INSURANCE COMPANY. A company which issues policies of insurance,-an in corporated company, and either a stock com pany, a mutual one, or a mixture of the two. In a stock company, the members or stock holders pay in a certain capital which is lia ble for the contracts of the company. In a mutual company, the members are them selves the parties insured; in other words, all the members contribute premiums to the fund, which is liable for indemnity to each member for loss, according to the terms of the contract. In the mixed class, certain members, who may or may not be insured, contribute a certain amount of the capital, for which they hold certificates of shares, and are entitled to interest on the same at a stipulated rate, or to an agreed share of the surplus receipts, after the payment of losses and expenses, to be estimated at certain pe riods.
There are in some states companies formed upon the plan combining a stock.capital with mutual insurance and issuing both bonds of mutual insurance and stock policies based upon the capital.
In New York it has been held that, under the statutes then in force regulating the formation of insurance companies and their organization, they could not be organized on this plan so as to accept premium notes, from some customers and cash premiums I from others and assess the premium notes to pay losses in either branch of the busi ness ; Hart v. Achilles, 28 Barb. (N. Y.) 576. See also White v. Haight, 16 N. Y. 310.
Beneficial societies are sometimes held to be insurance companies within the meaning of the statutes regulating such companies ; Berry v. Indemnity Co., 46 Fed. 439 ; and see State v. Benevolent Society, 72 Mo. 146; Com..v. Wetherbee, 105 Mass. 149 ; State v. Critchett, 37 Minn. 13, 32 N. W. 787; Golden Rule v. People, 118 Ill. 492, 9 N. E. 342. Where the main purpose of an order is that of life insurance, and insurance against sick ness and disability, whatever purposes it may have, it is amenable to the laws of that state relating to insurance companies ; it there fore must comply with the requirements of the statutes of that state (if the order is or ganized under the laws of another state), as to foreign insurance corqpanies, before it can do business in that state ; State v. Nichols, 78 Ia. 747, 41 N. W. 4. But in Wisconsin an association incorporated for the purpose of fraternal benevolent insurance upon the co operative or assessment plan was a charita ble and benevolent order within the meaning of the statute which, in line with the defined policy of the state, was exempted from the general laws relating to life insurance; State v. Whitmore, 75 Wis. 332, 43 N. W. 1133: In Pennsylvania a foreign mutual aid associa tion of the sathe character was held not lia ble for violation of the laws regulating in surance companies ; Corn. v. Mutual Aid
Ass'n, 94 Pa. 481; and the same association was held not to be a mutual insurance com pany in Ohio, the state of its incorporation; State v. Mutual Ass'n, 26 Ohio St. 19 ; so in many other states such associations are held not to be insurance companies within the purview of the general insurance laws of the state ; State v. Ass'n, 35 Kan. 51, 9 Pac. 956 ; Sherman v. Cora., 82 Ky. 102 ; State v. Aid Ass'n, 59 Ia. 125, 12 N. W. 782 ; Com mercial League Ass'n of America v. People, 90 Ill. 166; Supreme Council of Order of Chosen Friends v. Fairman, 62 How. Pr. (N. Y.) 386 ; Elsey v. Relief Ass'n, 142 Mass. 224, 7 N. E. 844; Barbaro v. Occidental Grove, 4 Mo. App. 429 ; Rensenhouse v. See ley, 72 Mich. 603, 40 N. W. 765; State v. Investment Co., 48 Minn. 110, 50 N. W. 1028. In Pennsylvania it was explicitly de cided that an association organized not to do business for profit or gain but to aid pecu niarily the widows, orphans, heirs, and dev isees of its members, is not an insurance company ; Northwestern Masonic Aid Ass'n v. Jones, 154 Pa. 99, 26 Atl. 253, 35 Am. St. Rep. 810.
A physicians' defense company which con tracts to pay the expenses of defending phy sicians against civil malpractice suits is an insurance company ; Physicians' Defense Co, v. Cooper, 199 Fed. 576, 118 C. C. A. 50; Phy sicians' Defense Co. v. O'Brien, 100 Minn. 490, 111 N. W. 396; contra, Vredenburgh v. Defense Co., 126 Ill. App. 509; State v. Lay lin, 73 Ohio St. 90, 76 N. E. 567.
A state has power to prohibit foreign in surance companies from doing business with in its limits. It may impose such conditions as it pleases ; Swing v. Lumber Co., 205 U. S. 275, 27 Sup. Ct. 497, 51 L. Ed. 799; Whit field v. Ins. Co., 205 U. S. 489, 27 Sup. Ct. 578, 51 L. Ed. 895 ; Carroll v. Ins. Co., 199 U. S. 401, 26 Sup. Ct. 66, 50 L. Ed. 246.
Membership in a mutual company does not necessarily imply liability to assessment; Given v. Rettew, 162 Pa. 638, 29 Atl. 703. A surplus of such a company belongs equita bly to the policy holders in the proportion in which they contributed to it and the directo rate has no option to declare dividends ; U. S. Life Ins. Co. v. Spinks, 96 S. W. 889, 29 Ky. L. Rep. 960, 13 L. R. A. (N. S.) 1053 ; contra, Greeff v. Assurance Society, 160 N. Y. 19, 54 N. E. 712, 46 L. R. A. 288, 73 Am. St. Rep. 659.
Dividends of a mutual life company re turned to policy holders are not income and are not taxable as such; Mutual Benefit Life Ins. Co. v. Herold, 198 Fed. 199; Fuller v. Ins. Co., 70 Conn. 647, 41 Atl. 4; L. R. 14 A. C. 381.
See INSURANCE.