Opinion
No. 36574.
March 8, 1948. Suggestion of Error Overruled May 10, 1948.
1. ADMINISTRATIVE LAW AND PROCEDURE. Insurance.
The Insurance Commissioner is allowed much latitude in use of power to approve form of life policy, but he cannot arbitrarily exercise such power, which is in nature of quasi judicial power subject to review by courts, and his judgment on doubtful question, when exercised in sound manner as between the people and insurance company, is entitled to much weight (Code 1942, secs. 5623, 5686).
2. INSURANCE.
In exercising power to approve form of life policies, Insurance Commissioner's prime duty is to protect people of State (Code 1942, secs. 5623, 5686).
3. INSURANCE.
A life policy "survivorship bonus clause" requiring insurance company to pay to holders of policies which were written in a particular calendar year and which were in force at end of 20 years, proportionate share of funds accumulated by company's annual payment from surplus of $5.00 for each $1,000 of insurance written during such year was violative of statute prohibiting writing of insurance contract not distinctly stating amount of benefits payable, and Commissioner properly disapproved such clause, notwithstanding that Commissioner had theretofore approved clause and disapproved only on advice of Attorney General that provision violated such statute (Code 1942, secs. 5623, 5680, 5686).
4. INSURANCE.
Dividend-sharing provision of life policy is not violative of statute prohibiting writing of insurance contract not distinctly stating amount of benefits payable (Code 1942, secs. 5680, 5681).
APPEAL from the Chancery Court of Hinds County.
Greek L. Rice, Attorney General, by Geo. H. Ethridge, Assistant Attorney General, for appellant.
The injunctive proceeding in the chancery court was not the proper form of proceeding to test and review the alleged action of the Commissioner of Insurance.
Poindexter v. Henderson, Walk. (1 Miss.) 176, 12 Am. Dec. 550; Madison County v. Mississippi State Highway Commission, 191 Miss. 192, 198 So. 284; Cole v. State ex rel. Harris, 91 Miss. 628, 45 So. 11; Holberg v. Macon, 55 Miss. 112; Bell v. City of West Point, 51 Miss. 262; Western Union Telegraph Co. v. Kennedy, 110 Miss. 73, 69 So. 674; Gulf S.I.R. Co. v. Adams, 85 Miss. 772, 38 So. 348; Power v. Robertson, 130 Miss. 188, 93 So. 769; Illinois Cent. R. Co. v. Miller, 141 Miss. 223, 106 So. 636; Mohundro v. Tippah County, 174 Miss. 512, 165 So. 124; Crittenden v. Booneville, 92 Miss. 277, 45 So. 723, 131 Am. St. Rep. 518; Nevitt v. Gillespie, 1 How. (2 Miss.) 108; Board of Sup'rs of Forrest County v. Melton, 123 Miss. 615, 86 So. 369; Code of 1942, Secs. 1206, 1207; Constitution of 1890, Secs. 33, 156; 28 Am. Jur. 232, Sec. 37, p. 242, Sec. 46; 42 Am. Jur. 137, 150; 54 Fed. Digest, "Prohibition."
The survivorship bonus clause is prohibited by law in that the policy does not show and cannot show what benefits the assured would receive upon the face of the policy, which makes it a gambling contract contrary to the laws of Mississippi and the public policy of the State and, being so, could not afford a basis for relief or any right of action for the complainant because the courts do not lend aid to an illegal transaction.
Knott v. State of Florida ex rel. Guaranty Life Ins. Co. (Fla.), 186 So. 788, 121 A.L.R. 715; Code of 1942, Secs. 5640, 5641, 5642, 5680, 5681.
The insurance business is a business that is affected by a public interest and it is permissible for the State thus to control it by proper legislation in some definite manner and to a definite degree, more so than if it were a business not affected by a public interest.
