its contention, differ widely from the case now under consideration.

The fund, of which the assessment against the claimant, when collected, will form a part, is a common fund, in which the claimant has only a qualified interest in common with other policyholders.

Neither the fund, nor any part of it, is subject to its control, but is to be paid ratably to those policyholders who have suffered loss within the meaning of their policies. To allow the claimant to set off a loss

Set-off-of insurance loss on

premium note. against what it is owing upon its assessment, when others have wholly or partially paid theirs into a fund which in part will be applied to the payment of the claimant's claim, in whole or in part, would not only be very unjust to other policyholders, but it would be giving him an unwarranted preference. We therefore agree with the court below that such set-off should not be allowed the claimant.

The fourth and last question for our consideration is, Shall the unearned or returned premiums, as referred to in the opinion of the court and the briefs of counsel, "be added to the claim under the policy," or shall they remain in the fund in which they were placed, and be applied to the payment of the losses suffered by the policyholders?

The court in Com. v. Massachusetts Mut. F. Ins. Co. 112 Mass. 124, in speaking upon the subject said, quoting from the syllabus: "When the losses suffered by a mutual. insurance company render it insolvent, and require an assessment to the full amount, . . . the holder of an unexpired policy, the cancelation of which has been rendered necessary by such insolvency, has no right of set-off, or of recoupment, or claim for return of premium, or for damages on account of the unexpired term of his policy."

And this seems to be the law, even though the policy contain the provision entitling its holder to a return premium upon the cancelation of the policy, as such provision

would apply only where the company was solvent when the policy was canceled.

As was said in the case from which we have just quoted, the fund is "pledged to satisfy and make good the losses that have occurred. Each one in turn who suffers loss is entitled to the full benefit of this pledge, according to the state of those funds when his loss occurs; this forbids any reduction of the fund, when the whole is required to cover losses, either by apportionment, set-off, or otherwise." Vanatta v. New Jersey Mut. L. Ins. Co. 31 N. J. Eq. 15; Raegener v. Hubbard, 167 N. Y. 301, 60 N. E. 633; Com. v. Massachusetts Mut. F. Ins. Co. 112 Mass. 116; Hillier v. Allegheny County Mut. Ins. Co. 3 Pa. St. 470, 45 Am. Dec. 656.

The court below held that the returned premiums, as it called them, could be added to the claim under the policy. In this finding we think the court was in er- Insuranceror, as, in our opin- right to unpaid ion, they should remain in the fund, and be applied to the payment of the claims of the policyholders suffering loss under their policies.

premium.

The appeal in this case is from an order passed by the court below, by which the exceptions filed to the auditor's report in the matter of the Fleet-McGinley Company were sustained, and the report referred "back to the auditor, with instructions to allow. it and other claims of the policyholders for loss under other policies, in accordance with the rules set out in the above opinion."

It will be observed that the name of the claimant in the above order is that of the Fleet-McGinley Company, when it should have been the Standard Printing & Publishing Company. This we have assumed was a typographical error, and have so treated it, as did the appellant in its order for an appeal.

Though neither the audit to which exceptions were taken and sustained, nor the items allowed there

others assessed have paid their money into a fund which will be applied in part to the payment of the claimant's claim would be giving him an unjust preference. The fund constituted by the payment of assessments is a common fund, in which the claimant has an interest together with other policyholders.

Stone v. Old Colony Street R. Co. (Mass.) supra, was an action of contract brought by a receiver on assessable policies of indemnity or accident insurance, to collect assessments levied for the payment of liabilities. The court said: "If the association while solvent had levied the assessment and brought suit, the defendant would have had a cross demand for the amount of its accrued claims under the policies, which, although liquidated, had not been paid. Rev. Laws, chap. 174, § 1. And the set-off would have operated as a defense to the extent for which it could have been sustained. Green v. Nelson (1847) 12 Met. (Mass.) 573. But as insolvency has intervened, the assessments, when collected, form a fund for the benefit of all the policyholders, including the defendant, whose demands comprise a part of the indebtedness which made the assessment necessary. The defendant received the benefit of the insurance of the subsidiary companies as a party insured, while it also became an insurer for the protection and benefit of the other members. A set-off would confer upon it a preference to the disadvantage of other creditors and policyholders, and permit it to appropriate exclusively the amount claimed in partial payment of its own demands against the insolvent, and to this extent the defendant would be relieved from the obligations of an insurer. The right invoked also has been pleaded in recoupment, but whichever form of procedure is adopted, the defendant stands on an equal footing with its fellow members from the collapse of the corporation, in their dual relation of insurers and creditors. It is because of this principle of equality, where an insolvent corporation of this character is being wound up for the purpose of a proportional distribution

of assets, that the right of a member who is also a creditor to set off or recoup his individual loss uniformly has been denied."

