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ance loss on
its contention, differ widely from would apply only where the company the case now under consideration. was solvent when the policy was
The fund, of which the assess- canceled. ment against the claimant, when col- As was said in the case from iected, will form a part, is a common which we have just quoted, the fund fund, in which the claimant has only is "pledged to satisfy and make a qualified interest in common with good the losses that have occurred. other policyholders.
Each one in turn who suffers loss is Neither the fund, nor any part of entitled to the full benefit of this it, is subject to its control, but is to pledge, according to the state of be paid ratably to those policyhold- those funds when his loss occurs; ers who have suffered loss within this forbids any reduction of the the meaning of their policies. To fund, when the whole is required to
allow the claimant Set-of-of insur
cover losses, either by apportionto set off a loss ment, set-off, or otherwise." Vanpremium note.
against what it is atta v. New Jersey Mut. L. Ins. Co. owing upon its assessment, when 31 N. J. Eq. 15; Raegener v. Hubothers have wholly or partially paid bard, 167 N. Y. 301, 60 N. E. 633; theirs into a fund which in part will Com. v. Massachusetts Mut. F. Ins. be applied to the payment of the Co. 112 Mass. 116; Hillier v. Alleclaimant's claim, in whole or in part, gheny County Mut. Ins. Co. 3 Pa. St. would not only be very unjust to 470, 45 Am. Dec. 656. other policyholders, but it would be The court below held that the regiving him an unwarranted prefer- turned premiums, as it called them, ence. We therefore agree with the could be added to the claim under court below that such set-off should the policy. In this finding we think not be allowed the claimant.
the court was in er
Insurance The fourth and last question for ror, as, in our opin- right to anpaid our consideration is, Shall the un- ion, they should re
premium. earned or returned premiums, as re- main in the fund, and be applied to ferred to in the opinion of the court the payment of the claims of the and the briefs of counsel, “be added policyholders suffering loss under to the claim under the policy," or their policies. shall they remain in the fund in The appeal in this case is from an which they were placed, and be ap- order passed by the court below, by plied to the payment of the losses which the exceptions filed to the ausuffered by the policyholders? ditor's report in the matter of the
The court in Com. v. Massachu- Fleet-McGinley Company were sussetts Mut. F. Ins. Co. 112 Mass. 124, tained, and the report referred in speaking upon the subject said, "back to the auditor, with instrucquoting from the syllabus: "When tions to allow. it and other claims of the losses
suffered by a mu- the policyholders for loss under tual insurance company
other policies, in accordance with render it insolvent, and require an the rules set out in the above opinassessment to the full amount, .. ion.” the holder of an unexpired policy, It will be observed that the name the cancelation of which has been of the claimant in the above order is rendered necessary by such insol- that of the Fleet-McGinley Comvency, has no right of set-off, or of
pany, when it should have been the recoupment, or claim for return of Standard Printing & Publishing premium, or for damages on account Company. This we have assumed of the unexpired term of his policy." was a typographical error, and have
And this seems to be the law, so treated it, as did the appellant in even though the policy contain the its order for an appeal. provision entitling its holder to a Though neither the audit to which return premium upon the cancela- exceptions were taken and sustion of the policy, as such provision tained, nor the items allowed there
(143 Md. 303, 122 Atl. 195.) in to the plaintiff, are found in the that because of the large amount to record, we think we may assume
be distributed, and the great numfrom the state of the record, and ber of policyholders, he had apthe directions given by the court, pointed counsel to represent the that it acted properly in sustaining claimant, and had directed them to the exceptions, and remanding the enter a cross appeal “to save excepcase to the auditor for restatement tions of separate policyholders." A of the audit or account; but as we cross appeal was therefore taken in differ with the court in at least one this case. of the rules laid down by it, the or- The order appealed from will be der will have to be affirmed in part, affirmed in part, and reversed in and reversed in part, and the case part, and the case remanded for the remanded, that the auditor may be purpose stated above. directed to distribute the funds as Order affirmed in part, and reherein stated.
versed in part, and case remanded. The court in its opinion stated The costs to be paid out of the fund.