State v. Alley, 96 Miss. 720, 51 So. 467; Scott v. Searles, 1 Smedes M. (9 Miss.) 590; City of Holly Springs v. Marshall County, 104 Miss. 752, 61 So. 703; Middleton v. Lincoln County, 122 Miss. 673, 84 So. 907; Barrett v. Cedar Hill Consolidated School District, 123 Miss. 370, 85 So. 125; German Alliance Ins. Co. v. Lewis, 233 U.S. 389, 34 S.Ct. 612, 58 L.Ed. 1011, L.R.A. 1915C, 1189; Code of 1942, Secs. 5616, 5617, 5621-5624, 5627-5631, 5638-5641, 5686; 50 Am. Jur. 449, Sec. 428, 13 Miss. Digest Annotated, Statutes, Key No. 225.
Under the laws of the State of Mississippi, the Commissioner of Insurance is given large powers and discretion as to admitting insurance companies to do business in this State, and to approve or disapprove policies and contracts issued by such companies, including the policies in question.
Walters v. Walters, 180 Miss. 268, 177 So. 507; Peets v. Martin, 135 Miss. 720, 101 So. 78; Code of 1942, Secs. 5631, 5686.
The large discretion and power given by statute to the Insurance Commissioner is to be exercised in a judicial or quasi judicial capacity and subject to reversal only by the circuit court by certiorari, or by prohibition, or mandamus, and not by the chancery court.
Cole v. State ex rel. Harris, supra; California Co. v. State Oil Gas Board, 200 Miss. 824, 27 So.2d 542; Holberg v. Macon, supra; Board of Sup'rs of Forrest County v. Melton, supra; Ferguson v. Seward, 146 Miss. 613, 111 So. 596; Mohundro v. Tippah County, supra; Bell v. City of West Point, supra; Madison County v. State Highway Commission, supra; Ringold v. Goyer Co., 164 Miss. 261, 144 So. 706; Barnes v. McLeod, 165 Miss. 437, 140 So. 740; Western Union Telegraph Co. v. Kennedy, supra; Illinois Cent. R. Co. v. Miller, supra; Barrett v. Picket, 117 Miss. 825, 78 So. 777; Yazoo M.V.R. Co. v. M. Levy Sons, 141 Miss. 196, 106 So. 524; Power v. Robertson, 130 Miss. 188, 93 So. 769; Walters v. Walters, supra; Ex parte Yarbrough, 110 U.S. 651, 4 S.Ct. 152, 28 L.Ed. 274; Rhode Island v. Massachusetts, 12 Pet. (U.S.) 657, 9 L.Ed. 1233; Phelps v. Harris, 101 U.S. 370, 25 L.Ed. 555; United States v. Harbin, 27 F.2d 892; Code of 1942, Secs. 1206, 1207, 1290, 5617, 5622, 5623, 5627-5631, 5639, 5642, 5680, 5681, 5686; Constitution of 1890, Secs. 24, 147, 156; 59 Federal Digest, Statutes, Key No. 225; 34 Words Phrases 638-639; 35 Words Phrases 254-279; 59 C.J. 973, note 96; 50 Am. Jur. 222, Secs. 234, 242, note 51; 51 A.L.R. 1194; 83 A.L.R. 122, 131; 144 A.L.R. 286; A.L.R. Digest, Statutes, Sec. 217; 25 R.C.L. 978; 4 R.C.L. Supp. 1612; 6 R.C.L. Supp. 1495; 3 Stephen's Commentaries on the Laws of England (15 Ed.), pp. 350, 351; 4 Stephen's Commentaries on the Laws of England, Book 6, p. 19, 374, 375.
James A. Blalock, of Jackson, for appellant.
The Commissioner of Insurance of the State of Mississippi had the power under Section 5686, Code of 1942, to issue a ruling prohibiting the use of the so-called "survivorship bonus policy."
The tontine clause in the life insurance policies in question is contrary to the best interest of the public and to public policy and should be prohibited in the general public interest. It also violates the statutes prohibiting lotteries, particularly Section 2270, Code of 1942.
