A state statute requiring insurance companies to make full and
specified returns to the proper state officers of their business
condition, liabilities, losses, premiums, taxes, dividends,
expenses, etc., is an exercise of the police power of the state,
and may be enforced against a company organized under a special
charter from the legislature of the state which does not in terms
require it to make such return without thereby depriving it of any
of its rights under the Constitution of the United States.
The insurance company, plaintiff in error, was incorporated on
March 22, 1850, by an act of the General Assembly of Ohio,
48 Ohio Laws
498. Sections 3654 and 3655 of the Revised Statutes of Ohio read as
Page 153 U. S. 447
"SEC. 3654. The President or vice-President and secretary of
each insurance company organized under any law of this
Page 153 U. S. 448
state shall, annually, on the first day of January or within
thirty days thereafter, prepare, under oath, and deposit in the
Page 153 U. S. 449
office of the superintendent of insurance a statement of the
condition of such company on the thirty-first day of December,
Page 153 U. S. 450
then next preceding, exhibiting the following facts and items,
and in the following form, namely:"
-- The amount of the capital stock of the
company, specifying the amount paid and unpaid."
-- The property or assets held by the company,
"1. The value of the real estate owned by such company, where it
is situated, and the value of buildings thereon."
"2. The amount of cash on hand and deposited in banks to the
credit of the company, specifying in what banks the same is
"3. The amount of cash in the hands of agents and in course of
"4. The amount of loans secured by bonds and mortgages, which
are the first lien on real estate, and on which there is less than
one year's interest due."
"5. The amount of loans on which interest has not been paid
within one year."
"6. The amount due the company on which judgments have been
obtained, and the cash value thereof."
"7. The amount of stocks in this state, the United States, of
any City of this state, and of any other stocks owned by the
company, specifying the amount, number of shares, and the par and
market value of each kind of stock."
"8. The amount of stock held as collateral security for loans,
with the amount loaned on, and the par and market value of each
kind of stock."
"9. The amount of unpaid assessments on stock, premium notes, or
"10. The amount of interest due and unpaid, and the amount of
interest accrued, but not due. "
Page 153 U. S. 451
"11. The amount of premium notes or contingent liabilities on
which policies are issued."
"12. The number of policies in force."
"13. The amount insured under all policies in force."
"14. The amount of premiums received thereon."
"15. The amount and a description of all other assets."
-- The liabilities of the company,
"1. The amount of losses due and unpaid."
"2. The amount of claims for losses resisted by the
"3. The amount of losses incurred during the year, including
those claimed and not due, and those reported to the company upon
which no action has been taken."
"4. The amount of dividends declared and due, and remaining
"5. The amount of dividends, either cash or scrip, declared but
"6. The amount of money borrowed, and the security given for the
"7. The amount required for a reinsurance, being in stock
companies a sum equal to fifty percent of the whole amount of
premiums on unexpired risks and policies, and in mutual companies a
sum equal to fifty percent of the cash premiums received on
unexpired risks and policies."
"8. The amount of all other existing claims against the
-- The income of the company during the
preceding year, specifying:"
"1. The amount of cash premiums received."
"2. The amount of notes or contingent assets received for
"3. The amount of interest money received."
"4. The amount of income received from other sources."
-- The expenditure during the preceding year,
"1. The amount of losses paid during the year, stating how much
of the same accrued prior, and how much subsequent to the date of
the preceding statement, and the amount at which losses were
estimated in each preceding statement. "
Page 153 U. S. 452
"2. The amount of dividends paid during the year."
"3. The amount of expenses paid during the year, including
commissions and fees to agents and officers of the company."
"4. The amount paid for taxes."
"5. The amount of all payments and expenditures."
"6. Amount of scrip dividend declared."
"* * * *"
"SEC. 3655. The statement of any such company, the capital of
which is composed in whole or in part of notes, shall, in addition
to the foregoing, exhibit the amount of notes which originally
formed the capital, and also what proportion of such notes is still
held by the company and considered capital, and every company
organized under any law of this state which fails to make and
deposit such statement, or to reply to any inquiry of the
superintendent with respect to such statement, shall be subject to
a penalty of five hundred dollars, and an additional five hundred
dollars for every month that it continues thereafter to transact
any business of insurance, to be recovered by action in the name of
the state, and, on collection, paid into the state treasury for the
benefit of the state common school fund, and the Attorney General,
on the request of the Superintendent of Insurance, shall institute
such action against any company so delinquent, in the court of
appropriate jurisdiction in Franklin County, or in the court of
appropriate jurisdiction of the county in which said company is
located or has its principal place of business, as he prefers."
