws of its state to do tbe business it proposes to transact, etc., that it possesses net cash assets of not less than $100,000, or net cash assets of not less than $50,000, with also invested assets of not less than $100,000, and in each case with additional contingent assets of not less than $300,000, etc.; third, it shall constitute and appoint the commissioner of insurance, etc., its true and lawful attorney, upon whom all process may be served as if upon the company, etc.; fourth, it shall also appoint as its agent in this state some resident other than the commissioner of insurance, on whom service can be had as effectively as upon the company itself; fifth, it shall have the commissioner certify that it has complied with all the above provisions of the. law. The facts conclusively show that the above requirements were not complied with by the Manufacturing Lumbermen’s Underwriters, though its domicile is indisputably in Kansas City, Mo.

The whole contention on tire part of appellee is that, under the plan used by the Manufacturing Lumbermen’s Underwriters for effecting insurance on the property of manufacturing lumbermen, it neither does an insurance business in the sense of' tire statute, nor does the statute in any way apply to' any business carried on by it. It is further the contention that the Manufacturing Lumbermen’s Underwriters is in no sense an “insurance company, corporation, partnership, association, or indi-viduáis” transacting the business of insurance in this state within the meaning of section 2559 of the Code. "While counsel representing the Manufacturing Lumbermen’s Underwriters, carefully refrain from referring to it as an association, never using the word one time in all the agreed record or in their brief, we shall hereafter designate it as such, for such in truth it is. We may here say that the determining feature as to the application of the insurance law to the organization whose plan of insurance is now under review lies, not in the name by which it is called, but in the business conducted by it. Though the organization be not called by any of the names specified in tire statute, such as “company, corporation, association,” etc., if in truth it is such, and is doing the business which makes it subject to our statutes on insurance, the absence of the name can operate as no charm wherewith to wrest it out of the control of the in-■sxirance department. If the contention of this association is sound, we bave an association domiciled in Kansas City, effecting large and important insurance risks in this state, and attempting to absorb the whole of the character of insurance done by it, without actual capital other than the premiums paid in by those taking membership in same, and' twenty-fire per cent, •of this, under the subscriber’s agreement, is payable for attorney’s fees and expenses. Further than this, in case it becomes necessary for an insurer to sue, there is no authorized person in this statfe to accept service of summons; in fact, the plan of this association runs counter to both the statute itself and all the purposes had in view when it was enacted. The object of tire statute is to prevent any but capitalized and responsible foreign insurance companies frpni doing business in this state, insurance companies that can be made responsible on their contracts and in the jurisdictions where those contracts are made; and yet this association violates every intent of the statute and' claims exemption therefrom on the phraseology, merely, off a scheme of great complexity, but which at last is nothing but insurance.

Section 2559 specifies the concerns subject to the insurance laws, which are “all companies, corporations, partnerships, associations, individuals and fraternal orders, whether domestic or foreign.” It would be impossible for the statute to more clearly indicate a purpose to include within its provisions all organizations doing an insurance business of any kind. This section includes every possible character of association or organization in that business. The use of the word “company” in section 2606, prohibiting any “'foreign insurance company” from doing business in this state until, etc., is defined in section 2562 to mean “all corporations, associations, partnerships, or individuals,” etc., thus again showing that the provisions of the statute apply to insurance associations in the broadest possible way. .Section 2563 provides what shall be a contract of insurance within the meaning of the statute; that is to say3 it is an agreement by which one party for a consideration promises to pay money or its equivalent or to do some act of value to the assured, upon the destruction, loss or injury of something in which the assured or other party has an interest.” The policy under consideration in this case is a policy of insurance in favor of the Cotton States Lumber Company for the sum of $3,000, on. property aggregating in value $8,000. It is an insurance contract falling literally within the definition of section 2563. The insurance contract is made by the Manufacturing Lumbermen’s Underwriters’ Association, which is “a party” within the meaning of the above statute. In volume 6, p. 5202, of Words and. Phrases, the word “party” is held to mean “as naturally a body composed of several individuals as a body sole and individually,” and we have no hesitancy in holding that the association in question, as such, is a “party” within the meaning of the statute. “ ‘Party’ everywhere implies unity, but is properly used to signify a unit composed of many, as well as an individual.” See above citation. The association is composed of a number of persons, firms, individuals, corporations, or associations who have become members of the underwriters’ association by becoming subscribers thereto, through the agency of the power of attorney executed to Harry Rankin & Co. The. only thing peculiar about this insurance association is the complication of its plan, designed only for the purpose of escaping-the insurance laws. We have nothing to do with the motive-behind the plan. It may be true, and doubtless is true, that all the promptings of this plan of insurance were worthy; but it falls within the condemnation of the statute. The rule of' law applies alike to the worthy and the unworthy, to the end that the unworthy may not get in control of the business. To-hold that a plan of insurance like this was above the broad terms of our statute would be to do- violence to its plain purpose and' open the door wide to all kinds of fraudulent insurance schemes-

