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Leader (1850-1860), 19th March 1859, Edition 2 of 2, Page 19

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      Relative Value To The Members Nor Of Nea...

      relative value to the members nor of nearl ^ . 4 69 . March 1 ^^ 371 ' ii i i . I ' ' ii I " ' i " ' ¦ "m . iesis ^ jwjsgj . iatar t ^ t , _ ,. : ¦ ¦ .. : ¦ " ¦ ¦ \ '¦ ¦ t ' •""• _' i _ . _ / n ¦ _ _ ¦ ¦ t . _ ¦ '' /> ' " ' ' f

      Mutual Assurance Societies, No. I. Liabi...

      MUTUAL ASSURANCE SOCIETIES , No . I . LIABILITIES OF THEIR FOLIOY HOLDERS . In the contest which has been carried on for many years , as to the relative claims to " piiblie support of Mutual and . Proprietary Assurance Companies , it has been often urged that the members of mutual offices could be regarded in the eyes of the law in , no other light than a copartnery of shareholders , who are individually liable for the fulfilment , of the society ' s engagements . So fully recognised has this doctrine been , and so uniformly assented to that for at least forty yeacs . it has hppn a stock commodity in the advertisements of

      nearly all proprietary companies . There are many ¦ precedents for this view of the question . It has been long since ruled that hi all mutual societies the parties assured are both individually and collectively liable for any losses which may happen . In the case of C . arlen v . Drurtj ( 1 ves andB . 154 ) , the Lord Chancellor say * , "I hold it quite clear that each individual is at law answerable for the amount of the whole debts of the concern . " This is certainly distinct and unmistakable , and niore recently the liability of policy-holders ( O'Brien v . Lord Keiryon , 6 Exch : 403 ) is held to attach , on the ground of participating in the

      profits of the society . It is affirmed by an able legal and practical authority , that the risk thus incurred by the assiu-ed is of importance only when the funds are small and the society is grossly mismanaged . Fortunately this is quite true , in so far as respects the general experience of recent years , and yet the law is , if possible , in a more seriously unsatisfactory state , as it affects the prospective liability of the assured in the older and wealthier mutual societies . Old companies , like old machinery , become rusty , worn-cmt , and incapable of performing the services it diet in its pristine condition ; and those familiar with the more venerable assurance

      institutions of the kingdom can point to various examples fully illustrative of the truth of this . Symptoms , " which are to many of an alarming nature , have for a lengthened period manifested themselves amongst tlic members of one of the wealthiest and most respected institutions of the day . And although that particular society maybe protected by special , legal securities against any serious consequences in the event of its dissolution , still there are many others not similarly privileged , ilt in impossible to over-rate the benefits which havu been conferred on the public by mutual societies , and it . is , therefore , to be lamented that the state of the law is not more satisfactory in ' . rcGriu ' d to the liability of their members .

      These institutions , have grown into national importance , and ( should the principle of limited liability not be shortly oxtended to all joint-stock undertakings , special" legislation should certainly be applied to at least theso provident societies . There exist four mutual companies , whose present accumulated funds amount to little short of twenty -millions sterling , and having in the ag < £ ref ato an annual revenue of upwards of one million , t may be said that with such immense rcsoui'cos the danger of personal liability to the assured is reduced to a shadow . This would , no doubt , bo

      tho cause were the same energy , tact , xind talent , as hereto fore , continued to bo applied to the administration pftlieir affairs . Experience , however , conclusive l y proves tluit the older classes of assurance institutions ofler no belter guarantee for their ntability and perpetuation than ninny of very recent date In met , the older tho societies the more comp li cated and obscure are tho nature nn < l oxtent of their liabilition . A siinplo cash -statement may , in the infancy of a eonipwvy , suffice to give a tolerably aporoxi inn live ' estimate of tho portion of its aiuilrs , but in a long established society its real

      unaltered , be foundto seriously affect the interests of the individual members . A most remarkable instance of the danger and liability to which the assured in mutual societies are subject , when the institutions become involved , has jtist been furnished by our courts of law , and although it has arisen in connexion ivith a new and obviously misconducted , if not a disreputable , undertaking , similar results would , in the present state of the law , follow any other mutual society , however respectably managed , in the eveiit of its affairs becoming embarrassed ; and its members would in like manner suffer . Hence the reason of ' . _ . j * ' - ^ % . . -. ; V , ' .

