Insurance Company of North America

“ 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 language of the policy is, that the underwriters insure 10,000 dollars at and from Alexandria, and two other ports in the West Indies, and back to the United States. The premium is apportioned accordingly, for a half per cent. is to be returned 'for each port not used or attempted;' and the contemplation of the parties manifestly is, that the premium should be paid during the round voyage upon the full sum insured, and that the assured should have the full benefit of the insurance, so long as he had 10,000 dollars on board. ”

“ The business of insurance, particularly, can only be carried on with entire safety by scattering the risks over large areas of territory, so as to secure the benefits of the most extended average. The needs of the country require that corporations-at least those of a commercial or financial character-should be able to transact business in different States. ”

“ Foreign corporations must obtain state authority to do business, segregate securities, submit to examination and state process. The business activities connected with the purchase of insurance by New York residents normally take place in New York. It is the beneficiary of the policy not the insurer who has abandoned the moneys. Undoubtedly the relationship is very close. [12] Certainly the relationship between New York and foreign insurance companies as to policies here under ciscussion, is as close as that between the company and its state of incorporation. ”

“ 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. ”

“ The effect of such a doctrine on the rights of states to govern themselves is graphically demonstrated by the insurance business. The five largest legal reserve life insurance companies in the United States, with total assets of approximately $15,000,000,000, have their home offices in or near New York and Connecticut. ”

“ The general principle that corporations must confine their operations to their legitimate business, is sufficiently definite. It is not necessary, nor would it be useful, to restrict them in the manner of conducting such business.'
In the State of New York, the principle of mutual insurance was sought to be worked out, not only by premium notes, and by the payment of a cash advance premium, but, in the same company, the premium on some of the policies is frequently secured by the premium note, and on other policies by cash paid in lieu of the note. ”

“ And just as all banks may be required to contribute to a depositors' guaranty fund, so may all automobile liability insurers be required to submit to the equitable apportionment among them of applicants who are in good faith entitled to, but are financially unable to, procure such insurance through ordinary methods. [327]
However, a statute which prohibits the assured from contracting directly with a marine insurance company outside the State for coverage of property within the State is invalid as a deprivation of liberty without due process of law. ”

“ Everyone recognizes the desirability of having such risks as those of fire, shipwreck, lightning, death, etc., assumed by certain individuals or companies who make a business of such risk-taking. A small premium is paid by the individual for protection, and he is freed from anxiety from mischance and is able to devote his whole energies and capital to his business; the insurance company has specialized in this one department and by equalizing the chances over a wide field has practically eliminated them. ”

“ Any merchant who knew just what his expenditures would be through a long series of years, and who had the power to adjust his income so as to equal them, could not possibly fail. That is the position of the life insurance company. Any accurate mortality table, common honesty, and good executive judgment—with these as capital no life insurance company could possibly collapse. Fire, marine, and other forms of insurance are not thus scientifically based. These companies cannot figure in advance their future losses. No natural laws regulate the burning of houses or the destruction of ships. ”

“ Now, let us suppose that he applies to and is insured in a stock company; he gets his policy for $1,000, and pays for it one per cent., $10. He is entitled to the same indemnity in case of a loss as he was in the mutual company; but when he pays his premium, he ceases to have any further interest in the successful operation of the company; he is the insured, but not the insurer; and whether the company make gains of suffer losses, matters not to him, provided the company continues solvent. ”

“ 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. ”

“ A remarkable difference in the development of life insurance between Great Britain and the United States is, that among the British companies only one-third of the insurances in force is in purely mutual institutions, while in America the proportion exceeds four-fifths. In both countries there are also “mixed” companies, in which policyholders receive a fixed percentage of the realized surplus, often from three-fourths to nine-tenths of the whole, but the control and management are in the hands of shareholders. ”

“ It is true that the bills of lading represent the goods, but the business of exporting requires not only the contract of carriage, but appropriate provision for indemnity against marine risks during the voyage. The policy of insurance is universally recognized as one of the ordinary 'shipping documents.' Thus when payment is to be made in exchange for such documents, they are held to include not only a proper bill of lading, but also 'a policy of insurance for the proper amount.' Tamvaco v. ”

