American Casualty Insurance Company's Case

34 A. 778, 82 Md. 535, 1896 Md. LEXIS 30

• Court: Court of Appeals of Maryland
• Decided: March 24, 1896
• Status: Published

Opinion

McSherry, C. J.,

delivered the opinion of the Court.

There are twenty appeals in the record now before us. The cases were elaborately and ably argued during the last October term of this Court and the preparation of the opinion was then assigned to the late Chief Judge Robinson. His lamented death occurring shortly afterwards without his having done more.than hurriedly sketch an incomplete outline of some of the many questions involved delayed a decision till now. We have had the benefit of Judge Robinson’s notes and will avail of them in this opinion.

The American Casualty Insurance and Security Company of Baltimore City was incorporated under the laws of Maryland in January, eighteen hundred and ninety, and began operations with a paid up capital stock of one million dollars. Its business embraced many and divers lines of insurance and indemnity. It was authorized to write and did write policies of insurance against accidents,- against losses by railroads and street railways, arising from injuries to property and persons, whether passengers, employees or strangers; and it engaged in various other kinds of indemnities. In a little less than four years its whole paid up capital, with the large sums which it had received in premiums —except, however, the funds in Court for distribution — has been swept away by losses, and there are now outstanding liabilities due by it in a very large aggregate amount and to many thousand creditors. Becoming hopelessly insolvent a bill was filed against it by some of its creditors and an order was passed thereon on November the twenty-third, eighteen hundred and ninety-three, appointing receivers to take charge of its assets. The receivers now have in hand certain funds of the insolvent company and the questions before us relate to the method of distributing the same. A portion of these funds is invested in certain securities which had been deposited by the company with the Treasurer of Maryland, and the residue consists of moneys derived from other sources ; and the question which is presented at the threshold is whether the proceeds of these securities when sold and the accrued and accruing interest thereon constitute a special or trust fund applicable to a particular purpose — to the payment of a particular class of creditors — or are general assets available for the settlement of all claims due by the insolvent company. All of the questions involved were passed upon by the Court below in its order of August the eighth, eighteen hundred and ninety-five, from which order the pending appeals were taken.

After determining by this order what was the special and what the general funds, and after directing how the commissions, costs and auditor’s fees were to be paid, the Circuit Court ordered that the taxes claimed to be due to the Mayor and City Council of Baltimore were not properly chargeable upon the assets in the hands of the receivers, and further that there were three classes of creditors. The order then proceeded to define each of these classes, and prescribed rules for ascertaining the different values of the several policies held by them. Following, with a single exception, the paragraphs of the order appealed from we come, first, to the question relating to the division of the funds into a special and a general fund.

At the time of the appointment of the receivers there was standing in the name of the Honorable Spencer C. Jones, Treasurer of Maryland, Baltimore City stock of the par value of two hundred thousand dollars, which had been deposited with him by the company as a guarantee for the payment of the policies issued by it. On December the second, eighteen hundred and ninety-three, the receivers filed their petition in the Circuit Court setting forth the facts in reference to the deposit of these securities, and praying the Court to require Mr. Jones to transfer and deliver’ them to the petitioners, to the end that the same might be administered under the order and direction of the Court. To this petition an answer was filed by Mr. Jones asserting that these securities were held by him as a trust fund for the benefit of the policy-holders of the company and that they could not be applied to any other or different purpose. Presenting this view he submitted to such decree as the Court might deem proper to pass in the premises. Upon the petition and answer a decree or order was passed whereby Mr. Jones, the Treasurer of Maryland, was directed to assign and deliver this Baltimore City stock to the receivers, to be held by them for the benefit of the policy-holders, subject to the further orders of the Court. Whether this fund is a special or trust fund, or,.on the other hand, belongs to the general assets of the company, depends entirely upon the facts and circumstances under which it was deposited with Mr. Jones. If these are such as to create a trust in behalf of the policy-holders, then the fund must be applied as the terms of the trust direct.

