Allgeyer v. Louisiana, 165 U.S. 578 (1897)
The Fourteenth Amendment voids a law that forces people to use an insurer licensed in a state to insure property in that state.
Relying on an open policy with the Atlantic Mutual Insurance Company in New York, E. Allgeyer & Company sent mail from New Orleans to Atlantic Mutual regarding insurance of an international shipment of Louisiana cotton. This allegedly violated a state law that prevented citizens of Louisiana from engaging in business with marine insurance companies outside the state unless those companies had appointed agents in Louisiana. (This was designed to reduce the risk of insurance fraud.)
Allgeyer was charged with violating this law on three occasions, and it faced a fine of $3,000, since the statute imposed a fine of $1,000 per violation. The state trial court ruled in its favor, finding that the law violated the Due Process Clause of the Fourteenth Amendment.
- Rufus Wheeler Peckham (Author)
- Melville Weston Fuller
- Stephen Johnson Field
- John Marshall Harlan
- Horace Gray
- David Josiah Brewer
- Henry B. Brown
- George Shiras, Jr.
- Edward Douglass White
Agreeing with the trial court, Peckham found that the Fourteenth Amendment extends broadly such that its liberty component protects individuals not only from wrongful imprisonment but also from restrictions on their freedom to contract in pursuit of one's livelihood or vocation. He agreed with the dissent by Joseph P. Bradley in the Slaughter-House Cases, and this decision marked a turn away from that case's limited interpretation of the Fourteenth Amendment. Writing for a unanimous Court, Peckham felt that each potential deprivation of liberty by the state needed to be evaluated on a case-by-case basis, since it was impracticable to create a broad rule in this area.Case Commentary
Later cases would place more restrictions on the freedom to contract, allowing states greater authority when they could supply evidence of dangers to public safety. In this situation, the law did not clearly relate to a significant state interest, and the potential harm was speculative at best.
U.S. Supreme CourtAllgeyer v. Louisiana, 165 U.S. 578 (1897)
Allgeyer v. Louisiana
Submitted January 6, 1897
Decided March 1897
165 U.S. 578
The provision in Act No. 66 of the Louisiana laws of 1894 that
"any person, firm or corporation . . . who in any manner whatever does an act in that state to effect, for himself or for another, insurance on property then in that state, in any marine insurance company which has not complied in all respects with the laws of the state, shall be subject to a fine,"
etc., when applied to a contract of insurance made in the New York, with an insurance company of that state, where the premiums were paid, and where the losses were to be paid, is a violation of the Constitution of the United States.
Hooper v. California, 155 U. S. 648, distinguished from this case, and it is further held that by the decision in this case it is not intended to
throw any doubt upon, or in the least to shake the authority of, that case.
When or how far the police power of the state may be legitimately exercised with regard to such subjects must be left for determination in each case as it arises.
The Legislature of Louisiana, in the year 1894, passed an act known as Act No. 66 of the acts of that year. It is entitled "An act to prevent persons, corporations or firms from dealing with marine insurance companies that have not complied with law."
The act reads as follows:
"Be it enacted by the General Assembly of the State of Louisiana that any person, firm or corporation who shall fill up, sign, or issue in this state any certificate of insurance under an open marine policy, or who in any manner whatever does any act in this state to effect for himself or for another insurance on property then in this state in any marine insurance company which has not complied in all respects with the laws of this state shall be subject to a fine of one thousand dollars for each offense, which shall be sued for in any competent court by the Attorney General for the benefit of the charity hospitals in New Orleans and Shreveport."
By reason of the provisions of this act, the State of Louisiana on the 21st of December, 1894, filed its petition in one of the courts of first instance for the Parish of Orleans, and alleged in substance that the defendants, E. Allgeyer & Co., had violated the statute by mailing in New Orleans a letter of advice or certificate of marine insurance on the 27th of October, 1894, to the Atlantic Mutual Insurance Company of New York, advising that company of the shipment of 100 bales of cotton to foreign ports in accordance with the terms of an open marine policy, etc. The state sought to recover for three violations of the act the sum of $3,000.
The defendants filed an answer in which, among other things, they averred that the above-named act was unconstitutional in that it deprived them of their property without due process of law and denied them the equal protection of
the laws in violation of the Constitution of the State of Louisiana and also of the Constitution of the United States. They also set up that the business concerning which defendants were sought to be made liable, and the contracts made in reference to such business, were beyond the jurisdiction of the State of Louisiana, and that the defendants were not amenable to any penalties imposed by its laws; that the contracts of insurance made by defendants were made with an insurance company in the State of New York, where the premiums were paid and where the losses thereunder, if any, were also to be paid; that the contracts were New York contracts, and that, under the Constitution of the United States, the defendants had the right to do and perform any act or acts within the State of Louisiana which might be necessary and proper for the execution of those contracts, and that insofar as Act No. 66 of the General Assembly of the State of Louisiana of the year 1894 might be construed to prevent or interfere with the execution of such contracts, the same was unconstitutional and in violation of the Constitution of both the State of Louisiana and the United States.