And in Stone v. New Jersey & H. River R. & Ferry Co. (1907) 75 N. J. L. 172, 66 Atl. 1072, a case involving similar facts, and apparently brought by the same plaintiff, the principal question before the court was whether there was a right to set off losses on the part of the defendant, against assessments on a mutual insurance policy. It was said: "The right of set-off as against the receiver of an insolvent corporation does not rest upon the statute of set-off, but upon the provision of the Corporation Act, authorizing the receiver to settle debts due the company upon such terms as he shall deem just and beneficial to the corporation, and in case of mutual dealings to allow just setoffs. Van Wagoner v. Paterson Gaslight Co. (1852) 23 N. J. L. 283. Whether the allowance of such a setoff as is here claimed is just or not depends upon the contractual relations between the insolvent company and the defendant. The contract is found in the defendant's applications and in the policies issued thereon, all of which are in the same terms. By the applications the defendant applies for membership and insurance. By the policies it is entitled to share in dividends declared by the directors of the insolvent association, and, in case the fixed premium rate charged by the association is insufficient to pay losses, becomes liable to pay a pro rata additional sum to make up the deficiency, not exceeding 5 per centum of its gross traffic receipts. Under such a contract the relation of the defendant to the association is twofold; it is assured thereby and hence a possible creditor; it is a member of the association and hence a quasi partner in the enterprise. The present suit is to enforce the liability of the defendant in the character of member. The set-off is a claim in its character of creditor. The injustice of allowing one member of a mutual insurance company upon the assessment plan to escape liability to

contribute to the common fund and thereby obtain an advantage over his fellow members, all of whom embarked in the same enterprise presumably on equal terms, and of allowing one creditor of an insolvent company to be preferred over other creditors merely by reason of his liability to contribute toward the payment of the losses of all, is manifest. The authorities seem quite unanimous against allowing a set-off in such a case."

A member of a mutual marine insurance company cannot, upon its insolvency, set off against his indebtedness for premiums due on policies a loss sustained by him, adjusted and payable by the company.

The pre

miums constitute a fund which as insyrer he is bound to make good for the benefit of all creditors, and as an insured person he is bound to take a pro rata dividend from the fund. Lawrence v. Nelson (1860) 21 N. Y. 158.

The holder of a mutual insurance policy cannot set off a loss under it against the amount of his premium note unless the assets of the company are enough to pay all losses in full. Hillier v. Allegheny County Mut. Ins. Co. (1846) 3 Pa. St. 470, 45 Am. Dec. 656, wherein the court said that such course would work most unjustly, by enabling a member who stood in the double relation of debtor and creditor to get more than his share of the insolvent fund; that where the company was bankrupt, each member was entitled to payment, not of his whole loss, but of a part of it in the proportion which the amount of all losses bore to the amount of the joint effects.

Holders of claims for losses in a mutual company which occur after the appointment of a receiver cannot set off their claims in actions on their premium notes. Standard Mut. Live Stock Ins. Co. v. Crawford (1893) 2 Pa. Dist. R. 601, 13 Pa. Co. Ct. 556.

A member of an insolvent mutual company is not entitled to set off

against an assessment against him a loss incurred while the company was apparently solvent. Dettra v. Spielberger (1896) 5 Pa. Dist. R. 262, 18 Pa. Co. Ct. 13; Gain's Estate (1896) 5 Pa. Dist. R. 350, 18 Pa. Co. Ct. 206.