Pittsburg, Cincinnati, Chicago St. Louis R. Co. v. Kinney, 95 Ohio St. 64, 115 N.E. 505, 506, L.R.A. 1917D, 641, Ann. Cas. 1918B, 286; Fidelity Funding Co. v. Vaughn, 19 Okla. 13, 90 P. 34, 10 L.R.A. (N.S.) 1123; Rhine v. New York Life Ins. Co., 273 N.Y. 1, 6 N.E.2d 74, 108 A.L.R. 1197; Code of 1942, Secs. 2270, 5633, 5642, 5669, 5680, 5681, 5686; 5 Elliott on Contracts, Sec. 4069; Ballentine's Law Dictionary (Abridged Ed.) "tontine policy"; "A Century of American Life Insurance" (A History of the Mutual Life Insurance Company of New York, 1843-1943), pp. 140-141; 34 Am. Jur., Lotteries, Secs. 6, 14.
The clause is not based on an insurable interest, and violates Section 5633, Code of 1942.
National Life Accident Ins. Co. v. Ball, 157 Miss. 163, 127 So. 268; Gerard v. Metropolitan Life Ins. Co., 167 Miss. 207, 149 So. 793; Colgrove v. Lowe, 343 Ill. 360, 175 N.E. 569, 282 U.S. 639, 52 S.Ct. 21, 76 L.Ed. 544; Walker v. Walbridge, 271 N.Y.S. 473, 151 Misc. 329; Knott v. State (Fla.), 186 So. 788, 121 A.L.R. 715; Code of 1942, Secs. 5633, 5686; 29 Am. Jur. 290, 291, Sec. 319.
The clause fails to state the exact amount of benefits payable, and violates Section 5780, Code of 1942.
New York Life Ins. Co. v. Boling, 177 Miss. 172, 169 So. 882, 111 A.L.R. 967; New York Life Ins. Co. v. Nessossis, 189 Miss. 414, 196 So. 766; Mutual Life Ins. Co. v. Nelson, 184 Miss. 632, 184 So. 636, 186 So. 837; Code of 1942, Sec. 5686.
The clause discriminates between policyholders, and violates Section 5681, Code of 1942.
McCain v. Lamar Life Ins. Co., 178 Miss. 459, 172 So. 495; Cole v. State, 91 Miss. 628, 45 So. 11; Code of 1942, Sec. 5681; 29 Am. Jur. 390, Sec. 473.
Where the meaning of a statute is doubtful, so that it may reasonably be construed in several different ways, then in such situation prior administrative constructions of the statute are entitled to some weight when the statute is being construed by the courts. Such prior administrative determinations, however, are never binding upon the court and are of no weight where the circumstances have changed or where the meaning of the statutes is (as in this instance) clear.
National Life Accident Ins. Co. v. Ball, supra; Gerard v. Metropolitan Life Ins. Co., supra; New York Life Ins. Co. v. Boling, supra; McCain v. Lamar Life Ins. Co., supra; Mutual Life Ins. Co. v. Nelson, supra; New York Life Ins. Co. v. Nessossis, supra; Colgrove v. Lowe, supra; Knott v. State, supra; Code of 1942, Sec. 5642.
Creekmore Creekmore, of Jackson, for appellee.
Appellee has no adequate remedy at law.
Rockett v. Finley, 183 Miss. 308, 184 So. 78; McKee v. Hogan, 145 Miss. 747, 110 So. 775; Campbell v. Warwick, 142 Miss. 510, 107 So. 657; Stokes v. Newell, 172 Miss. 289, 159 So. 540; Hobbs v. Germany, 94 Miss. 469, 49 So. 515; Hardee v. Brooks, 107 Miss. 821, 66 So. 216; Knox v. Jefferson Davis County, 162 Miss. 9, 137 So. 783; Crittenden v. Town of Booneville, 92 Miss. 277, 45 So. 723; Glover v. City Council of Columbus, 132 Miss. 776, 96 So. 521; Blount v. Kerley, 180 Miss. 863, 178 So. 591; Holmes v. Board of Sup'rs of Forrest County, 199 Miss. 363, 24 So.2d 867; Board of Sup'rs of Forrest County v. Melton, 123 Miss. 615, 86 So. 369, Cumberland Telephone Telegraph Co. v. State, 135 Miss. 835, 100 So. 378; Illinois Cent. R. Co. v. Miller, 141 Miss. 223, 106 So. 636; Illinois Cent. R. Co. v. Mississippi Railroad Commission, 143 Miss. 805, 109 So. 868; Ferguson v. Seward, 146 Miss. 613, 111 So. 596; Anderson v. Franklin County School Board, 164 Miss. 646, 146 So. 134; Mohundro v. Board of Sup'rs of Tippah County, 174 Miss. 512, 165 So. 124; Gulf S.I.R. Co. v. Adams, 85 Miss. 722, 38 So. 348; Federal Credit Co. v. Zepernick Grocery Co., 153 Miss. 489, 494, 120 So. 173, 121 So. 114; Board of Sup'rs of Calhoun County v. Young, 156 Miss. 644, 126 So. 469; Dickson v. Town of Centreville, 157 Miss. 490, 128 So. 332; Yazoo M.V.R. Co. v. Mississippi Railroad Commission, 169 Miss. 131, 152 So. 649; Hamilton v. Long, 181 Miss. 627, 180 So. 615; Fairley v. Ladnier, 190 Miss. 514, 200 So. 724; Code of 1942, Secs. 1206, 1208; 42 Am. Jur. 144, 148.
