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Mutual Reserve Life Ins. v. Roth

122 F. 853, 59 C.C.A. 63, 1903 U.S. App. LEXIS 3932
CourtCourt of Appeals for the Eighth Circuit
DecidedApril 20, 1903
DocketNo. 1,807
StatusPublished
Cited by15 cases

This text of 122 F. 853 (Mutual Reserve Life Ins. v. Roth) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mutual Reserve Life Ins. v. Roth, 122 F. 853, 59 C.C.A. 63, 1903 U.S. App. LEXIS 3932 (8th Cir. 1903).

Opinion

THAYER, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

We are of opinion that, when the trial ended, all of the material facts in the case were practically confessed, and that the learned trial judge was right in holding that the only question involved was one of statutory construction arising upon the aforesaid statute.- All of the actuaries who testified in the case (and there were several) agreed that the net value of a policy at any time is the difference between the single premium necessary to purchase the sum assured, estimated on the age of the person at the time the policy is valued, and the then pres[855]*855ent value of all the future premiums expected to be received on the policy. The net value of a policy is sometimes termed the reserve on the policy, and represents a sum of money already collected, which is supposed to be in the hands of the insurer, and available in its hands either to reinsure the risk in some other company, or to enable it, with the aid of the premiums thereafter payable, to meet the risk at the end of the party’s expectancy. The net value of a policy is computed, of course, on a given table of mortality, at a specified rate of interest, and upon the assumption that during the early years of the risk, the premium being the same each year, the insured pays more than the actual cost of insurance; the excess which is thus paid making good the deficit during the later years, when it costs more to carry the risk. New York Life Ins. Co. v. Statham, 93 U. S. 24, 34, 23 L. Ed. 789. All of the actuaries agree on the foregoing proposition. The actuaries further agreed, we think, that, under the provisions of such a policy as was issued to Roth, it did not have an actual net value; that is to say, they agreed that the defendant company had not accumulated any sum of money to help carry the risk to maturity, because the policy did not stipulate for the payment of a fixed or uniform premium annually, like an ordinary life policy, but contained provisions which necessarily made the premiums variable, by limiting them to such amounts as were necessary to meet death losses as they occurred.

The policy in suit contained a provision making it payable out of what is termed the “Death Fund” of the association, and a further provision that if, at such time as the directors of the association might fix for making an assessment, the death fund should be insufficient to meet existing death claims, an assessment should be made upon every member whose certificate was in force at the date of the death for which the assessment was made, said assessment to be made at such rates, according to the age of each member, as might be established by the directors, and that the net amount of such assessment, less 25 per cent, to be set apart for the reserve fund, should go into the death fund. The policy further stated that “no assessments will be made while there remains in the death fund a sum sufficient to pay the existing claims in full.” The constitution of the order, which was made a part of the contract, provided that on the 1st days of February, May, August, and November an assessment should be made upon the entire membership in force at the date of the last audited death claim prior thereto, for such a sum as the executive committee might deem sufficient to meet the existing claims by death, the sum to be apportioned among the members according to the age of each member as per the rates named in the certificates of membership, and that the net amount received from such assessments, less 25 .per cent, to be set apart for the reserve fund, should go into the death fund. Other provisions of the constitution declared that the interest on the reserve fund, as it accrued, should be placed to the credit of the death fund, to be used in providing for current death claims; that after the expiration of each period of five years, during the continuance of a membership certificate, a bond should be issued to the member, bearing interest at the rate of 4 per cent, per annum, for an equitable proportion of each member’s interest in the reserve fund, which bond [856]*856should be available after io years from its date to pay the future assessments levied against the member; and that the entire reserve fund above $100,000, and in excess of sums represented by outstanding bonds, might be applied to the payment of death claims in excess of the American experience table of mortality, and when any claim by death was due, to make up any deficiency that might then exist in the death fund.

It is manifest, therefore, that, according to the contract existing •between the parties, the premiums payable were not to remain fixed or level during the life of the policy, but were expressly made indefinite in amount, and dependent upon the mortuary necessities of the company. This fact was disclosed by a table of rates of assessment indorsed on the back of the policy, which showed that the rates of assessment increased as the member grew older. In other words, the contract in suit was one whereby the member was required to pay from one assessment period to another the actual cost of insurance during that period, without paying an additional sum to be husbanded and accumulated to make up a deficit in future years, when the cost of carrying the risk on the member’s life became greater. All of the actuaries agreed that when insurance is conducted on this plan, which may be called either “term insurance,” or “insurance on the natural premium plan,” a policy can have no actual net value; and that fact is obvious, because, if an insurance company collects from its policy holders, from one assessment period to another, no more than is necessary to pay losses which occur in the meantime, it can have nothing in its treasury to reinsure outstanding risks, or give them a net value.

Only one of the actuaries who testified at the trial claimed that the policy in suit had a net value on November i, 1899, applicable to the purchase of extended insurance; and the net value which he assigned to it was not an actual net value incident to the payment of assessments previous to that time, but a theoretical net value, which, as he contended, might and ought to be given to it under the provisions of the Missouri statute, to wit, section 5983, Rev. St. Mo. 1879, above quoted, and section 5968 of the same chapter. The last-mentioned section (5968) provided, in substance, that it should be the duty of the State Superintendent of Insurance to make or cause to be made annually a valuation of the policies and all other obligations of insurance outstanding and in force on December 31st next preceding, of every life insurance company doing business in the state, and also provided that for the purpose of making such a valuation, and for making special examinations under the provisions of the laws of the state, in order to ascertain the solvency of insurance companies, and their eligibility to do business in the state, the rate of interest assumed should be 4yí per cent, per annum, and that the rate of mortality should be that established by the American experience table, in which 'table the numbers living and dying at each age, and the expectation of life from the ages of 10 to 95 out of 100,000 persons living at the age of 10, were as stated in a schedule appended to that section, which is quoted below in a note. While no rate of premium was prescribed by that section, but was apparently left to the agreement of the par[857]

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Bluebook (online)
122 F. 853, 59 C.C.A. 63, 1903 U.S. App. LEXIS 3932, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mutual-reserve-life-ins-v-roth-ca8-1903.