Allstate Insurance Company

“ Though this excess of premiums paid is legally the sole property of the company, still in practical effect, though not in law, it is moneys of the assured, deposited with the company in advance, to make up the deficiency in later premiums to cover the annual cost of insurance, instead of being retained by the assured, and paid by him to the company in the shape of greatly-increased premiums, when the risk is greatest. It is the 'net reserve' required by law to be kept by the company for the benefit of the assured, and to be maintained to the credit of the policy. ”

“ To indulge in outdoor life, the townships of Darlington and East and West Whitby were traversed by me as sub-agent for a farmers’ insurance company. There was not much difficulty in securing renewals of policies, but it was uphill work to get new business. The general excuse for refusal to insure was that Mr. Farmer had been insured before and had never made anything out of it. My throat used to get dry as a tin horn in trying to explain that the company couldn’t exactly guarantee a “blaze”, but the insurance policy was to protect the insure in case of fire. ”

“ A policy of insurance, the cases declare, is a personal contract, a mere indemnity, for a consideration, against the happening of some contingent event which may bring detriment to life or property, and its character is the same no matter what the event insured against, whether fire or hurricane, acts of man or acts of God, storms on land or storms on sea, death or lessor accident. The same event may involve both life and property, precipitating the obligation of the policies. Nor does the character of the contracts change by their numbers or the residence of the parties. ”

“ They also try to prevent the lapsing of policies and sell new insurance when time allows. The company compensates the agents as agreed to in the 'Agent's Commission Plan' under which the agent retains 20% of his weekly premium collections on industrial insurance and 10% from holders of ordinary life, and 50% of the first year's premiums on new ordinary life insurance sold by him. The company plan also provides for bonuses and other fringe benefits for the debit agents, including a vacation-with-pay plan and participation in a group insurance and profit-sharing plan. ”

“ In every level, or uniform premium, there is a provision for the payment to the company of the rate of insurance at the actual present age, (no matter at what age the insurance was affected) on the net amount at risk.
The great danger for co-oporative or assessment companies lies in the facility with which such institutions may be organized, and by men without capital, character, experience or financial ability, who may thus be ushered into corporate existence by the indulgent laws of different states. ”

“ The insurance phase of this company is set apart from the fraternal phase after election to membership, even though payment of assessments levied for insurance purposes is made compulsory. The provisions of its constitution show that insurance terms and conditions are precisely like those of non-fraternal companies. Insurance funds are administered on a business basis, and they cannot be used for fraternal purposes. In short, the insurance program and activities reveal that this is an insurance company, run like other insurance companies. ”

“ Petitioner's election and the employer's application for the policy were made before the Texas Board authorized the insurer to do business in that state. By uncontradicted evidence it is shown that the insurer did not qualify to solicit or write insurance or accept any application originating there. Employers regard group insurance not only as protection at low cost for their employees but also as advantageous to themselves in that it makes for loyalty, lessens turn-over and the like. ”

“ We omit the reasoning by which that is demonstrated, and will only repeat: 'The business of insurance is not commerce. The contract of insurance is not an instrumentality of commerce. The making of such a contract is a mere incident of commercial intercourse, and in this respect there is no difference whatever between insurance against fire and insurance against 'the perils of the sea. ”

“ The only question before the court is as to the construction of the language of the reinsurance compact. The term 'reinsurance' has a well-known meaning. That kind of a contract has been in force in the commercial world for a long number of years, and it is entirely different from what is termed 'double insurance,' i. e., an insurance of the same interest. The contract is one of indemnity to the person or corporation reinsured, and it binds the reinsurer to pay to the reinsured the whole loss sustained in respect to the subject of the insurance to the extent to which he is reinsured. ”

“ I know that this man is dying; I know that, if I pay this premium, the company will have to pay out the full amount of the insurance within a few days; I know that the premiums paid to date amount to only about five hundred or six hundred dollars, which, under the terms of the policy, the woman will not wholly lose. For me, an employee, to conspire to 41 get the rest of the money for her would be like taking it from the cash drawer. I won’t do it; I can’t do it after Murray’s talk to me to-day about business integrity! ”

“ The practical consequences are serious when, as often, many of the insured cease to pay premiums, and each demands the amount of the supposed individual reserve. His right to claim it is countenanced by a widespread public opinion, which has inspired statutes in Massachusetts and some other states, requiring companies to redeem all policies lapsing after the first two or three years of insurance at a price founded on the technical reserve. Yet, in by far the majority of instances, the lapse of policies is of itself a loss to the company. ”

“ The decision proceeds upon the ground that the insurance business is to be distinguished from ordinary private business; that an insurance company, in effect, is an instrumentality which gathers funds upon the basis of equality of risk from a great number of persons-sufficiently large in number to cause the element of chance to step out and the law of averages to step in as the controlling factor-and holds the numerous amounts so collected as a general fund to be paid out to those who shall suffer losses. Insurance companies do not sell commodities ”

“ If we say New York may step into the beneficiary's shoes and collect his unclaimed insurance proceeds solely because the insured lived in New York when the policy issued for delivery there, how can we deny the claim of another state to escheat the same fund when its claim is asserted under any one or more of the following circumstances: (1) It is the state in which the insured has died or where some other contingency occurred which brought the claim to maturity. ”

