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policy entered at 25 in its eleventh year.

To illustrate: The company has a life
policy for $1,000, issued at age 25, which
will have, upon an average, the reserve for
the middle of the 11th year charged against
it, $100.79. But before this computation
is made by the department, the company's
agent goes to the holder of that policy and
represents that, by its patent process Jmt
discovered, a new plan has been evolvicd
which will give him a better policy for the
same money, takes up his old policy and
gives him a new one at the same premiumi
and apparently entered at the same age.
The company cancels the old and reports
the new to the department as a new one,
so that the reserve charged against it will
be $11.16, and the department valuation
of the reserve will be $8&6d less than it
should be, and the company's liabilities
are decreased by just so much, apparently*
As we have said, the actual liability will
not be changed at alL The policy-holder
will die and his claim will have to be paid
just as quick and no quicker, and all the
company has gained is an apparent

This is, of course, a dishonest trick to
deceive state supervision with, but it has
been resorted to more than oi^ce, and more
than one company is to day pointing with
pride to the reports of state supervision
showing a surplus thus obtained. Our on-
ly answer to the charge of dishonesty is,
that no honest company needs supervision.
They that are whole need not a physician.
We only cite this as one point to show
that state supervision is giving us a lot
of figures, pretended values, designed to
measure liability, when there is not neces-
sarily any connection between them and
the truth. A million of insurance thus
manipulated would make quite a change
in the appearance of a company, but none
in its condition.

But as this article is growing long, and
was commenced for the purpose of illus-
trating the fostering care of the state as
exemplified in the New Haven case, per-
haps we had better get to the point. Leav-
ing out its guarantee capital, the American
Mutual Life Ins. Co. had witliin about
$25,000 of enough assets to meet its liabili-
ties, judged by the supervision of Connec-
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ticut, when early in 1873 it was taken pos-
session of by the American National, a
transfer presided over by the general as-
sembly of the state, which had previously
chartered the American National for the
purpose. With a guarantee capital which
was simply a loan, and was then as now a
liability, it was allowed by state supervi-
sion to commence doing business, and to
make a large dividend to stockholders.
With this authority it entrapped 79 policy-
holders in the state of Ck)nnecticut into
contracts, though probably some of them
got away before the contract was complet-
ed. It was not owing to state supervision,
but to the good sense of the people of Con-
necticut, that 79 hundred, instead of 79,
were not taken in.

We have had active supervision ever
since, and today the company is trying to
settle death claims at 50 cents on the dol-
lar. Here, then, is a company which two
years ago was in a fairly sound condition,
with over half a million dollars of assets,
shrinking those assets one-half in a little
over a year and a half, and settling, on a
basis of 50 per cent, claims which were
then worth their face. Not only that, the
same department which allowed them to
do that now asserts their insolvency.

We are not blaming the state for this
failure to supervise, but for attempting to
perform a public service which it cannot
perfonn. If insurance officers are inclined
to be rogues, no amount of supervision
can prevent it. A nation which cannot
collect a tax on distilled spirits, whose rev-
enue laws are set at defiance every day and
whose <^cia1s are corrupted en metsse, and
whose wealthy merchants smuggle with
impunity, may certainly, as it does, bleed
corporations unmercifully under the name
of supervision, but it will only succeed in
giving a sanction and a power to fraudu-
lent practices and dishonest men they
could never attain without the certificate
of the state.

This is now pretty thoroughly under-
stood to be the use of state supervision of
insurance, and its certificate to a company
is valued in proportion. It will not be
long before officers and agents will no
more think of showing a state certificate
as a badge of honor than they would a ball
and chain attached to their leg or hand-
cuffs on their wrists. To trade upon it is
to be suspected. Therefore we say, again,
state supervision is dead.


Life Insaracnce on Its Merits Per Se.

Wbstibn Union Building, I
New York, Mat 29th, 1876. f

EorroBS Chboniclb:

I was much struck, a short time since,

in reading one of your editorials, by the

following statements in regard to a person

seeking insurance:

Accomalating a stim of money in the hands of an
inanrance company to be paid at a fotnre day, if
yon live to want it, is not insnrance, bnt a very cost-
ly way of investing savings.