The Insurance Commissioner has only such powers as are conferred upon him by statute.
Tatum v. Wheeless, 180 Miss. 800, 178 So. 95; State ex rel. Attorney General v. School Board of Quitman County, 181 Miss. 818, 181 So. 313; Illinois Cent. R Co. v. Mississippi Railroad Commission, supra; Capital Stages v. State, 157 Miss. 576, 128 So. 759; Eastman Oil Mills v. State, 130 Miss. 63, 93 So. 484; State v. McPhail, 182 Miss. 360, 180 So. 387; Schechter v. United States, 295 U.S. 595, 79 L.Ed. 1570; Panama Refining Co. v. Ryan, 79 L.Ed. 446; Opp Cotton Mills v. Administrator, 312 U.S. 126, 85 L.Ed. 624; Dowling v. Lancaster Ins. Co., 92 Wis. 63, 65 N.W. 738, 31 L.R.A. 112.
The survivorship bonus provision is legal.
Clark v. Equitable Life Assurance Society, 76 Miss. 22, 23 So. 453; Equitable Life Assurance Society v. Weil, 103 Miss. 186, 60 So. 133; Romer v. Equitable Life Assur. Co., 102 Ill. App. 621; Simons v. New York Life Ins. Co., 38 Hum. (N.Y.) 309; Equitable Life Assur. Society v. Winn, 137 Ky. 641, 126 S.W. 153, 29 L.R.A. (N.S.) 558; Chan v. Northwestern Nat. Life Ins. Co., 94 Okla. 46, 220 P. 645; Rhine v. New York Life Ins. Co., 273 N.Y. 1, 6 N.E.2d 74, 108 A.L.R. 1197, 1213; Conn. Mutual Life Ins. Co. v. Shafer, 94 U.S. 457, 24 L.Ed. 251; Maddox v. Mutual Life Ins. Co., 193 Ky. 38, 234 S.W. 949, 22 A.L.R. 1267; 29 Am. Jur. 58, Sec. 21, p. 94, Sec. 65; 37 C.J. 374, 375; Clough's "A Century of American Life Insurance," Ch. 7; 1 Couch Cyc. of Insurance Law 71, Sec. 50; 1 Cooley's Briefs on Insurance (2 Ed.), p. 170.
The policy contains no element of chance and is not a lottery or a gambling contract.
Murphy v. Red, 64 Miss. 614, 1 So. 761; Grant v. Independent Order of Sons and Daughters of Jacob, 97 Miss. 182, 52 So. 698; Davis v. Gulf States Ins. Co., 168 Miss. 161, 151 So. 167; Neely v. Pigford, 181 Miss. 306, 178 So. 913; Van Zandt v. Morris, 196 Miss. 374, 17 So.2d 435; Conn. Mutual Life Ins. Co. v. Shafer, supra; Liberty National Life Ins. Co. v. Reed, 24 F. 103; Commercial Travelers Ins. Co. et al. v. Carlson (Utah), 137 P.2d 656; Code of 1942, Sec. 5642; Laws of 1936, Ch. 322; 1 Couch Cyc. of Insurance Law, Sec 296; 5 Elliott on Contracts, Sec. 4067; 37 C.J. 360.