The question of whether or not the association is doing an insurance business, within the meaning of the statute, is not affected by the fact that the association confines itself to the insurance of only a particular hind of property. If this were-not true, all subjects of insurance might be covered under a similar plan and by the same association, merely by having the association formulate the same plan, with the same attorney in fact, having a branch dealing only with insurance on dwellings, then again another branch dealing with insurance on stocks of goods, then again another branch dealing with insurance on storehouses, and so on until it might absorb any and all subjects of insurance and thus repeal the whole insurance law. This construction of the statute does no violence to the constitutional rights of any person, whether it be a right asserted under the federal or state constitution., The right of a state to regulate the business of insurance is so well settled that it needs- no citation of authority. Indeed, counsel for the association opens the argument with the statement that: “Counsel for the state devote considerable space to the right of the state to regulate-the business of insurance. It is unnecessary to cite authorities, on this point. We believe that .the state has the unquestioned right to regulate the business of insurance.” But it is claimed by counsel for the association that, if it be held by this court that the statute is broad enough to cover the plan under review, then the statute is unconstitutional, because it invades the right of private contract. This contention is not sound. The question in this case is whether or not this association is doing “an insurance business” in this state within the meaning of the statutes. There is no question in the case as to the right of any individual to make a contract with the association. The main question here to be considered is whether mere language may be so manipulated as to formulate an adroit plan for the operation of an insurance business in this state in violation of its laws. We say not. It plainly appears that the association is doing an insurance business, and that it lias not complied with the insurance laws. The business is therefore declared unlawful, and the association is conducting its business without .authority.

The principle declared here is but the reannouncement of what was well said by this court in the case of Filces v. State, ■87 Miss. 251, 39 South. 783.' In the case just cited the court said: “The law referred to was a timely and wise effort by the legislature to protect the.people of the state against imposition and fraud on the part of any insurance company, no matter what form the particular scheme might assume. The intent of that law was that all insurance companies, whether fire, marine, accident, or fraternal, or other kind, should be subjected to an ■examination, by the insurance commissioner before they could legally write insurance in this state. It imposes certain restrictions on every insurance company desiring to do business in this state, and demands compliance with certain conditions and the payment of certain fees before it can receive a license from the proper authority. The statute also contemplates that no agent shall represent any character of insurance company unless the same has been lawfully permitted to do business in the state and such agent has himself received a certificate entitling him to solicit and write insurance. This beneficial legislation was found necessary in order to insure the people protection from the imposition and fraud of so-called insurance companies hot organized in accordance with law, not financially responsible for losses in case such should occur, and being in truth simply traps for the unwary, operated mainly, if not solely, for tire benefit of the officials and soliciting agents. The inhibition against the unlicensed transactions of insurance business was wisely couched in general terms, and that inhibition applies to all insurance companies, without regard to mere formal differences occurring in their routine of business or in the promised benefits. The intention of the legislature was not to incite op encourage the conniving to devise different kinds of insurance associations, simply varying in some particular from the generally recognized organizations, but was an attempt to absolutely prevent dishonest, fraudulent, or insolvent associations transacting business in this state. The terms of the statute expressly include ‘all corporations, associations, partnerships, or individuals engaged as principals in the business of insurance.’ Hence a permit and license is demanded of all insurance associations, without exception, and such permit can only be obtained by complete compliance with all the provisions of the statute; one of the chief conditions being that the state insurance commissioner must be fully satisfied of the applying company’s ‘financial condition and ability to fulfill its obligations.’ ”