We tnist the day will come when men of common
sense will quit baying options in life insurance, bat
will pay the cost of what they want, present protec-

tion, and keep ap that protection so long as they
need it, and when they no longer need it they will
have no heart-bomings over wasted accumulations.
— Chronicli, May, 1875, page 378.

Tou have in this struck a key-note. As
heretofore conducted, by uniform annual
premiums, no one can purchase life insur-
ance, which is one thing, without at the
same time piling up deposits for the dis-
tant and uncertain future, which is some-
thing entirely different In other words,
under this system, which, with unimpor-
tant exceptions, comprises all the insur-
ance hitherto granted here or abroad, ev-
ery life insurance company is, to a certain
extent, a savings bank also, since a portion
of every uniform annual premium is sim-
ply and solely a deposit, or payment in ad-
vance, for future insurances or endow-
ments. There is no absolute necessity for
this. That is to say, there is no absolute
necessity for confining life insurance to the
system of uniform annual payments. Life
insurance, pure and simj:^^ may be sold.
Just as any other commodity, pure and sim-
ple, may be sold. Compelling a man to
pay for two articles, insurance and sav-
ings, when he may need, or can afford,
only one, reminds me of a country dry
goods store, with a crockery department,
in which the proprietor compels a custom-
er, who desires to purchase a piece of dry
goods, to purchase, in addition, a piece of
crockery, and not only to purchase it but
to leave it on deposit in the store for a cer-
tain length of time. Pursuing the simile
still further, not one person in ten waits
until the end of the designated time to
claim the crockery, but sells it out at a dis-
count previously, or forfeits it altogether.
Meanwhile, there is danger that the crock-
ery may be broken.

By the necessity of the case, uniform
premiums in life insurance must be greater
than are required in the earlier years, in
order that they may be sufficient in the
later years. These excesses or differences
between the uniform payments and the
current yearly costs of the risks, are sim-
ply and solely deposits^ or payments in ad-
vance, for insurances or endowments in
the distant future. These deposits are pri-
vate accumulations, and may not be used
for any pretent purpose, either for death
claim:s, for expenses of management, or
even to meet adverse (Contingencies, with-
out a breach of trust— a provision for each
one of these being found in those portions
of the premiums specifically charged for
these purposes, and which are quite sepa-
rate from the deposit portions of the same.

A contract of insurance, to extend over
the whole duration of life if desired, may
be so adjusted, each year, that wJtcU is left
from the payment of any one year, may
be applied in part payment of what is re-
quisite for the year next ensuing. In other
words, the account may be baianeed at the
end of any year, in a simple, straightfor-
ward business-like manner, so that each
year wHl take care of itself, thus avoiding the
necessity for large accumulations. The
company on the one hand will be compen-
sated for «]] \h^ woi"^ dope iq the past.

and for all the work to be done in the year
ensuing, including an ample margin for
contingencies— while the individual, on
the other hand, will have the option of
continued insurance if he wishes it, or of
discontinuance if he prefers, without un-
necessary loss to himself fiom previous
payments. In this way the cheapness, or
small outlay, of insurance for a single year,
will be combined with the security and
permanence of insurance for the whole du-
ration of life.

A life insurance company must be com-
pensated each year for the insurance fur-
nished, for expenses of management and
for possible adverse contingencies, and
should retain from the payments of each
policy- holder a sum sufficient to procure a
substitute equally satisfactory, in case he
should terminate his contract Beyond
this a reserve, or deposit or provision of
any kind is not necessary and is not always

Why should a man be compelled, as a
condition for obtaining insurance which he
needs, to pile up deposits for the distant and
uncertain future, which he may not desire,
which are expensively managed, which are
beyond his control, and which are not ab-
solutely necessary? A man seeks an in-
surance company for insurance^ not as a
depository for savings. If he can use his
money to better advantage in business, or
by depositing in a savings bank, or if he
has not the means to spare for accumula-
tion, why should he be refused insurance
which he needs, and is willing to pay for
as long as he shall continue to need it?
Let us furnish life insurance pure and sim-
ple, for those who wish it, and also Ufe in-
surance combined with savings for thoee who
prefer the system of uniform annual pre-
miums, so that any one may have the op-
tion by either method.

