Imperial Mutual Life Insurance v. Caminetti

WHITE, J. This action was instituted by plaintiff for declaratory relief (See. 1060, Code Civ. Proc.) in connection with the interpretation placed by defendant Insurance Commissioner upon certain sections of the Insurance Code of this state insofar as such sections applied to the manner of doing business by plaintiff insurance company.

By its complaint and supplement thereto, plaintiff alleged that it has outstanding approximately 11,000 life contracts or policies, all of which were issued to and held by residents of the county of Los Angeles. That with the exception of approximately 790 policies, which were issued prior to October 26, 1936, when plaintiff became a mutual life and disability insurance company on the stipulated premium plan, with provision for assessments, under and by virtue of the provisions of chapter 9, part 2, division 2 of the Insurance Code, as provided by sections 10739 to 10744 inclusive of said code. Practically all plaintiff’s outstanding policies are what are commonly known as “burial” policies, or “funeral service” policies, providing in substance that upon the death of the insured the plaintiff will procure and pay for a funeral, consisting of various designated services and items for a designated amount by a designated funeral director named in the policy. It was further alleged that of such outstanding “funeral service” policies, approximately 600 are single premium policies, that is, policies paid for by one premium at the time of issuance, and that approximately 9,500 are premium paying policies—that is policies paid for by periodic premiums from time to time during the lifetime of the-assured, or for a designated number of years. Plaintiff further alleged that under the provisions of sections 10870 and 10875 of the Insurance Code, it had calculated its reserves in accordance therewith and in the regular, usual and acceptable way of calculating reserves on life contracts by all life insurance companies. It is then alleged that starting in 1937 plaintiff company annually furnished and filed with defendant Insurance Commissioner reports, duly and properly executed, showing in detail the modified reserve calculation, and also [503]filed statements reflecting its condition and affairs. It is then alleged that about November, 1940, defendant commissioner for the first time “intimated to plaintiff that there might be a contention advanced by him that he would adopt another method of calculating modified reserves and another interpretation of section 10870 than that used by plaintiff.” It is then further alleged that defendant commissioner did “on or about the 22nd day of May, 1941, adopt the contention and still contends that plaintiff’s said method under its interpretation of section 10870 is incorrect.” Plaintiff’s pleading then alleged “That there has arisen and continues to exist, an actual and bona fide dispute and controversy between plaintiff and defendant, with respect to the modified reserve and assessment provisions of plaintiff’s outstanding ‘funeral service’ policies and respecting the interpretation of sections 10870 and 10875 of the Insurance Code and respecting the proper method of calculating modified reserves on such business and respecting plaintiff’s reserve liability on such business as hereinabove set forth and further, in that defendant contends that plaintiff cannot modify in any way the reserves on its said single premium policies, whereas plaintiff contends that while it has not done so in the past (it has carried full reserves thereon) it may, in accordance with said reserve provisions of such policies and section 10870, for the purpose of a test of solvency, modify reserves on such business, and further in that defendant contends that by applying his" method and interpretation of section 10870, there is a deficiency in plaintiff’s reserves and that therefore, plaintiff is insolvent and defendant can therefore seize and take over plaintiff, its business and assets, whereas plaintiff contends that there is no deficiency in its reserves and that on the contrary, it has a substantial surplus and is not insolvent, and that if it should be held that defendant’s method of calculating modified reserves and his interpretation of section 10870 are correct and that also plaintiff cannot modify the reserves under its said single premium policies, defendant cannot seize and take over plaintiff, its business and assets, but that plaintiff is entitled, and should be given an opportunity, to collect ‘additional premiums or assessments’ from its policy holders for the purpose of repairing such deficiency, or charging same, if not paid, as a lien against the reserve on such policies, which would eliminate any such deficiency, as specifically provided