Statutes of the character under discussion should be liberally construed, in order to bring within their provisions and remedial purpose all associations organized for the purpose of conducting the insurance bxisiness, however complex and obscure may be the plan attempted through which to carry on that business. We-are prepared to say, under the comprehensive language used in our statute, that no plan of insurance can be originated whereby that business can be conducted without compliance with our laws. The discussion in this case has taken a very wide range, but the case itself has its beginning and ending in the terms of our statute.' The plan itself, bared of all its confusing complexities and stripped of all its veiling, is nothing more or less than a foreign insurance association, without capital of its own,, and making its profits out of the premiums paid by its subscribers, conducting the business of ordinary insurance on a particular class of property, doubtless selected by the association as being the most remunerative to it. It is not important for us to declare what kind of an insurance association this is. Suffice it to say that it is an insurance association more nearly falling under the classification of a “mixed company” or association, in that it possesses some of the features incident to botb a “stock company” and a “mutual company,” but being neither. State v. Willett, 171 Ind. 296, 86 N. E. 68. We have found no decided case exactly in point. In truth, this contract •seems to be the first of its kind ever reviewed by any court. The manifest purpose of this contract is to create an association ■for the purpose of doing ordinary insurance business, and at the same time raising the association engaged in the' business .above and out of the reach of the insurance law of this state, by a plan of operation that is masterful in its evasion of all heretofore decided cases, but which falls to pieces when interpreted in the light of the broad provisions of our statute, giving to them only a common-sense interpretation.

In the brief - of counsel representing the underwriters it is insisted that it can never be held that the underwriters are conducting the business of insurance, for the reason that there is no element of profit arising therefrom to the subscribers to same. Counsel say: “The parties to the contract do not enter into the relation for profit, except as the adage has it: A penny saved is a penny made.’ ” The construction which counsel representing the underwriters place upon this contract is not its true ■construction, and in reaching their conclusions they overlook important results accomplished by the contract in so- far as its •originators and officers are concerned. It is quite true that the ■only object that the subscriber has in joining this association and taking out insurance is to effect cheap insurance. That may be said to be the only profit accruing to the subscriber. But the same may be said on tire, part of any insurer who undertakes to get insured in any cheap, but irresponsible, company. The object of the state’s police power rvas to make insurance ■safe, as well as cheap. The design of the statute is to protect the citizens of the state against their own improvidence in insuring with irresponsible concerns. But, while it is true that the object of the subscriber is merely to get cheap insurance, the whole scheme shows that the subscriber is at last a mere figure-bead in this plan of insurance, when it comes to control and management of tbe association. Stripped of all its disguise, "the Manufacturing Lumbermen’s Underwriters’ Association is nothing more nor less than an insurance association, conducted by Harry Nankin & Co. in Kansas City, Mo., having m> capital .•stock and unauthorized to do business in this state in any way. Harry Nankin & Co., in effect, the association, receive their profit by deducting twenty-five per cent, of all premiums paid by the subscribers to effect insurance with the association. In a more complicated form, this association is in effect nothing but an insurance association organized for the purpose of profit to its originators, and they do receive a handsome profit, and, in reality, constitute the association itself.

In the case of Farmers’ Ins., etc., Co. v. Cole, 90 Miss. 508, 43 South. 949, no question was presented save that of whether ■or not a domestic mutual insurance company, chartered under section 891 of the Code, could force the insurance commissioner to issue the certificate of authority to do business in' this state. It was shown in that case that the insurance company, though •domestic, and not foreign, had no capital stock, and this court merely held that the insurance commissioner could not be made to issue the certificate of authority. The question of whether it could conduct the business of insurance independently of this •certificate and in violation of section 2582, requiring that all •companies organized “for the purpose of transacting life or fire insurances,” etc., “shall have a capital of not less than fifty thousand dollars,”, was not involved, and was not decided. Whatever may be the law in regard to domestic mutual insurance companies, it is clear to us that the “Underwriters” is but •a foreign insurance association, and was carrying on the business of insurance in contravention of our statutes.

The court should not have ordered the discharge of the ap-pellee, and in doing so it committed error. Reversed.