Montana Attorney General Opinion 15-208

Opinion No. 208 MutuaJ Insumnce Companies- Insumnce-Benevolent Societies- Licenses-Commissioner of Insurance. HELD: Organizations known as "be- nevolent insurance companies" or a,; "benevolent insurance societies" which cannot qualify as mutual benefit com- panies or as fraternal benefit societies. have no right otherwise to he in the in· surance business, and if they wish to continue in it, it is incumhent npon them to incorporate under some appro- priate provision of the Civil Code and thereby subject themselves to the pay- ment of a license fee and to the visi- torial powers of the commissioner of insurance. May 11, 1933. In a communication to me of recent date you state that, in your judgment, certain unincorporated aSSOCiations, pro- fessing to be benevolent SOCieties, are engaged in the insurance business in ,'arious parts of the state, and desire to know whether, under the circumstnnces existing, they are subject to our insur- ance laws. It appears from your statement of the facts that each of the associations in question has a membership in excess of two hundred and that a fee of $2.00 is exacted from a new memher or im- mediately before he joins such associa- tion. This fee goes to the person who procures the new member or to him and the promoter of the organization. There is no initiatory ceremony and no meetings are ever held. }j'ollowing the death of a member an assessment of $1.00 is levied on each surviving mem- ber, the proceeds of which are paid to o OPINIOKS OF THE ATTORNEY GENERAL 145 the beneficiary of the deceased, less ten per cent thel:eof retained fOI' operat· ing expenses. In the membership blank it is stipulated that the members are under no legal liability to pay the as· sessment of one dollar. The secretary of the association is compensated for his services out of the fund established for operating expenses. Furthermore. the associations. or some of them, pay benefits to members on account of dis- ability resulting from sickness, accident or old age. From the facts before me. meager as they are in some respects, it is safe to conclude that these associations cannot be classed as mutual benefit ('omp<'mies under the provisions of section 6159, Revised Codes U)21, or as fraternal benefit societies under the provisions of Chapter 22 of Part III, Ci,il Code of 1921. What, then, is their status? The question must be answered. not from what they profess to he, but from what they actually are, and the nature of the business they conduct. The general trend of authority in this coun- try is that organizations like those are, in effect. mutual insurance companies. (Hoyal Highlanders Y. State. 108 N. W. 183; 1 Couch, Cyclopedia of Insurance Law, secs. 250, 251; 32 C. J. 1018-1021.) Thus it has been held that an asso- ciation which insured only the prop- erty of its members by a poliCy in the form of a certificate of membership, for a premium paid simply as an ad- mission fee, and by assessing its mem- bers to pay for the losses sustained by such certificate holders, was, to all In- tents and purposes, a mutual insurance company. (State v. Lh'e Stock Ass'n., 20 N. W. 852.) 'Vhere associations agree with their members, in consideration- of the pay- ment of dues and assessments, to in- demnify them or their nominees against loss from certain causes, such as acci- dental personal injury, sickness, or death, they conduct an insurance busi- ness, and the certificate issued to each member fills the place of the ordinary insurance policy and is essentially a contract of insUI·ance. (7 C .. J. 1053- 1056; 1 Bacon on Benefit Societies 94- H7; I Couch, Cyclopedia of Insurance, sec. 6.) After much consideration of the ques- tion it is my view that these organiza- tions are engaged in the insurance busi- ness. but without authority of law. As they cannot qualify as mutual benefit companies or as fraternal benefit so- cieties, they have no right otherwise to be in the insurance business. If they wish to continue in it. it is incumbent on them to incorpora te under some RP- propriate provision of the Civil Code and therehy subject themselves to the payment of a license fee and to the. visitorial powers of the commissioner of insurance. (Chapters 14. 19 and 21 of Part III, Civil Code of 1921 : Inter- mountain Lloyds Y. Diefendorf, 5 Pac. (2d) 730; 32 C. J. H81; 1 COUCh, Cyclo- pedia of Insurance Law, Sec. 242.) Your vigilance in this matter is wor- thy of hearty approbation. What the Supreme Court of Pennsylvania said in the case of In re National Indemnity & Endowment Co .. 21 At!. 87!l, may apply very closely to more than one of these organizations, namely: "The Rppellant company claims to be a beneficial association. within thp meaning of the ninth pRragraph of section 2 of the Act of 1874. Without going into detail, the auditor and the court below have sufficiently demon- strated that the only persons likely to be benefited by the scheme set forth in the charter are the officers them- selves. It manifestly belongs to that class of aSSOCiations, by far too nu- merous, the practical effect of whose operations is to enrich a few at the expense of confiding and ignorant people. S~ICh corporations are 'unlaw- ful and injurious to the community,' and in this age of deception and frand too much care cannot be exercised in scrutinizing the provisions of charters with sounding names and alluring schemes to benefit the public."