In determining whether or not a trust has been created Courts will take into consideration the situation and relations of the parties, the character of the property and the purpose which the settlor had in view in making the declaration. No technical terms or expressions are needed. It is sufficient if the language used shows that the settlor intended to create a trust, and clearly points out the property, the beneficiary and the disposition to be made of the property. 27 Am. & Eng. Ency. of Law, 26, and the citations in notes 1, 2 and 3. In this case the trust is alleged to have been created by an accident insurance and security company doing business in all parts of the country and having its home office in this State. In many States of the Union insurance companies of every kind doing business in such States are required to deposit with some one of the State’s officers a certain named sum of money or approved securities of a designated value, as a guarantee for the payment of losses ■ sustained by the policy-holders. And in this State every life insurance company is required to deposit with the Treasurer of the State public securities of the value of one hundred thousand dollars as a guarantee for the payment of the policies issued by the company. The American Casualty Company it is insisted however, is not a life insurance company within the meaning of the Code of Public General Laws, and was not therefore obliged to make a deposit of any kind with the Treasurer; and further, that the Treasurer as such had no lawful authority to accept such deposit. We need not stop to consider whether the deposit in this case was made by the company under the impression that it was a statutory requirement, or whether it was made voluntarily with a view to strengthen its credit and to give confidence to its policy-holders of its ability to meet its obligations. The fact is the company did make the deposit with Mr. Jones and did take from him at the time the following certificate : “ I, Spencer C. Jones, do hereby certify, that I am Treasurer of the State of Maryland, and that the American Casualty Insurance and Security Company of Baltimore City, a corporation chartered by said State, and located in the city of Baltimore, has deposited in this office securities of the denominations and descriptions particularly set forth and described in the schedule signed by me and hereto annexed, amounting in par value to the sum of two hundred thousand dollars; and I further certify, that said securities are now held by me as such Treasurer aforesaid, in my official capacity, on deposit as a guarantee for the payment of the policies of insurance issued by said company. In witness whereof, I have hereunto set my hand, at the city of Annapolis, this twenty-eighth day of July, A. D. 1892. Spencer C. Jones, Treasurer of Maryland.” The schedule annexed to this certificate is entitled “ Schedule setting forth the several denominations and a particular description of the stocks and other securities * * held by me in trust for the policy-holders of the American Casualty Insurance and Security Company of Baltimore City, as stated in the foregoing certificate.” Here then is an express declaration by the, trustee that this city stock was deposited with him by the company, and that it was held by him in trust as a guarantee for the payment of its policy-holders ; and this certificate was delivered by Mr. Jones to the company, and was in its possession at the time the receivers were appointed. An intention to create a trust of this kind may be inferred from conduct and circumstances without any express declaration. Allen v. Withrow, 110 U. S. 119. In the case at bar we have the most explicit proof of the creation of the trust, for there is the unequivocal declaration of the trustee that he held the funds in trust, and by the acceptance of the certificate there is the direct admission on the part of the company itself as to the existence of the trust, and there is a clear designation of the cestuis que trustent who are entitled under it. This is sufficient. Smith v. Darby, 39 Md. 268—a case directly in point. The evidence of the trust then is conclusive, not only as to its creation, but also as to the objects and purposes for which and the persons for whose benefit it was established. And in reply to the objection that Mr. Jones has no right to accept the deposit as Treasurer of the State, it js sufficient to say that it is quite immaterial whether he held it in his official or in his individual capacity. If a trust existed it will not be defeated by the inability of the trustee to act. A Court of Equity will never suffer a trust to fail for the want of a trustee. Nor can the action of Mr. Jones in surrendering the fund under an order of a Court of Equity to the receivers be held to have revoked the trust or to have in any manner affected the rights of the cestuis que trustent thereunder. If he did not care to take upon himself the responsibility of distributing the fund among the parties entitled to it, he had the undoubted right either to invoke the aid of a Court in its distribution, or upon the petition of the receivers to surrender it to the Court, whose officers the receivers were. As to sec.-205, Art. 16 of the Code, which requires trustees to whom any property has been conveyed or limited for the benefit of creditors or to be sold for any purpose, to .give bond to be filed with the Clerk of the Court, it is only necessary to say that it has no application to a trust of this character. That section relates only to the assignment or conveyance of property for the purpose of sale, and it provides that no' title shall pass to any trustee until such bond shall be filed and approved, and that no sale made by any such trustee without such bond shall be valid.

For the reasons we have given we agree with the Court below that the funds arising from the sale of the city stock and the interest accrued and accruing on that stock until sold must be treated as impressed with a trust and must be applied solely to the payment of the claims of the policyholders, subject, however, to such prior or paramount liens upon it as will be hereinafter alluded to.

We have just said that we agree with the Court below in that part of the order appealed from which defines the special and the general funds; but we cannot concur in that portion which provides that the general fund shall be set apart for the payment of all creditors “ other than the claims of the policy-holders.” The policy-holders after they have exhausted the special fund are entitled to participate along with all other creditors in the general fund.