“ Throughout the policy, wherever the subject intended to be insured is spoken of, it is described, not as a partial interest, not as a mere lien for advances and charges upon the goods held in storage, but as the property itself, whatever might be the existing rights to it. Thus the insurance company covenanted to make good to the assured all such loss or damage, not exceeding the sum insured, as should happen by fire 'to the property as above specified.' What that specification was, we have seen. ”

“ The membership fee is not returnable but entitles the insured to insure one automobile so long as he remains a desirable risk and so long as the company continues to write such coverage. It is said that the membership fee gives a life option to the insured to purchase insurance at a saving of from twenty to thirty-five per cent of the usual cost. Appellant has contended that the membership fees are no part of the premiums, furnish no insurance protection, and merely reimburse it for the expense of obtaining the new business. Wisconsin took a different view. ”

“ State laws that directly regulate insurance are "saved" but do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purposes of such state laws. On the other hand, employee benefit plans that are insured are subject to indirect state insurance regulation. An insurance company that insures a plan remains an insurer for purposes of state laws "purporting to regulate insurance" after application of the deemer clause. ”

“ On the twenty-seventh of December, the complainants tendered their note for the agreed premium, and demanded the policy of reinsurance. The defendants declined to make the policy. Several grounds have been insisted on in support of this refusal:
The first is, that by force of a statute of the State of Massachusetts, (Rev. Stats., ch. 37, secs. 12, 13,) insurance corporations can make valid policies of insurance only by having them signed by the president and countersigned by the secretary. ”

“ It can never be an equivalent for a premium note, unless the sum is as large as that expressed in the premium note. In the case I have supposed, it would be $100 on an insurance of $1,000. Was it a supposable case that such a sum would be paid, and were it within the spirit of the act, that would be an equivalent; but the idea that any sane man would ever take an insurance in a mutual company, and pay for it anything over the ordinary cash rates of a sound stock company, is preposterous, and requires no answer. ”

“ If the assured, by his voluntary act, increases the risk, and the fact is not known, the result is that he gets an insurance for which he has not paid.' And again: 'An increase of risk which is substantial, and which is continued for a considerable period of time, changes the basis upon which the contract of insurance rests ”

“ Insurance Co. that the permitted deductions specified by section 12, Act 1916, do not necessarily include anything which may be denominated 'reserve fund' by state statute or officer. We there distinctly ruled that the 'reserve fund' of the federal act did not include something held by a fire and marine insurance company to cover accrued, but unsettled, claims for losses. We adhere to and reaffirm that doctrine. How far it must be modified, if at all, in respect of insurance companies which issue casualty, surety, or liability policies, or similar obligations, is not now before us. ”

“ The policy was duly issued in Connecticut and delivered in Tennessee to Dunken. By its terms, at the sole option of the insured, upon any anniversary of its date, without medical re-examination, it was convertible, among other forms of insurance, into a 20-payment life commercial policy, bearing the same date and issued at the same age, on payment of the difference between the premiums already paid and those required under the converted policy. ”

“ In return, the reinsurer receives the future income generated from the policies and their associated reserve accounts.
Reinsurance comes in two basic types, assumption reinsurance and indemnity reinsurance. In the case of assumption reinsurance, the reinsurer steps into the shoes of the ceding company with respect to the reinsured policy, assuming all its liabilities and its responsi ility to maintain required reserves against potential claims. The assumption reinsurer thereafter receives all premiums directly and becomes directly liable to the holders of the policies it has reinsured. ”

“ An insurance company obtains most of its funds from premiums paid to it by policyholders in exchange for the company's promise to pay future death claims and other benefits. The company is also obligated to maintain reserves, which, if they are to be adequate to pay future claims, must grow at a sufficient rate each year. The receipt of premiums necessarily entails the creation of reserves and additions to reserves from investment income. Thus the insurance company is not only permitted to invest, but it must invest; and it must return to the reserve a large portion of its investment income. ”

“ I The matrix for our decision is the customs and practices of the reinsurance industry and the role of Pritchard & Baird as a reinsurance broker. Reinsurance involves a contract under which one insurer agrees to indemnify another for loss sustained under the latter's policy of insurance. Insurance companies that insure against losses arising out of fire or other casualty seek at times to minimize their exposure by sharing risks with other insurance companies. Thus, when the face amount of a policy is comparatively large, the company may enlist one or more insurers to participate in that risk. ”

“ In view of the statute, and of that understanding, upon the faith of which the assured made his application, paid the first premium, and accepted the policy, the company is estopped, by every principle of justice, from saying that its question embraced insurance in cooperative associations. The answer of 'No other,' having been written by its own agent, invested with authority to solicit and procure applications, to deliver policies, and, under certain limitations, to receive premiums, should be held as properly interpreting both the question and the answer as to other insurance. ”

“ It cannot be said with truth, as we think, that an insurance company does no business within a state unless it have agents therein who are continuously seeking new risks, and it is continuing to issue new policies upon such risks. ”

“ The performances of these promises are not only separate, but inconsistent with each other: the payment of the 'surrender value' cancels the promise to pay the 'proceeds' and the promise to pay the 'proceeds' assumes that the insured has not demanded and received the 'surrender value.' The premiums when paid become the property of the insurer and the insured has no interest in them, although it is true that in New York, as in most states, a life insurance company's finances are regulated by statute in much detail in order to protect policyholders. ”