Duel v. Ramar Baking Co

In Duel v. Ramar Baking Co. (1945) 246 Wis. 604 18 N.W.2d 345, a person was fraudulently induced to become a member of a mutual insurance company by "false representations as to the corporation's solvency. ..." (Id. at p. 606 18 N.W.2d at p. 346.) The member became aware of the fraud only after insolvency proceedings began. (Ibid.) The Wisconsin Supreme Court held that the member could not rescind and was not relieved of his liability under the policy because rights of third parties had intervened. "Rights of creditors and other policyholders intervened subsequent to the defendant's becoming a member. They are innocent of the fraud, and as to them the defendant has no right to cancellation or rescission of his policy, whatever its rights against the company were had it sought to exercise them." (Id. at pp. 606-607 18 N.W.2d at p. 346.) Additionally, "voidance of membership in a mutual insurance company cannot be permitted after insolvency proceedings are begun, for every policyholder member would have equal right with the instant policyholder to void his contract, if not on the ground of fraudulent misrepresentations of solvency, on the ground of mistake of fact as to solvency and there might be no members left to respond to the claims of creditors." (Id. at p. 607 18 N.W.2d at p. 347.)