      our giving so much prominence to the subject , and begging that such of our : readers who may have a pecuniary interest in the question , may not overlook and remain indifferent to their legal position . The following is the notice of the . case to which we refer , and on Monday last , the 14 th inst ., the Vice-Chancellor made the call without any objections or notice of appeal being lodged , . showing that his decision was held to he indisputable by tbe various contributories , and that there is practically no hope of escape for the unfortunate persons who had been deluded into the false step of joining the " Security Mutual , " as policy-holders . of

      ^ y so complicated a natul e in then * legal ; contingences as those entered into by the ordinary benefit and friendly societies . There is , therefore , no proper and really good reason why legal redress and legal responsibility should not be as much facilitated and as well defined in the more aristocratic institution as in that which is the more plebeian . The great power of this kingdom consists in its immense and wonderful commercial enterprise , which has been the harbinger of its provident societies , unequalled in their pecuniary importance by those of all the other nations of the world . We intend to show in a subsequent article that leo-al restrictions of the most ill-devised nature . .

      and wlu ' ch are closely interwoven with our commercial code of laws , have not only here , but _ in other States , greatly hindered and interfered with our commercial successes , as well as the full development of those provident institutions - . which , have naturally arisen out of that commercial greatness , in order to protect the population . of the State against the evils of the pecuniary vicissitudes which are inevitable to a peo ] : > le almost wholly engrossed in a commerce which is necessarily " greatly affected , not only bv the natural course of the seasons , variations of climate , but by the enprice of statesmen , the conflict of partypolitick , diplomatic misunderstanding ? , and the fbrttmes of war .

      " In GhanceiT- —^ the matter the Joint-stock Companies Windiiiff-up Acts , 1848 and 1849 , and in the matter of the Security Mutual Life Assurance Soeietj ' . —I 3 y direction of his Honour Vice-Chancellor Sir llichard ToriiiKindersIeyy the judge to whose court this matter is attached , notice is hereby given that the " said judge purposes , on Monday , the ¦ 14 th day of March next , at 12 o ' clock at noon , at his chambers , \ No . 3 , Stone-buildings , Lincoln ' s Inn , in the county of Middlesex , to proceed to make a call

      On the present occasion , we have only further to remark , that while we have drawn' attention to the most unpleasant legal position in which the policy holders ' in . the older of our mutual societies are placed , it is by no means to be inferred- that we regard those insured in younger companies more secure ; on the contrary , however safely placed may be the members of a few of the newer societies , it is to be feared there are several in anything but a comfortable condition . .

      on all the contributories of the said society , who have been settled by his Honour upon the list of contributories thereof , and that his Honour purposes that such call shall Ibe at the rate of 30 / . for every 1 / ., and so in proportion for every fractional part of 1 / : paid by each contributory b y way of premium or consideration in respect of the assurance effected by him or her in or with the said society- All persons interested . are . entitled to . attend ' -at ; such day , hour , and place to offer objections to such call . "

      If it were always certain that the management of a society , whether mutual or otherwise , were so watchful of its progress , that they would transfer its business and . its engagements to a better established one , prior to any serious liabilities possibly attaching to its policy-holders , the risk of joining a young society would be greatly lessened ; but the last ten years' experience shows how little reliance is to be _ placed on this , even in societies when under the direction of gentlemen of the highest commercial reputation . < Jf the vast number of societies established

