Also known as: insurance premiums · premium
Written by attorneys — see sources below.
A sum paid by an insured to an insurer in return for the insurer's promise to provide coverage against specified losses or liabilities.
Iain Irons borrowed from Ironwood Capital to buy a home and the mortgage required him to maintain casualty insurance. After five years Iain paid the remaining principal plus all accrued interest and the final insurance premium installment directly to the lender. Ironwood Capital executed and recorded a satisfaction of mortgage releasing the lien on the property.
Irene Ingalls purchased an auto policy from Allstate while living in Minnesota and later moved to Wisconsin. When a claim arose Allstate argued Minnesota law governed the premium payment obligations. The Supreme Court examined whether Minnesota had sufficient contacts to apply its rules to the premium dispute.
Ralph Hague, a Wisconsin resident who had been employed in Red Wing, Minnesota, for the fifteen years preceding his death, died of injuries suffered when a motorcycle on which he was a passenger was struck from behind by an automobile. The accident occurred in Pierce County, Wisconsin, immediately across the Minnesota border from Red Wing. The operators of both vehicles were Wisconsin residents, as was the decedent, who resided with respondent in Hager City, Wisconsin. Mr. Hague held a policy issued by petitioner Allstate Insurance Co. covering three automobiles owned by him. The policy contained an uninsured motorist clause insuring him against loss incurred from accidents with uninsured motorists. The uninsured motorist coverage was limited to $15,000 for each automobile. After the accident, respondent moved to Red Wing, Minnesota. She subsequently married a Minnesota resident and established residence with her new husband in Savage, Minnesota. At approximately the same time, a Minnesota Registrar of Probate appointed respondent personal representative of her deceased husband’s estate. Following her appointment, she brought this action in Minnesota District Court seeking a declaration under Minnesota law that the $15,000 uninsured motorist coverage on each of her late husband’s three automobiles could be stacked to provide total coverage of $45,000. Allstate defended on the ground that whether the three uninsured motorist coverages could be stacked should be determined by Wisconsin law. Allstate pointed out that the insurance policy was delivered in Wisconsin, the accident occurred in Wisconsin, and all persons involved were Wisconsin residents at the time of the accident. The Minnesota District Court interpreted Wisconsin law to disallow stacking. Nevertheless, the court concluded that Minnesota’s choice-of-law rules required the application of Minnesota law permitting stacking. The court refused to apply Wisconsin law as inimical to the public policy of Minnesota and granted summary judgment for respondent. The Minnesota Supreme Court, sitting en banc, affirmed the District Court. The court interpreted Wisconsin law to prohibit stacking and applied Minnesota law after analyzing the Minnesota contacts and interests within the analytical framework developed by Professor Leflar. The United States Supreme Court granted certiorari to determine whether the Due Process Clause of the Fourteenth Amendment or the Full Faith and Credit Clause bars the Minnesota Supreme Court’s choice of substantive Minnesota law.
View caseUnitrin's board adopted a poison pill that would dilute any acquirer. American General offered a cash price that included an amount reflecting the value of Unitrin's insurance operations. The Delaware court evaluated whether the pill was a proportionate response when the offer included payment of the next insurance premium installment on the subsidiary policies.