Under these sections, proper blanks were furnished to the
company by the state Superintendent of Insurance, and, on its
refusal to make the returns required by law, proceedings by
mandamus were begun against it. The defense was that the above
provisions impaired the obligation of the contract which grew out
of its charter. Upon the decision of the supreme court of the state
making the writ peremptory, the case was brought here by error.
Page 153 U. S. 453
MR. JUSTICE WHITE, after stating the case, delivered the opinion
of the Court.
The only question presented is whether or not the charter of the
plaintiff in error exempted it from obligation to comply with the
subsequently established police regulations of the state, contained
in sections 3654 and 3655 of the Revised Statutes of Ohio. This
subject was fully considered by this Court in the case of The
Chicago Life Insurance Company v. Needles, 113 U.
. There, the company had been chartered by the
State of Illinois to carry on a life insurance business, and the
question was whether subsequently enacted police regulations of
that state for the inspection of such business and for the
liquidation thereof in the event of insolvency could be enforced
against a corporation working under a prior charter without
impairing the obligation of the contract. The statute considered in
the Needles case authorized the auditor, whenever the actual funds
of any life insurance company doing business in the state were not
of a net value equal to the net value of its policies, according to
the "combined experience" or "actuaries" rate of mortality, with
interest at four percent, to give notice to such company and its
agent to discontinue issuing policies in the state until such time
as its funds should become equal to its liabilities, valuing its
policies as aforesaid. The law, in addition, required every life
insurance company incorporated in Illinois to transmit to the
auditor on or before the 1st day of March in each year a sworn
statement of its business, standing, and affairs, in the form
prescribed and authorized by law. It also empowered the officer to
address inquiries to any company in relation to its "doings and
condition," and any other matter connected with its transactions,
which inquiries, it provided, should be "promptly answered;" and it
imposed upon him the duty of making an examination of the
Page 153 U. S. 454
and affairs of any company, whenever he deemed it expedient to
do so, and had reason to suspect the correctness of any annual
statement, or that the company was in an unsound condition. By
another statute it was provided that if, upon examination of the
affairs of any insurance company, the auditor should conclude that
it was insolvent, or that its further continuance in business would
be hazardous to the insured or the public, he should apply by
petition to the judge of any circuit court for an injunction
restraining the company from proceeding with its business until
further hearing etc. Upon the case as thus presented the Court
"The case upon the merits, so far as they involve any question
of which this Court may take cognizance, is within a very narrow
compass. The main proposition of the counsel is that the obligation
of the contract which the company had with the state in its
original and amended charter will be impaired if that company be
held subject to the operation of subsequent statutes regulating the
business of life insurance, and authorizing the courts, in certain
contingencies, to suspend, restrain, or prohibit insurance
companies incorporated in Illinois from further continuance in
business. This position cannot be sustained consistently with the
power which the state has, and upon every ground of public policy
must always have, over corporations of her own creation. Nor is it
justified by any reasonable interpretation of the language of the
company's charter. The right of the plaintiff in error to exist as
a corporation and its authority in that capacity to conduct the
particular business for which it was created were granted subject
to the condition that the privileges and franchises conferred upon
it should not be abused or so employed as to defeat the ends for
which it was established, and that when so abused or misemployed,
they might be withdrawn or reclaimed by the state in such way and
by such modes of procedure as were consistent with law. Although no
such condition is expressed in the company's charter, it is
necessarily implied in every grant of corporate existence.
9 Cranch 43, 13 U. S.
; Angell & Ames on Corporations, 9th ed.,
paragraph 774, note. "
Page 153 U. S. 455
"Equally implied, in our judgment, is the condition that the
corporation shall be subject to such reasonable regulations in
respect to the general conduct of its affairs as the legislature
may from time to time prescribe which do not materially interfere
with or obstruct the substantial enjoyment of the privileges the
state has granted, and serve only to secure the ends for which the
corporation was created. Sinking Fund Cases, 99 U. S.
