2013 North Dakota Century Code
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INCORPORATED MUTUAL INSURANCE COMPANIES
26.1-12-01. Organization of mutual insurance company - Minimum number of
Any number of persons, not less than twenty, a majority of whom must be bona fide
residents of this state, may become, together with others who thereafter may be associated with
them or their successors, a body corporate for the purpose of carrying on the business of
mutual insurance as provided in this chapter by complying with this chapter. Any number of
persons, not less than seven, may form a mutual life insurance company and, with others who
may become associated with them or their successors, may become a body corporate for the
purpose of carrying on the business of a mutual life insurance company. A mutual life insurance
company organized under this chapter may carry insurance upon the lives of persons, including
every kind of insurance pertaining thereto.
26.1-12-02. Corporate name - Restrictions.
The name of a mutual insurance company organized under this chapter must contain the
word "mutual". A name which is so similar to any name already in use by any existing
corporation, limited liability company, company, or association organized or doing business in
this state as to be confusing or misleading is not permitted.
26.1-12-03. Articles of incorporation - Contents.
Persons proposing to form a mutual insurance company under this chapter shall subscribe
and acknowledge articles of incorporation specifying:
1. The name of the company and the purpose for which it is to be formed.
2. The location of its principal or home office, which must be within this state.
3. The names and addresses of those composing the board of directors in which the
management is vested until the first meeting of the members.
4. The names and places of residence of the incorporators.
5. The term of existence of the company, which may be perpetual.
26.1-12-04. Articles of incorporation - Filing - Issuance of certificate.
The articles of incorporation or amendments thereto of a mutual insurance company
organized under this chapter must be submitted to the commissioner. If the commissioner
determines the articles or amendments comply with this chapter, the commissioner shall
approve the same. The articles or amendments must be filed in the office of the secretary of
state and a certified copy must be filed with the commissioner. The commissioner shall deliver a
certificate to the company indicating that it has complied with this chapter.
26.1-12-05. Legal existence - Adoption of bylaws - Transaction of business.
The mutual insurance company has legal existence as of the date of the certificate. The
board of directors named in the articles thereafter may adopt bylaws which must be filed with
the commissioner, accept applications for insurance, and proceed to transact company
business. Insurance may not be put into force, however, until the company has been licensed to
transact an insurance business as provided by this chapter.
26.1-12-06. Bylaws of mutual company - Meetings - Notice - Quorum.
The bylaws of any mutual insurance company organized under this chapter must prescribe
the manner of notification to members of all corporation meetings of members and must
prescribe what constitutes a quorum of members. A quorum is those members present in
person or represented by written proxies. A majority of those voting is sufficient to approve or
reject any proposal submitted at any annual or special meeting. Every member of the company
is entitled to one vote only. Every member must be notified of the time and place of the holding
of the meetings of the company by a written notice or by an imprint on each policy, receipt, or
certificate of renewal. In addition, a notice of any annual or special meeting must be published in
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the official newspaper of the county in which the principal office of the company is located. The
notice must be published at least twice, the first publication to be made at least sixty days
before the meeting. If a special meeting of members is called, a notice of the time, place, and
object of the meeting must be mailed to all members at least sixty days before the meeting.
26.1-12-07. Amendment of articles of incorporation - Amendment of bylaws Extension of corporate existence.
The articles of incorporation of a mutual insurance company organized under this chapter
may be amended, its term of corporate existence extended, and its bylaws adopted, amended,
or repealed at any annual meeting of the company, or at any special meeting called for that
purpose, by the affirmative vote of two-thirds of the members voting on the proposition.
26.1-12-08. License required - Prerequisites to issuance of license.
A mutual insurance company organized under this chapter may not issue policies or
transact any insurance business unless it holds a license from the commissioner authorizing the
transaction of insurance business. The license may not be issued unless and until the company
complies with the following conditions:
1. It must hold bona fide applications for insurance upon which it will issue
simultaneously at least twenty policies to at least twenty members for the same kind of
insurance upon not less than two hundred separate risks, each within the maximum
2. It must have collected a premium upon each application. All premiums must be held in
cash or in securities in which insurance companies may invest, and in the case of fire
insurance, must be equal to not less than twice the maximum single risk assumed
subject to one fire nor less than ten thousand dollars, and in any other kind of
insurance as listed in section 26.1-12-11, to not less than five times the maximum
single risk assumed nor less than ten thousand dollars.
