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Michigan Supremes Uphold Victory for Mutual Insurers

NAMIC Friend of the Court Brief Argues that Mutual Insurers not Compelled to Issue Dividends

INDIANAPOLIS (July 29, 2004)--The Michigan Supreme Court let stand an appeals court ruling that a mutual insurance company's policyholders cannot compel the company to issue dividends, absent any bylaw, statutory or contact provision according such a right.

The National Association of Mutual Insurance Companies (NAMIC) had filed a friend of the court brief in Churella v. Pioneer State Mutual, arguing that the court recognize a significant difference between stock and mutual insurance companies regarding their operation and governance, and that mutual boards are in the best position to address adequacy of policyholder surplus and financial soundness subject to regulatory oversight.

"In this particular case, our amicus brief argued that there is no basis in the insurance policy, articles and bylaws of the company, Michigan statutes or case law that supports the policyholders' claim of a right to compel dividends of a mutual insurance company's surplus," said NAMIC General Counsel Gregg A. Dykstra.

"NAMIC also argued that the position advocated by the plaintiff is contrary to the public policy of Michigan regarding the rational and effective regulation of insurance companies by the Insurance Commissioner and the efficient operation of mutual insurance companies in particular," Dykstra said.

"NAMIC feels it's not for a court and a class of policyholders to determine on their own if there's too much surplus for a single company," summed Dykstra.

In a clear victory for mutual insurers, the court wrote "while the purpose of a business corporation is to distribute profits to its shareholders, the purpose of a mutual insurance company is to provide affordable coverage to its members."

"The amicus curiae (friend of the court) brief process enables entities with relevant knowledge to participate in the proceedings by providing factual and persuasive information that addresses issues important to our member companies," concluded Dykstra.

More information is available at NAMIC Online.

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For further information contact:
Robert Detlefsen at rdetlefsen@namic.org
or (317) 875-5250