The policy definitely provides the minimum amount that the holder of one of these policies may receive at the time of the survivorship period, and also set forth definitely the mathematical formula whereby there will be determined the actual amount each will receive at the end of the period, after the contingencies, such as death and lapse during the period shall have actually occurred.
White v. Standard Life Ins. Co., 198 Miss. 325, 22 So.2d 353; Code of 1942, Sec. 5680.
The policy here in question is not violative of Section 5681 of the Code of 1942 which prohibits discrimination between policyholders in the payment of dividends or other benefits to accrue thereon.
37 C.J. 374, 375; 29 Am. Jur. 94.
It is well settled in this State that, if a policy of life insurance constitutes a wagering or gambling contract, it is contrary to public policy and absolutely void, and neither party to the contract has any legally enforceable rights thereunder.
National Life Accident Ins. Co. v. Ball, 157 Miss. 163, 127 So. 268; Gerard v. Metropolitan Life Ins. Co., 167 Miss. 207, 149 So. 793; Davis v. Gulf States Ins. Co., 168 Miss. 161, 151 So. 167.
If the Court should uphold appellant in his contention here, and should determine that the survivorship bonus feature of the policy makes it a gambling contract, then this Court will have rendered void and utterly unenforceable policies of insurance held by some 1,100 citizens of this State with total face values of more than four million dollars and cash reserve values of more than $400,000.00.
Even if it should be held that the survivorship bonus provision is void, but nevertheless separable from the rest of the policy, yet even in such event the policyholder would have forfeited all right to qualify for, and share in, the survivorship bonus fund, and in all probability would feel impelled to let his policy lapse because he could not afford to pay the premium charged, without enjoying all the benefits which the policy undertook to confer.
The serious harm which thus would be done to innocent citizens of this State, if the policy be held a gambling contract, should cause the court to give great weight to the construction and interpretation of the policy by the Insurance Department for many years last past.
Where the meaning of a statute is doubtful or where its language is such that it may reasonably be construed in different ways, then the contemporaneous construction thereof by that department of the government which is charged with its administration and enforcement, especially where such interpretation has long prevailed, is entitled to great weight and should be followed by the courts unless it is plainly erroneous.
Conard Furniture Co. v. Mississippi State Tax Commission, 160 Miss. 185, 133 So. 652; Briscoe v. Buzbee, 163 Miss. 574, 143 So. 407; Gully v. Jackson International Co., 165 Miss. 103, 145 So. 905; Anderson v. Love, 169 Miss. 219, 153 So. 369; Mississippi Cottonseed Products Co. v. Stone, 184 Miss. 409, 184 So. 428; State ex rel. Gully v. Mutual Life Ins. Co. of New York, 189 Miss. 830, 198 So. 763.
Argued orally by James A. Blalock and Geo. H. Ethridge, for apellant, and by Rufus Creekmore, for appellee.
Appellee was chartered and organized as a life insurance corporation in the State of Arkansas in 1926, with its domicile at Little Rock, said State. It was admitted to do business in Mississippi in 1928 and did so until 1933, when it ceased temporarily to write policies in this State. It renewed that business in 1938 and so continued to the time of this litigation. During all the time it has done business in Mississippi the forms of its policies have been approved by the then respective State Insurance Commissioners, including appellant.
On April 25, 1946, J.L. White, the then and present Insurance Commissioner of Mississippi, gave appellee written notice that the Attorney General of Mississippi had informed him that a provision, designated "Survivorship Bonus," appearing in one of its forms of policies, did not comply with the laws of this State, and that it would be his official duty to disapprove that provision and to prohibit its issuance in Mississippi. He invited the view of the appellee on the question and set a date for a hearing and discussion of the problem before him. That hearing seems not to have taken place but appellee made known its contention that the provision did comply with the laws of this State. The Commissioner then requested of the Attorney General a further consideration of the question. On June 25, 1946, said Commissioner again informed appellee in writing that the Attorney General had re-examined the legal question, and had not changed his opinion, and requested appellee to cease writing that provision in this State.