Passing by, for the moment, the intervening provisions of the order relative to the costs and commissions and which will be disposed of later on, we come now to the claim filed, by the Mayor and City Council of Baltimore for taxes. This appeal presents two questions: First. Whether the tax levied by the municipality for the year eighteen hundred and ninety-three upon the shares of stock of the company held by residents and non-residents is a debt due and payable by the company or only collectible from the. shareholders ; and secondly, if the tax be a debt due and payable by the company, is it a prior lien over the claims of all other creditors ? These taxes cannot, of course, be considered a debt due by the company unless they are made so by statute, because the' shares of stock are the property of the share-holder and under the Code must be valued to him. But the Code further provides that the shares of stock of corporations owned by residents or non-residents of the State shall be valued at their actual cash value, “ but the tax assessed on such stock shall be levied and collected from said corporation, and may be ,charged to the account of such non-resident stockholders ” and shall be a lien on the shares held by them respectively. Code, Art. 81, sec. 138, as to non-residents, and sec. 141 as to residents. The statute thus makes explicit provision for a certain and prompt method of collecting the taxes due upon shares of stock, whether held by residents or non-residents, by imposing upon the -corporation the obligation and the duty to pay the tax itself. In the case of shareholders not residing in the State it is the only mode in which the State can reach their shares for taxation. National Bank v. Kentucky, 9 Wall. 353. And when this Court came to deal with the same question, American Coal Co. v. Co. Com. Al. County, 59 Md. 197, we held that “the statute having created the duty and obligation to pay when the shares are assessed to the individual owners, that duty and obligation on the part of the corporation may be‘ enforced by a proper action at law.” It these taxes are a debt due by the corporation they are a debt due by it and to be paid by it regardless of any dividends or profits payable by the corporation to the shareholder and out of which it might be reimbursed. New Orleaus v. Houston, 119 U. S. 265. Though this is conceded ±0 be so whilst the corporation is a going concern, the contention is that when the company becomes insolvent and its property has passed into hands of receivers such taxes cannot be held to be a debt of the corporation for the payment of which its assets are liable. In reply to this, it may be observed that the tax is by the express terms of the statute charged to and made payable by the corporation. If this be so and if the tax was due at the time of the insolvency, then obviously the insolvency could in no manner affect' thé right of the city to demand payment out of the company’s assets. By Art. 4, sec. 827, Code of Public Local Laws, the city of Baltimore is empowered to levy taxes annually upon the assessable property of the city and to provide by ordinance for the collection of the same. The city has provided by ordinance that taxes levied shall be paid on or before the first day of October in the year for which the levy was made, and that the collector may enforce the payment of the same after giving thirty days notice. These taxes were consequently due when the company’s assets passed into the hands of the receivers; and being then due, the Act of 1892, ch. 518, directs that they shall be paid and satisfied by the officer or person selling under judicial process the property, real or personal, upon which such taxes are payable. As these taxes were due and payable when the company became insolvent, they are, in our opinion, a prior lien upon the assets in the hands of the receivers and must be paid out of the general fund, and if that should be insufficient the balance must be paid out of the special fund.

This brings us to that part of the order of August the 8th, which classifies the various creditors, numbering in the vicinity of four thousand. The order divides these creditors into three groups. First: Clerks, servants and employes to the extent of their salaries or wages due and unpaid for not exceeding three months prior to the appointment of the receivers. These creditors are allowed their claims for salaries and wages due and unpaid for not exceeding three months prior to November the twenty-third, 1893, as preferred claims under Art. 47, sec. 15 of the Code, and such allowance is free from objection, but is, in no contingency, payable out of the special fund. Second: Policy-holders of the company, and, thirdly, all other creditors.

First. Who are included within the terms clerks, servants and employees? By the section of the Code to which reference has just above been made, it is provided that “whenever any person or body corporate shall make an assignment * * or shall be adjudicated insolvent * * or shall have his, her or its property or estate taken possession of by a receiver * * in the distribution of the property or estate of such person or body corporate all moneys due and owing from such person or body corporate for wages or salaries to clerks, servants or employees contracted not more than three months anterior “ to such assignment, insolvency or receivership” “shall first be paid in full, &c.” Under no circumstances can these claims be paid out of the special or trust fund. That trust, as we have said, was created for a particular purpose and it was created as far back as eighteen hundred and ninety-two, long before any debt now due for wages or salaries and entitled to priority under the statute was contracted. The trust fund devoted to a special purpose cannot therefore be considered such property and estate belonging to the company at the time it became insolvent as would be liable for the satisfaction of these claims.

In the case of Lewis v. Fisher et al., 80 Md. 139, we held that an attorney at law was not a clerk, servant or employee; and we have now to determine whether an insurance adjuster is within these terms. What is the precise nature of the duties of an adjuster the record does not disclose. But an adjuster was not, as we understand it, a person in the continuous employment of the company; that is, one who devoted his whole time and service uninterruptedly to the company. In his petition Mr. Phelps says he was employed as an adjuster in the State of Alabama at a salary of one thousand dollars and expenses. It was his duty and the duty of other adjusters when an accident occurred to ascertain all the facts and circumstances in connection with such accident — how it happened, whether it was through the fault of the insured corporation, the nature and extent of the injury, and to make report thereof to the company. All this involved the exercise of judgment and discretion and required some familiarity with the principles of law relating to the legal liability of the insured. Now, it is clear, we think; that the word “ employee ” as used in the statute was intended to have a limited meaning, and that it cannot be applied in its broadest sense, or as including every one in the service or employment of a corporation or individual. The object of the statute was to provide for the payment of the wages and salaries due a certain class of persons to whom such wages or salaries were deemed always necessaiy for their support and maintenance. The statute first provides for the payment of the wages and salaries of clerks, persons rendering mere clerical services, then, of servants or employees. The statute did not mean by employees persons rendering services of a higher degree than clerks. The duties of an adjuster being, as far as we are able to discover, of the character we have described, these officers, whilst in a general sense employees, cannot by any fair rule of construction be considered employees in the limited and restricted meaning of that term as used in the statute. To hold otherwise would result in the inclusion of a large class of persons in the service of a company or individual as preferred creditors, though they are obviously not within the scope, purpose and object of the Code, under which provision is made for a preference.

