Mutual Company Law and Legal Definition
A mutual company refers to a private company whose profits are distributed in proportion to the amount of business each participant does with the company. It is owned by, and run for the benefit of, its members. The company does not have external shareholders. Everyone who owns a mutual company policy owns a part of the company. However, such a company is different from a stock company. A mutual company does not have stockholders. Its policy holders, in effect, own the company. [Bowker v. State Farm Fire & Cas. Co., 946 F.2d 900 (10th Cir. 1991)].
A mutual insurance is a system of insurance by which the members of the association or company mutually insure each other. A mutual company, therefore, is one in which the members are both the insurers and the insured. The insured in a mutual company holds his/her policy guaranteeing indemnity against loss with a specific and limited fund out of which that indemnity is to be made good. [Pink v. Town Taxi Co., 138 Me. 44, 50 (Me. 1941)].
Legal Definition list
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