Appellee immediately filed the bill in this cause seeking temporary and permanent injunctions prohibiting the Commissioner from enforcing the ruling set out in his letters to appellee. A temporary injunction was granted and, upon a hearing on the merits, the injunction was made permanent. From that action the Commissioner appeals. We are, therefore, to determine whether the Commissioner has the power and the right, under the facts of this case, to refuse his approval of the provision in question, and prohibit its issuance in this State.
The Commissioner takes the position that the provision violates a number of statutes, but we confine our consideration to Section 5680, Miss. Code 1942, which prohibits the writing of any insurance contract in this State "which does not distinctly state the amount of benefits payable, the manner of payment and the consideration therefor". The Survivorship Bonus clause is as follows:
"Upon payment of each full year's premium, after the first and to and including the twentieth, on account of each and every policy issued in the same calendar year as this policy and containing a provision entitled `Survivorship Bonus', the Company will place in a fund $5.00 for each $1000 of the sum insured of such policy, provided that `sum insured' as here used shall mean the ultimate sum insured in child's policies having a graduated sum insured. At the end of each calendar year, the fund shall be credited with interest at 3% on the amount in the fund at the beginning of the year. No deduction shall be made from the fund for any purpose whatsoever, other than for payments, if any, required by law, as by way of taxes or otherwise.
"If the insured be living and if this policy be in force, other than by reason of the operation of one of the nonforfeiture values provisions, on the twentieth anniversary of the date hereof, this policy will have qualified for a Survivorship Bonus payable to the then life owner, and the Company will determine the amount of such bonus upon the expiration of the then calendar year. The Survivorship Bonus shall be an amount of money bearing the same proportion to the whole of the fund at the end of such calendar year, as the sum insured under this policy bears to the total sum insured under all policies that shall have qualified for a Survivorship Bonus in the same calendar year."
It then stipulates for additional paid up life insurance.
It is evident, we think, this Survivorship Bonus provision does not comply with Section 5680. It does not state the benefits payable. Indeed, it would be imposible to do so. No holder can know, or approximate with any degree of acuracy, the benefits he will receive thereunder, if any. It creates a class. That class is composed of and limited to all persons who take out policies during each calendar year, regardless of age, occupation, employment or insurable risk. The holders are grouped alone upon the year in which the policies are issued. For that group the Company, each year, places in a fund from its surplus five dollars for each one thousand dollars of insurance, plus three per cent interest thereon compounded, and this is repeated for twenty years. Those of each class who survive the twenty years and keep their policies in force share in the total fund in proportion to the face amounts of their respective policies. How many will share therein and the amount received will depend (1) on the number in the class who have died before the twenty years, and (2) how many have survived, and (3) of the survivors the number who have kept their policies in force. The result is, of course, pure speculation.
The Insurance Commissioner is charged with many important duties and vested with extensive powers in insurance matters. It is pertinent to note some of them here. The sections we cite refer to Mississippi Code 1942. He is the chief officer of the Department of Insurance; is elected by the voters of the State and executed a bond in the sum of $25,000. Section 5617. He makes annual reports to the Governor of all his official acts; the condition of all insurance companies doing business in Mississippi; the amount of taxes collected and all licenses issued by him, with such suggested changes in the laws affecting his department as he deems wise, which reports the Governor transmits to the Legislature. Further, "The commissioner shall see that all laws relating to matters under his supervision are faithfully executed. He shall supply each insurance company doing business in this state with all necessary printed forms." Section 5623. He may, by suit, enforce compliance with the insurance laws of this State. Section 5624. He may grant, refuse or revoke permits to do business in this State. Sections 5627 and 5630. He may suspend or revoke authority to do business in Mississippi when it shall appear to him upon examination any insurance company is in an unsound condition, or "has failed to comply with the law", or refuses to submit to examination, has exceeded its powers, or has failed to comply with any provision of law applicable to it, or its condition is such that further business by it in this State would be hazardous to the public or its policyholders, and may apply to the Chancery Court for injunction to enforce his action. Sections 5630 and 5638. Companies writing insurance in Mississippi are "subject to the inspection and supervision of the commissioner." Section 5631. Articles of association and bylaws must be submitted to him. Section 5657. He has power to regulate the sale of stock of