ANNOTATION. Right to set off loss under mutual insurance policy against premium or assess
It is generally held that a policy- South Carolina. Ex parte Banks holder in an insolvent mutual insur- (1910) 85 S. C. 37, 67 S. E. 19. ance company will not be permitted to In Traer v. Consolidated Coal Co. set off a loss under his policy against (Ill.) supra, an action brought by the his liability to pay a premium or an receiver of a mutual insurance comassessment.
pany on notes given by the appellant Illinois. Traer v. Consolidated in payment of assessments, the court Coal Co. (1921) 221 Ill. App. 576. said: “Appellant further claims the
Maryland. See the reported case right to set off $12,188.06 losses sus(STANDARD PRINTING & PUB. Co. v. tained. The same claims now interBOTHWELL, ante, 1269).
posed as a set-off, by appellant, were Massachusetts.–Stone v. Old Col- proved by it as a claim against the reony Street R. Co. (1912) 212 Mass. ceiver in a chancery proceeding in the 459, 99 N. E. 218.
circuit court of Sangamon county. New Jersey.–Stone v. New Jersey Appellant cannot prove these claims & H. River R. & Ferry Co. (1907) 75 as a basis to collect its pro rata share N. J. L, 172, 66 Atl. 1072.
in the chancery proceedings and at New York. Lawrence v. Nelson the same time interpose them as a set(1860) 21 N. Y. 158, affirming (1859) off in order to avoid paying its share 4 Bosw. 240. See also Berry v. Brett of the losses for which it gave its (1860) 6 Bosw. 627.
notes. Further, a policyholder in a Pennsylvania.—Hillier v. Allegheny mutual company cannot set off his County Mut. Ins. Co. (1846) 3 Pa. St. losses against his liability for losses. 470, 45 Am. Dec. 656; Care v. Brown, Lawrence v. Nelson (1860) 21 N. Y. (1893) 31 W. N. C. 501; Standard Mut. 158." Live Stock Ins. Co. v. Crawford (1893) A similar conclusion is reached in 2 Pa. Dist. R. 601, 13 Pa. Co. Ct. 556; the reported case (STANDARD PRINTDettra v. Lock (1895) 5 Pa. Dist. R. ING & PUB. Co. v. BOTHWELL, ante, 200, 18 Pa. Co. Ct. 12; Dettra v. Spiel- 1269), involving assessments on a berger (1896) 5 Pa. Dist. R. 262, 18 mutual policy of so-called "strike inPa. Co. Ct. 13; Gain's Estate (1896). surance" and the question whether a 5 Pa. Dist. R. 350, 18 Pa. Co. Ct. 206; policyholder may set off a loss under Schofield v. Lafferty (1901) 17 Pa. the policy against the amount owing Super. Ct. 8. See also Long v. Penn on the assessment. It is pointed out Ins. Co. (1847) 6 Pa. 421.
that to allow such a set-off when 31 A.L.R.–81.
others assessed have paid their money of assets, that the right of a member into a fund which will be applied in who is also a creditor to set off or repart to the payment of the claimant's coup his individual loss uniformly has claim would be giving him an unjust been denied.” preference. The fund constituted by And in Stone v. New Jersey & H. the payment of assessments is a com- River R. & Ferry Co. (1907) 75 N. J. mon fund, in which the claimant has L. 172, 66 Atl. 1072, a case involving an interest together with other policy- similar facts, and apparently brought holders.