The case was tried upon an agreed statement of facts, as follows: the Atlantic Mutual Insurance Company is a corporation, created by the laws of the State of New York and domiciled and carrying on business in that state, and the defendants made a contract with that company for an open policy of marine insurance for $200,000 on account of themselves and to cover cotton in bales purchased and shipped by them on which drafts might be drawn for the purchaser upon "Whom it might Concern." By the terms of the policy, among other things, it was stated:
"Shipments applicable to this policy, to be reported to this company by mail or telegraph the day purchased, warranted not to cover cotton in charge of carriers on shore or during inland transportation. No risk is to be insured by this policy until a letter signed by _____, and addressed to the president of this company, detailing the name of the vessel, particulars of the shipment, with description of the property and amount to be insured, is deposited in the post office at _____, which must be done
while the property is in good safety, and in all cases prior to the departure of the risk from _____, a duplicate of such letter to be sent by the following mail. A new and separate policy to be issued for each risk, the premium on which is to be paid in cash upon the delivery of such policy in New York to E. Allgeyer & Company."
The Atlantic Mutual Insurance Company is engaged in the business of marine insurance, and has appointed no agent in the State of Louisiana, and has not complied with the conditions required by the laws of that state for the doing of business within the same by insurance companies incorporated and domiciled out of the state.
On the 23d of October, 1894, the defendants mailed to that company a communication, stating insurance was wanted by defendants for account of same (the open policy); loss, if any, payable at Paris, in French currency, etc., for $3,400 on 100 bales of cotton, which at the time of the communication, were within the State of Louisiana. The premiums to be paid under the contract of insurance, and the loss or losses under the same, were payable in the City of New York, the premiums being remitted by the defendants from New Orleans by exchange.
Defendants are exporters of cotton from the port of New Orleans to ports in Great Britain and on the continent of Europe. They sell cotton in New Orleans to purchasers at said ports. For the price of every sale of cotton made by them, they, in accordance with the general custom of business, draw a bill of exchange against the purchaser, attaching to the same the bill of lading for the cotton and an order on the Atlantic Mutual Insurance Company for a new and separate policy of insurance, spoken of in the open policy, and the form of the said order is as follows:
"Attached to draft No. ___ on _____, from E. Allgeyer & Co., New Orleans, 189, to Atlantic Mutual Ins. Co., New York."
"Marks and numbers, ___."
"Please deliver to _____ ________or order special policy for
$_____ on _____ bales cotton, per _____, from New Orleans to _____."
"E. Allgeyer & Co."
This bill of exchange, with the bill of lading attached, is sometimes negotiated with banks in the City of New York; sometimes it is not negotiated at all, but forwarded direct for collection from the purchaser of the cotton. The bill of exchange, with bill of lading and order for insurance attached, in either case is sent from New Orleans first to New York, where, after its negotiation or before being forwarded from thence for collection, the order for insurance is presented to the Atlantic Mutual Insurance Company. Upon this showing, the insurance company in New York issues and delivers to the holder of the exchange and bill of lading when the former has been negotiated, or to the agent of defendant when the exchange has not been negotiated, a new and a separate policy of insurance for the cotton, in accordance with the contract made with the defendants and evidenced by the policy above mentioned and described. This new and separate policy, when received, is attached to the bill of exchange. The exchange cannot be negotiated in New York unless it is accompanied by both the bill of lading and order for insurance and unless the new and separate policy issued by the company is attached to it the purchaser of the cotton is under no obligation to pay the bill drawn on him for the price of the cotton. The new and separate policy delivered to the holder of the exchange and bill of lading in New York, or to defendants' agent there, as the case may be, is for the benefit of the holder of the latter, or of defendants, according as the exchange has been negotiated or not. The holder of the exchange becomes the owner of the cotton covered by the bill of lading attached, and is the owner of the policy of insurance covering the same in the event of a loss within the terms of the policy.
The business thus described is conducted as above by the general custom and agreement of all parties concerned.
The court of first instance before which the trial was had ordered that plaintiff's demand be rejected and that judgment in favor of the defendants be given. An appeal was taken from that judgment to the supreme court of the state, which, after argument before it and due consideration, reversed the judgment of the court below and gave judgment in favor of the plaintiff for $1,000, as for one violation of the statute, being the only one which was proved. State v. Allgeyer, 48 La.Ann. 104. The plaintiffs in error ask a review in this Court of the judgment entered against them by directions of the Supreme Court of Louisiana.