3. It must maintain a surplus of at least one million dollars. However, for any company
doing business only in this state, if the minimum assets and surplus requirements
required by this subsection are more than the minimum requirements at the time the
company was issued its original certificate of authority to do business, the company
may maintain assets and surplus which satisfy the requirements in effect at that time.
For all other companies, if the minimum assets and surplus requirements required by
this subsection are more than the minimum requirements required at the time the
company was issued its original certificate of authority, the company shall increase its
surplus of assets over all liabilities according to the following schedule:
a. Two hundred fifty thousand dollars by December 31, 1994.
b. Five hundred thousand dollars by December 31, 1995.
c. Seven hundred fifty thousand dollars by December 31, 1996.
d. One million dollars by December 31, 1997.
26.1-12-09. Temporary capital on organization of mutual life insurance company Retirement.
A mutual life insurance company may be organized with, and an existing mutual life
insurance company may establish, a temporary capital of not less than one hundred thousand
dollars which must be invested in the manner provided for the investment of its other funds. Out
of the net surplus of the company, the holders of the temporary capital stock may receive a
dividend of not more than eight percent per annum, and the dividend may be cumulative. The
capital stock may not be a liability of the company except that it must be retired as soon as, but
not before, the surplus of the company remaining after its retirement will equal at least the
amount of the temporary capital. At the time for the retirement of the capital stock, the holders
must receive from the company the par value thereof and any dividends thereon due and
unpaid, and the stock must be surrendered and canceled, and the right to vote thereon ceases.
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26.1-12-10. Mutual life insurance company - Amount of subscribed insurance
required - Surplus required.
A mutual life insurance company may not issue a policy until not less than two hundred
thousand dollars of insurance in not less than two hundred separate risks have been subscribed
for and entered on its books. The commissioner may not issue a certificate of authority for the
transaction of business to the company unless it has a surplus of assets over all liabilities of at
least one million dollars. A domestic mutual life insurance company shall maintain surplus of at
least this amount. However, for any company doing business only in this state, if the minimum
asset and surplus requirements required by this section are more than the minimum
requirements required at the time a company was issued its original certificate of authority, the
company shall increase its assets and surplus to a minimum of one hundred thousand dollars.
All other companies shall increase their surplus of assets over all liabilities according to the
schedule set out in subsection 4 of section 26.1-12-08.
26.1-12-11. Authority to insure or reinsure - Types of insurance open to mutual
Any mutual insurance company organized under this chapter may make insurance
contracts, and may reinsure or accept reinsurance on any portion thereof, to the extent specified
in its articles of incorporation, for the following lines of insurance:
1. Life and annuity means insurance coverage on human lives, including benefits of
endowment, annuities, and credit life.
2. Accident and health means insurance coverage for sickness, disease, injury,
accidental death, and disability.
3. Property means insurance coverage for direct and consequential loss of or damage to
property of every kind.
4. Casualty means insurance coverage against legal liability, including that for death,
injury, or disability or damage to real or personal property.
5. Variable life and annuity means insurance coverage provided under variable life
insurance contracts, variable annuities, or any other life insurance or annuity that
reflects the investment experience of a separate account.
26.1-12-11.1. Authority to define products.
The product types found under each of the above lines of insurance are those adopted
pursuant to section 26.1-05-02.1.
26.1-12-12. Compliance with general insurance laws - Provisions or conditions in
A mutual insurance company organized under this chapter shall comply with the provisions
of any law applicable to a stock insurance company effecting the same kind of insurance. A
company may insert in any form of policy prescribed by the law of this state any provisions or
conditions required by its plan of insurance which are not inconsistent or in conflict with the law
of this state. The policy may conform to the form prescribed by the law, if the policy includes a
provision or endorsement reciting that the policy is to be construed as if it were in the form
prescribed by the law.
26.1-12-13. Applicability of general insurance laws to mutual companies.
