this company were unsuccessful in securing business in competition with representatives of the Physicians Guarantee Company, they pursued similar underhanded tactics to those tried in other states. They brought the matter to the attention of the insurance department and received from the commissioner a ruling to the effect that the Physicians Guarantee Company had not complied with the insurance laws of Minnesota and for this reason was illegally doing business in that state, and threatened the arrest of our representative under the insurance laws.

The company took up the matter with Commissioner Dearth, presenting to him the facts that the company was incorporated under the Voluntary Association acts of the state of Indiana; that it was not incorporated as an insurance company in its home state; that it was not considered as doing an insurance business by the insurance department of any state except Minnesota, producing rulings of the various commissioners to this effect; demonstrating that its contract was one for services and not one for indemnity; that it had complied with the foreign corporation laws and had been admited as such by the secretary of the state of Minnesota; for all of which reasons his ruling was erroneous, arbitrary and unjust. The commissioner was deaf to all argument and reason, and arbitrarily maintained his position. The company then sought legal redress and planned to bring, as it had done in other states, a mandamus action against the department. Upon consultation with its attorneys in Minnesota, O'Brien & O'Brien, of St. Paul, and, after careful examination of the statutes, it was ascertained that Minnesota occupied the unique position of having a law which prohibited bringing a mandamus action against any state official. Under these conditions the company was placed in an embarrassing position, for the only manner in which the matter could be brought to the attention of the courts was to have a representative arrested by the insurance department and prosecuted for violating the insurance laws. This the company hesitated to do, for the reason that it might be some time before a decision could be obtained from a higher court, and during the interval our competitors would use the fact in attempting to secure our contract holders as patrons of their own companies.

In the meantime the Physicians Guarantee company was reincorporated under the name of the Physicians Defense Company, with absolutely no change in its organization so far as its right to do business as a foreign corporation was concerned. The management of the new company decided to contest the ruling of Insurance Commissioner Dearth, and for this purpose

sent a special representative to St. Paul. The company's representative and attorneys called on the commissioner and explained that if he still persisted in his unjust and arbitrary ruling, that we desired to make a test case of the matter, and that our representative was here for the purpose of being arrested. When the commissioner found that the company did not propose to longer submit to his prejudiced opinion, he referred the matter to the attorney general, Hon. W. B. Douglass. The attorney general, after giving the company's Articles of Incorporation and Contract for Defense careful investigation, rendered a written opinion to the insurance commissioner to the effect that: "This corporation is not an insurance company under the definition of insurance adopted by the legislature of Minnesota, and the company is not required, as a basis for doing business in Minnesota, to obtain a license from your department. The rule is well settled in this state that the nature of the corporation must be determined from its articles of incorporation. The power of the Physicians Defense Company may be found in that portion of article two, which reads as follows:

""The association shall issue to physicians and surgeons for stated and agreed compensation, contracts by which it will undertake and agree to defend the holder of the contract at its own expense, against any action brought against him for damages for alleged malpractice in relation to or connection with services performed, or which should have been performed within the time covered by the contract. But the Association shall not in any defense contract issued by it assume or pay any judgment for damages for malpractice rendered against the holder of such contract.'

"The terms of the contract enclosed are consistent with the powers in the articles quoted. In brief, the company agrees, in consideration of a certain sum, to furnish its attorney and also employ a local attorney, in whose selection the holder shall have a choice, and defend any civil action which may be brought against him during the specified time. The contract expressly provides that the company does not obligate itself to pay any judgment which may be rendered against such holder, or the amount of any damage which he may, as a physician, inflict. In brief, the company is empowered to and does enter into contract with physicians of this state to furnish them and pay for the services of an at

torney in actions of malpractice which may be instituted.
In my judgment this does not make it an insurance com-
pany within the definition adopted by our Legislature,
which has defined a contract of insurance, as follows:

"An agreement by which one party, for a consider-
ation, promises to pay money or its equivalent, or to do
some act of value to the assured upon the destruction or
injury of something in which the other party has an in-
terest.'