, 99 U. S. 768
Commonwealth v. Farmers' & Mechanics' Bank,
542; Commercial Bank v. Mississippi,
4 Sm. & Marsh.
497, 503. If this condition be not necessarily implied, then the
creation of corporations, with rights and franchises which do not
belong to individual citizens, may become dangerous to the public
welfare through the ignorance or misconduct or fraud of those to
whose management their affairs are entrusted. It would be
extraordinary if the legislative department of a government,
charged with the duty of enacting such laws as may promote the
health, the morals, and the prosperity of the people, might not,
when unrestrained by constitutional limitations upon its authority,
provide by reasonable regulations against the misuse of special
corporate privileges which it has granted, and which could not,
except by its sanction, express or implied, have been exercised at
These views are decisive of the issue here. An attempt is made
to distinguish that case from this upon the ground that in the
former, the proceedings were for the purpose of compelling the
company to cease from business because of insolvency. while in this
case the question is as to the obligation of the company to make
the statements required by the statute. This distinction is without
foundation. In the Needles
case, the duty was expressly
imposed upon the corporation to make statements identical in form
and substance with those which insurance companies are required to
make under the Ohio statute we are here considering. Many
additional police powers were conferred by the Illinois law, among
them being the authority which, as stated above, was given to the
state auditor to apply for an injunction restraining a company from
continuing its business whenever, by its statement, it appeared to
him to be insolvent. It is indeed
Page 153 U. S. 456
true that the relief there invoked was the restraint of the
corporation from doing business on the ground of insolvency. But
that case substantially involved not only the right to compel the
statement, but the greater right to prevent, in case of insolvency,
the continuance of the business of the corporation. Hence, as the
greater includes the less, the Needles
embraces every issue presented here.
Another contention is that compliance with the provisions in
regard to statements of its business would bring the company under
the operation of the general law of the state relating to
corporations, and thus place it in the position of voluntarily
subjecting itself to many provisions which would, if applied,
impair the obligations of the charter. In March, 1892, 89 Ohio Laws
73, the General Assembly of Ohio specifically enacted that any fire
insurance company which should comply with the requirements of
sections 3654 and 3655, or any other police regulations contained
in chapter 11 of the title relating to corporations, and chapter
VIII, Tit. 3, Part 1, of the Revised Statutes of Ohio, relating to
the insurance department of the state, "shall not be deemed to have
consented to and shall not be affected by the provisions" of the
title relating to corporations.
The judgment of the Supreme Court of Ohio in the case before us
expressly finds that, under the operation of this last provision,
the plaintiff in error would not subject its charter to any
conditions or modifications by making the statement which it now
refuses to submit.
"AN ACT TO INCORPORATE THE EAGLE INSURANCE COMPANY OF
"SEC. 1. Be it enacted by the General Assembly of the
that George Crawford, Timothy Griffith, Isaac C. Copelen,
William Wood, Henry Kessler, Henry Brachman, George M. Herincourt,
and the subscribers of the stock of this association and their
successors shall be and are hereby declared to be a body politic
and corporate, by the name and style of the Eagle Insurance Company
of Cincinnati, and in that name shall be capable in law to sue and
be sued, plead and be impleaded, answer and be answered, defend and
be defended in all courts of law and equity and elsewhere, with
full authority to acquire, hold, possess, occupy, and enjoy, and
the same to sell, convey, and dispose of all such real estate as
shall be necessary and convenient for the transaction of its
business or which may be conveyed in said company for the security
or in payment of any debt which may become due and owing to the
same or in satisfaction of any judgment of a court of law or any
order or decree of a court of equity in their favor, and to make
use a common seal, and the same to alter and renew at pleasure, and
generally to do and perform all things relative to the object of
"SEC. 2. That the capital stock of this company shall be one
hundred thousand dollars, which may be increased at the pleasure of
the majority of the stockholders to two hundred thousand dollars,
divided into shares of one hundred dollars each; at the time of
subscribing there shall be paid on each share twenty-five dollars,
and the balance on each share shall be subject to the call of the
directors, and shall be secured by endorsed notes payable on
demand, or other property or stocks, to be approved by the board of
directors. Moreover, if at any time the directors shall deem any
such security insufficient, it shall be their duty to require
additional security on such notes or obligations by them held for
the payment of stocks as they shall deem best, and any stockholder
failing to pay at the time and in the manner prescribed by the
board, any portion of their stock remaining unpaid, or shall fail,
neglect or refuse to give such additional securities as may be
required of them, it shall be the duty of the directors to sell
such delinquent share or shares at auction for cash to the highest
bidder, after having given ten days' public notice of the time and
place of sale, and the proceeds to be applied in payment of said
shares; and moreover such delinquent stockholder shall be held
liable in his individual capacity for any balance remaining unpaid
on said shares, and in case any excess shall arise from such sale
after having paid up the delinquency and expenses of such sale,
such excess shall be paid to stockholder."
"SEC. 3. That so soon as four hundred shares are subscribed for
and paid, or secured to be paid as required in the second section
of this act, the company shall be competent to transact all kinds
of business for which it was established."