But it was .insisted that the conclusions reached by this Court in Lewis v. Fisher et al., supra, are in conflict with the decision in Moore v. Heaney, 14 Md. 558. Such is not, however, the fact. Two entirely different statutes, relating to different subjects, were construed in the two cases. In Moore’s case the Act of 1854, ch. 23, relating to the exemption of the wages or hire of “ a laborer or other employee ” from attachment, was interpreted] whilst in Lewis’s case the identical statute now involved — the Act of 1888, ch. 383, Art. 47, sec. 15 of the Code — was before us. In Moore's case this Court gave a wide and liberal meaning to the word “ employee,” so as to bring as large a class of persons as possible within the provision which created an exemption in favor of laborers and other employees from the stringent terms of the attachment law and from the equally harsh effects of an attachment levied by way of execution on wages. The Act of 1854, creating an exemption in favor of a class of persons least able to protect themselves and largely dependent on their wages for support, was given a liberal and not a technically strict construction that might perhaps have been placed upon it. But the Act of 1888 (Art. 47, sec. 15 of the Code), was designed to create a preference in behalf of certain creditors in the distribution of an insolvent’s assets, and to that extent it disturbs and destroys the equality amongst all the creditors, which equality it was the obvious, if not declared, policy of the insolvent system to promote and preserve. Hence it was that without questioning the decision in Moore’s case, which defined the words “ other employee ” as used in a statute relating to one subject, we gave in Lewis' case to the term “ employee ” as used in another and a totally different statute, and as restricted by the context and by the words with which it was associated a less comprehensive signification. The same word used in different statutes relating to different subjects does not necessarily have the same meaning. As observed by Pollock, C. B., in Reg. v. Skeen, Bell C. C. 97, “ there is no word in the English language which does not admit of various interpretations.”

We come now to the rules laid down in the order of August the eighth for ascertaining the values of the various policies ; and it will be necessary for the sake of clearness to make some general reference to the nature and character of these contracts of insurance or indemnity. No useful purpose Gould be served, but this opinion would be protracted far beyond all reasonable limits, if the provisions and stipulations contained in the various policies were set forth at large. We may say, however, that with suitable modifications and changes to adapt them to the particular character of loss designed to be covered in each case, and to adjust them to the sort of business in which the insured was engaged, all the policies purport to be either individual accident insurance policies, employee’s indemnity bonds or contracts under which, for a designated and agreed consideration, the company stipulated to indemnify the assured against liability for damages (not exceeding a specified amount) which might arise out of injuries to property, or out of an injury to, or the death of, certain persons standing in various relations to the assured — these injuries both to persons and to property and these deaths happening upon described premises and being such as the assured might, in consequence of being responsible for their occurrence, be legally bound to answer for in damages. The object of the insurance then, except in the case of a mere individual accident policy, was to provide means with which the assured might be reimbursed for any loss he had sustained if he were the holder of an employee’s indemnity bond, or for any damages which he might lawfully be required to pay and did in fact pay by reason of such injuries or deaths as the policies covered, if he were the holder of the other classes of.indemnity. The amount actually paid by the assured to the person injured or to the representatives of the person killed or to the owners of the property damaged or destroyed, settled and measured, within the limits specified in the policy, the extent of the insurer’s liability. And whilst the mere liability of the assured to pay unascertained damages for any of the causes set forth in the contract of indemnity did not determine the precise amount which the insurer was bound to pay to reimburse the assured, it nevertheless fixed the insurer’s liability to the assured under the contract. The happening of the event which subjected the insured to a claim for damages established the period when the corelative obligation of the insurer became complete and ceased to be contingent except as to the amount to be paid. The liability of the insurer was thereby fixed, though the extent of that liability might, and in most cases must necessarily have been unascertained until a subsequent period.

