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Robert J Koenig’s study on
the severalty as
a special form of
unincorporated business organization
September 24 2018 2045 GMT

Started ca September 2016

© 2018 Robert J Koenig [1]

Corrections, comments criticisms/compliments and USAA hate mail may be phoned, sms’d, mms’d, or FaceTimed to Robert J Koenig at+




The severalty  (see OED) is an archaic common law construct and an uncommon [2]  form of modern business organization.  It is helpful to look at the severalty as a more of “a process” than “an entity” - perhaps an ad hoc machine: a several liability machine.

Severalties, by their very non-incorporatable nature, are the ephemeral butterflies of the world of business organization:  here today, and gone to tomorrow.  Here are two examples:

  1. A bank lending syndicate formed to undertake a single syndicated loan larger than each syndicate name’s  [3]  [4]  individual lending capacity or taste for risk.

Bank lending syndicate names are only held to the task for so long as it takes to retire the loan.  When the loan is repaid, the syndicate ceases to “operate”.  Nothing stops the exact same syndicate names from reforming to offer the same borrower the exact same syndicated loan on identical terms.  However, congruence of terms notwithstanding, such a syndicate is a new syndicate.  

  1. An insurance syndicate such as at Lloyd’s of London or at a reciprocal interinsurance exchange  [5] [6] [7] [8]   .

All insurance contracts at Lloyd’s of London are term insurance policies.  The syndicate names who supply their several liability to the insurance contracts at Lloyd’s of London disband at the end of every year.  Period!

Severalties, lacking the attribute of corporate perpetuity, seem for the most part to engage in businesses that are intrinsically  self-extinguish by their very nature.  Thus, perpetuity (qua existing for a long time) is neither a characteristic nor a feature sought after by the protagonists for syndicates.

Corporations  [9],  more properly called joint stock corporations, are joint liability machines for the longer term. When the investor commits her funds to the corporation’s capital, it is:

The only two ways an investor can practically retrieve the present value of her cost basis is to either sell her shares or to have the corporation wind down its affairs.  Most corporations are formed without time limitations:  and corporations, for the most part, are formed with a view towards perpetuity.  Thus the sale of a shareholding is by far the most likely method for termination and recovery of an investment in a corporation's shares.

The several liability machine, always a syndicate it seems, is very different in both its contemplated existential time frame and as to the expectations of the syndicate names who commit severally liability to the enterprise.

The commitment of wherewithal at syndicates differs from corporations in another fundamental way.

  1. Syndicate names seem rarely to supply cash but instead each pledges her several liability.
  2. Cash supplied to a syndicate takes the form of a deposit rather than either a loan or an investment.
  3. When cash is supplied at syndicates, it is never “to the syndicate” but rather to fund the eventuality for which the syndicate was formed or to pay the syndicate’s administrators.

Funds committed in syndicates in advance take the form of deposits: and are strictly refundable. 

The syndicate often quickly winds down its affairs as the purpose of its formation is usually ad hoc.

An inspection of insurance syndicates shows that this sort of severalty winds down its affairs daily:  that is to say that an insurance syndicate settles its affairs daily [10] .

In the USA (and abroad), two forms of business enterprise models use several liability rather than joint liability:

  1. Insurance syndicates organized as interinsurance exchanges offering reciprocal indemnity contracts; and,
  2. Bank syndicates offering syndicated loans.

Indeed, Lloyd’s of London insurance syndicates are severalties [11].

The severalty is exclusively and exhaustively differentiated from all the other business structures, e.g.:

  1. Sole proprietorship  [12]
  2. Partnership
  3. Corporation
  4.  LLC

by the several liability it affords participants without the burden of joint liability.

Ad Hoc:  why?

It’s hard to own and hold bricks and mortar and hard physical and not-easily subdividable assets with several liability capital structures.

Severalties seem to be associated with businesses that concern themselves with processes rather than tangibles.  For this reason, it might be said that severalties are per processum rather than ad personam [13] [14] or in rem [15] .

This concern for process is reflected by the jurisdictions and special reliefs that associated with legal actions surrounding severalties.

When a borrower is stiffed by a banking syndicate, he sues to compel the process of carrying through with loan.  But whom does he sue?

He can’t sue the syndicate.  A lending syndicate has no separate existence from the syndicate banks that syndicated the promised loan.

  1. The syndicate was never organized in the sense of corporations.
  2. There are no foundation documents for a syndicate and the state need not bless syndicates.

For all practical purposes, it can be fairly said that a lending syndicate does not exist as a legal entity:  it is an ad hoc process which generates an expectation on the part of the borrower that a loan will be forthcoming.

But as I asked above - if the loan is not forthcoming or incomplete:  who does the borrower sue?

