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THE GREEN BAG
tice. The arrangement of the cases under the Statute of Frauds, however, is to be regretted. The lawyer will hardly find the collection of cases in his own state more satisfactory than his own digest, except from the fact that recent decisions are included, and the time required to locate analogous decisions in other jurisdictions would seem to be prohibitive. The differences in the statutes in the different states seem hardly great enough to warrant the classification determined upon. INSURA5CE DIVIDENDS (Armstrong Committee Legislation). Samuel B. Clarke, in the March-April American Law Review dis cusses " Defects of the Armstrong Committee's Legislation Relating to the Dividends of Mutual Life Insurance Policy Holders " (V. xli, p. 161). Mr. Clarke is far from satisfied with the legislation, though he commends heartily the committee's work in ferreting out abuses. The committee has done well, Mr. Clarke thinks, in not attempting to establish by statute the manner of distribution of surplus, leaving it to be divided equitably, that is, by the courts. The dividends of policy holders should be determined, Mr. Clarke urges, by the amount of sacrifice made by them. The differences in sacrifice are in the payment of money: " A has made a single payment of Sioo; B has paid Sioo annually for the past fifty years; C has made one pay ment of $10,000; D has paid Sio.ooo annually for twenty years; E has paid one lump sum, $250,000; and so on, and so on. It is the plainest equity that these differences ought to be taken into account, and unless there are other germane considerations not yet adverted to, they ought to furnish the rule or prin ciple of distribution. By this standard the share of the divisible surplus, which each policy holder is entitled to, is to be determined by the ratio between the total amount which he has paid to the company since he became a member of it and the total amount which all the policy holders who are to participate in the distribution have paid since they •severally became members of it. The general expres sion of the proportion for each individual policy holder, whom we may call A, would be; — as the total amount paid by A to the com pany since he became a member of it is. to the total amount paid to the company by all
the participating policy holders since they severally became members, so is A's share of the divisible surplus to the divisible sur plus. To illustrate arithmetically: — If the total premiums paid by all the participating policy holders are $100,000,000, and if the total paid by A is $100, and if the fund to be divided is $2,000,000, the proportion stands thus, — $100: $100,000,000 = A's share: S2,000,000. Solving this proportion we find that A's share amounts to $2. If, instead of paying $100 once, A has paid that amount annually for the past fifty years,- making $5,060 in all, the proportion stands thus, — $5,000: $100,000,000 =A's share: $2,000,000. Solving this we find A's share to amount to $100. We know, mathematically, that in. every proportion the ratio between the second and fourth proportionals is equal to the ratio between the first and third proportionals. This enables us to establish a dividend rate capable of quick and easy application as a percentage of the total amount of premiums which each participating policy holder has paid to the company. Thus, in the last ex ample, the dividend rate is the ratio 2,000,000: 100,000,000, or two per cent. A's share is equal to and may, correctly, be measured as two per cent of the total of the premiums ($5,000) which he has paid." Minor corrections are to be made, but the principle is not affected. The actuary's idea that surplus comes from the earnings of three imaginary funds, the death loss, premium reserve, and loading funds and that the divi dend should depend on what the premium has contributed to each, is ridiculed as arti ficial and untrue. Mr. Clarke's specific criticisms of the Arm strong legislation are four in number: First, the requirement that on the 31st of Decem ber each year companies shall ascertain the surplus earned during that year. What should be found is the surplus, if any, existing at a particular time. The limitation obliges a company to* make its investigation from its books of, accounts, a method much more lia ble to error than the natural one of inven torying present property and obligations. A company does not have to report the. sur plus existing, but only the profits and losses of the business of the year and their sources.
