Insurance broker

“ To become a surplus line broker one must procure a special license pursuant to the requirements of § 1765. This license also is issued upon application, if the commissioner of insurance finds that the applicant is 'trust-worthy and competent to transact an insurance brokerage business in such a manner as to safeguard and interest of the insured.' The applicant also must file with the commissioner a faithful performance bond in the amount of $5000 and pay a filing fee of $50. ”

“ The admission that the insurance was procured for the resident from a foreign company which had no agent in the state does not exclude the possibility of its having been procured within the state. If it were obtained for the resident by a broker who was himself a resident, this would be a procuring within the state, and be covered by the statute.
The business of a broker is to serve as a connecting link between the party who is to be insured and the party who is to do the insuring,-to bring about 'the meeting of their minds' which is necessary to the consummation of the contract. ”

“ Such insurance broker shall exercise due care in the placing of insurance and shall procure from the supervising official in the state or county in which the home office of the insurer is located a certificate to the effect that the insurer is safe and solvent and is authorized to do business. ”

“ The insurable value of the various properties of the company must amount to six or eight million dollars. The average rate on those properties would probably be about seventy-five cents per hundred dollars a year for insurance. That would make a premium of say fifty thousand dollars per annum. The commission to the insurance broker who handled that line—who could secure it and control it—would be ten per cent of fifty thousand, or five thousand dollars. ”

“ An insurance broker must exercise reasonable care and diligence in selecting none but reliable companies, and in securing proper and sufficient policies to cover the risks placed to be covered by insurance ”

“ But the broker has a lien on the policy for the premium and for his brokerage, and in case he has had dealings as a principal with the insured, he has a lien on the policy for any balance due to himself in insurance transactions, unless he should have known that in these transactions the insured was merely an agent. Some policy forms state definitely that the premium has been paid; when such a form is used and no fraud is proved, this receipt is binding between assured and underwriter, but not between broker and underwriter. ”

“ When the insured effects insurance with an underwriter through a broker, then, unless otherwise agreed, the broker is liable for the premium to the underwriter, who is, however, directly responsible to the assured for losses or liabilities falling on the policy and for returnable premium. ”

“ And it necessarily follows that, as insurance is affected with a public interest, those engaged in it or who bring about its consummation are affected with the same interest and subject to regulation as it is. A broker is so engaged-is an instrument of such consummation. ”

“ At the trial below evidence was offered by the company, and was permitted, over the objection of plaintiffs, to go to the jury, to the effect that, when this contract was made, there existed in the cities of New York and Brooklyn an established, well-known general custom in fire insurance business, which authorized an insurance company, entitled upon notice to terminate its policy, to give such notice to the broker by or through whom the insurance was procured. ”

“ This is the result, though those so intended are not known to the broker who procures the policy, or to the underwriters who are bound by it. Id., sect. 384.
One may become a party to an insurance effected in terms applicable to his interest, without previous authority from him, by adopting it either before or after the loss has taken place, though the loss may have happened before the insurance was made. Id., sect. 388.
The adoption of the policy need not be in any particular form. Any thing which clearly evinces such purpose is sufficient. ”

“ But fair dealing requires that he should state every thing which might influence, and probably would influence the mind of the underwriter in forming or declining the contract, &c. Generally speaking, insurances against fire are made in the confidence that the assured will use all the precautions to avoid the calamity insured against, which would be suggested by his interest. The extent of this interest must always influence the underwriter in taking or rejecting the risk, or in estimating the premium. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ The agent of the company at Baltimore, who negotiated this insurance, the defendants being a New York company, states that when applications are made to enter risks on running policies, they are endorsed at once by him, and the report of such endorsement transmitted to the company in New York, which names the premium, and this is communicated to the assured; that the premiums specified in the body of the policies are nominal, and the true premiums to be charged are fixed by increasing or reducing the nominal premiums when the risks are reported ”

“ 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. ”

“ 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 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. ”

“ In that case it was held that, where the assured contracts with one as the agent of the insurer, believing him to be such, and does not employ such supposed agent to act for him in obtaining insurance, such person has no power to act for or bind the insured, though the policy may provide that the person procuring the insurance shall be deemed the agent of the insured, and not of the company. ”

“ But in case of such sale or alienation of the insured property, the original assured having no longer any interest in the policy, except to claim a return of premium, if he will assign his policy or his contract of insurance to such purchaser, and the company assent to it, here is a new and original contract embracing all the elements of a contract of insurance between the assignee and the insurers. The property having become the purchaser’s, is at his risk, and if burnt it is his loss, and he has a good original contract upon a valid consideration to guarantee him against such loss...... ”

“ 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 ”

“ 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. ”

“ There is nothing in the record which shows that the agent was invested with authority to make an insurance for the company. In representing himself as an agent, he only solicited an application by the assured to the company for a 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. ”

“ Such is the form of the contract, and such is its character. It has been contended that the payment of each premium is the consideration for insurance during the next following year,-as in fire policies. But the position is untenable. It often happens that the assured pays the entire premium in advance, or in five, ten, or twenty annual instalments. ”

“ On the other hand, it may be said that the contract of insurance means that the insured is to be indemnified from any loss which he may suffer during the period named in the policy. If he aliens the property insured, it is true that if the property is destroyed when he has no interest therein, it is not possible for him to hold the underwriter, for he has suffered no loss. ”

“ They find their business profitable, and pay good dividends to their shareholders. Moreover, they incur a considerable expenditure on offices, on clerical staff, on agents, and the like. All these payments must be defrayed out of the premiums they receive; so that it is plain that the premiums greatly exceed the expectation of the risks insured. The odds are heavily in favor of the Insurance Company—of that the stupidest person can have no shadow of doubt. ”

“ The assured assumes the risk of paying premiums during the life on which the insurance is taken, even though their aggregate amount should exceed the insurance money. He also takes the risk of the forfeiture of his policy if the premiums are not paid on the day they fall due. ”

“ 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. ”

“ Perhaps no modern commercial enterprise directly affects so many persons in all walks of life as does the insurance business. Insurance touches the home, the family, and the occupation or the business of almost every person in the United States. ”