      The calls made oh shareholders of the Western Bank of Scotland , -were * in relation to the interest they held in the concern , comparatively nothing to the calls in tliis instance . 30 ? . pro-i-atd for every \ l . paid to the " Security" to provide a life assurance payable only at death , is a fearful legal retribution and penalty on the want of caution evinced by those who became members . It follows that every person who , it must be admitted

      through the operation of a prudential motive , effected a policy which , under the most favourable circumstances , could only benefit his siu-vivors , on the average at a period of thirty years hence , must now relinquish all prospective claims , and pay down immediately about the full amount he looked forward to being handed over to his children a generation hence . This is truly a bitter cup , and sympath y must be xiniversally felt for the unfortunate contributories .

      since the passing of , and registered under , the 7 & 8 Viet . c . 110 , it will be . found that more than four - fifths of them Avere promoted , conducted , and managed by persons who , either as leading officers or directors , have had no previous experience in the management of Assurance Companies . To any one , therefore ,, well acquainted with the practical difficulties , the experience necessary , and the technical knowledge , in many instances , required to regulate their affairs , it must appear more surprising that more have not failed than that so few have succeeded . Indeed , so usual

      I ] t is not our object to dwell on their individual losses , however great , for we believe they will , in common with injury other commercial disasters which have recently gained notoriety , and which , although entailing rum on thousands of families , bo the immediate means of leading to important legal " > reforms in the laws affecting Joint-Stock Companies of all descriptions , btit more particularly Assurance Institutions . We have .. formerly

      has it been for inexperienced persons to become promoters of assurance companies , that we well recollect an experienced , and one of our most laborious actuaries , Mr . Neison , incurring a high degree of obloquy from the officials of new institutions , from having declared before Mr . Wilson ' s Committee of 1853 , that instead of their promoters being enabled to job , or effect beneficial arrangements for themselves , as usually supposed , they wore generally soon turned adrift for their incompetence , and forced to push their fortunes . elsewhere . All careful observers of our economic institutions are fully

      directed attention to tho question of Limited Liability , and we now propose , in a short series ) of articles , to consider tho various reasons which may bo adduced for and against bringing tho most important of all our groat financial undertakings within the operation of that law . Limited liability , cheap and expeditious legal proceedings havo long been granted and conferred on one class of Provident Institutions , Friendly Societies , winch embrace between two and three millions of the most

      alive to this fact ; To bo enabled to manage a life assurance company well , tho principal officer , as a rule , must havo natural aptitude ior tho parliiculnr studies , which , when persovercd in , qualify him . for tho duties which devolve on him ; and lew can master those studies -without tuo previous aid of practical experience m a vroll conducted society . There are , no doubt , startling and patent exceptions to this rule , ne to every othor i but wo cannot recall a sing ly instance , within the last fifteen years , of a porson of previous fair experience having failed to make successful an

      mstlprudential of our working ehweos ; and m these times of popular progress , and when all clans distinctions are most rapidly disappearing , there is no sound or valid reason , that while- fie upper and middle classes are conceding their political rights to tho working portion of the community , that tho legal aoilities enjoyed by tho latter should not also bo extended to the former . All tho possible combinations and diversified interests which can over arise in assurance companies , and in the legal contracts in which thoy engage , or are peculiar to thoin , although of greater absolute value , are neither of so niuoh

      tution with tno management of whioh Uo has been onti'ustud . This is a circumstance of muph more guHiifiouucQ tlwa a mere cursory observer will consider it to bo ; but with the numerous

      uitolupoaitiou can only bo understood by tho low who are permitted ' and are capable of performing a laborious series of highly technical and difficult calculations . It is . on this account that fiill grown societies , although apparently plethoric with wealth , may yet enjoy public confidence , for a protracted period , and eventually find that its affairs nayo become involved in unexpected complications . It is diu'ing such a critical juncture that tho prosent etutc of tho law miirht , ' if permitted to remain

  • Citation
    • Leader (1850-1860), March 19, 1859, page 19, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/cld_19031859/page/19/