In January 1994, James Tuerff, the president of American General, met with Richard Vie, Unitrin’s chief executive officer, to discuss American General potentially acquiring other companies including Unitrin. Vie replied that Unitrin had excellent prospects as an independent company and had never considered a merger, indicating that Unitrin was not for sale. The Unitrin Board confirmed this position at its February 1994 meeting. On July 12, 1994, American General sent a letter to Vie proposing a consensual merger transaction in which it would purchase all of Unitrin’s 51.8 million outstanding shares of common stock for $50.50 per share, in cash. The Offer price represented a 30% premium over the market price of Unitrin’s shares. The offer was conditioned on development of a merger agreement and regulatory approval. American General stated it would consider offering a higher price or tax-free alternatives if Unitrin could demonstrate additional value. Upon receiving the offer, the Unitrin Board’s Executive Committee engaged legal counsel and scheduled a telephonic Board meeting for July 18. The Unitrin Board met for seven hours on July 25, 1994, in Los Angeles with all directors present. Vie reviewed Unitrin’s financial condition and ongoing business strategies while Morgan Stanley presented its opinion that the offer was financially inadequate and legal counsel raised antitrust concerns about the combination. The Board unanimously concluded that the merger proposal was not in the best interests of Unitrin’s shareholders and voted to reject the offer. Vie sent a letter to American General stating that Unitrin was not for sale and had the financial capacity to pursue all avenues the Board considered appropriate. On August 2, 1994, American General issued a press release announcing its offer, after which trading volume and the market price of Unitrin stock increased. At its regularly scheduled meeting on August 3, the Unitrin Board viewed the public announcement as a hostile act designed to coerce a sale at an inadequate price. The Board unanimously approved a shareholder rights plan and an advance notice bylaw provision. Between August 2 and August 12, Unitrin issued a series of press releases asserting that its stock was undervalued and that the Board had adopted a poison pill. On August 11, 1994, the Unitrin Board met to consider the Repurchase Program after receiving materials from Morgan Stanley that recommended an open market stock repurchase. The Board voted to authorize the repurchase of up to ten million shares of its outstanding stock. Unitrin publicly announced the Repurchase Program on August 12, noting that the directors who owned 23 percent of the stock would not participate. The company’s certificate of incorporation included a supermajority voting provision. By noon on August 24, Morgan Stanley had purchased nearly five million shares on Unitrin’s behalf at an average price slightly above the offer price. American General and Unitrin shareholder plaintiffs filed suit in the Court of Chancery seeking to enjoin the Repurchase Program. On August 26, 1994, the Court of Chancery temporarily restrained Unitrin from making any further repurchases. After expedited discovery, briefing, and argument, the Court of Chancery entered a preliminary injunction on October 13, 1994, enjoining further repurchases on the ground that the Repurchase Program was a disproportionate response. The Court of Chancery certified an interlocutory appeal on October 24, 1994, which this Court accepted on October 27, 1994.
View caseImani Idowu operated a small business and objected to the requirement that she obtain health insurance or pay a penalty. The statute treated the required payment as a premium for minimum essential coverage. The Court upheld the provision as a valid exercise of the taxing power rather than a direct command to buy insurance.
In 2010 Congress enacted the Patient Protection and Affordable Care Act containing hundreds of provisions across ten titles. The Act requires most Americans to maintain minimum essential health insurance coverage beginning in 2014 or else make a shared responsibility payment calculated as a percentage of household income subject to a floor and ceiling. The Act also expands Medicaid by requiring participating states to cover adults with incomes up to 133 percent of the federal poverty level while increasing federal funding but threatening loss of all Medicaid funds for noncompliance. On the day the President signed the Act Florida and twelve other states filed suit in the United States District Court for the Northern District of Florida challenging the individual mandate provisions under Article I. The original plaintiffs were later joined by eighteen additional states several individuals and the National Federation of Independent Business. The District Court held that the individual mandate exceeded congressional power and could not be severed from the remainder of the Act so it struck down the entire statute. The Court of Appeals for the Eleventh Circuit affirmed that the individual mandate exceeded congressional power but held the provision severable from the rest of the Act while unanimously upholding the Medicaid expansion. Other courts of appeals reached conflicting results on the mandate with the Sixth Circuit and the D.C. Circuit upholding it under the commerce power and the Fourth Circuit applying the Anti-Injunction Act to bar review. The Supreme Court granted certiorari to review the Eleventh Circuit judgment on both the individual mandate and the Medicaid expansion and appointed amici curiae to address severability and the Anti-Injunction Act. The penalty for noncompliance with the individual mandate first becomes enforceable in 2014. The present suit seeks to restrain its future collection. The Act describes the payment as a penalty rather than a tax. It directs that the payment be assessed and collected in the same manner as taxes but bars the IRS from using criminal prosecutions or levies to enforce it.
View caseHome Building & Loan held a mortgage on Igor Ito's farm and the loan documents required Ito to keep casualty insurance in force. During the Depression the state imposed a moratorium preventing foreclosure even though Ito had missed several premium payments. The Court examined whether the moratorium unconstitutionally impaired the lender's contractual rights.
