from serving the term he was chosen for by reason of the expiration or cancellation of his policy. In companies with a guaranty capital, one-half of the directors shall be chosen by and from the stockholders.

C. S., s. 6349; Rev., s. 4739; 1899, c. 54, s. 33.

744. Mutual fire companies with a guaranty capital. A mutual fire insurance company formed as provided in this article, or a mutual fire insurance company now existing, may establish a guaranty capital or surplus of not less than twenty-five thousand dollars nor more than two hundred thousand dollars, divided into shares of one hundred dollars each, which shall be invested in the same manner as is provided in this subchapter for the investment of the capital stock of certain insurance companies. The stockholders of the guaranty capital of a company or owners of guaranty surplus are entitled to a semiannual dividend of not more than three and one-half per centum on their respective shares if the net profits or unused premiums left after all expenses, losses, and liabilities then incurred, together with the reserve for reinsurance, as provided for, are sufficient to pay the same. The guaranty capital or surplus shall be applied to the payment of losses only when the company has exhausted its cash in hand and the invested assets, exclusive of uncollected premiums, and when thus impaired, the directors may make good the whole or any part of it by assessments upon the contingent funds of the company at the date of such impairment. Shareholders and members of such companies are subject to the same provisions of law in respect to their right to vote as apply respectively to shareholders in stock companies and policyholders in purely mutual companies. This guaranty capital or surplus shall be retired when the permanent fund of the company equals two per centum of the amount insured upon all policies in force, and may be reduced or retired by vote of the policyholders of the company and the assent of the insurance commissioner, if the net assets of the company above its reinsurance reserve and all other claims and obligations, exclusive of guaranty capital or surplus, for two years immediately preceding and including the date of its last. annual statement, is not less than twenty-five per centum of the guaranty capital or surplus. Due notice of such proposed action on the part of the company must be mailed to each policyholder of the company not less than thirty days before the meeting when the action may be taken, and must also be advertised in two papers of general circulation, approved by the insurance com

missioner, not less than three times a week for a period of not less than four weeks before such meeting. No insurance company with a guaranty capital or surplus, which has ceased to do new business, shall divide to its stockholders any part of its assets or guaranty capital or surplus, except income from investments, until it has performed or canceled its policy obligations.

C. S., s. 6350; Rev., s. 4740; 1899, c. 54, s. 34; 1911, c. 196, s. 3.

745. Dividends and assessments; liability of policyholders. The directors of a mutual fire insurance company may from time to time by vote fix and determine the amount to be paid as a dividend upon policies expiring during each year. Each policyholder is liable to pay his proportional share of any assessments which are made by the company in accordance with law and his contract on account of losses incurred while he was a member, if he is notified of such assessments within one year after the expiration of his policy. Any mutual fire insurance company doing business with a fixed annual premium may in its by-laws and policies fix the contingent liability of its members for the payment of losses and expenses not provided for by its cash funds; but this contingent liability of a member must not be less than a sum equal to five times the cash premiums written in his policy and in addition thereto. The total amount of the liability of the policyholder must be plainly and legibly stated upon the back of each policy. Whenever any reduction is made in the contingent liability of members, it applies proportionately to all policies in force.

C. S., s. 6351; Rev., s. 4741; 1899, c. 54, s. 35.

746. Mutual and assessment companies and their liability. When any policy of insurance is issued by any mutual insurance company or association organized under the laws of this state and such policy is assigned or pledged as collateral security for the payment of a debt, such company or association, by its president and secretary or other managing officers, may insert in such policy so assigned or pledged, or attach thereto, as a rider thereon, a provision or provisions to be approved by the insurance commissioner, whereby any or all conditions of the policy which work a suspension or forfeiture and especially the provisions of the statute which limits such corporation to insure only property of its members, may be waived in such cases for the benefit of the assignee or mortgagee. In case any such company or association shall consent to such assignment of any policy or policies, or the proceeds thereof, it may nevertheless

at any time thereafter, by its president and secretary or such other officer as may be authorized by the board of directors, cancel such policy by giving the assignee or mortgagee not less than ten days notice in writing: Provided however, a longer period may be agreed upon by the company or association and such assignee or mortgagee. And the president and secretary of such company or association, with the approval of the insurance commissioner, may agree with the assignee or mortgagee upon an assessment or premium to be paid to the insurer in case the insured shall not pay the same, which shall not be less than such a rate or sum of money as may be produced by the average assessments or premiums made or charged by like company or association during a period of five years next preceding the year of such agreement and assignment. When an assignment is made as herein provided the policy or policies so assigned or pledged, subject to the conditions herein, shall remain in full force and effect for the benefit of the assignee or mortgagee, notwithstanding the title or ownership of the assured to the property insured, or to any interest therein, shall be in any manner changed, transferred or encumbered.

C. S., s. 6351-a; 1920, c. 79.

747. Guaranty against assessments prohibited. If any director or other officer of a mutual fire insurance company, either officially or privately, shall give a guarantee to a policyholder thereof against an assessment to which such policyholder would otherwise be liable, he shall be punished by a fine not exceeding one hundred dollars for each offense.