“ The whole judicial and legislative history of insurance regulation in the United States warns us against the judicial creation of admiralty rules to govern marine policy terms and warranties. The control of all types of insurance companies and contracts has been primarily a state function since the States came into being. ”

“ The reports of the state insurance departments in America show that less than one-eighth of the premiums are now collected by companies founded since 1880; and, except in districts remote from the principal financial centres, or mutual associations for special classes of hazards, new companies are not often formed. In Great Britain a considerable number of new corporations are registered every year, with fire insurance among their professed objects, but almost always in connexion with some forms of casualty insurance, which appear to be practically the purpose in view. ”

“ Under our present system of diverse state regulations, which is as old as the Union, the insurance business has become one of the great enterprises of the Nation. Congress has been exceedingly cautious about disturbing this system, even as to marine insurance where congressional power is undoubted. [28] We, like Congress, leave the regulation of marine insurance where it has been-with the States. ”

“ Leaders who wish to communicate directly with the great body of their co-nationals in America, do so through the channels provided by these organizations.
As the group develops a feeling of confidence, the insurance function becomes less urgent. In fact, officers of the national societies predict that the societies will gradually abandon the field of insurance and develop along other lines. Many societies already admit a considerable number of uninsured persons, who join in order to share in other enterprises. ”

“ The truth of this proposition is demonstrated by the existence of institutions more impressive than Monte Carlo—the Insurance Companies, which play so large a part in the economic life of modern times. Every year, and upon an ever-growing scale, both private individuals and business concerns pay sums of money, which reach in the aggregate a colossal sum, as premiums to insure themselves against loss by Fire, Shipwreck, Burglary, Death, Death Duties, against every risk which Insurance Companies will cover. Now Insurance Companies are not, as we say, in business for their health. ”

“ One thing the policy-holder can always depend upon, however: he pays for everything he gets. The price rests upon certain scientific principles; no company can disregard them without disaster. What one company offers another can offer; and any policy that contains unusual opportunities also carries a premium that completely pays for them. All modern novelties are simply old forms of life-insurance under new names—and usually at greatly increased prices.
In recent years, for example, the New York companies have gone daft over "gold bonds," " consols," and "debentures." ”

“ However, premium-institutions are more easily capable of extending the circle of their business; [237a-10] which of itself decreases the general expenses and strengthens their insuring power. Premium-insurance supposes a greater development of capitalistic speculation than does mutual insurance. But, even in the highest stages of civilization, the competition of some mutual insurance companies is desirable to protect the insured from a too high rate of profit to the insurers. ”

“ Open policies were executed by the insurance company, containing an agreement that the company would insure all cargoes which the insured should ship in the foreign trade during the life of the policies, and that the shipper would procure such insurance, and from time to time would pay the premiums according to the regular rates for the particular voyages. ”

“ Interrelationship, interdependence, and integration of activities in all the states in which they operate are practical aspects of the insurance companies' methods of doing business. A large share of the insurance business is concentrated in a comparatively few companies located, for the most part, in the financial centers of the East. [15] Premiums collected from policyholders in every part of the United States flow into these companies for investment. As policies become payable, checks and drafts flow back to the many states where the policyholders reside. ”

“ In the great insurance corporations that are "one-man run," the hundreds of thousands of policy-holders have but one protection. This, notwithstanding the protection of the State laws, the guardianship of the Insurance Department of the various States, and the provisions of the company's charter and by-laws. ”

“ 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. ”

“ 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. ”

“ Its outstanding policies were not affected thereby, and it continued to collect the premiums upon them and to pay the losses arising thereunder, and it was doing so at the time of the service of process upon its agent.'
'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 means adopted was to prescribe the limits within which the parties might agree to dispose of the net value of the policy otherwise than by commutation into extended insurance; a means commonly adopted in non-forfeiture laws, only the specific limitation in question being unusual. The insurance policy sought to be protected was a contract made within the state between a citizen of the state and a foreign corporation also resident or present there. ”