The borrower sues the particular syndicate bank(s) that failed to carry through.

Robert J Koenig
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Exhibit “_”:  OED on several, severally, and severalty.

The layman incorrectly believes (as once did I) that “several” means “a few”.

The Oxford English Dictionary [16] corrects our understanding.

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[1]  Permission to use the content of this article is freely granted so long as this citation and ip reservation is supplied:

Severalties by Robert J Koenig self-published at New York NY 2018
© 2018 Robert J Koenig 

[2] As severalties, by their very legal construct are not recorded, my statement that they are rare may be faulty.  Syndicates may far more common than generally thought.

[3] The concept of “name” is central to the syndicate form of business organization; best explained by the insurance syndicate example.  The insurance syndicate has neither independent wherewithal or self-sufficient credit worthiness. That is because the insurance syndicate has no self to be sufficient.  It is the individual self-sufficiency of each syndicate name that added together without a trace of joint liability that adds up to the syndicate’s financial wherewithal.  A $100,000,000 insurance syndicate with sketchy offshore names is clearly less worthy than a $100,000,000 insurance syndicate with wealthy neighbors.  So the quality of the names at an insurance syndicate are a far more important than the notional surplus.

So - to understand the quality and then the quantity of an insurance syndicate’s financial statement - you need to know the names of the syndicate members.  The shorthand for that is the term “names”.  To cut to the chase.  If the so-called USAA members knew they were actually names with direct inescapable  personal liability for each and every claim at USAA: they’d pay a lot more attention to what Stuart Parker does.

[4] Why “names” and not “members”?  The term “member” runs with affinity fraud (see SEC on affinity fraud).  “Member” (notion and term) is used by con-men seeking to dupe “marks” and “victims” into believing that that they have some sort of proprietary and perhaps even vague and unspecified property interest in an ongoing business operation.  The word “member” is also used as a calming device to allay suspicion.  “Members” who become suspicious are then castigated for being bad members: and in the case of USAA are then jailed.

[5] United Services Automobile Association; NAIC # 25941; FEIN  74-0959140; TDI Company Number 14-86800; Current TDI Certificate of Authority  [CofA]  # 14585 granted on April 2 2008: an unincorporated insurance syndicate organized as a Texas reciprocal inter-insurance exchange.

Unlawfully commenced inter-insuring by receipt of a syndicate name's deposit against a reciprocal contract on either June 20 or June 22 1922. First one year license (expired February 28 1926) to commence inter-insuring by reciprocal contract granted on or slightly before March 23 1925 (two and nine years after USAA's unlawful 1922 "receipt of a first deposit from a "syndicate name".

[6] Erie Insurance Exchange; NAIC # 26271; FEIN 25-6038677; Certificate of Authority [CofA] granted by the Pennsylvania Insurance Department [PID] to commence inter-insuring by reciprocal contract on 20 April 1925

[7] Interinsurance Exchange of the Automobile Club; NAIC # 15598;  FEIN:  95-0865765;  California Company ID (CA DOI) 0392-1;   Certificate of Authority [CofA] granted to commence inter-insuring by reciprocal contract on October 4 1912

[8] Farmers Insurance Exchange:  NAIC # 21652;  FEIN 95-2575893; California Company ID (CA DOI) 0937-3;    Certificate of Authority [CofA] granted to commence inter-insuring by reciprocal contract on 06 April 1928


[10] As I write, Hurricane Matthew is making landfall in Florida,.  By the close of business, today, the Lloyd’s of London syndicates and the four major USA-based reciprocal interinsurers will have settled all the liabilities associated with this Hurricane.  The Lloyd’s of London syndicate names will wake up tomorrow to open their telegrams instructing them to “send it in”.  The “members” at AAA, Erie, Farmers,and USAA are having their deposit accounts docked as I write.  The members at AAA, Erie, Farmers,and USAA who canceled their policies yesterday have absolutely no liability for Hurricane Matthew.  The new members at AAA, Erie, Farmers,and USAA the join tomorrow have no liability for Hurricane Matthew.


[12] In an odd sense, the business structure which is closest to the severalty is the sole proprietorship.  This is because the severalty also puts a person’s assets on the line with no juris person intermediating.  But organized as a severalty:  the participant may limit liability to a fixed amount.

[13] Commercial litigants seek in personam jurisdiction over their business counterparties and “to be made whole” as their relief.

[14] Natural persons seek in personam jurisdiction over tortfeasors and “to be made whole” as their relief.

[15] Landlords and tenants seek in rem jurisdiction and possession of the premises as their relief.

[16] “Several.” Oxford English Dictionary (The Compact Edition) Volume II (P-Z) pp 2754-2755.  1971,  [form of citation]