Now, the insolvency of the company cancelled all outstanding policies of insurance for the future. Doane v. M. I. Co., 43 N. J. Eq. 522. It is apparent that all casualties for which the various insured corporations and individuals holding the insolvent company’s policies might be responsible must have happened either before or after the date of the insolvency. If the accidents, which form the basis of the claims now made for indemnity, happened after the insolvency was declared, then, inasmuch as the insolvency can-celled the policies, there can be no claim under the policies, but as the company by its insolvency committed a breach of its contracts, the policy-holders thereupon became entitled to damages for that breach, and these damages are the values of the destroyed policies. Mason v. Cronk, 125 N. Y. 503; People v. Security Life Ins. Co., 78 N. Y. 125. The policies being thus destroyed, of course, all liability under them, from the date of the insolvency, for accidents occurring subsequently to the insolvency, ceased, consequently losses which happened after the insolvency under policies in existence at the date of the insolvency, are not provable against the funds in the receiver’s hands. Whilst this is so, the values of the destroyed policies are provable, and according to well-settled rules, these values consist solely of the unearned or return premium. And this the Circuit Court decided. With respect to the other category, the occurrence of the casualty before the date of the insolvency — there are two contingencies presented: First, where the accident or injury insured against occurred and the damages were ascertained and actually paid by the assured before the appointment of the receivers; and secondly, where the accident or injury insured against happened before the appointment of the receivers, but the amount recoverable from the assured remained unascertained and unpaid till after that date. As to the first of these contingencies, and in so far as the policy covers no other loss, there is and can be no dispute, and the Court below properly held with respect to such policies that their value was a sum of money equal to the sum of the loss and the return or unearned premium. But as to the second of the above contingencies we think the Court was in error. With respect to the policies falling within this' second contingency the order of August the eighth declared: “ But no cause of action, nor action, nor suit pending against the claimant, nor judgment, nor decree against the claimant unsatisfied before November 23rd, 1893, by the claimant, is a loss sustained by the claimant, nor can any claim be made or any judgment or decree rendered against the claimant and satisfied by him prior to November 23rd, 1893, except for the amount actually paid in settlement thereof.” As already observed, these policies in so far as they related to a period subsequent to the appointment of the receivers and covered no antecedent loss or injury, were, by operation of law, annulled when the company became insolvent; but for the consequences of accidents or other casualties which occurred anterior to the insolvency and which subjected the assured to a liability or a loss the amount of which remained undetermined or unsatisfied until after the receivers were appointed, the policies were unaffected and the obligations arising under them were unimpared by the company’s insolvency. It is not solely because the insured has actually paid damages that the liability of the insurer to him is fixed; but it is because an accident or casualty or occurrence has happened for which he is responsible and against the loss arising from which he has been indemnified that the obligation of the insurer to reimburse him arises, though the precise amount to be paid by the insurer may depend for its ascertainment upon events happening after the insolvency. In other words, the contingent liability of the insurer to reimburse the insured becomes a fixed liability the-moment an event happens which fastens a responsibility on the insured, if that event be within the terms of the policy ; but the amount of the liability continues to be contingent till the precise extent of the demand against the insured is established and paid. This contingency as to amount in no manner derogates from the fact that a liability for some amount has arisen and become fixed. In all instances, therefore, where the loss or injury happened before the insolvency, though the amount thereof was not ascertained and was not paid by the insured until after the insolvency the holder of the policy will be entitled to prove for a sum equal to the loss or damages paid by him plus the return premium, if any.

What has been said above is sufficient to indicate that we also dissent from the third rule laid down by the Circuit Court for ascertaining the value of the class of policies in that rule referred to. When the liability became fixed prior to November the 23rd, 1893, the insolvency on that date did not extinguish the assured’s claim upon the assets and did not put an end to the assured’s right to indemnity. To the return premium in the cases described in this rule must be added what would have been payable under the policy” after November the twenty-third had no insolvency supervened.

If by the fourth rule laid down in the order of August the 8th it is meant that no loss arising from occurrences which happened after November the 23rd gives rise to a claim against the assets, we see no error in the rule; but if it means that no such claims exist if the accident or casualty occurred before November the 23rd and the amount was not ascertained until after that date, then, for the reasons we have heretofore given, we regard this fourth rule as erroneous.

There must of necessity be many outstanding and unascertained claims pending against holders of the company’s policies, which claims may require some time for adjustment ; but it is of great importance that the company’s assets should be distributed at as early a date as practicable, and hence the settlement of its affairs ought not to be postponed to await the determination of every contingency on which its policy engagements are suspended. Carr v. Hamilton, 129 U. S. 256. To obviate all unreasonable delay and yet to afford an opportunity to each policy-holder, who may be entitled to prove against the company’s assets, it will be the duty of the Circuit Court to prescribe by an order that all claims be filed on or before the second Monday of June next, or otherwise be barred from participation in the distribution. This may result in cutting out some claims but that will be unavoidable unless the distribution be postponed for a considerable space of time; and such a course would occasion unnecessary loss to those whose claims are in a condition to be proved. If by that date there should be outstanding claims not reduced to a certain basis it will be the misfortune of the assured ; but there is no way of obviating that misfortune. May on Ins., sec. 594, a.

By a prior clause of the order of August the eighth it was provided “that each owner and holder of or person having any lawful claim upon any of said classes of insurance policies or any similar policy of the defendant corporation, issued prior to November 23rd, 1893, for a period to extend beyond said date, who duly paid the premium thereon for the entire period or any portion of it extending after November 23rd, 1893, as agreed between the policyholders and the said company, is entitled to claim upon the value thereof on November 23rd, 1893, and to receive dividends upon such value out of the net special fund.” If the design of this provision was to exclude all policies which did not cover a period of time extending beyond November the 23rd, 1893, the provision is obviously erroneous. Such an exclusion would cut out a claim matured and perfected during the life of the policy whose limit of duration terminated the day before the appointment of the receivers, and under which nothing remained to be done by the insurance company but to reimburse the insured.

In respect to that part of the order which charges the special fund with the payment of costs and expenses that the general fund may be insufficient to meet, it is only necessary to say this special fund being a trust fund devoted to a particular and special purpose, cannot be diverted therefrom or applied to any other or different object; and except in so far as it is liable for the payment of the taxes which are paramount to all other claims, it must be distributed to the policy-holders for whom it was set apart and can be charged with no portion of the costs and commissions incurred in administering a totally distinct fund.

