The power of a state over the subject of insurance extends to
the regulation of those who may carry on the business as brokers
representing both insurer and insured. P. 248 U. S.
A law of South Carolina provides that only such persons shall be
licensed to act as brokers to represent citizens for the placing of
insurance with insurers in that state or elsewhere as are residents
of the state and have been licensed insurance agents of the state
for at least two years. Construed as requiring local residence, as
distinguished from citizenship, held
within the police
power, and that it does not deprive a citizen and resident of
another state, desiring to act as such broker in South Carolina, of
liberty or property in violation of the Fourteenth Amendment, or
discriminate against him in violation of § 2 of Article IV of the
Constitution. Pp. 248 U. S.
104 S.C. 501 affirmed.
The case is stated in the opinion.
Page 248 U. S. 466
MR. JUSTICE McKENNA delivered the opinion of the Court.
An act of South Carolina approved March 2, 1916, entitled "An
act to provide for the licensing of insurance brokers," defines in
its first section an insurance broker "to be such person as shall
be licensed by the insurance Commissioner to represent citizens" of
the state in placing insurance with insurers in the "state or in
any other state or country." And it is provided in § 2 of the act,
among other conditions, that only such persons may be licensed as
are residents of the state and have been licensed insurance agents
of the state for at least two years.
La Tourette offered to comply with all of the provisions of the
act, but could not comply with the requirement of § 2, he being, as
he alleged, a resident and citizen of New York, and he attacked the
requirement by a petition in the supreme court of the state by
which he charged it to be a violation of the Constitution of the
state and of § 2 of Article IV and the Fourteenth Amendment of
Page 248 U. S. 467
the Constitution of the United States in that he, a citizen of
New York, was denied the privileges and immunities granted to
citizens of the State of South Carolina and deprived of liberty and
property without due process of law. He further alleged that the
Commissioner had refused to issue a license to him, and prayed that
he be required to do so.
The Insurance Commissioner, by the Attorney General of the state
and other counsel, demurred to the petition, asserting as the
ground thereof that the requirement of the act was a legal exercise
of the police power of the state and that La Tourette was not
deprived of any privilege or immunity secured to citizens of other
states by the Constitution of the United States. The court
sustained the demurrer and dismissed the petition, and to that
action this writ of error is directed.
The pleadings and the action of the court indicate the question
in the case, and, it would seem, the elements of it, but they are
not clearly segregated in the argument of counsel. They seem to be
(1) that La Tourette is deprived of his liberty and a property
right by the act of the state in violation of the due process
clause of the Fourteenth Amendment; (2) that the act discriminates
against citizens of other states in favor of citizens of the state
of South Carolina in violation of § 2, Article IV, of the
Constitution of the United States.
1. This contention depends upon the character of the business of
insurance, and it was decided in German Alliance Insurance Co.
v. Kansas, 233 U. S. 389
be clothed with a public interest and subject therefore to the
regulating power of the state. And it necessarily follows that, as
insurance is affected with a public interest, those engaged in it
or who bring about its consummation are affected with the same
interest, and subject to regulation as it is. A broker is so
engaged -- is an instrument of such consummation. The statute makes
him the representative
Page 248 U. S. 468
of the insured. He is also the representative of the insurer
(Hooper v. California, 155 U. S. 648
155 U. S.
), and his fidelity to both may be the concern of the
state to secure. As said by the supreme court of the state:
"It is important for the protection of the interests of the
people of the state that the business should be in the hands of
competent and trustworthy persons."
And we may say that this result can be more confidently and
completely secured through resident brokers, they being immediately
under the inspection of the Commissioner of insurance. *
The motive of
the statute therefore is benefit to insurer and insured, and the
means it provides seem to be appropriate.
"But we need not cast about for reasons for the legislative
judgment. We are not required to be sure of the precise reasons for
its exercise or be convinced of the wisdom of its exercise."
It is enough if the legislation be passed in the exercise of a
power of government and has relation to that power. Rast v. Van
Deman & Lewis, 240 U. S. 342
240 U. S.
-366, and cases cited; also Bunting v.
Oregon, 243 U. S. 426
243 U. S.
2. This contention -- that is, that the act discriminates
against citizens of other states and thereby offends the
Page 248 U. S. 469
Constitution of the United States, is La Tourette's ultimate
reliance, and to it his counsel devote their entire argument. The
state replies its power over insurance and that the legislation it
justifies extends to its agents, and is best executed when they are
residents of the state. This view we have sustained, and manifestly
to declare the legislation illegal is to put a restraint upon a
power that has practical justifications.
The illegality of the act is, however, earnestly urged, and that
it is a "trade regulation," and recognizes "the business, trade or
occupation of an insurance broker as proper and legitimate," and
yet denies to La Tourette, a citizen of New York, the right to
engage in it, and thereby abridges the privileges and immunities
that he has as a citizen. The contention is expressed and
illustrated in a number of ways, and the privilege of a citizen is
defined to be "the right to pursue and obtain happiness and safety"
and "to pursue any lawful business or vocation, in any manner not
inconsistent with the equal rights of others," and that whatever
rights a state grants to its own citizens are the measure within
its jurisdiction of the rights of the citizens of other states, and
for these propositions the Slaughterhouse
16 Wall. 36, and Butchers' Union v.
Crescent City Co., 111 U. S. 746
cited. Other cases are also cited in illustration. We do not
dispute the propositions, and, to see if they determine against the
act under review, we must turn to its words, as did the supreme
court of the state, whose interpretation of them we must accept. It
said, speaking by Mr. Justice Hydrick:
"A citizen of any state of the Union who is a resident of this
state and has been a licensed insurance agent of this state for at
least two years may obtain a broker's license; on the other hand, a
citizen of this state, who is not a resident of the state and has
not been a licensed insurance agent of this state for two years,
may not be licensed. No discrimination is made
Page 248 U. S. 470
on account of citizenship. It rests alone on residence in the
state and experience in the business."
And the court further said:
"Citizenship and residence are not the same thing, nor does one
include the other. Cummings v. Wingo,
31 S.C. 427, and
authorities cited. But our conclusion is not rested upon the mere
use of the word 'residents,' for no doubt it might appear from the
purpose and scope of an act that 'residents' was used in the sense
of 'citizens.' If so, the court would so construe it, and in no
event would the court sanction an evasion of the purpose and intent
of this wise and wholesome provision of the Constitution based on
mere verbiage. But there is nothing in the act to suggest any such
intention. On the contrary, the words 'residents' and 'citizens'
are both used, and each apparently in its ordinary legal sense,
which is well defined and understood, making a distinction which is
substantial in its purpose and one that is sanctioned by the
highest judicial authority."
The court thus distinguishes between citizens and residents, and
decides that it is the purpose of the statute to do so, and, by
doing so, it avoids discrimination. In other words, it is the
effect of the statute that its requirement applies as well to
citizens of the state of South Carolina as to citizens of other
states, residence and citizenship being different things.
"Sec. 3. Such insurance broker shall exercise due care in the
placing of insurance and shall procure from the supervising
official in the state or county in which the home office of the
insurer is located a certificate to the effect that the insurer is
safe and solvent and is authorized to do business. He shall furnish
the insured a statement showing the financial condition of the
insurer and such other information as the insured may require. He
shall report to the Insurance Commissioner in detail the amount of
insurance placed and the premiums paid therefor, and shall pay to
the Insurance Commissioner the additional license fee herein
provided. He shall submit to the Insurance Commissioner within
thirty days after December 31 of each year an annual report of his
transactions, and his books, papers, and accounts shall at all
times be open to the inspection of the Insurance Commissioner or a
deputy appointed by him."