"This is universally construed as an agreement
to reimburse the assured for damages resulting from the
destruction of or injury to his property. A foreign cor-
poration undertaking to do an insurance business as thus
defined is required to take out a license therefor. It
seems to me clear that an agreement of the company
under consideration to hire an attorney to defend a civil
action, or if necessary, pay the expenses of possible liti-
gation, cannot be deemed to be an agreement to reim-
burse or pay damages arising from the destruction of or
injury to a person's property. Regretting that I am un-
able to concur in the opinion of your department, I am,
"Very truly yours.
W. B. Douglass."

Upon receipt of this opinion from the attorney general the insurance commissioner wrote the attorneys of the Physicians Defense Company, enclosing a copy of the same. A fac simile of the insurance commissioner's letter and of the secretary of state's certificate will be found on pages 405 and 406.

From the foregoing it can be seen that the Physicians Defense Company is lawfully qualified and has been legally admitted to do business in the state of Minnesota in the issuance of physicians' defense contracts, for the defense of physicians and surgeons in civil prosecutions for malpractice. While we are on this subject, let us lock for a moment as to the legality of the physicians' liability policies under the laws of Minnesota, as issued by the casualty companies.

March 1, 1900, Insurance Commissioner Dearth wrote to the Physicians Guarantee Company relative to its application to do business in Minnesota:

"I am obliged to state to you that the state laws authorize certain kinds of insurance as the proper and legal subjects of insurance, and the business you are transacting is an insurance business not authorized by the law of this state, but, on the contrary, in general terms, prohibited. Therefore I would not be in position

to consider the admission of your company to transact
this kind of business. In brief, you can do no business
in Minnesota without first being legally authorized by
this department, and the law would not allow this de-
partment to so authorize you."

(It should be born in mind that at this time the company contemplated paying the judgment.)

On October 22, 1901, Insurance Commissioner Dearth wrote Dr. F. McGuire, St. Cloud, Minn., as follows:

"I am in receipt of your favor bearing date of the 20th inst., referring to the matter of the writing of socalled physicians' and surgeons' insurance by the Fidelity and Casualty Company, of New York, and the Travelers' Insurance Company, of Hartford, Conn., in which you raise the point as to the legality of such a contract, both as regards the laws of this state and the charters of the respective companies named. I was not before aware of the fact that said companies were writing this class of business, and upon referring to their charters, I am very much in doubt as to the same covering this class of risks, and in any event, am equally as much in doubt as to their right under the laws of Minnesota to assume such liability. Inasmuch as the matter has been brought to my attention, I shall take same up and give it very careful consideration. On the face of it, it appears to me that such a contract is really against public policy, as it will serve as an excuse, or at least may be the result of carelessness on the part of physicians in connection with their practice, but without having given the matter due consideration, which I shall certainly do, such a contract does not appear to be covered by the insurance laws of our state. Thanking you for calling this matter to my attention, and assuring you that the same will receive my prompt and careful consideration, I remain,

"Yours very truly,

Elmer H. Dearth."

From the foregoing it will be seen that the casualty companies who are issuing in the state of Minnesota what is known as physicians' liability policies, are doing so without first bringing the matter to the attention of the insurance commissioner, from whose department alone can be secured authority to transact business of insurance. Furthermore, that the commissioner holds that the indemnity of the physicians in actions for civil malpractice, is against public policy; that the law does not authorize insurance of this character, but is on the contrary, in general terms, prohibited.

I have received from Attorney General Douglas an opinion on the question, as to whether or not the contract issued by the Physicians' Defense Company-which for the consideration of a certain annual payment agrees to defend the holder of the contract at its own expense in any action brought against him for damages for alleged malpractice, etc.-involves the business of insurance as defined under the statutes of Minnesota, in which he (Attorney General) holds that said contract is not that of insurance as defined by the statutes and, consequently, said company will not be required to obtain a license from the Insurance Commissioner as a prerequisite for the transaction of business in this State, as set forth in its articles of incorporation.

While this does not sustain the opinion entertained and expressed by the writer, at the same time I cannot do less than accept as final the Attorney General's construction placed upon the business of said company in its relation to the general insurance statutes as construed or interpretod by him; therefore, you will please advise your clients, accordingly. Enclosed, I duly submit copy of the aforesaid opinion, which you

will find self-explanatory.

Yours very truly,

Shun Diath

Insurance Commissioner.