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[No. 169.]

AN ACT to define what shall constitute fraternal beneficiary societies, orders or associations; to provide for their incorporation and the regulation of their business, and for the punishment for violations of this act, and to repeal all existing acts or parts of acts inconsistent therewith.

The People of the State of Michigan enact:

SECTION 1. Fraternal benefit societies defined. Any corporation, society, order or voluntary association, without capital stock, organized and carried on solely for the mutual benefit of its members and their beneficiaries, and not for profit, and having a lodge system with ritualistic form of work and representative form of government, and which shall make provision for the payment of benefits in accordance with section five hereof, is hereby declared to be a fraternal benefit society: Provided, That the provision of this section requiring a ritualistic form of work shall not apply to any society heretofore organized under the provisions of act number one hundred nineteen of the public acts of eighteen hundred ninety-three, as amended.

SEC. 2. Lodge system defined. defined. Any society having a supreme governing or legislative body and subordinate lodges or branches by whatever name known, into which members shall be elected, initiated and admitted in accordance with its constitution, laws, rules, regulations and prescribed ritualistic ceremonies, which subordinate lodges or branches shall be required by the laws of such society to hold regular or stated meetings at least once in each month, shall be deemed to be operating on the lodge system.

SEC. 3. Representative form of government defined. Any such society shall be deemed to have a representative form of government when it shall provide in its constitution and laws for a supreme legislative or governing body, composed of representatives elected either by the members or by delegates elected directly or indirectly by the members, together with such other members as may be prescribed by its constitution and laws: Provided, That the elective members shall constitute a majority in number and have not less than two-thirds of the votes, nor less than the votes required to amend its constitution and laws: And Provided further, That the meetings of the supreme or governing body, and the election of officers, representatives or delegates shall be held as often as once in four years. The members, officers, representatives or delegates of a fraternal benefit society shall not vote by proxy.

SEC. 4. Exemptions. Except as herein provided, such societies shall be governed by this act, and shall be exempt from all provisions of the insurance laws of this State, not





Paid-up pro

may grant.

only in governmental relations with the State, but for every other purpose, and no law hereafter enacted shall apply to them, unless they be expressly designated therein.

SEC. 5. Benefits. Sub. 1. Every society transacting business under this act shall provide for the payment of death benefits, and may provide for the payment of benefits in case of temporary or permanent physical disability, either as the result of disease, accident or old age: Provided, The period of life at which the payment of benefits for disability on account of old age shall commence, shall not be under seventy years, and may provide for monuments or tombstones to the memory of its deceased members, and for the payment of last sickness and funeral benefits. Such society shall have the power to give a member, when permanently disabled or on attaining the age of seventy, all, or such portion of the face value of his certificate as the laws of the society may provide: Provided, That nothing in this act contained shall be so construed as to prevent the issuing of benefit certificates for a term of years less than the whole of life which are payable upon the death or disability of the member occurring within the term for which the benefit certificate may be issued. Such society shall, upon written application of the member, have the power to accept a part of the periodical contributions in cash, and charge the remainder, not exceeding one-half of the periodical contribution, against the certificate with interest payable or compounded annually at a rate not lower than four per cent per annum: Provided, That this privilege shall not be granted except to societies which have readjusted or may hereafter readjust their rates of contributions, and to contracts affected by such readjustment.

Sub. 2. Any society which shall show by the annual tection, when valuation hereinafter provided for that it is accumulating and maintaining the reserve not lower than the usual reserve computed by the American Experience Table and four per cent interest, may grant to its members extended and paid-up protection, or such withdrawal equities as its constitution and laws may provide: Provided, That such grants shall in no case exceed in value the portion of the reserve to the credit of such members to whom they are made.




SEC. 6. Beneficiaries. The payment of death benefits shall be confined to wife, husband, relative by blood to the fourth degree, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather, stepmother, stepchildren, children by legal adoption or to a person or persons dependent upon the member: Provided, That if after the issuance of the original certificate the member shall become dependent upon an incorporated charitable institution, he shall have the privilege with the consent of the society to make such institution his beneficiary. Within the above restrictions each member shall have the right to designate his beneficiary, and, from time to time, have the same changed in accordance with

the laws, rules or regulations of the society, and no beneficiary shall have or obtain any vested interest in the said benefit until the same has become due and payable upon the death of the said member: Provided, That any society Proviso. may by its laws limit the scope of beneficiaries within the above classes: Provided further, That where an applicant Further or member has no relative, as above provided, to whom he proviso. may make his certificate payable, in such case he may designate any other person or make his estate his beneficiary.

SEC. 7. Qualifications for membership. Any society may Membership admit to beneficial membership any person not less than qualifications. sixteen and not more than sixty years of age, who has been examined by a legally qualified physician, and whose examination has been supervised and approved in accordance with the laws of the society: Provided, That any bene- Proviso. ficiary member of such society who shall apply for a certificate providing for disability benefits, need not be required to pass an additional medical examination therefor. Nothing herein contained shall prevent such society from accepting general or social members.

