Insurance.

Those engaged in the insurance business 248 as well as the business itself have been peculiarly subject to supervision and control.249 Even during the Lochner era the Court recognized that government may fix insurance rates and regulate the compensation of insurance agents,250 and over the years the Court has upheld a wide variety of regulation. For instance, a state may impose a fine on “any person ‘who shall act in any manner in the negotiation or transaction of unlawful insurance . . . with a foreign insurance company not admitted to do business [within said State].’ ”251 Or, a state may forbid life insurance companies and their agents to engage in the undertaking business and undertakers to serve as life insurance agents.252 Further, foreign casualty and surety insurers were not deprived of due process by a Virginia law that prohibited the making of contracts of casualty or surety insurance except through registered agents, that required that such contracts applicable to persons or property in the state be countersigned by a registered local agent, and that prohibited such agents from sharing more than 50% of a commission with a nonresident broker.253 And just as all banks may be required to contribute to a depositors’ guaranty fund, so may automobile liability insurers be required to submit to the equitable apportionment among them of applicants who are in good faith entitled to, but are financially unable to, procure such insurance through ordinary methods.254

However, the Court has discerned some limitations to such regulations. A statute that prohibited the insured from contracting directly with a marine insurance company outside the state for coverage of property within the state was held invalid as a deprivation of liberty without due process of law.255 For the same reason, the Court held, a state may not prevent a citizen from concluding a policy loan agreement with a foreign life insurance company at its home office whereby the policy on his life is pledged as collateral security for a cash loan to become due upon default in payment of premiums, in which case the entire policy reserve might be applied to discharge the indebtedness. Authority to subject such an agreement to the conflicting provisions of domestic law is not deducible from the power of a state to license a foreign insurance company as a condition of its doing business therein.256

A stipulation that policies of hail insurance shall take effect and become binding twenty-four hours after the hour in which an application is taken and further requiring notice by telegram of rejection of an application was upheld.257 No unconstitutional restraint was imposed upon the liberty of contract of surety companies by a statute providing that, after enactment, any bond executed for the faithful performance of a building contract shall inure to the benefit of material men and laborers, notwithstanding any provision of the bond to the contrary.258 Likewise constitutional was a law requiring that a motor vehicle liability policy shall provide that bankruptcy of the insured does not release the insurer from liability to an injured person.259 There also is no denial of due process for a state to require that casualty companies, in case of total loss, pay the total amount for which the property was insured, less depreciation between the time of issuing the policy and the time of the loss, rather than the actual cash value of the property at the time of loss.260

Moreover, even though it had its attorney-in-fact located in Illinois, signed all its contracts there, and forwarded from there all checks in payment of losses, a reciprocal insurance association covering real property located in New York could be compelled to comply with New York regulations that required maintenance of an office in that state and the countersigning of policies by an agent resident therein.261 Also, to discourage monopolies and to encourage rate competition, a state constitutionally may impose on all fire insurance companies connected with a tariff association fixing rates a liability or penalty to be collected by the insured of 25% in excess of actual loss or damage, stipulations in the insurance contract to the contrary notwithstanding.262

A state statute by which a life insurance company, if it fails to pay upon demand the amount due under a policy after death of the insured, is made liable in addition for fixed damages, reasonable in amount, and for a reasonable attorney’s fee is not unconstitutional even though payment is resisted in good faith and upon reasonable grounds.263 It is also proper by law to cut off a defense by a life insurance company based on false and fraudulent statements in the application, unless the matter misrepresented actually contributed to the death of the insured.264 A provision that suicide, unless contemplated when the application for a policy was made, shall be no defense is equally valid.265 When a cooperative life insurance association is reorganized so as to permit it to do a life insurance business of every kind, policyholders are not deprived of their property without due process of law.266 Similarly, when the method of liquidation provided by a plan of rehabilitation of a mutual life insurance company is as favorable to dissenting policyholders as would have been the sale of assets and pro rata distribution to all creditors, the dissenters are unable to show any taking without due process. Dissenting policyholders have no constitutional right to a particular form of remedy.267

Footnotes

248
La Tourette v. McMaster, 248 U.S. 465 (1919); Stipich v. Insurance Co., 277 U.S. 311, 320 (1928). [Back to text]
249
German Alliance Ins. Co. v. Kansas, 233 U.S. 389 (1914). [Back to text]
250
O’Gorman & Young v. Hartford Ins. Co., 282 U.S. 251 (1931). [Back to text]
251
Nutting v. Massachusetts, 183 U.S. 553, 556 (1902) (distinguishing Allgeyer v. Louisiana, 165 U.S. 578 (1897)). See also Hoper v. California, 155 U.S. 648 (1895). [Back to text]
252
Daniel v. Family Ins. Co., 336 U.S. 220 (1949). [Back to text]
253
Osborn v. Ozlin, 310 U.S. 53, 68–69 (1940). Dissenting from the conclusion, Justice Roberts declared that the plain effect of the Virginia law is to compel a non-resident to pay a Virginia resident for services that the latter does not in fact render. [Back to text]
254
California Auto. Ass’n v. Maloney, 341 U.S. 105 (1951). [Back to text]
255
Allgeyer v. Louisiana, 165 U.S. 578 (1897). [Back to text]
256
New York Life Ins. Co. v. Dodge, 246 U.S. 357 (1918). [Back to text]
257
National Ins. Co. v. Wanberg, 260 U.S. 71 (1922). [Back to text]
258
Hartford Accident Co. v. Nelson Co., 291 U.S. 352 (1934). [Back to text]
259
Merchants Liability Co. v. Smart, 267 U.S. 126 (1925). [Back to text]
260
Orient Ins. Co. v. Daggs, 172 U.S. 577 (1899) (the statute was in effect when the contract at issue was signed). [Back to text]
261
Hoopeston Canning Co. v. Cullen, 318 U.S. 313 (1943). [Back to text]
262
German Alliance Ins. Co. v. Hale, 219 U.S. 307 (1911). See also Carroll v. Greenwich Ins. Co., 199 U.S. 401 (1905). [Back to text]
263
Life & Casualty Co. v. McCray, 291 U.S. 566 (1934). [Back to text]
264
Northwestern Life Ins. Co. v. Riggs, 203 U.S. 243 (1906). [Back to text]
265
Whitfield v. Aetna Life Ins. Co., 205 U.S. 489 (1907). [Back to text]
266
Polk v. Mutual Reserve Fund, 207 U.S. 310 (1907). [Back to text]
267
Neblett v. Carpenter, 305 U.S. 297 (1938). [Back to text]