In all respects not specifically provided for in this chapter, mutual insurance companies
organized under this chapter are subject to the provisions of this title relating to insurance
26.1-12-14. Membership in domestic mutual insurance company - Votes of members Notice of meetings.
Every member of a domestic mutual insurance company organized under this chapter is a
member of the company while the policy is in force. A member may be an insured or owner of a
policy as provided in the bylaws of the company. Every member of the company is entitled to
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one vote. Every member must be notified of the time and place of the holding of the meetings of
the company by a written notice or by an imprint on each policy, receipt, or certificate of renewal
The member is hereby notified that by virtue of this policy you are a member of
___________ mutual insurance company, and that the annual meetings of such company
are held at its home office on the ________ day of __________ in each year at _____
When the blanks in the notice are properly filled, the notice is sufficient.
26.1-12-15. Corporations, limited liability companies, associations, boards, and
estates may become member of mutual insurance company - Rights and liabilities.
Any public or private corporation, limited liability company, board, or association in this state
or elsewhere may make applications and enter into agreements for, and hold, policies in any
mutual insurance company organized under this chapter. Any officer, stockholder, trustee,
manager, member, governor, or legal representative of the corporation, limited liability company,
board, association, or the representative of an estate may be recognized as acting for or on its
behalf for the purpose of the membership but is not liable personally upon the insurance
contract by reason of acting in the representative capacity. The right of any corporation or
limited liability company organized under the laws of this state to participate as a member of any
mutual insurance company is declared to be incidental to the purpose for which the corporation
or limited liability company is organized and granted as fully as the rights and powers expressly
conferred upon it.
26.1-12-16. Vote by proxy permitted - Manner of voting by proxy.
Members of a mutual insurance company may vote by proxy dated and executed within
three months prior to the meeting at which the proxy is to be used when returned and recorded
on the books of the company three days or more before the meeting. A person may not as proxy
or otherwise cast more than fifty votes, and an officer, personally or by another, may not ask for,
receive, procure to be obtained, or use, a proxy vote. This section does not apply to a proxy
committee duly established by the bylaws comprised of no less than three members appointed
by the board of directors whose duty is to cast the vote by proxy of members at any duly called
annual or special meeting of the mutual insurance company.
26.1-12-17. Members of mutual company entitled to share of net profits.
Repealed by S.L. 1993, ch. 292, § 49.
26.1-12-18. Premiums and contingent liabilities to be stated in bylaws and on policy Collection of premiums.
A mutual insurance company, other than a mutual life insurance company, shall charge and
collect the full mutual premium upon its policies in cash or in the form of a note. It may fix in its
bylaws the contingent mutual liability of its members for the payment of losses and expenses
not provided for by the cash funds of the company, but the contingent liability of a member, if
any, may not be less than a sum equal, and in addition to, the cash premium written in the
policy. The total amount of the liability of a policyholder must be stated clearly and legibly upon
the face of each policy. A policy may not be issued for a cash premium without an additional
contingent premium unless the company has a surplus which is not less in amount than the
surplus required of domestic stock insurance companies transacting the same kinds of
26.1-12-19. Nonpayment of premiums and contingent liabilities - Effect - Continuation
of liability on mortgage clause policy.
If the premium on a policy issued by a mutual insurance company is not paid in cash or in
an unconditional note within sixty days after the date of issue of the policy, the policy becomes
void and remains void during the period of nonpayment of premium. Upon the payment of the
premium, the policy reattaches if no loss has occurred thereunder while the policy was void. If,
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however, the company has issued a policy with a mortgage clause making loss, if any, payable
to the mortgagee to the extent of the mortgagee's interest and not exceeding the amount of the
policy, the company, notwithstanding the nonpayment of premium or contingent mutual liability,
is liable on the policy to the mortgagee until the secretary of the company has notified the
mortgagee in writing that the premium or contingent mutual liability has not been paid and the
mortgagee has twenty days from the date of the notice in which to pay the same, and in default
of the payment, the liability of the company to the mortgagee ceases.
26.1-12-20. Separate reserves to be maintained for each kind of insurance written by
mutual insurance company.