But two questions more remain to be considered. One is of considerable interest. In the argument at the bar it was insisted with great earnestness and marked ability that all policies issued by the Casualty and Indemnity Company to carriers of passengers indemnifying the carriers against their liability for injuries to persons are void because contrary to public policy. The contention is that as the law exacts from the carrier of passengers the exercise of the utmost care and diligence which human foresight can use to avoid an injury, any contract which relieves the carrier of his duty to the public in this regard or lessens his liabil-. ity for all or any of the wilful, criminal and negligent acts of his emyloyees or his managers and himself, is detrimental to the interests of the public as understood by the Courts at this time, and is therefore repugnant to public policy. No exact definition of public policy has ever been given or can be found. Speakinggenerally,the principle which holds that no one can lawfully do that which has a tendency to be injurious to the public, or against the public good, may be termed the policy of the law, or public policy in relation to the administration of the law. 19 Am. & Eng. Ency. Law. 565. In Richardson v. Mellish, 2 Bing. 229, Mr. Justice Burroughs pointedly observed: “ I for one protest against arguing too strongly upon public policy ; it is a very unruly horse, and when once you get astride it you never know where it will carry you. It may lead you from the sound law. It is never argued at all but when all other points fail.” It is one thing at one time, another thing at another time, and its very vagueness shows that it does not admit of exact or precise definition, and that it is not easily explained. If this statement requires authority, said Kekewich, J., in Davies v. Davies, 36 Ch. D. 364, when discussing public policy as affecting contracts in restraint of trade, “turn to Egerton v. Earl Brownlow, 4 H. L. Cas. 1, and consult the arguments of counsel and opinions of Judges covering the whole subject ***** One thing I take to be clear and it is this, that public policy is a variable quantity; that it must vary and does vary with the habits, capacities and opportunities of the public; that it cannot have been the same when Chief Justice Tindal decided Horner v. Graves, 7 Bing. 735, in 1831, as it was when Chief Justice Parker decided Mitchell v. Reynolds, 1 P. Wms. 181, in 1711; that it must have changed and did change between 1831 and 1869, when Vice-Chancellor James decided Leather Cloth Co. v. Lorsont, L. R. 9 Eq. 345; and if there had not been further change before Lord Justice Fry decided Rousillon v. Rousillon, 14 Ch. Div. 351, in 1880, it must have occurred ere now.” The wisdom and correctness of these observations are strikingly illustrated in the development and change and expansion of the law from the crude, rigorous and harsh exactions of past centuries to the liberal, enlightened and advanced policy of to-day, in relation to the liability of a carrier of goods, his right to restrict that liability by contract, and to insure against loss and injury the property entrusted to him, and of which he, himself, is, under the law, ah insurer. By the common law the carrier was treated as an insurer, and was bound to keep and carry safely all goods consigned to his care, and he was liable for all losses, and in all events except for losses caused by the act of God and the King’s enemies. Chitty on the Law of Carriers, 34; Balto. & Ohio R. R. Co. v. Green, 25 Md. 89. This rule of responsibility did not have its origin in contract, but was founded on grounds of public policy. “For though,” said Lord Holt in Coggs v. Bernard, 2 Ld. Ray. 900, “ the force be never so great, as if an irresistible multitude of people should rob him, nevertheless he is chargeable; and this is a politic establishment, contrived by the policy of the law for the safety of all persons the necessity of whose affairs obliges them to trust these sort of persons, that they may be safe in their dealings. For else these carriers might have an opportunity of undoing all persons that had any dealings with them by combining with thieves, and yet doing it in such a clandestine manner as would not be possible to be discovered.” Afterwards, when the better administration of the lawafforded greater protection to the carrier against the depredations of thieves, and had lessened the opportunities for fraud and collusion, the strict rule of the common law was measurably-relaxed, and the carrier was permitted to limit his responsibility by special contract, where the limitations were just and reasonable. But even this departure was of gradual development. For in Barney et al. v. Prentiss, 4 H. & J. 317, the Court declined to express an opinion on the carrier’s right to restrict his liability; but in Brehme v. Adams Ex. Co., 25 Md. 328, the right was distinctively recognized and is undoubtedly now the law. N. Y. Cent. R. R. Co. v. Lockwood, 17 Wall. 357; McCoy & Parkhurst v. Erie & West. Trans. Co., 42 Md. 498. The conclusions reached in the carefully considered and exceedingly able opinion delivered in Lockwood's case, supra, were first, that a common carrier cannot lawfully stipulate- for exemption from responsibility when such exemption is not just and reasonable in the eye of the law. Secondly. That it is not just and reasonable in the eye of the law for a common carrier to stipulate for exemption from responsibility for the negligence of himself or his servants. Thirdly. That these rules apply both to carriers of goods and carriers of passengers for hire, and with special force to the latter. Whilst the carrier will not be permitted by contract or otherwise to exempt himself from liability for losses caused by his own negligence or the negligence of his servants, there is no reason of public policy which prohibits him from contracting with a third person for insurance against these very same losses. Consequently he may by insurance indemnify himself against loss of or injury to property entrusted to his care, even where the loss or injury is caused by his own or his servant’s negligence. This was decided in Phoenix Ins. Co. v. Erie & West Trans. Co., 117 U. S. 324; and the ground upon which the decision was based was that such insurance did not diminish the carrier’s own responsibility to.ihe owner of the goods, but increased the means of meeting that responsibility. Notwithstanding such insurance the carrier remains liable to the owner or shipper of the goods, and by insuring them he merely contracts, as in every other instance of a reinsurance, with some one else for reimbursement for such loss. The doctrine announced in the Phoenix Ins. Co.'s case, supra, was affirmed in Cal. Ins. Co. v. Union Compress Co., 133 U. S. 387, and is the settled law of the land. A reasonable restriction by contract of his common law liability and an insurance by the carrier of goods against loss are recognized by the law and are not in contravention of its policy to-day, whatever that policy might have been heretofore.