It may be urged as an objection to this
plan that the payments required will in-
crease each year, until in time they may
exceed the uniform annual premium at
age of entry. This is unavoidable, and
must be true of any system. Life insur-
ance must be paid for, and the cost usually
increases with the age of the person whose
life is insured. It is a question for each
one to decide for himself, whether it is bet-
ter to make deposits in order to provide for
excesses, during old age, in the yeariy cost
of insurance over the uniform premium,
or to pay as he ^<?«i— whether it is better to
pay in advance for insurance to cover a pe-
riod of life which he may never reach, or,
if he does, for insurance which he may not
then need. The payments by the plan
herein suggested, will be far less during a
series of years than the uniform annual
premium— afterwards they will be higher;
this excess, however, may be provided for
by depositing in a savings bank- a portion
of the premium saved. In the one case
the insurance actually furnished each year
is alone paid for— in the other, deposits
are required in addition, to pay for insur-
ance in the distant future. In both cases


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PAID FOB AT BOMB TiMB, and at the same
yearly costs, pro rata^ corresponding to the
age. No intelligent man can for a mo-
ment be made to believe that any company
will assume the risk of his life without an
adequate compensation, to be paid by him-,
self. Unless the heavy expenses of collect-
ing and managing deposits in existing
companies is lessened, and unless the right
to withdraw these deposits— « man*s own
money— in case of need, be given, one
would think the choice between pure in-
surance without accumulations, and insur-
ance combined with savings, would not be

Life insurance managers have made a
great mistake in not separating the premi-
ums into their component parts, and treat-
ing each part upon correct principles.* For
instance, the insurance portion of each an-
nual premium, besides including its propor-
tion of death claims, should include an equi-
table aseessment for expenses of manage-
ment, for procuring business, and for possi-
ble adverse contingencies. The deposit por-
tion, on the other hand» should be subjected
to no expense, other than a very smfdl per-
centage, perhaps, to cover cost of collection
and of management There is no more ne-
cessity or propriety for the payment of
commissions to agents upon deposits in
life insurance companies, than there would
be for the payment of commissions upon
similar deposits in savings banks; and the
practice of doing so in the former would
not be tolerated if policyholders under-
stood their true interests.

Not only should the expenses of manage-
ment be confined to the insurance portions
of the premiums, but policy-holders should
have Uie rights as a matter of contract, to
terminate their insurance at the end of any
year, giving suitable notice, and to with-
draw their eq^iUy in cash. This equity is
the full reserve or accumulated deposit,
lees the cost to the company of procuring
a satisfactory substitute. The cost of pro-
curing a substitute will, of course, vary in
different companies, but it is for each the
true measure of the tax, or penalty, which
should be imposed upon the termination
of an insurance, and the withdrawal of the
fall reserve, or deposit of the policy-holder.
Upon such terms, no injustice can accrue
to any other policy holder, each one hav-
ing his own similar deposit, and no harm
can result to a properly- managed company.

If instead of attempting to enact cast-
iron rules of non- forfeiture, or surrender
values, legislatures would compel each
company to insert in their policy contracts
the terms and conditions upon which the
holder may, at the end of any year, termi-
nate his insurance and receive his depos-
its in cash, life insurance companies would
deserve, and would at once attain, a much
higher, and their proper, place in the esti-
mation of the public.


Law Beports.

The United States supreme court has

just rendered a very important decision in
the case of the United States, appellants,
M. the Home Ins. Co., and in the parallel
case of the United States i». the Southern
Ins. and Trust Co.