Every mutual insurance company organized under this chapter shall maintain unearned
premium and other reserves separately for each kind of insurance written by it upon the same
basis as is required of a domestic stock insurance company transacting the same kind of
insurance business. Any reserve for losses or claims based upon the premium income,
however, must be computed upon the net premium income after deducting any so-called
dividend or premium returned or credited to the member.
26.1-12-21. Reserve fund may be established - Limitation - Use.
Any mutual insurance company, at a meeting called for that purpose, may provide for the
accumulation of a permanent fund, in an amount determined from time to time by the board of
directors, by reserving a portion of the net profits for investment as a reserve for the security of
the policyholders. When the fund amounts to five percent of the sum insured by all policies in
force, the whole of the net profits thereafter must be divided among the insureds in cash as
provided in the bylaws of the company. The fund must be used for the payment of losses and
expenses whenever the cash funds of the company in excess of an amount equal to its liabilities
A mutual insurance company organized under this chapter may invest its assets only in
accordance with the provisions of the laws of this state relating to the investment of the assets
of domestic stock companies transacting the same kind or kinds of insurance business.
26.1-12-23. Deficiency in assets - Assessments required.
A mutual insurance company not possessed of assets at least equal to its unearned
premium reserve and other liabilities shall make an assessment upon its members liable to
assessment to provide for the deficiency. The assessment must be made against each such
member in proportion to the member's liability as expressed in the member's policy. The
commissioner, however, may relieve the company, by written order, from any assessment or
other proceedings to restore the assets during the time fixed in the order. The company shall
record in a book kept for that purpose the order for the assessment and a statement setting
forth the condition of the company at the date of the order, the amount of its cash assets and of
the notes of its policyholders or of other contingent funds liable to the assessment, the amount
of the assessment, and the particular losses or other liabilities for which the assessment is
made. The 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 for the assessment may inspect and
take a copy of the record.
26.1-12-24. Making premium reserve good - Assessments - Cancellation of policies Reinsurance.
When, by reason of depreciation or loss of its funds or otherwise, the cash assets of a
mutual insurance company, after providing for its other debts, are less than the required
premium reserve upon its policies, it shall make good the deficiency by assessment in the mode
provided in section 26.1-12-23. If the directors are of the opinion that the company is likely to
become insolvent, the board of directors, instead of the assessment, may make two
assessments, the first determining what each policyholder must equitably pay or receive in case
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of withdrawal from the company and having the policy canceled and the second determining
what further sum each must pay in order to reinsure the unexpired term of the policy at the rate
at which the whole was insured at first. Each policyholder subject to assessment shall pay or
receive according to the first assessment, and the policy then must be canceled unless the
policyholder pays the further sum determined by the second assessment, in which case the
policy continues in force. In neither case, however, may a policyholder receive or have credited
more than the policyholder would have received on having the policy canceled by a vote of the
board of directors under the bylaws. If, within two months after the alternative assessments
have become collectible, the amount of the policies whose holders have settled for both
assessments is less than two hundred thousand dollars, the company shall stop issuing
policies. All policies the holders of which have not settled for both assessments are void, and
the company may continue only for the purpose of adjusting the deficiency or excess of
premiums among the members and settling outstanding claims. No assessment is valid against
a person who has not been notified thereof within two years after the expiration or cancellation
of the policy.
26.1-12-25. Directors and treasurer of mutual insurance company personally liable for
not making and collecting assessments.
If the directors of any mutual insurance company neglect or omit for the space of six months
to lay, or to use reasonable diligence to collect, any assessment which the board of directors is
required to make, they are liable personally for all debts and claims then outstanding against the
company or that may accrue until the assessment is laid and put in process of collection. If the
treasurer of the company unreasonably neglects to collect an assessment made by order of the
board of directors and to apply the assessment to the payment of the claims for which it was
made, the treasurer is liable personally to the parties having the claims for the amount of the
assessment. The treasurer may repay oneself out of any money afterwards received for the
company on account of the assessment.
26.1-12-26. Advance to mutual insurance company - Repayment - Reporting Commission or promotion expense.