insurance companies in this State, Section 5639; ask for and be appointed receiver of such companies under prescribed conditions, Sections 5643, 5644. And, finally, "a policy of life insurance shall not be issued or delivered in this state until the form has been approved and filed by the insurance commissioner." Section 5686. The powers conferred by Sections 5623 and 5686 are the powers most directly involved in this case. This proceeding, in effect, is one to compel him to approve the survivorship bonus form of policy. Clearly he should be allowed much latitude in the use of that power. It is not a power, of course, to be exercised in an arbitrary manner. It is in the nature of a quasi-judicial power, subject to review by the courts. Cole v. State, 91 Miss. 628, 45 So. 11. However, the judgment of the Commissioner, when exercised in a sound manner as between the people of the State, on the one hand, and the insurance company, on the other hand, upon a doubtful question, is entitled to much weight. His prime duty is to protect the people of the State, who, by the very nature of the situation, are not in position to adequately protect themselves. They have not the means by which they can know the financial condition, or the methods of doing business, of the companies who offer to write insurance upon their lives and their property. They are at disadvantage as to knowledge of the contents and fairness of such policies. These, and other public considerations, caused the creation of the Department of Insurance and a Commissioner thereof, vested with such far-reaching powers. It is clear, we think, the survivorship bonus provision does not comply with Section 5680 and the Commissioner was within his right and power to refuse its approval. The fact that he had previously approved it would not prevent his subsequent disapproval upon being advised by the Attorney General that in his opinion the provision did not comply with the law. The validity of the policies heretofore written containing that provision are in no wise affected. Section 5680 so expressly provides. And appellant has the privilege of writing in this State its other forms of policies, and, for that matter, the form here involved, with the survivorship bonus provision eliminated.
Appellee strongly urges that the Commissioner should not disapprove the provision in question because, as it asserts, life policies are permitted to be issued in this state which provide for sharing by the holder in dividends to be declared by the insuring company, and that the amount of such dividends are not stated in the policies. It would be sufficient answer to that to say that even if such dividend-sharing policies do not comply with the statute, that fact would not justify issuance of another provision which did not comply therewith. However, we think there are vital distinctions between the dividend-sharing provisions and the one here under consideration. In the first place, notwithstanding Section 5680, the next section (5681) seems to recognize the legality of dividend-sharing provisions, because it prohibits any company from making a distinction "in the dividends" paid by it to members of the same class and equal expectation of life, an implied recognition that policies may contain dividend-sharing provisions. Again, dividend-sharing policies do not obligate the insurer to pay any certain amount. They provide, in effect, that if money is available with which to pay dividends and the officers of the company deem it wise to do so, the company may declare a dividend at such time and in such amount as the officers think advisable. In other words, such companies do not have to pay dividends. Whether they do or not depends (1) on whether they make sufficient money, and (2) whether the officers in their discretion think it wise to do so. On the other hand, the provision under consideration is a binding, affirmative obligation to pay $5 per thousand annually for twenty years, with interest on such fund compounded annually. This affects directly the long-range financial status of the insuring company. That is especially true in this case, for the reason the same policy contains what is termed "Return of Premium" clause. That covers cases where the holders die within twenty years and whose policies are in force. In such cases the Company is obligated to pay the beneficiaries not only the face amount of the policies but also all premiums which have been paid on such policies, calculated as if paid annually. The record discloses that the Commissioner considered this "Return of Premium" clause along with the "Survivorship Bonus" provision. He did not decline to approve the "Return of Premium" clause but he evidently did weigh the effect of both provisions upon the long-range financial condition of the insurer. Well he might do that, because, taken together, they impose obligations unusual in the insurance business, imposing express liability on the insurer for both classes — those who die before twenty years and those who survive that length of time. In the first case the company pays the face of the policies and returns all premiums which have been paid; in the second, it pays the survivors, upon reaching the twenty year period, five dollars per thousand annually for twenty years on the face of the policies, plus three percent thereon compounded annually. These elements distinguish, in vital and important respects, the survivorship bonus obligation from dividend-sharing provisions.
Reversed and judgment here for appellant.