"SEC. 4. That the affairs of the company shall be managed by
seven directors, all of whom shall be stockholders, to be elected
as follows: a majority of the stockholders composing this
association, shall hold a meeting for the first election of
directors within one month after the amount of four hundred shares
of stock shall be subscribed, and on the first Monday in May in
each and every year thereafter, and choose by ballot seven
directors, who shall be stockholders, and each share of stock shall
entitle the holder thereof to one vote, and the directors so chosen
shall serve to the first Monday in May, 1851, and until others are
chosen. At their first meeting after every election, they shall
choose by ballot a president thus chosen, the directors shall fill
the vacancy by ballot as before, and in case of a vacancy in the
board of directors, it shall be filled by the remaining directors
from the stockholders for the remainder of the year, and the board
of directors thus constituted, or a majority of them, when convened
at the office of the company, shall be competent to exercise all
other powers vested in the board by this act."
"SEC. 5. That it shall be lawful for said company to insure all
kinds of property against loss or damage by fire or any other cause
or risk, in and out of the state; to make all kinds of insurance on
goods, merchandise, or other property in the course of
transportation, whether on land or water, or any vessel or boats
wherever they may be, to lend money upon bottomry or respondentia
to cause themselves to be insured against any loss or risk they may
have incurred in the course of their business, and against any
maritime or other risks, upon the interest which they may have in
any vessel boat, goods, or merchandise, or other property, by means
of any loan or loans which they may make on mortgage, bottomry, or
respondentia, and generally to do and perform all other matters an
things connected with and proper to promote these objects."
"SEC. 6. It shall be lawful for said company to invest all or
any part of their capital stock, money, funds, or other property in
such a way as the directors shall deem best for the safety of the
capital and interest of the stockholders, and may transfer, sell,
and dispose of any or all interest which the said company may have
acquired by said investment, provided that it shall not be lawful
for said corporation to use or employ any part of their capital
stock, money, or other funds in buying or selling goods, wares, or
merchandise, nor in the purchase of real estate, except as provided
in the first section of this act, nor shall the said company trade
in the business of exchange brokerage, nor issue or emit any bills
of credit as a circulating medium of trade or exchange, or in any
manner engage in the business or operation of banking."
"SEC. 7. That the president and directors shall declare such
dividends of the profits of the business of the company as shall
not impair nor in anywise lessen the capital stock of the same. The
dividends shall be made half-yearly, on the first Monday in January
and July, and shall be paid to the stockholders ten days
thereafter, but no dividends shall be paid to any stockholder whose
stock is delinquent."
"SEC. 8. The transfers of stock may be made by any stockholder
or his legal representative, subject to such restrictions as the
board of directors shall from time to time make and establish."
"SEC. 9. That all policies or contracts of insurance that may be
made or entered into by the said company may be made either under
or without the seal thereof, and shall be subscribed by the
president or by such other officer as may be designated for that
purpose by the board of directors, and attested by the secretary,
and being so subscribed and attested shall be obligatory upon the
said company according to the tenor, intent, and meaning of this
act, and of such policies or contracts, and all such policies or
contracts so made, subscribed, attested, and executed, and the
loans and other business of the company may be made, conducted, and
carried on without the presence of the whole of the directors, but
by such committee or otherwise as the board may authorize, and the
same shall be binding on the company."
"SEC 10. That the individuals named in the first section of this
act, or such committee as they shall appoint, shall receive the
subscriptions to the capital stock of this company, and open books
for that purpose at the City of Cincinnati aforesaid, upon two
weeks' notice published in at least two daily papers of said city,
which books shall continue open from day to day for ten days,
unless the whole amount of the capital stock shall sooner be
subscribed, and shall receive all moneys paid at the time of
subscribing to said stock, and hold the same until the election of
the first board of directors, when they shall dispose of it as said
board may direct."
"SEC. 11. That the president and directors shall have power and
authority to appoint a secretary, and such other officers under
them as shall be necessary for transacting the business of said
institution, and may allow them such salaries as they shall judge
reasonable -- to ordain and establish such bylaws and regulations
as shall appear to them necessary for regulating and conducting the
concerns of said institution, not being contrary to or inconsistent
with this act, the constitution or laws of this state, and of the
United States; they shall keep full, fair, and correct entries of
their transactions, which shall be at all times open to the
inspection of the stockholders."
"SEC. 12. That should it so happen from any cause whatsoever
that the annual election of directors should not take place in any
year on the day hereinbefore mentioned for that purpose, this
corporation shall not be for that reason dissolved, but such
election may be lawfully held on such other convenient day, within
six months thereafter, as may for that purpose be fixed by the
president and directors, they causing ten days' notice thereof to
be given in one or more of the newspapers printed in the City of
"SEC. 13. That the president and directors may call a general
meeting of the stockholders for any purpose relative to the affairs
of the company, giving at least ten days' notice thereof in some
newspaper printed in Cincinnati."
"BENJAMIN F. LEITER"
"Speaker of the House of Representatives
"CHARLES C. CONVERS"
"Speaker of the Senate
"MARCH 22, 1850"