Any director, officer, or member of a mutual insurance company, or any other person, may
advance to the company any sum of money necessary for the purpose of its business or to
enable it to comply with any of the requirements of the law, and such moneys, together with any
interest agreed upon, but not exceeding the maximum contract rate, is not a liability or claim
against the company or any of its assets and may be repaid only out of the surplus earnings of
the company. A commission or promotional expense may not be paid in connection with the
advance to the company. The amount of any advance must be reported in each annual
26.1-12-27. Licensing foreign mutual insurance company - Prerequisites.
Any mutual insurance company organized outside of this state and authorized to transact
insurance business on the mutual plan in any state, district, or territory must be admitted and
licensed to transact the kinds of insurance authorized by its charter or articles, to the extent and
with the powers and privileges specified in this chapter and subject to all the provisions of law
relating to information to, and examinations by, the commissioner, the making of annual reports,
the payment of taxes, and the renewal of licenses applicable to stock insurance companies
transacting the same kinds of insurance business except as otherwise provided in this chapter,
when it is solvent under this chapter and when it has:
1. Filed with the commissioner a certified copy of its charter or articles of association;
2. Filed with the commissioner a copy of its bylaws certified by its secretary;
3. Appointed the commissioner its agent for the service of process in any action, suit, or
proceeding in any court of this state, for as long as any liability remains outstanding in
4. Filed a financial statement under oath, in the form required by the commissioner, and
complied with other provisions of law applicable to the filing of papers and furnishing
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information by stock companies on application for authority to transact the same kind
of insurance business;
Made and maintained, if organized without the United States, the deposit required of
stock insurance companies formed without the United States transacting the same
kinds of insurance business;
Adopted a name which is not so similar to a name already in use by an existing
corporation, limited liability company, company, or association organized or licensed in
this state as to be confusing or misleading; and
Accumulated assets in excess of all of its liabilities in an amount not less than five
hundred thousand dollars, except if the minimum surplus requirement for the company
is more than the minimum requirement provided by this subsection at the time the
company was originally issued a license to do business, the company may maintain
surplus which satisfies the requirements in effect at that time.
26.1-12-28. Annual statements and examinations of mutual insurance companies.
Every mutual insurance company doing business in this state shall make its annual
statement and report in the form and submit to the examinations and furnish the information
required by the commissioner. As far as practicable, examinations of foreign mutual insurance
companies must be made in cooperation with the insurance departments of other states, and
the forms of annual reports must be such as are in general use throughout the United States.
26.1-12-29. Dividends payable by mutual insurance company.
Any mutual insurance company writing fire, accident, or other forms of insurance protection
on its own motion or at the request of policyholders may pay dividends to the different classes of
policyholders based upon the losses sustained as compared with the income received from
those engaged in a particular trade, occupation, or profession.
26.1-12-30. Determination of dividends.
In determining the rate of dividend due a given trade, occupation, or profession, if the
dividend is allowed, the income received and losses sustained must be tabulated for a period of
not less than five years immediately preceding the determination of the dividend rate, and the
return dividend to policyholders must be based upon the experience of such period after
deduction for expenses and allowances for reserves as required by law.
26.1-12-31. Taxable premiums of mutual insurance company.
For the purposes of taxation under the laws of this state, the taxable premiums or premium
receipts of a mutual insurance company organized or admitted to do business in this state are
the gross premiums received for direct insurance upon property or risks in this state less:
1. Any amount paid for reinsurance upon which a tax has been, or is to be, paid to this
2. Premiums upon policies not accepted.
3. Premiums returned on canceled policies.
4. Any refund or return made to the policyholder other than for losses.
26.1-12-32. Demutualization of domestic mutual insurance companies - Rules.
The insurance commissioner may adopt rules necessary to provide for the orderly and
equitable demutualization of domestic insurance companies. Rules adopted must provide for
the requirements to be included in a plan of conversion; guarantee that policyholders receive an
equitable share of the surplus or stock, or both, of the company being demutualized; address
the compensation paid to any person providing services relating to the proposed demutalization;
and establish a procedure for the commissioner's approval of a plan for conversion prior to the
adoption of such a plan by the company's policyholders.
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Title 26.1 Insurance
Chapter 26.1-12 Incorporated Mutual Insurance Companies
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