It is obvious that a carrier of passengers cannot by contract restrict, diminish or limit that obligation to the public, or that duty to the passenger, which requires the exercise of the highest degree of care and diligence on his part. A contract which stipulates for or agrees to such relaxation, and therefore contemplates immunity from the carrier’s own negligence, would be utterly void ; precisely as would a contract purporting to relieve a carrier of goods from liability for losses occasioned by his own or his servant’s negligence. But the policies before us are not contracts of that character. Neither in express terms nor by implication do they profess or purport to abridge, in any way, the carrier’s common law liability for injuries to passengers, employees or strangers. These policies leave that liability precisely where and as complete as it was before they were written. They contain no provision impugning or questioning in the slightest degree the full measure of that responsibility. It is perfectly manifest, therefore, that they are not in terms contracts restricting or attempting to restrict the carrier’s conceded liability; and if they contravene public policy at all, it must and can only be incidentally and indirectly. This is all that can be imputed to them. But they are all, it is alleged, repugnant to public policy because by furnishing the carrier with a fund with which to reimburse himself for losses caused by his own negligence, their' inevitable tendency or effect is to induce less vigilance, or to promote greater carelessness on the part of the carrier. Precisely the same reasoning would invalidate, as repugnant to public policy, every species of fire and marine insurance. To the extent that a fire insurance policy affords an individual protection against loss, to exactly the .same extent may it be said the assured will become indifferent in guarding against casualties from fire. And in so far as a carrier may have a policy covering goods and insuring them for his own benefit against losses arising from his or his servant’s negligence just so far will he be either tempted to be negligent, or become indifferent as to vigilance. But in neither instance can it be said that because a temptation to be negligent, may possibly result from the possession of an insurance policy, the contract of insurance necessarily begets negligence or conflicts with public policy. Nor can we assume as an unvarying rule, of which judicial notice will be taken, that a carrier of passengers who has secured an indemnity to reimburse himself for losses which his own negligence may produce, will, merely because and solely in consequence of having such indemnity — which at best is but limited and partial — necessarily disregard the duty to exercise the highest degree of care. And unless it be assumed as a postulate that the mere possession of an indemnity will of itself necessarily and invariably produce negligence, it does not logically follow that such a policy or indemnity is even incidentally or indirectly repugnant to public policy. ' The indemnity in no way affects the liability of the carrier to the person injured. The utmost that it does, precisely as in the case of a carrier of goods is to afford him a fund out of which he may be reimbursed, and that too, perhaps, but partially ; for in all these policies the liability of the insurer is always limited and confined to a specifically designated sum. The compensation to an in-, dividual, whether passenger, employee or stranger, is after all a money compensation, and though the life or limb of a person may be and most certainly is of greater intrinsic value than goods and chattels, still the law knows of no other means of making compensation or approximate compensation in either instance than by the assessment of damages in dollars and cents.

If in the development and progress of the law the ancient rules have been relaxed, in the case of a carrier of goods so as to enable him to insure against his own negligence when the result of that insurance is to furnish him the means to make compensation to the owner or shipper of goods, we see no valid reason for holding that the law in its advance to conform to the “ habits,” capacities and opportunities of the public has not reached the stage of allowing a carried of passengers not to contract for a restriction of his original liability, but to purchase from a third party an indemnity fund with which to make more certain his ability to respond in damages for personal injuries caused by his carelessness and neglect. As public policy is a varying quantity, changing with the habits of the people, there is nothing in it as it exists at this day to warrant us in saying these policies infringe it. But how can an insurance or indemnity of this kind be contrary to that vague, indefinite and “variable quantity” called public policy; when no restriction is placed on the carrier’s liability or duty to the public or to the individual, and no attempt is made in the contract of indemnity to interfere with the relations between the carrier and the public, or the carrier and' the individual as those relations existed under the law prior to the writing of the policy? We have said the only suggestion in answer to this inquiry is that a tendency to relax the carrier’s vigilance necessarily results from the fact that under the policy a fund is provided out of which he may be reimbursed the sums he may be obliged to pay as penalties occasioned by his own' negligence. But this not only does not meet the objection that no such relaxation of care and diligenee is stipulated for in the contract of insurance or in any contract between ’ •the carrier and the passenger or other individual, but it lays •out of viéw a consideration of which the most casual observer cannot fail to take note — and it is this: The carrier will, from motives of self-interest, if from none other, endeavor to reduce the sum total of his insurance to a minimum figure and thereby diminish the amount of the annual premium payable therefor, whilst the aggregate of insurance which he may be able to procure as well as' the rate charged him for it, will always depend in a large measure, if not entirely, upon the prudence, care and skill with which his affairs are managed and conducted. Such a carrier has, consequently, exactly the same motive or incentive to protect the public and the individual from injury that he would have if he should become his own insurer, or were a carrier of goods and therefore the insurer of them. Stretching the doctrine of public policy to the extent of striking down these policies would, in the language of Mr. Justice Burroughs, “ lead you from the sound law.” And as according to the same learned Justice this doctrine “is never argued at all but where all other points fail,” it would be of -doubtful expediency to invoke it where the only apparent consequence of obtaining such insurance would be not to diminish the carrier’s own responsibility, but rather to increase his means of meeting that responsibility. The fallacy of the objection urged against the validity of these policies lies in the failure to distinguish between a contract, which, on the one hand, stipulates with the passenger for immunity on the part of the carrier from the consequences of the latter’s breach of duty ; and a contract whereby, on the other hand, the. carrier, whilst in no way diminishing that liability, merely agrees with a third person to procure from the latter a fund out of which to pay, perhaps the whole, but at least; a portion of the damages which he may be chargeable with on account of his failure to observe and discharge his duty.

