LIFE ASSURANCE.

New Zealand Herald, Volume XVII, Issue 5729, 29 March 1880, Page 5

LIFE ASSURANCE.

TO TUB KDITOR.

Sir, —la reply to "Mutual Policyholder's" letter in your yesterday's isßne, I beg the insertion of the following : — > Extract from the Insurance Agent: Liability of policy-holderi participating in profits.—* Mr. Driuimie, of the JJnglish and Scottish I*aw 9 Dublin, writes tho following pertinent letter to the Irish Times :—" Much disquiet has been occasioned in the minds of numerous life policyholders by a recent decision of Mr. Justice Fry in re the Ablion Assurance Society, by which a Miss NYinstone was held to be a contributor in. the winding-up of that company, on the ground that she was a policy-holder participating in the profits of the Society. In the absence of an explanation, it would be not unreasonable to iufer that this decision would seriously affect participating policy-holders in other offices. But such a conclusion "would be quite erroneous, is in the now moribund Albion office all persons who proposed for participating policies signed an extraordinary and unusuat declaration, under which they were committed to the responsibility of shareholders, and it was ipuu tuio *2<M>iorAtioD, and not because ;ho assured participated in profits. ihat Mr. Justice Fry's decision was ioanded. I beliere I am quite correct in itating that such a-form of declaration is not in ase by any ojficc, and it is manifestly absurd to suppose that because a policy-holder in a proprietary office participates in the profits, any partnership liability could be incurred on that iccouafc. In the case of the English and Irish Church and University Assurance Society (Henniug and Miller, S5), Lord Hatherly, in 1663, decided that neither participating nor non-par-ticipating policy-holders wore liable for any debts of the company, but, on the contrary, were entitled to share pari passu in the assets with the general creditors. This decision was a.lso upheld in the case of the Albert and European offices, whose participating policy-holders, instead of being made contributories, received dividends from the assets. The question was completely set at rest in the case of Cox v. Hickman, before the House of Lords. Mr. Justice Fry's decision in the case of the Albion has no general application; the question turned entirely upon the construction of the memorandum and articles of association, which were in very unusual form,and provided for participating assurers becoming members on nu analogous footing to shareholders. **The very principle of the distribution of profits, under the usual practice of offices, places participating policyholders beyond the reach of liability, either in equity or law." Mr. Justice Fry s Decision. —As it is desirable that the grounds of this important decision should be clearly understood —and they have been much misapprehended, owing to the insufficiency of the ordinary newspaper reports—we give the following official brief resume :—From u The Weekly Notes " June 21, 1579. fry, J. June 12.—"1n re Albion Life Insurance Society, winding-up. Contributories. Policy-holders. This was an adjourned summons on the part of the official liquidator ofjthe. Albion Life Insurance Society, seeking to place upon the list of contributories a policyholder **ho had paid premiums upon the principle of participating in the profits. The Society was formed in 1863 as an unlimited company, with capital of £50,000, divided into 5000 shares of £10 each. It was wound up in March, 1878. 3uaanna "Winston© proposed to insure her life for £1000 with, profits, and the proposal signed by her contained the following clause * I hereby further agree to execute the articles of association, or any deed of covenant in conformity thereto, when required.' Premiums were paid upon this policy, The articles of association of the company provided that the company should consist of two classes of members—namely, shareholders and assured members for the time being, so long as there should be any shareholders, and afterwards of the assured members for the time being, and the directors were to register the names of both classes of members. It was also provided that the assured members should have votes at the meetings of shareholders, and that the payment of a premium which would entitle the holder of a policy to be an assured member should be deemed an agreement to become a member in respect thereof. Susanna Winstone's name was not on the register of the company. Fry, J., was of opinion, upon the construction of tho policy and the articles of association, that Susanna Winßtone's name ought to be placed on the list of contributories, and that he had no power in this case to rectify the omission in the register by inserting the names of policy-holders." " Mutual Policy-holder," before inserting his letter, would have done well had he made himself thoroughly acquainted with the for* m»tion of the Albion Company and the nature of the proposals signed. He would not then have misled the public by stating that the Albion was formed under the purely mutual system. In lite insurance there are three distinct: systems—viz. : 1. Purely mutual offices, in. which the profits belong exclusively to the assured, without their incurring any liability whatever, the proper funds thereof for the time being alone being applicable to meet whatever claims may arise. Under this plan the policy-holders bave the right of appoint* ing their own directors, officers, and auditors. 2. Proprietary offices, in which policyholders obtain no share of the profits, which belong exclusively to the shareholders. 3* Mixed offices, composed of policy-holders and shareholders, in which the former are promised a certain portion of the profits, the balance going to the latter. The Albion Company was formed under the last head, but proponents for policies to participate iu the profits had to sign a proposal containing a most unusnal clause, hi which they agreed to take upon themselves the responsibility of shareholders whenever called upon to do 60. Your correspondent states that he writes for information on this important point. To my miud, judging from the tone of his letter, he has written with the idea of prejudicing the minds of the public against insuring in mutual companies, whose system has baen proved by older heads than his or mine to be the soundest and best everadopted. 1 should have much preferred that the instigator of the letter signed "Mutual Policyholder " had come out in his true colours, as I feel su re that he is endeavouring to advance the interests of that "truly unique department" (which, in the words of the Post Magazine, appears to have been undertaken on the p inciple of heads you win, tails I lose) jby throwing mud at the two other offices doing business in New Zealand. I may also i add that a "Mutual Policy-holder" inquir* iog for information would not have proceeded in the same way a3 your correspondent, neither would he have offered to pay for the insertion of the article from the Lyttelton Times.—l am, &c., William T. J. Bell, , General Agent for New Zealand Mutual Life Association | of Australasia.