In the case of Ex parte Banks (1909) 85 S. C. 37, 67 S. E. 19, it appeared that one who held a policy of insurance in a defunct mutual fire insurance company had been credited on the books of the company with $190 for an adjustment of a partial loss thereunder, the company being placed in the hands of a receiver about six months later. The receiver levied an assessment against the policy, which the policyholder, insisted should have been deducted from the sum credited to him on the books. The court sustained the action of the receiver, who deducted the assessment from the dividend due the policyholder, and not from the sum representing his loss.

But a loss under a mutual insurance policy may be set off against an assessment, where the company or association issuing the policy is solvent. Stone v. Old Colony Street R. Co. (1912) 212 Mass. 459, 99 N. E. 218. See also Lawrence v. Nelson (1860) 21 N. Y. 158.

In Stutzman v. Cicero Mut. F. Ins. Co. (1912) 150 Wis. 254, 136 N. W. 604, an action brought to recover on a mutual fire insurance policy, it appeared that the plaintiff's share of an assessment had not been paid, the plaintiff offering in justification of such nonpayment the existence of an unliquidated claim for the loss by lightning. This claim, however, was, in the opinion of the court, trifling in amount and had been permitted to slumber. The court said: "But in any event the existence of such an unliquidated and disputed claim would afford no justification for refusal to pay the assessment under the policy, or relieve the respondent from the penalty of failure to pay during suspension." R. S.

Statement by Crownhart, J.:

There was an application by the dependent before the Industrial Commission for compensation, by reason of the death of Phillip Wagenknecht, resulting from accident while in the course of his employment, working out a highway tax for the defendant town. The Industrial Commission awarded compensation, and the award was affirmed by the circuit court. There is no dispute upon the facts, and the only question before this court is one of law as to the construction of the following language in the Compensation Act: "Section 2394-7. The term 'employee' as used in §§ 2394-1 to 2394-31, inclusive, shall be construed to mean: (1) Every person in the service of any town under any appointment, or contract of hire, express or implied, oral or written.

The defendant contends that the deceased was not in the service of the town under any contract of hire, express or implied.

Messrs. Sawyer & Sawyer, for appellant:

A highway taxpayer, while engaged in paying his highway taxes in labor, is not an employee of his town within the meaning of the Workmen's Compensation Act.

State v. Chicago & N. W. R. Co. 128 Wis. 485, 108 N. W. 594; Miller v. Pillsbury, 164 Cal. 199, 128 Pac. 327, Ann. Cas. 1914B, 886; Martin v. Fond du Lac County, 127 Wis. 586, 106 N. W. 1095; McCormick v. Niles, 81 Ohio St. 246, 27 L.R.A. (N.S.) 1117, 90 N. E. 803; Robinson v. Baltimore & O. R. Co. 237 U. S. 84, 59 L. ed. 849, 35 Sup. Ct. Rep. 491, 8 N. C. C. A. 1; Harley v. United States, 198 U. S. 229, 49 L. ed. 1029, 25 Sup. Ct. Rep. 634; Lineoski v. Susquehanna Coal Co. 157 Pa. 153, 27 Atl. 577; McColligan v. Pennsylvania R. Co. 214 Pa. 229, 6 L.R.A. (N.S.) 544, 112 Am. St. Rep. 739, 63 Atl. 792, 20 Am. Neg. Rep. 471; Hillestad v. Industrial Ins. Commission, 80 Wash. 426, 141 Pac. 913, Ann. Cas. 1916B, 789, 6 N. C. C. A. 763; General Steam Nav. Co. v. British & C. Steam Nav. Co. L. R. 3 Exch. 330; Grossbier v. Chicago, St. P. M. & O.

R. Co. 173 Wis. 508, 181 N. W. 746; Simpson v. Ebbw Vale Steel Iron & Coal Co. [1905] 1 K. B. 453, 74 L. J. K. B. N. S. 347, 53 Week. Rep. 390, 92 L. T. N. S. 282, 21 Times L. R. 209-C. A.

Messrs. William J. Morgan, Attorney General, and Winfield W. Gilman, Assistant Attorney General, for respondent commission:

At the time of the injury the relationship of employer and employee existed between the the plaintiff and Phillip Wagenknecht, Jr.

Elder v. Bemis, 2 Met. 599; Re Ashby, 60 Kan. 101, 55 Pac. 336; Win