quires that the companies inform the policy-holders as to what they have done with that fund while it has been in their hands, how they have invested it and what the share of each policyholder in the fund is. I think that is a perfectly legitimate exercise of the power of the state, and I think it is simple justice to the policy-holders, and I trust this recommendation may be adopted.

W. R. Vance, of the District of Columbia:

I feel that I owe an apology for taking the floor a second time, but I cannot do otherwise than answer very briefly the delightfully wrong argument of my friend, Congressman Littlefield. I love to hear him speak. Whenever I read in the newspaper that he is going to speak in the House, and I am in Washington, I always go to listen to him. I usually rejoice in his views on constitutional law; but as the gentleman from Massachusetts has already shown, he need have no alarm as to the question here. This bill does not provide for any impairment of the obligations of any contract, but it does provide for the conduct of these insurance officials who, before the advent of our noble friend to the councils of the Equitable Company, were sometimes not as careful of the rights of other parties as they might have been; I wish I were a director of that company or of any other big company for that matter. All the information I have about the Equitable is from a sad experience in a little effort made before the regeneration of the company, to secure an additional equitable settlement for an unfortunate client. He thought that he was entitled to a whole lot of dividends, but he did not get them, and when I undertook to find some sort of legal remedy in his behalf, I ran across that miserable case, Greeff vs. Equitable Assurance Society, in 160 N. Y. Reports, where a man had a beautiful contract, and if the company had lived up to it, he would have had a beautiful dividend, but unfortunately they had squandered earnings in wicked salaries and commissions and had put funds that ought to have been out earning interest, into various trust companies so that the directors could get a rake-off. I hope our friend, the Con

gressman, will live a long time to watch over that company, but he may be succeeded by some man that might be weak, and not as strong morally and intellectually as he is, and we want to guard against any such contingency in the future. I am sure that there cannot be many lawyers who believe that the bill here proposed involves in any respect the impairment of a contract. Charles E. Littlefield, of Maine:

Does the gentleman understand that these policies contain an express stipulation that the dividend period shall be deferred? W. R. Vance:

I do not understand exactly what kind of policy you refer to, but the policy I had in mind promised distinctly that the policyholder should have paid to him at the end of his Tontine period such a portion of the earnings of the company as would be apportioned to his policy.

Charles E. Littlefield:

Was there not an express stipulation in the policy that the dividend period should be postponed?

W. R. Vance:

We do not propose that it should be paid except in accordance with the strict terms of the contract; that is all we contend for here, but when the company says that it will pay to the policyholder such a portion of the earnings of the company as shall be properly apportioned to that policy, the company ought to be required to live up to the contract equitably and not to use the earnings for the purpose of paying its officers large salaries and enabling the trust companies to make enormous profits out of the money the company puts into them in the way of special deposits.

Charles E. Littlefield:

May I ask you this question. Assume now that a contract exists between a policy-holder and an insurance company that postpones the dividend period for ten years. Can the company or can the assured change that contract by antedating that period?

W. R. Vance:

That is the easiest question I ever had to answer. No.

Charles E. Littlefield:

Now then, would your bill undertake to change the existing legal status of the parties?

W. R. Vance:

No, sir; not at all.

Charles E. Littlefield:

66

Then let me ask you what you mean by this: Require the. companies to treat their dividend surplus as a liability and not as an asset." Do you mean that?

W. R. Vance:

Yes, sir; precisely.

Charles E. Littlefield:

Very well. If they treat it as a liability and not as an asset and declare a dividend before the contract expires, why don't they change the contract if you get a legal liability?

W. R. Vance:

This imposes merely a trust upon the company which rightfully belongs there, but which as a matter of fact the courts have not heretofore enforced. The courts have decided that until the dividend has been apportioned the company is under no liability in that respect.

Charles E. Littlefield:

Let me ask you this question. I suppose it is the essence of this Tontine proposition that a policy-holder whose policy lapses before the expiration of the deferred dividend period does not get any dividend?

W. R. Vance:

Yes.

Charles E. Littlefield:

And that is a part of the contract that each policy-holder makes?

W. R. Vance:

Yes.

Charles E. Littlefield:

If a dividend is declared as a legal liability is it a thing that may be lawful now and not lawful later?

W. R. Vance:

I do not think that the opportunity exists here for debating this question of constitutional law.

The second point made by Mr. Littlefield is, that the apportionment of this surplus to the policy-holders would approximately bankrupt the company, or at least, would make all of its assets, liabilities. Why, gentlemen, there is absolutely nothing in this proposition that justifies any such fear as that, because the bill which we propose merely provides that the policy-holder shall have such a dividend from the earnings of the company assigned to him as may properly belong to his policy. That would be determined just as in the case of an annual dividend policy; that is, the directors shall assign to him such portion of the earnings of the company as might be properly declared as a dividend. It does not require that the directors shall assign to him all of the earnings of the company. It is recognized, of course, by all business men that it is necessary and proper for a corporation to retain from its earnings a sufficient sum to guard against times of misfortune. That sum is very properly called a surplus. case a proper statement of the assets and liabilities were made, the items that have appeared in the Equitable's statements for instance as surplus would have been put down as contingent liabilities. Of course, the corporation that does not maintain such a proper surplus is recreant to its trust. Now, Mr. Littlefield would not for a moment think of impairing that fund, nor would the committee. It ought always to be maintained and I hope as long as Mr. Littlefield is on the board of directors of the Equitable Company he will see to it that a safe surplus is kept. But do not let him describe as a surplus fund, a fund which in accordance with a fair and equitable interpretation of these contracts belongs really to the policy-holders.

A Member:

In

I would like to be heard briefly on this important resolution.

I will limit my criticism of it although the temptation is very great to make a speech on the actuarial side of the life insurance business. However, I promise to spare you that infliction.

While I am strongly of the opinion that as to some of the insurance contracts this proposed statute would be more to impair them, as Mr. Littlefield has said, I do not wish to base my objection on that ground solely. That it would compel the enactment of such a law as this, that it would compel the companies to test it in spite of their indisposition to rush into litigation, would be a misfortune and would only prolong the existing demoralization of the life insurance business, and the existing conservation of the interests of all policy-holders. As Mr. Littlefield has said, most of these deferred dividend contracts have been most carefully drawn with the very purpose of making it clear that no contract liability shall arise until the time when the dividend is to be ascertained and to become payable, and the bill which compels the companies every year to estimate the amount of what is called the contingent dividend, is certainly requiring them to do something which never was contemplated by the parties. But what I wanted to say was simply to object to the latter part of this resolution, while feeling that the whole of it is unfortunate and I would like to see it defeated. For one, I thoroughly believe in the importance of, if necessary, compelling the life insurance companies to reserve what is called the deferred dividend fund. The law of New York now requires that to be done. It requires our companies to retain and specifically reserve the entire deferred dividend fund. It has to be separately reported. But what we object to is that provision in this resolution which compels the company contingently to apportion to each one of these policy-holders his share in this dividend fund. What should be retained is the entire fund. That by law should be compelled to be made known and the method of its calculation should be enacted. But the moment you compel the recognition of individual policy rights before they have accrued, you introduce disappointment in the result. It is an underlying fallacy, of all life insurance business the difference between a class of people and the rights