These were suits under the captured and
abandoned property act, to recover the
proceeds of the sale of cotton captured at
Savannah in 1864, and now in the treasury
of the United States. From the findings
of fact in the court of claims, it appears
that the plaintifiis are corporations created
by the legislature of Georgia in 1861 and
1868, while the state was in armed rebel-
lion against the government of the United
StatQS, and the question now presented is,
whether such corporations can be recog-
nized as having legal existence, with ca-
pacity to own cotton and to sue in the
court of claims. It is insisted on behalf of
the appellants that the courts of the United
States will not recognize the competency
of those bodies known as the legislatures
of the insurgent states to create corpora-
tions, such as insurance, banking and trust
companies; and, as the plaintifib in the
court below were incorporated under acts
passed after the attempted secession of
Georgia from the Union and before the
close of the war, it is argued that they have
no legal existence.

It may well be doubted whether, under
the pleadings in the court below, the ap-
pellants have any right to raise such an ob-
jection here. There was no plea that tra-
versed directly the corporate existence of
the plaintiff. A general denial of the
averments of the petition was hardly suffi-
cient Notwithstanding the old rule that
a corporation suing must prove its corpo-
rate existence, it has been many times de-
cided that a plea of the general issue ad-
mits its capacity to sue, as does going to
trial upon the merits. We do not, howev-
er, rest our decision upon this ground.
We prefer answering the question which
the appellants attempt to raise. No doubt
the legislature of Georgia in 1861 and 1863,
when the enactments were made for the
incorporation of these plaintifiis, was not
the legitimate legislature of the state. The
state had thrown off its connection with
the United States, and the members of the
legislature had repudiated or had not tak-
en the oath by which the third section
of the sixth article of the constitution re-
quires the members of the several state
legislatures to be bound. But it does not
follow from this that it was not a legisla-
ture, the acts of which were of force when
they were made, and are in force now. If
not a legislature of the state dejure^ it was,
at least, a legislature de facto. It was the
only law making body which had any ex-
istence. Its members acted under color of
office, by an election, though not qualified
according to the requirements of the con-
stitution of the United States. Now, while
it must be held that all their acts in hostil-
ity to that constitution or Union, of which
the state was an inseparable member, have
no validity, no good reason can be assigned
why all their other enactments not forbi(l-

den by the constitution should not have
the force which the law generally accords
to the action of de facto public officers.

The court here review the decisions on
this point, and state the following general
rule: All the enactments of the de facto
legislatures in the insurrectionary states
during the war, which were not hostile to
the Union, or to the authority of the gen-
eral government, and which were not in
confiict with the constitution of the United
States, or of the states, have the same va-
lidity as if they had been enactments of
legitimate legislatures, and any other doc-
trine than this would work great unneces-
sary hardship upon the people of these
states without any corresponding benefit
to the citizens of other states, and without
any advantage to the national government.

Tried by the rule thus stated, the enact-
ments by which the plaintiflb in these cases
were incorporated must be treated as valid.
They had no relation to anything else than
the domestic concerns of the state. Neith-
er in their apparent purpose nor in their
operation were they hostile to the Union,
or in confiict with the constitution. They
were mere ordinary legislation, such as
might have been had there been no war,
or no attempted secession; such as is of
yearly occurrence in all the states of the
Union. We hold, therefore, that the court
of claims correctly decided that the plain-
tiffs were lawfully incorporated, and that
they had a legal capacity to sue in that
court It remains only to notice one other
position taken by the appellants during the
argument It is that, even if the plaintifiis
below are corporations which this court
can recognize as such« they cannot sue in
the court of claims for the proceeds of the
sale of captured and abandoned property,
because, as it is argued, the captured and
abandoned property act provides only for
suits by persons who could have given aid
and comfort to the rebellion. It is said
corporations were incapable of giving such
aid, and that they cannot make proof that
they have never given it Nothing in the
assignments of error Justifies the presenta-
tion of such an argument. But were it
otherwise, the argument would be plainly
unsound. The act of congress confers the
right to sue upon any person claiming to
have been the owner of the captured or
abandoned property. It makes no distinc-
tion between natural and artificial persons,
and it has not been doubted that corpora-
tions created before the war commenced
might sue. Many such actions have been
sustained. It is no objection to them that
plaintifiis in all suits are required to make
proof that they have never given aid and
comfort to the rebellion. Such proof may
be made as well by artificial as natural per-
sons. Corporations may have rendered
very substantial aid to the armed resistance
to the laws of Uie United States. They
may have made loans or contributions to
the confederate government. They may
even have fitted out companies or regi-
ments of soldiers. If they have rendered
\i{\ t^iil, the fa^it is <iuite capable of proof.

