Repository: UIHistories Project: Board of Trustees Minutes - 1944 [PAGE 31]

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BOARD OF TRUSTEES

[July 25

go to stock companies. The principal problem with respect to placing insurance with stock companies is that the rates of all are similar and it is difficult to determine to what agencies it should be awarded."

On motion of Mr. Cleary, this matter was referred to the Committee on General Policy for study and recommendation, and the following opinion of the Attorney General, given under date of June 29, 1942, in response to a request from the President of the Board dated February 2, 1942, was received for record.

June 29, 1042 The Board of Trustees, University of Illinois, Urbana, Illinois.

GENTLEMEN :

I am in receipt of your letter of recent date in which you ask my opinion as to whether or not the University of Illinois, by and through its board of trustees, may insure University property in mutual insurance companies under nonassessable policies of insurance. Your letter further states that the policies contain, in substance, the following provisions: "The assured shall under no circumstances be subject to assessment," and "The company having complied with statutory requirements relative to the issuance of nonassessable policies of insurance, limits the insured's liability hereunder to the premium as herein provided." T h e Illinois Insurance Code by section 55 thereof authorizes mutual insurance companies (other than life) to issue policies of insurance without contingent liability, that is, nonassessable policies, under certain conditions. Said section 55 (Chap. 73, Par. 667, 111. Rev. Stats. 1941) provides in part as follows: "If a mutual company other than life shall have a surplus equal to the minimum capital and surplus required in section 13, for a stock company transacting the same kind or kinds of business, such company may issue policies without contingent liability." Whether or not a mutual insurance company has complied with the provisions of the Illinois Insurance Code so as to be eligible to issue nonassessable policies would be purely a matter of investigation of each particular company. Section 58 of the Illinois Insurance Code (Chap. 73, Par. 670, 111. Rev. Stats. 1941) provides in part as follows: "Any government or governmental agency, state or political subdivision thereof, public or private corporation, board, association, estate, trustee or fiduciary in this State or elsewhere, may make application, enter into agreements for and hold policies or contracts in or with, and be a member of, any domestic, foreign or alien mutual company subject to the provisions of this Code." The University of Illinois being a public corporation and an instrumentality of the State (People v. Board of Trustees, 283 111. 494), is specifically given the right to purchase policies of insurance in a mutual insurance company in accordance with the above quoted statute. If a nonassessable policy of insurance issued by a mutual insurance company is in fact nonassessable upon the payment of the specific premium, the purchase of the same by an instrumentality of the State is not objectionable as being in violation of section 20 of Article I V or section 18 of Article I V of the Constitution of the State of Illinois as creating a debt against the State. While the courts of this State have never passed upon the right of the State or its instrumentalities to insure in mutual companies under nonassessable policies, the authorities in other States have held that such a purchase of insurance does not violate the constitutional provision that the State shall never pay, assume or become responsible for the debts or liabilities of, or in any manner give, loan or extend its credit to or in aid of any public or other corporation, association or individual. (Sec. 20, Art. IV, Constitution of the State of Illinois.) In the case of Johnson v. School District No. 1, 128 Ore. 9, the mutual policy involved was issued under a statute similar to that existing in Illinois