The Blaisdells executed a mortgage on their property in Minneapolis to the Home Building & Loan Association on August 1, 1928. The mortgage contained a valid power of sale by advertisement. After default, the mortgage was foreclosed and the property sold to the Association on May 2, 1932, for $3700.98. The period of redemption under the law then in effect was set to expire on May 2, 1933. On April 18, 1933, Minnesota enacted Chapter 339 of the Laws of 1933, known as the Mortgage Moratorium Law. The statute authorized district courts to extend the period of redemption from foreclosure sales for such additional time as the court deemed just and equitable, not beyond May 1, 1935, upon condition that the mortgagor pay a reasonable part of the income or rental value toward taxes, insurance, interest, and principal. The Blaisdells applied to the District Court of Hennepin County for an extension of the redemption period. The district court found that the reasonable rental value of the property was $40 per month and the present market value was $6000. It extended the redemption period to May 1, 1935, requiring the Blaisdells to pay $40 per month to the Association. The Supreme Court of Minnesota affirmed the order. The Home Building & Loan Association appealed to the United States Supreme Court, which reviewed the judgment sustaining the statute as applied to the preexisting mortgage.
View caseVirginia Bankshares directors recommended a merger that would cash out minority shareholders. The proxy statement failed to disclose that the controlling shareholder had received a separate payment covering the upcoming insurance premium on the subsidiary's policies. Minority shareholders sued alleging the omission rendered the solicitation materially misleading.
In December 1986, First American Bankshares, Inc. (FABI), a bank holding company, began a freeze-out merger in which the First American Bank of Virginia (Bank) eventually merged into Virginia Bankshares, Inc. (VBI), a wholly owned subsidiary of FABI. VBI owned 85 percent of the Bank's shares, with the remaining 15 percent held by approximately 2,000 minority shareholders. FABI hired the investment banking firm of Keefe, Bruyette & Woods (KBW) to opine on the appropriate price for the minority shares. Based on market quotations and unverified information from FABI, KBW advised the Bank's executive committee that $42 per share would be a fair price. The executive committee approved the merger proposal at that price, and the full board followed suit. Although Virginia law required only that the merger proposal be submitted to a vote at a shareholders' meeting preceded by circulation of a statement of information, the directors solicited proxies for voting on the proposal at the annual meeting set for April 21, 1987. In the solicitation, the directors urged adoption of the proposal and stated they had approved the plan because it provided an opportunity for the minority shareholders to achieve a high value for their shares, which they elsewhere described as a fair price. Respondent Sandberg, a minority shareholder who did not provide the requested proxy, filed suit in the United States District Court for the Eastern District of Virginia against VBI, FABI, and the Bank's directors. She alleged violations of section 14(a) and Rule 14a-9. She also alleged breaches of fiduciary duties under state law. Sandberg claimed the directors did not believe the $42 price was high or the merger terms fair but recommended the merger only to retain their board seats. At trial, the jury returned verdicts for Sandberg on both counts and awarded her $18 per share after finding she would have received $60 if the stock had been valued adequately. While Sandberg's case was pending, other minority shareholders including respondent Weinstein filed a similar action in the United States District Court for the District of Columbia. That case was transferred to the Eastern District of Virginia. After Sandberg's trial, the Weinstein respondents obtained summary judgment on liability through collateral estoppel. On appeal, the United States Court of Appeals for the Fourth Circuit affirmed the judgments, holding that certain statements in the proxy solicitation were materially misleading and that the respondents could maintain their action even though their votes had not been needed to effectuate the merger. The Supreme Court granted certiorari.
View caseThe partner becomes a creditor of the partnership for the amount advanced. In winding up the partnership must apply its assets to pay all creditor claims including the partner's reimbursement claim before any surplus is distributed to partners as owners.
The partnership is liable when the general partner receives the funds while acting with actual or apparent authority in the ordinary course of the partnership's insurance brokerage business and then diverts them. The client may sue the partnership directly for the loss.
Yes when the corporation is thinly capitalized and the owner diverts most premium dollars to an affiliated entity for personal benefit. That combination shows the corporation was operated as an alter ego used to externalize risk and supports holding the owner personally liable.