As remarked by Mr. Justice Story in The Ocean Ins. Co. v. Polleys, 13 Pet. 164: “We all know that there are cases where a contract may be valid, notwithstanding it is remotely connected with an independent illegal transaction, which, however, it is not designed to aid or promote.” Now, it is perfectly obvious the Casualty Company never intended, by writing policies for carriers of persons, to aid or promote carelessness or negligence on the part of the assured. Its manifest interest to avoid the payment of heavy amounts to reimburse the assured for the damages which might be recovered in consequence of such negligence was alone sufficient to exclude the inference that by writing these policies its purpose was to aid or promote negligent, and therefore, illegal conduct on the part of the carrier; and though its liability might depend on just such negligence, its contract was not made to promote it; nor did the underwriter, directly or indirectly, stipulate for any breach of duty by the carrier towards the public or the individual. The thing done by the insured might subject him to an action for damages because wrongfully done ; but the distinct and independent contract to partially reimburse him those same damages was “in no respect designed to aid, assist or advance any such illegal act.” In the case last above cited from 13 Pet., a policy of insurance written upon a schooner for the term of one year was the cause of action. The schooner was totally lost by the perils of the sea whilst the policy was in force. The insurance company insisted that the schooner on the voyage on which she was lost was sailing under circumstances rendering her liable to forfeiture for a violation of the laws of the United States ; and that therefore a policy on a vessel pursuing such a voyage was not valid, or legal and binding. The Supreme Court said: “ The objection, then, as insisted on by the counsel for the insurance company, involved two distinct propositions. The first was, that the schooner was sailing on the voyage under circumstances which rendered her liable to forfeiture. The second was, that the policy on her was therefore void. Now the first might have been most fully admitted by the Court and yet the second have been denied, upon the ground that the policy was a lawful contract in itself and only remotely connected with the illegal use of the certificate of registry; and in no respect designed to aid, assist or advance any such illegal purpose.”

We see no reason to hold that these policies are void because against public policy.

There is but one other question to be considered and that relates to the claim of the West End Street Railway, one of the appellants. A policy was taken out by this company for a year, expiring August the first, 1892. It coatained a provision allowing the insured to renew; at its option, the same policy for three years from the above date. The insured gave notice of its intention to claim and it did claim an extension or renewal of the policy under the option ; but the insurer refused to renew. The West End Company claims that the policy is still in force. To this we do not assent. If the insured intended to rely on the contract it was its duty to have paid the premium or at least to have tendered the premium and demanded a renewal. Dungan v. Mut. B. L. I. Co., 46 Md. 469. It did neither, and the policy thereupon ceased to be effective.

We think no interest should be allowed on the claim for taxes or on any of the other claims filed against the insolvent company. Whilst not precisely analogous, the case of Hutchinson v. Liverpool & Lon. & Gl. Ins. Co., 153 Mass. 143, supports this conclusion. It is not easy, if indeed it be possible, to place upon a consistent basis many of the decisions in which interest has been allowed or disallowed. Perhaps some of the numerous claims might in strictness be entitled to an allowance of interest under ordinary circumstances ; but it does not appear that the amounts asserted to be due have been wrongfully withheld by the Casualty Company. The failure to pay, as far as we can see, has been the result of the company’s insolvency, A penalty or damages in the way of interest ought not, therefore, to be added to'the sums actually due.

It results from what we have said that the order of August the eighth, eighteen hundred and ninety-five, will be affirmed in part and reversed in part and the causes, except those that will be dismissed, must be remanded to the end: that another order may be passed conforming to this opinion.

(Decided March 24th, 1896.)

Order offirmed in part and reversed ■ in part, and causes remanded to the end that another order may be passed in conformity to this opin- ■ ion; one-half the costs in all the cases to be paid out of the general fund, the other half to be paid out of the special fund.