C. S., s. 6352; Rev., s. 3496; 1899, c. 54, s. 100.

748. Manner of making assessments; rights and liabilities of policyholders. When a mutual fire insurance company is not possessed of cash funds above its reinsurance reserve sufficient for the payment of insured losses and expenses, it must make an assessment for the amount needed to pay such losses and expenses upon its members liable to assessment therefor in proportion to their several liabilities. The company shall cause to be recorded in a book kept for that purpose the order for the assessment, together with a statement which must set forth the condition of the company at the date of the order, the amount of its cash assets and deposits, notes, or other contingent funds liable to the assessment, the amount the assessment calls for, and the particular losses or liabilities it is made to provide for. This record must be made and signed by the directors who voted

for the order before any part of the assessment is collected, and any person liable to the assessment may inspect and take a copy of the same. When, by reason of depreciation or loss of its funds or otherwise, the cash assets of such company, after providing for its other debts, are less than the required premium reserve upon its policies, it must make good the deficiency by assessment in the manner above provided. If the directors are of the opinion that the company is liable to become insolvent they may, instead of such assessment, make two assessments, the first determining what each policyholder must equitably pay or receive in case of withdrawal from the company and having his policy canceled; the second, what further sum each must pay in order to reinsure the unexpired term of his policy at the same rate as the whole was insured at first. Each policyholder must pay or receive according to the first assessment, and his policy shall be canceled unless he pays the sum further determined by the second assessment, in which case his policy continues in force; but in neither case may a policyholder receive or have credited to him more than he would have received on having his policy canceled by a vote of the directors under the by-laws.

C. S., s. 6353; Rev., s. 4742; 1899, c. 54, ss. 36, 37.

Mandamus § 136. Where, after judgment against a mutual fire insurance company in an action on a policy, it refuses to make an assessment on its members necessary in order to raise funds with which to pay the judgment, the policyholder may have mandamus to compel such assessment.-Perry v. Farmers' Mut. Fire Ins. Co., 132 N. C. 283, 43 S. E. 837.

Insurance § 191. Where the members of mutual insurance companies have enjoyed the protection which membership affords, they cannot, after a loss has been sustained, withdraw and refuse to pay their portion of the loss.-Perry v. Farmers' Mutual Fire Ins. Co., 139 N. C. 374, 51 S. E. 1025.

Insurance § 125. All contracts and by-laws of an incorporated society are made with reference to the general law, and they must conform to certain general requirements in respect to vested personal and property rights of members.-Sherrod v. Farmers' Mutual Fire Ins. Co., 139 N. C. 167, 51 S. E. 910.

749. Mutual life and health companies. Life and health insurance companies and associations organized in this state to do business on the mutual plan shall be governed as to the commencement of business, election of members, guaranty capital, dividends, and assessments as provided in this article for mutual fire insurance companies, where applicable.

C. S., s. 6354; Rev., s. 4743; 1903, c. 536, s. 1.

750. Dividends on, and redemption of, guaranty capital of life companies. The stockholders of the guaranty capital of any

domestic life insurance company are entitled to such annual dividends not exceeding eight per centum, payable from the net surplus, as have been agreed upon in the subscription thereof. Such company may redeem its guaranty capital by appropriation of net surplus for that purpose whenever its members so vote. C. S., s. 6355; Rev., s. 4744; 1899, c. 54, s. 58; 1903, c. 438, s. 5.

ART. 9. ASSESSMENT COMPANIES.

751. Copies of charter and by-laws filed. Every corporation, society, or organization of this or any other state or country, transacting business under this department upon the co-operative or assessment plan, must file with the insurance commissioner, before beginning to do business in this state, a copy of its charter or articles of association, and the by-laws, rules, or regulations referred to in its policies or certificates and made a part of such contract. By-laws or regulations not so filed with the insurance commissioner will not avoid or affect any policy or certificate issued by such company or association.

C. S., s. 6356; Rev., s. 4790; 1899, c. 54, s. 86.

See Brenizer v. Royal Arcanum, 141 N. C. 409, 53 S. E. 835.

752. Contracts must accord with charter and by-laws. Every policy or certificate or renewal receipt issued to a resident of this state by any corporation, association, or order transacting therein the business of insurance upon the assessment plan must be in accord with the provisions of the charter and by-laws of such corporation, association, or order, as filed with the insurance commissioner. It is unlawful for any such domestic or foreign insurance company or fraternal order to transact or offer to transact any business not authorized by the provisions of its charter and the terms of its by-laws, or, through an agent or otherwise, to offer or issue any policy, renewal certificate, or other contract whose terms are not in clear accord with the powers, terms, and stipulations of its charter and by-laws.

C. S., s. 6357; Rev., s. 4791; 1899, c. 54, s. 84; 1903, c. 438, s. 9. Insurance § 719. Since no law prohibits fraternal benefit society from raising its rates, but above section makes such contracts subject to the charter and by-laws of the company, a Massachusetts company, whose charter and by-laws permit, may raise the rate of a North Carolina member.-Hollingsworth v. Supreme Council of the Royal Arcanum, 175 N. C. 615, 96 S. E. 81.

753. "Assessment plan" printed on application and policy. Every policy or certificate issued to a resident of the state by