Rates of all the stock fire insurance companies doing business
in Missouri having been reduced uniformly upon consideration en
of their earnings and a finding of an excessive
aggregate profit, as provided in § 6283, Rev.Stats. Mo. 1919, they
sued jointly in the state courts to obtain judicial review of that
determination upon the ground that the aggregate profits were not
excessive, and that the aggregate collections permitted under the
reduced rates were so low as to be confiscatory in violation of the
due process clause of the Fourteenth Amendment. But they did not
challenge the constitutionality of the statute if construed, as
they contended it should be, to require the superintendent to make
his determination on the basis of premiums earned and losses and
expenses incurred, and not on the basis of premiums received and
losses and expenses paid.
1 Rates fixed by state authority on the basis of aggregate
collections of competing fire insurance companies doing business in
the state and which afford just compensation to some of them, but
not to others, cannot be attacked by the former under the
Fourteenth Amendment upon the ground that they are confiscatory as
applied to the latter; nor may the latter prevent their enforcement
against the former because of their inability to compete
successfully if their own rates were increased. P. 275 U. S.
2. State-made rates do not violate the Fourteenth Amendment
merely because aggregate collections are not sufficient to yield a
reasonable profit or just compensation to all companies that happen
to be engaged in the affected business. P. 275 U.S. 447
3. Rates will be set aside as confiscatory only in clear cases,
and the burden is on the one seeking that relief to bring forward
the invalidating facts. P. 275
4. The facts relied on to restrain enforcement of such rates
should be specifically set forth, and from them it should clearly
appear that the rates would deny to plaintiff just compensation and
deprive it of its property without due process of law. P.
275 U.S. 447
5. The complaint does not allege facts to show that the rates
were confiscatory as to any company, and it fails to show any
Page 275 U. S. 441
joint interest or right in or to the business covered by the
rates or the protection sought to be invoked, or that the Missouri
business of each of the companies is so well and economically
carried on that all are entitled, as of right protected by the
Constitution, to have premiums amounting, in the aggregate, enough
to yield a reasonable return or profit to all the companies on all
the business carried on; it does not state a federal question. P.
275 U. S.
whether, upon any state of facts, petitioners
would be entitled jointly to the constitutional protection invoked.
P. 275 U. S.
Writ to renew 315 Mo. 113 dismissed.
Certiorari, 273 U.S. 681, to a decree of the Supreme Court of
Missouri, which reversed a decree setting aside an order reducing
the rates of the plaintiff fire insurance companies.
MR. JUSTICE BUTLER delivered the opinion of the Court.
October 9, 1922, respondent, acting under § 6283, Revised
Statutes of Missouri 1919, made findings of fact and an order
directing a reduction of 10 percent in the rates charged by stock
companies for fire, lightning, hail, and windstorm insurance. The
petitioners, 156 companies, were all the stock fire insurance
companies engaged in that business in Missouri. November 10, 1922,
they brought this suit under § 6284, praying that the order be
reviewed and set aside. The complaint challenges the methods
employed by respondent to make the calculations provided for, and
alleges that the findings and order are unreasonable, confiscatory,
and in contravention of the due process clause of the Fourteenth
Amendment. Issue was joined,
Page 275 U. S. 442
and a trial was had. The circuit court, confirming the report of
a referee appointed to hear the evidence and report his findings of
fact and conclusions of law, found the order unreasonable and
confiscatory and entered a decree setting it aside. The supreme
court reversed and dismissed the case. 315 Mo. 113. This Court
granted a writ of certiorari. 273 U.S. 681.
Respondent insists that the case presents no federal question.
In order to determine whether that contention has merit, it is
necessary to examine the statutory provisions under which the
respondent made the findings and order complained of, the grounds
on which petitioners seek to have them set aside, and the decision
of the supreme court.
Section 6283, as it was at the time the order was made,
] provided that the
superintendent of insurance
"is hereby empowered to investigate the necessity for a
reduction of rates, and if, upon such investigation, it appears
that the result of the earnings in this state of the stock fire
insurance companies for five years next preceding such
investigation shows there has been an aggregate profit therein in
excess of what is reasonable, he shall order such reduction of
rates as shall be necessary to limit the aggregate collections by
insurance companies in this state to not more than a reasonable
profit. . . ."
Section 6284, as it stood when this suit was commenced,
"The orders and directions of the superintendent of insurance,
together with his findings or determinations of facts upon which
such order or determination is founded, shall be reviewable by a
proper action in the courts, and upon such review the entire matter
shall be treated and determined de novo.
. . ."
This section was amended before the trial. