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the corporate business and interest on capital invested as to
them appears advisable; but the moneys received and notes
taken for premium on risks which are undetermined and out-
standing at the time of making the dividend must not be
treated as profits, nor divided, except as provided in chapter
two of this title.

History: Enacted March 21, 1872, founded upon § 21 Act April
2, 1866, Stats. 1865-6, p. 748; amended by Code Commission, Act
March 16, 1901, Stats, and Amdts. 1900-1, p. 355, held unconstitu-
tional, see historj', § 4 ante.

256



Tit.II,ch.I.] INSURANCE COMPANIES. §§ 418-420

As to many miscellaneous matters of insurance, see note
§ 414, ante.

Dividends — When and from what declared, — as to, see Kerr's
Cyc. C. C. § 309 and note.

§ 418. DIRECTORS LIABLE FOR LOSS ON I>SURANCE

IX CERTAIN CASES. If any insurance corporation is under
liabilities for losses to an amount equal to its capital stock,
and the president or directors, after knowing the same,
make any new or further insurance, the estates of all who
make such insurance, or assent thereto, are severally and
jointly liable for the amount of any loss which takes place
under such insurance.

History: Enacted March 21, 1872, founded upon Act April 2,
1866, Stats. 1865-6, p. 747; amended by Code Commission, Act
March 16, 1901, Stats, and Amdts. 1900-1, p. 355, held unconstitu-
tional, see history, § 4 ante.

§419. CERTAIN INSURANCE COMPANIES TO HAVE A
CAPITAL STOCK OF TWO HUNDRED THOUSAND DOL-
LARS (repealed).

History: Enacted March 21, 1872; amended March 30, 1874,
Code Amdts. 1873-4, p. 269; April 1, 1878, Code Amdts. 1877-8,
p. 80; amended by Code Commission, Act March 16, 1901, Stats.
and Amdts. 1900-1, p. 355, held unconstitutional, see history, § 4
ante; repealed March 8, 1907, Stats, and Amdts. 1907, p. 141.
Kerr's Stats, and Amdts. 1906-7, p. 411. In effect immediately.
Incorporated in Article XVI, of Ch. Ill, Part III, Title I, of the
Political Code. See Pol. C. § 594.

See Kerr's Cyc. C. C. for 2 pars, annotation.
64 C. 49, 52, 28 P. 495 (construed).

As to many miscellaneous matters of insurance, see note
§ 414, ante.

§420. CERTAIN INSURANCE COMPANIES TO HAVE A
CAPITAL STOCK OF ONE HUNDRED THOUSAND DOL-
LARS (repealed).

History: Enacted April 1, 1878, Code Amdts. 1877-8, p. 80;
repealed March 8, 1907, Stats, and Amdts. 1907, p. 141, Kerr's
Stats, and Amdts. 1906-7, p. 411. In effect immediately. Incor-
porated in Pol. C. as noted in last section.
Kerr's C. C. — 9 257



§§421, 421[a] CIVIL CODE. [Div.I.Pt.IV.

§421. INVESTMENT OF CAPITAL AND ACCUMULA-
TIONS OF CERTAIN CORPORATIONS— REPORT OF OFFI-
CERS [repealed].

[Repeal.] Sec. 1. Section four hundred and twenty-one
of the Civil Code, as approved March 3, 1905, is hereby
repealed.

[Saving' clause.] Sec. 2. Nothing herein contained shall
be deemed to repeal any of the provisions of section four
hundred and twenty-one of said code, as approved March 21,
1905, and any rights acquired under said section four hun-
dred and twenty-one, as approved March 3, 1905, shall be
preserved under the provisions of said section four hundred
and twenty-one, as approved March 21, 1905.

History: Added by Code Commission, Act March 16, 1901,
Stats, and Amdts. 1900-1, pp. 355-357, lield unconstitutional, see
history, § 4 ante; re-enacted March 3, 1905, Stats, and Amdts.
1905, pp. 34-36. Also re-enacted on March 21, 1905, with slight
variations, which latter enactment is given below as §421 [a];
repeal enacted March 18, 1907, Stats, and Amdts. 1907, p. 597,
Kerr's Stats, and Amdts. 1906-7, p. 411.

Note: The section 421 approved March 21, 1905, and which is
retained, is numbered § 421[a] herein and amended March 22,
1907. See next section.



§421 [a]. INSURANCE CORPORATIONS, HOW CAPITAL

MAY BE INVESTED. Companies organized under the laws
of this state for the transaction of business in any kind of
insurance, may invest their capital and accumulations in
the following named securities:

1. [Seeurities in ^vliioli may be invested.] In the purchase
of, or loans upon interest-bearing bonds of the United States
government.

2. In tlie purchase of, or loans upon interest-bearing bonds
of any of the states of the United States, not in default for
interest on such bonds.

3. In the purchase of, or loans upon interest-bearing bonds
of any of the counties and Incorporated cities and towns and
duly organized school districts of any state or territory of
the United States not in default for interest on such bonds.

258



Tit.II.ch.L] INVESTMENT OF CAPITAL. § 421[a]

4. In loans upon unencumbered real property, no loan to
exceed sixty per cent of the market value of any piece of
real estate to be taken as security.

5. [Title insurance companies.] Corporations engaged in
the business of insuring titles to real estate may, after the
investment of one hundred thousand dollars in the manner
provided for in subdivisions one, two, three and four of this
section, invest an amount not exceeding fifty per cent of their
subscribed capital stock, in the preparation or purchase of
the materials or plant necessary to enable them to engage
in such business; and such material or plant shall be deemed
an asset valued at the actual cost thereof, in all statements
and proceedings required by law for the ascertainment and
determination of the condition of such corporations.

6. [Fire, life, health, accident and marine insurance com-
panies.] Companies organized for and engaged in the busi-
ness of fire, life, health, accident and marine insurance, may,
after the investment of two hundred thousand dollars, and
companies duly formed or organized for the transaction of
business in any other kind of insurance may, after the
investment of one hundred thousand dollars, in the manner
provided in subdivisions one, two, three and four of this
section, invest the balance of their capital and any accumu-
lations in the purchase of or loans upon the stock of any
corporation (except mining companies) organized and carry-
ing on business under the laws of the state of California
which have at the time of investment a market value of not
less than their paid-in value, and which are rated as first-
class securities, or in interest-bearing bonds of any corpora-
tion of any state or territory of the United States not in
default of interest; provided, that a two-thirds vote of all
the directors of such corporations shall approve such invest-
ment. It shall be the duty of the officers of such corpora-
tion to report quarterly during the months of January, April,
July and October of each year to the insurance commissioner
a list of such investments so made by them, and the insur-
ance commissioner may, if such investments, or any of them,

259



§421[a] CIVIL CODE. [Div.I,Pt.IV.

seem injudicious to him, require ttie sale of ttie same. But
no investment in the securities named in subdivisions one,
two, three and six of this section must be made in an amount
exceeding the market value of such securities, at the date
of such investment.

7. Life insurance companies may loan upon their own poli-
cies provided that the amount so loaned upon each policy
shall not exceed the reserve against said policy at the
time said loan is made; provided further, that no policy loans
whatever shall ever be used as security which may be depos-
ited with the insurance commissioner under section six hun-
dred and thirty-four of the Political Code; and provided
further, that whenever any such loan in any amount is made
on a policy registered with the insurance commissioner under
said section six hundred and thirty-four of the Political
Code, such registration shall be forthwith canceled.

History: Enacted by Code Commission, Act March 16, 1901,
Stats, and Amdts. 1900-1, pp. 355-357, held unconstitutional, see
history, § 4 ante; re-enacted March 21, 1905, pp. 628-629. Also
re-enacted March 3, 1905 (see ante § 421); amended March 22,
1907, Stats, and Amdts. 1907, p. 890, Kerr's Stats, and Amdts.
1906-7, p. 412. The section amended is numbered 421[a] herein
and is especially preserved in the repeal of March 18, 1907. See
note to preceding section.

See Kerr's Cyc. C. C. for 19 pars, annotation.

As to authority of corporations to hold shares in other cor-
porations, see 10 Cyc. 1107.

As to authority of corporation to take and hold land, see
2 Lr. 255; 13 Encyc. L. 851.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

As to power of corporation to deal in stock of other corpo-
rations or its own, see 18 L. 252.

As to power of corporation to lend out funds, see 10 Cyc.
1105.

As to right to acquire mortgages, see 13 Encyc. L. 854.

As to right of corporation to purchase its own stock, see 61.
L. 621-633.



260



Tit.II,ch.II.] PAYMENT OF CAPITAL. §§ 424, 425

CHAPTER II.
FIRE, MARINE, AND TITLE INSURANCE COMPANIES.

§ 424. Paj'inent of subscriptions — Capital to be all paid in
twelve months.

§ 425. Certificate of capital stock paid up to be filed, and when.

§ 426. Property which may be insured.

§ 427. Funds may be invested how [repealed].

§ 428. Corporations, fire and marine; amount of risk to be
taken.

§ 429. [Reserve before dividends] — Corporations formed subse-
quent to April 1, 1878.

§ 430. Amount to be reserved by companies witli less than
$200,000.

§ 431. Amount to be reserved by life insiirance conapanies
[repealed].

§ 432. Accumulate surplus fund.

§424. PAYMENT OF SUBSCRIPTIONS— CAPITAL TO
BE ALL PAID IN TWELVE MONTHS. The entire capital
stock of every fire or marine insurance corporation must be
paid up in casli within twelve months from the filing of the
articles of incorporation, and no policy of insurance must be
issued or risk taken until twenty-five per cent of the whole
capital stock is paid up.

History: Enacted March 21, 1872.

See Kerr's Cyc. C. C. for 3 pars, annotation.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

Fire insurance, — as to, see Kerr's Cyc. C. C. §§ 2752-2757 and
notes; also note § 414, ante.

Same — County fire insurance companies, as to act providing
for, see Hen. G. L., tits. Corporations and Insurance.

Marine insurance, — as to, see Kerr's Cyc. C. C. §§ 2655-2746
and notes; also note § 414, ante.

§ 425. CERTIFICATE OF CAPITAL STOCK PAID UP TO
BE FILED, AND WHEN. The president and a majority of
the directors must, [1] within thirty days after the payment
of the twenty-five per cent of the capital stock, and also [2]

261



§§ 426-428 CIVIL CODE. [Div.I,Pt.IV.

within tliirty days after the payment of the last instalment
or assessment of the capital stock limited and fixed, [3]
prepare, subscribe, and swear to [4] a certificate setting
forth the amount of the fixed capital and [5] the amount
thereof paid up at the times respectively in this section
named, and [6] file the same in the office of the county clerk
of the county where the principal place of business of the
corporation is located, and [7] a duplicate thereof, similarly
executed, with the insurance commissioner.

History: Enacted March 21, 1872.

§426. PROPERTY ^VHICH MAY BE INSURED. Every
corporation formed for fire or marine insurance, or both,
may [1] make insurance on all insurable interests witliln
the scope of its articles of incorporation, and [2] may cause
itself to be reinsured.

History: Enacted March 21, 1872.

§427. FUNDS MAY BE INVESTED, HOW (repealed).

History: Enacted March 21, 1872; amended March 30, 1874,
Code Amdts. 1873-4, p. 210; April 1, 1878, Code Amdts. 1877-8, p.
81; March 5, 1887, Stats, and Amdts. 1887, p. 22; March 6. 1899,
Stats, and Amdts. 1899, pp. 66-68 (became law, under constitu-
tional provision, witliout governor's approval); repealed March
3. 1905, Stats, and Amdts. 1905, p. 34; re-repealed March 21, 1905,
Stats, and Amdts. 1905, p. 628.

See Kerr's Cyc. C. C. for 3 pars, annotation.

123 C. 196, 203, 55 P. 902 (referred to).

As to many miscellaneous matters of insurance, see note
§ 414, ante.

Insurable interest, — as to what is, see Kerr's Cyc. C. C. § 2546
and note.

§428. CORPORATIONS, FIRE AND MARINE; AMOUNT

OF RISK TO BE TAKEN. Fire and marine insurance cor-
porations must never take, on any one risk, whether it is a
mai'ine insurance or an insurance against fire, a sum exceed-
ing one-tenth part of their capital actually paid in, and intact

262



Tit.II,ch.II.] RESERVE AND DIVIDENDS. § 429

at the time of taking such risk, without at once reinsuring
the excess above one-tenth.

History: Enacted March 21, 1S72; amended March 30, 1874,
Code Aindts. 1873-4, p. 210; amended by Code Commission, Act
March 16, 1901, Stats, and Amdts. 1900-1, p. 357, held unconstitu-
tional, see history, § 4 ante; re-amended Marcli 21, 1905, p. 570.

See Kerr's Cyc. C. C. for 5 pars, annotation.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

As to waiver of condition against over-insurance, see 27 A.
R. 597.

Power of state to regulate and limit insurance companies. —
See 16 Encyc. L. 884-886.



§429. [BESEKVE BEFOEE DIVIDENDS.] CORPORA-
TIONS FORMED SUBSEQUENT TO APRIL 1, 1878. No cor-
poration formed subsequent to April first, eighteen hundred
and seventy-eight, under the laws of this state, and trans-
acting fire, marine, inland navigation insurance business, or
insurance provided for by section four hundred and twenty
(420) of this code, except insurance of the title to real prop-
erty, must make any dividends except from profits remaining
on hand after retaining unimpaired:

1. The entire subscribed capital stock:

2. All the premiums received or receivable on outstanding
marine or inland risks, except marine time risks.

3. A fund equal to one-half of the amount of all premium?*
on all other risks not terminated at the time of making such
dividend.

4. A sum sufficient to pay all losses reported or in course
of settlement, and all liabilities for expenses and taxes.

History: Enacted March 21, 1872; amended April 1, 1878, Code
Amdts. 1877-8, p. 81; March 5, 1887, Stats, and Amdts. 1887, p. 23.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

Declaring dividends — When and from what, by insurance
companies. — As to, see Kerr's Cyc. C. C. § 309 and note; § 417
and note; also 99 A. D. 761.

263



§§ 430-432 CIVIL CODE. [Div.I,Pt.IV.

§ 430. AMOUNT TO BE ESERYED BY COMPAINIES WITH
LESS THAN $200,000. No fire or marine insurance corpora-
tion, with a subscribed capital of less than two hundred thou-
sand dollars, must declare any dividends, except from profits
remaining on hand after reserving:

1. A sum necessary to form, with the subscribed capital
stock, the aggregate sum of two hundred thousand dollars;

2. All the premiums received or receivable on outstanding
marine or inland risks, except marine time risks;

3. A fund equal to one-half the amount of all premiums on
fire risks and marine time risks not terminated at the time
of making such dividend;

4. A sum sufficient to pay all losses reported or in course
of settlement, and all liabilities for expenses and taxes.

History: Enacted March 21, 1872.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

§431. AMOUNT TO BE RESERVED BY LIFE INSUR-
ANCE COMPANIES (repealed).

History: Enacted April 1, 1878, Code Amdts. 1877-8, p. 81;
repealed by Code Commission, Act March 16, 1901, Stats, and
Amdts. 1900-1, p. 357, held unconstitutional; see history, § 4 ante;
re-repealed March 21, 1905, Stats, and Amdts. 1905, p. 571.

As to life and health insurance corporations and insurance,
see Kerr's Cyc. C. C. §§ 2762 et seq. and notes.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

§432. ACCUMULATE SURPLUS FUND. Corporations
transacting business in insuring titles to real estate, shall
annually set apart a sum equal to twenty-five per cent of
their premiums collected during the year, which sum shall be
allowed to accumulate until a fund shall have been created
amounting to ten per cent of the subscribed capital stock.
Such fund shall be maintained as a further security to
policy holders, and shall be known as the surplus fund;

[Impairment of surplus fund — Restoration.] And if at any

264



TitJI.Ch.II.] SURPLUS FUND. §432

time such fund shall be Impaired by reason of a loss, the
amount by which it may be impaired shall be restored in the
manner hereinabove provided for its accumulation. The
reporting of a loss shall be deemed an impairment of such
fund for the purposes of this section.

[DiYideuds— From what made— ReserTatious.] Such cor-
poration must not make any dividends except from profits
remaining on hand after retaining unimpaired:

1. The entire subscribed capital stock.

2. The amount owing to the surplus fund, under the pro-
visions of this section.

3. A sum sufficient to pay all losses reported, or in course
of settlement, which shall be in excess of the surplus fund,
and all liabilities for expenses and taxes.

Hi-story: Enacted March 5, 1887, Stats, and Amdts. 1887, p. 23.
In effect March 5, 1887; repealed by Code Commission, Act March
16, 1901, Stats, and Amdts. 1900-1, p. 357, held unconstitutional;
see history, § 4 ante.



265



§ 437 CIVIL CODE. [Div.I.Pt.IV.



CHAPTER III.

MUTUAL LIFE, HEALTH, AND ACCIDENT INSURANCE COR-
PORATIONS.

§ 437. Capital stock — Guarantee fund.

§ 438. Of what guarantee fund shall consist [repealed].

§ 439. What constitutes, and deficiency in fixed capital.

§ 440. Declaration of fixed capital to be filed.

§ 441. Guarantee notes and interest. [Commission and interest
allowed.]

§ 442. Insured entitled to vote, when.

§ 443. Number of directors, how altered.

§ 444. Investment of capital stock [repealed].

§ 445. Limitation to the holding of stock, etc., may be provided
for in by-laws.

§ 446. Premiums, how payable.

§ 447. Insurance companies to furnish data to insurance com-
missioner — Employment of actuary [repealed].

§ 448. No stamps required on accident insiirance contract [re-
pealed].

§ 449. [Valuation of policies.] Retaliatory clause [repealed].

§ 450. Policies issued within state.

§ 451. Certain orders not insurance companies [repealed].

§ 452. Corporations, life insurance — Dividends, how made.



§437. CAPITAL STOCK— GUARANTEE FUND. Every
corporation formed for .the purpose of mutual insurance on
the lives or health of persons, or against accidents to persons
for life or any fixed period of time, or to purchase and sell
annuities, must have a capital stock of not less than two
hundred thousand dollars. It must not make ar,y insurance
upon any risk or transact any other business as a corporation
until its capital stock is fully paid up in cash, nor until it
has also obtained a fund, to be known as a "guarantee fund,"
of not less than two hundred and fifty thousand dollars, as is
hereinafter provided. If more than the requisite amount is
subscribed, the stock must be distributed pro rata among the
subscribers. Any subscription may be rejected by the board
of directors or the committee thereof, either as to the whole
or any part thereof, and must be, so far as rejected, without

266



TiUI,Cb.ni.] FIXED CAPITAU ETC. H 438-440

etteot. nothing in this section shall be deemed to «-;™ -
any ot the provisions of section tour hundred and fitty-one.

n>.U,ry: Enactecl March 21, 1872; ™.nded 1,y Code Commis-
sion. Act Marc, 16. 1901 Sta,. -d Amdt . «0-^l,^P.J^57._. ^^^

unconstitutional, see history, S * anLe,
1905, Stats, and Amdts. 1905, pp. 183-184.

See Kerr's Cyc. C. C. for 2 pars, annotation

l-n C 317 320, 321, 324, 53 P. 901 (construed).

A^ to life and accident insurance, see note § 414, ante.

fs to ^n.anT nicellaneous n.atters of insurance, see note
§ 414, ante.

§438. OF WHAT GUARANTEE FUND SHALL CONSIST
(repealed).

History: Enacted March 21, 1872; repealed March 21, 1905,
Stats, and Amdts. 1905, p. 571.

AS to debts for which guarantee fund liable, under former
^^rt^^maS; mi'lnln^ufmatters of insurance, see note
§ 414, ante.

§439 WHAT CONSTITUTES, AND DEFICIENCY IN
FIXED CAPITAL. The sum accumulated as provided m the
preceding section, together with the capital stock, shall
become and remain the fixed capital of the corporation, not
subject to division among the stockholders or parties deamg
with it, or to be expended in any manner otherwise than [as]
may be required in payment of the corporation's debts and
actual expenses, until the business of the ^^owov^'ion js
closed, its debts paid, and its outstanding policies and ob iga-
tions of every kind canceled or provided for; and if from
any cause a deficiency at any time occurs in such fixed capi-
tal, no further division of profits must take place until such
deficiency has been made up.

History: Enacted March 21, 1872.

§440. DECLARATION OF FIXED CAPITAL TO BE
FILED. Whenever the fixed capital of the corporation is
obtained as hereinbefore provided, [1] the president of the

267



§ 441 CIVIL CODE. [Div.I,Pt.IV.

corporation and its actuary, or its secretary, if there is no
actuary, must [2] make a declaration in writing, [3] sworn to
before some notary public, of the amount of such fixed capital,
and of [4] the particular kinds of property composing the
same, with [»5] the nature and amount of each kind, which
[6] must be filed with the original articles of incorporation,
and [7] a copy, certified by the county clerk, must be pub-
lished for at least four successive weeks, in a newspaper
published in the county where the principal business of the
corporation is situated. Upon the filing of such declaration
the guarantee fund is discharged of its obligations, and all
notes of the fund remaining in the control of the corporation,
and not affected by any lien thei-eon, or claim of that nature,
must be surrendered by it to the makers thereof, respectively,
or other parties entitled to receive the same.

History: Enacted March 21, 1872.

§ 441. GUARANTEE XOTES A>D INTEREST. [COMMIS-
SION AND INTEREST ALLOWED.] Until the guarantee
fund is discharged from its obligations, as provided in the
preceding section, no note must be withdrawn from the fund,
unless another note of equal solvency is substituted therefor,
with the approval of the board of directors. The corporation
must allow [1] a commission, not exceeding five per cent per
annum, on all such guarantee notes while outstanding, and
also [2] interest on all moneys paid on such notes by the
parties liable thereon, at the rate of twelve per cent per
annum, payable half yearly until repaid by the corporation,
unless the current rate of interest is different from this
amount, in which case the rate payable may, from time to
time, at intervals of not less than one year, be increased or
reduced by the board of directors, so as to conform to the
current rate.

History: Enacted March 21, 1872; amended March 30, 1874,
Code Amdts. 1873-4, p. 210.

268



Tit.II,ch.III.] LIMITING HOLDING. §§442-446

§442. INSURED TO BE ENTITLED TO VOTE, WHEN.

After the filing of the declaration of the fixed capital, as in
this article provided, the holders of policies of life insurance
for the term of life, on which the premiums are not in default,
may vote at the election of directors, and have one vote for
each one thousand dollars insured by their policies, respect-
ively.

History: Enacted March 21, 1872.

As to many miscellaneous matters of insurance, see note
§ 414, ante.

§443. NUMBER OF DIRECTORS, HOW ALTERED. The

number of directors specified in the articles of incorporation
may be altered from time to time during the existence of the
corporation by resolution, at the annual meeting of a majority
of those enitled to vote at the election of directors, but the
number must never be reduced below five.

History: Enacted March 21, 1872.

§444. INVESTMENT OF CAPITAL STOCK (repealed).

History: Enacted March 21, 1872; amended March 30, 1874,
Code Amdts. 1873-4, p. 211; repealed by Code Commission, Act
March 16, 1901, Stats, and Amdts. 1900-1, p. 357, held unconstitu-
tional; see history, § 4 ante; repealed March 22, 1907, Stats, and
Amdts. 1907, p. 889, Kerr's Stats, and Amdts. 1906-7, p. 413. In
effect immediately.

§445. LIMITATIONS TO THE HOLDING OF STOCK,
ETC., MAY BE PROVIDED FOR IN BY-LAWS. The corpora-
tion may, by its by-laws, limit the number of shares which
may be held by any one person, and make such other pro-
visions for the protection of the stockholders and the better



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