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The judgment of the court of claims in
each case is affirmed.

The Mutual Life Ins. Co. of New York,
plaintiff in error, vs. James Toung, admin-
istrator of McPherson Young, deceased. —
In error to the circuit court for the district
of California. Mr. Justice Swayne deliv-
ered the opinion of the court, in substance
as follows:

The case was submitted to the court
without the intervention of the jury. The
court found the facts, and gave judgment
for the plaintiE The defendant sued out
this writ of error. The question presented
for our determination is whether the find-
ings warrant the judgment The facts
found lie within a narrow compass. On
the 5th of June, 1867, McPherson Young
applied to the agent of the plaintifi in er-
ror, in San Francisco, for insurance upon
his life, and thereupon received from the
agent a receipt for the first quarter of the
annual premium, conditional upon the ac-
ceptance of the application by the compa-
ny. The plaintiff in error is a corporation
of the city of New York, but had a general
agent at San Francisco, and an office there
for the transaction of its business. The
application of Young was received by the
company at New York, and was answered
by a policy transmitted to the agent at San
Francisco. The policy bore date of the
5th of April, 1867, and varied from the
terms specified in the receipt, in the fol-
lowing particulars;

First— It took efifect from the 5th of
April instead of the 5(h of June. The loss
to the applicant by this change is obvious,
and needs no comment Second— The
quarterly payments were to be $96.60 in-
stead of $99.90. Third— The days of pay-
ment during the ten years were to be the
6th days of April, July, October and Jan-
uary, instead of the 5tii days of June, Sep-
tember, December and March. It con-
tained a provision that *'if the said pre-
miums shall not be paid on or before the
days above mentioned for the payment
thereof," **then in every such case the
company shall not be liable for the pay-
ment of the sum assured, or any part there-
of, and this policy shall cease and deter-
mine." The policy was received by the
agent at San Francisco on the 23d of
August, 1867. With the policy were re-
ceived two receipts to be signed by the sec-
retary of the company, and to be counter-
signed by the agent before delivery. One
of them was for the payment of the instal-
ment due on the 6th of April, 1867, and
the other for the instalment due on the 6lh
of July in that year. On the 8th of Au-
gust, 1867, the agent addressed a note to
Young at Yallejo, notifying him that the
policy had arrived, and requesting to be
advised whether it should be forwarded to
Yallejo or be held until he should call for
it in San Francisco. It does not appear in
the case when or how this note was for-
waifbid, or whether Young ever received
it Notice of the receipt of the applica-
tion by the company, or of the receipt of

the policy by the agent, was not shown to
have been given to or received by him.
No demand was made upon him for any
further payment, and no receipt requiring
such payment was prescribed to him.
Young was shot and mortally wounded at
Yallejo on the 21st of August, 1867. He
was removed the next day to a hospital in
San Francisco, where he died on the 20th
of September following.

From the time he was shot until his
death he was unable to leave his bed,
and was incompetent, mentally and physi-
cally, to attend to any business. The com-
munication at that time from San Fraqcis-
co to New York was by ocean steamers to
Panama, thence by rail to Aspinwall, and
thence by steamers to New York. The
time consumed in the transit was from 23
to 80 days. After the death of Young, the
agent wrote on the policy, "Cancel-dead,"
and sent it to the office in New York. The
officers there on the 21st of October, 1867,
canceled it by tearing ofif the seal of the
company and the signature of the presi-
dent The agent countersigned the re-
ceipts, and applied and canceled the proper
stamps. They remain in the hands of the

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