by the same plaintiff, the principal Stone v. Old Colony Street R. Co. question before the court was whether (Mass.) supra, was an action of con- there was a right to set off losses on tract brought by a receiver on assess- the part of the defendant, against asable policies of indemnity or accident sessments on a mutual insurance polinsurance, to collect assessments ley- icy. It was said: “The right of set-off ied for the payment of liabilities. as against the receiver of an insolThe court said: “If the association vent corporation does not rest upon while solvent had levied the assess- the statute of set-off, but upon the ment and brought suit, the defendant provision of the Corporation Act, would have had a cross demand for authorizing the receiver to
to settle the amount of its accrued claims debts due the company upon such under the policies, which, although terms as he shall deem just and beneliquidated, had not been paid. Rev. ficial to the corporation, and in case Laws, chap. 174, § 1. And the set-off of mutual dealings to allow just setwould have operated as a defense to offs. Van Wagoner v. Paterson Gasthe extent for which it could have light Co. (1852) 23 N. J. L. 283. been sustained. Green v. Nelson Whether the allowance of such a set(1847) 12 Met. (Mass.) 573. But as off as is here claimed is just or not deinsolvency has intervened, the assess- pends upon the contractual relations ments, when collected, form a fund for between the insolvent company and the benefit of all the policyholders, the defendant. The contract is found including the defendant, whose de- in the defendant's applications and in mands comprise a part of the indebt- the policies issued thereon, all of edness which made the assessment which are in the same terms. By the necessary. The defendant received applications the defendant applies the benefit of the insurance of the sub
for membership and insurance. By sidiary companies as a party insured,
the policies it is entitled to share while it also became an insurer for the
in dividends declared by the diprotection and benefit of the other
rectors of the insolvent associamembers. A set-off would confer up
tion, and, in case the fixed premium on it a preference to the disadvantage of other creditors and policyholders,
rate charged by the association is in
sufficient to pay losses, becomes liable and permit it to appropriate exclusively the amount claimed in partial pay
to pay a pro rata additional sum to
make up the deficiency, not exceeding ment of its own demands against the
5 per centum of its gross traffic reinsolvent, and to this extent the defendant would be relieved from the
ceipts. Under such a contract the re
lation of the defendant to the assoobligations of an insurer. The right invoked also has been pleaded in re
ciation is twofold; it is assured therecoupment, but whichever form of pro
by and hence a possible creditor; it is cedure is adopted, the defendant
a member of the association and hence stamals on an equal footing with its a quasi partner in the enterprise. fellow members from the collapse of
The present suit is to enforce the liathe corporation, in their dual relation
bility of the defendant in the characof insurers and creditors. It is be
ter of member. The set-off is a claim cause of this principle of equality, in its character of creditor. The inwhere an insolvent corporation of this justice of allowing one member of a character is being wound up for the mutual insurance company upon the purpose of a proportional distribution assessment plan to escape liability to
contribute to the common fund and against an assessment against him a thereby obtain an advantage over his loss incurred while the company was fellow members, all of whom em- apparently solvent. Dettra v. Spielbarked in the same enterprise pre- berger (1896) 5 Pa. Dist. R. 262, 18 sumably on equal terms, and of al- Pa. Co. Ct. 13; Gain's Estate (1896) 5 lowing one creditor of an insolvent Pa. Dist. R. 350, 18 Pa. Co. Ct. 206. company to be preferred over other In the case of Ex parte Banks (1909) creditors merely by reason of his lia- 85 S. C. 37, 67 S. E. 19, it appeared that bility to contribute toward the pay- one who held a policy of insurance in ment of the losses of all, is manifest. a defunct mutual fire insurance comThe authorities seem quite unanimous pany had been credited on the books against allowing a set-off in such of the company with $190 for an ada case.”
justment of a partial loss thereunder, A member of a mutual marine in- the company being placed in the surance company cannot, upon its in- hands of a receiver about six months solvency, set off against his indebted- later. The receiver levied an assessness for premiums due on policies a ment against the policy, which the loss ,sustained by him, adjusted and policyholder, insisted should have payable by the company.
been deducted from the sum credited miums constitute a fund which as in- to him on the books. The court sussyrer he is bound to make good for the tained the action of the receiver, who benefit of all creditors, and as an in- deducted the assessment from the divsured person he is bound to take a pro idend due the policyholder, and not rata dividend from the fund. Law- from the sum representing his loss. rence v. Nelson (1860) 21 N. Y. 158. But a loss under a mutual insurance
The holder of a mutual insurance policy may be set off against an aspolicy cannot set off a loss under it sessment, where the company or assoagainst the amount of his premium ciation issuing the policy is solvent. note unless the assets of the company Stone v. Old Colony Street R. Co. are enough to pay all losses in full. (1912) 212 Mass. 459, 99 N. E. 218. Hillier v. Allegheny County Mut. Ins. See also Lawrence v. Nelson (1860) 21 Co. (1846) 3 Pa. St. 470, 45 Am. Dec. N. Y. 158. 656, wherein the court said that such In Stutzman v. Cicero Mut. F. Ins. course would work most unjustly, by Co. (1912) 150 Wis. 254, 136 N. W. 604, enabling a member who stood in the an action brought to recover on a mudouble relation of debtor and creditor tual fire insurance policy, it appeared to get more than his share of the in- that the plaintiff's share of an assesssolvent fund; that where the company ment had not been paid, the plaintiff was bankrupt, each nember was en- offering in justification of such nontitled to payment, not of his whole payment the existence of an unliquiloss, but of a part of it in the propor- dated claim for the loss by lightning. tion which the amount of all losses
This claim, however, was, in the opinbore to the amount of the joint effects.