SEC. 8. Certificate. Every certificate issued by any such Certificate. society shall specify the amount of benefit provided thereby, and shall provide that the certificate, the charter or articles of incorporation, or, if a voluntary association, the articles of association, the constitution and laws of the society and the application for membership and medical examination, signed by the applicant, and all amendments to each thereof, shall constitute the agreement between the society and the member, and copies of the same certified by the secretary of the society, or corresponding officer, shall be received in evidence of the terms and conditions thereof, and any changes, additions or amendments to said charter or articles of incorporation, or articles of association, if a voluntary association, constitution or laws duly made or enacted subsequent to the issuance of the benefit certificate shall bind the member and his beneficiaries, and shall govern and control the agreement in all respects the same as though such changes, additions or amendments had been made prior to and were in force at the time of the application for membership.

SEC. 9. Funds. Sub. 1. Any society may create, main- Funds. tain, invest, disburse and apply an emergency, surplus or other similar fund in accordance with its laws. Unless otherwise provided in the contract, such funds shall be held, invested, and disbursed for the use and benefit of the society, and no member or beneficiary shall have or acquire individual rights therein or become entitled to any apportionment or the surrender of any part thereof, except as provided in subsection two of section five of this act. The funds from which benefits shall be paid and the funds from which the expenses of the society shall be defrayed shall be derived from periodical or other payments by the members of

Proviso, mortuary obligations.

Fixed liabilities, what

considered as.


Proviso, foreign society.

Distribution of funds.

Number may organize.


the society and accretions of said funds: Provided, That no society shall hereafter be incorporated in this State, which does not provide for stated periodical contributions sufficient to provide for meeting the mortuary obligations contracted, when valued upon the basis of the National Fraternal Congress Table of Mortality as adopted by the National Fraternal Congress, August twenty-third, eighteen hundred ninety-nine, or any higher standard, with interest assumption not more than four per cent per annum, nor shall any such society be admitted to transact business in this State which does not provide for stated periodical contributions sufficient to provide for meeting the mortuary obligations contracted, when valued upon one of the bases named in section twenty-three-a of this act and applicable to such society, nor write or accept members for temporary or permanent disability benefits, except upon tables based upon reliable experience, with an interest assumption not higher than four per cent per annum.

Sub. 2. Deferred payments or installments of claims shall be considered as fixed liabilities on the happening of the contingency upon which such payments or installments are thereafter to be paid. Such liability shall be the present value of such future payments or installments upon the rate of interest and mortality assumed by the society for valuation, and every society shall maintain a fund sufficient to meet such liability regardless of proposed future collections to meet any such liabilities.

SEC. 10. Investments. Every society shall invest its funds only in securities permitted by the laws of this State for the investment of the assets of life insurance companies: Provided, That any foreign society permitted or seeking to do business in this State, which invests its funds in accordance with the laws of the State in which it is incorporated, shall be held to meet the requirements of this act for the investment of funds.

SEC. 11. Distribution of funds. Every provision of the laws of the society for payment by members of such society, in whatever form made, shall distinctly state the purpose of the same and the proportion thereof which may be used for expenses, and no part of the money collected for mortuary or disability purposes or the net accretions of either or any of said funds shall be used for expenses.

SEC. 12. Organization. Seven or more persons, citizens of the United States, and a majority of whom are citizens of this State, who desire to form a fraternal benefit society as defined by this act, may make and sign (giving their addresses) and acknowledge before some officer competent to take acknowledgment of deeds, articles of incorporation, in which shall be stated:

First, The proposed corporate name of the society, which shall not so closely resemble the name of any society or in

surance company already transacting business in this State, as to mislead the public or to lead to confusion;

Second, The purpose for which it is formed which shall Purpose. not include more liberal powers than are granted by this act: Provided, That any lawful, social, intellectual, educa- Proviso. tional, charitable, benevolent, moral or religious advantages may be set forth among the purposes of the society and the mode in which its corporate powers are to be exercised;

Third, The names, residences and official titles of all the officers. officers, trustees, directors or other persons who are to have and exercise the general control and management of the affairs and funds of the society for the first year, or until the ensuing election at which all such officers shall be elected by the supreme legislative or governing body, which election. shall be held not later then [than] one year from the date of the issuance of the permanent certificate.

Such articles of incorporation and duly certified copies of Articles, bond, the constitution and laws, rules and regulations, and copies etc., filing of. of all proposed forms of benefit certificates, applications therefor and circulars to be issued by such society, and a bond in the sum of five thousand dollars, with sureties approved by the Commissioner of Insurance, conditioned upon the return of the advance payments as provided in this section to applicants, if the organization is not completed within one year, shall be filed with the Commissioner of Insurance, who may require such further information as he deems necessary, and if the purposes of the society conform to the requirements of this act, and all provisions of law have been complied with, the Commissioner of Insurance shall so certify and retain and record or file the articles of incorporation, and furnish the incorporators a preliminary certificate

authorizing said society to solicit members as hereinafter provided.

Upon receipt of said certificate from the Commissioner of May solicit Insurance, said society may solicit members for the purpose members. of completing its organization, and shall collect from each applicant the amount of not less than one regular monthly payment, in accordance with its table of rates as provided by its constitution and laws, and shall issue to each such applicant a receipt for the amount so collected. But no such society shall incur any liability other than for such advanced payments, nor issue any benefit certificate nor pay or allow, or offer or promise to pay or allow, to any person any death or disability benefit until actual bona fide applications for death benefit certificates have been secured upon at least five hundred lives for at least one thousand dollars each, and all such applicants for death benefits shall have been regularly examined by legally qualified practicing physicians, and certificates of such examinations have been duly filed and approved by the chief medical examiner of such society; nor until there shall be established ten subordinate lodges or branches into which said five hundred applicants have

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