ion of the court, trifling in amount Holders of claims for losses in a
and had been permitted to slumber. mutual company which occur after the appointment of a receiver cannot set
The court said: “But in any event the
existence of such an unliquidated and off their claims in actions on their premium notes. Standard Mut. Live
disputed claim would afford no justifiStock Ins. Co. v. Crawford (1893) 2
cation for refusal to pay the assessPa. Dist. R. 601, 13 Pa. Co. Ct. 556. ment under the policy, or relieve the
A member of an insolvent mutual respondent from the penalty of failure company is not entitled to set off to pay during suspension." R. S.
(178 Wis. 642, 190 N. W. 448.) Workmen's compensation injury to one working out highway tax.
One working out a highway tax for a town is in the service of the town under contract of hire, express or implied, within the meaning of the Workmen's Compensation Act. [See note on this question beginning on page 1286.]
(Rosenberry, Eschweiler, and Jones, JJ., dissent.)
APPEAL by defendant from a judgment of the Circuit Court for Dane County (Stevens, J.) affirming an award of the Industrial Commission in favor of claimant in a proceeding by her under the Workmen's Compensation Act to recover compensation for the death of her husband. Affirmed. Statement by Crownhart, J.:
State v. Chicago & N. W. R. Co. 128 There was an application by the Wis. 485, 108 N. W. 594; Miller v. dependent before the Industrial Pillsbury, 164 Cal. 199, 128 Pac. 327, Commission for compensation, by
Ann. Cas. 1914B, 886; Martin v. Fond reason of the death of Phillip Wag- 1095; McCormick v. Niles, 81 Ohio St.
du Lac County, 127 Wis. 586, 106 N. W. enknecht, resulting from accident
246, 27 L.R.A.(N.S.) 1117, 90 N. E. while in the course of his employ- 803; Robinson v. Baltimore & 0. R. ment, working out a highway tax Co. 237 U. S. 84, 59 L. ed. 849, 35 for the defendant town. The In- Sup. Ct. Rep. 491, 8 N. C. C. A. 1; dustrial Commission awarded com- Harley v. United States, 198 U. S. 229, pensation, and the award was af- 49 L. ed. 1029, 25 Sup. Ct. Rep. 634; firmed by the circuit court. There
Lineoski v. Susquehanna Coal Co. 157 is no dispute upon the facts, and the
Pa. 153, 27 Atl. 577; McColligan v. only question before this court is
Pennsylvania R. Co. 214 Pa. 229, 6
L.R.A. (N.S.) 544, 112 Am. St. Rep. one of law as to the construction of
739, 63 Atl. 792, 20 Am. Neg. Rep. 471; the following language in the Com
Hillestad v. Industrial Ins. Commispensation Act: “Section 2394-7.
sion, 80 Wash. 426, 141 Pac. 913, Ann. The term "employee' as used in $$ Cas. 1916B, 789, 6 N. C. C. A. 763; Gen2394–1 to 2394-31, inclusive, shall eral Steam Nav. Co. v. British & C. be construed to mean: (1) Every Steam Nav. Co. L. R. 3 Exch. 330; person in the service of any
Grossbier v. Chicago, St. P. M. & 0. town
under any appoint: R: Co. 173 Wis. 508, 181 N. W. 746; ment, or contract of hire, express
Simpson v. Ebbw Vale Steel Iron &
Coal Co.  1 K. B. 453, 74 L. J. or implied, oral or written.
K. B. N. S. 347, 53 Week. Rep. 390, 92 The defendant contends that the
L. T. N. S. 282, 21 Times L. R. 209_C. deceased was not in the service of A. the town under any contract of Messrs. William J. Morgan, Attorhire, express or implied.
ney General, and Winfield W. Gilman, Messrs. Sawyer & Sawyer, for appel- spondent commission:
Assistant Attorney General, for relant:
At the time of the injury the relaA highway taxpayer, while engaged
tionship of employer and employee in paying his highway taxes in labor, existed between the plaintiff and is not an employee of his town within Phillip Wagenknecht, Jr. the meaning of the Workmen's Com- Elder V. Bemis, 2 Met. 599; Re pensation Act.
Ashby, 60 Kan. 101, 55 Pac. 336; Win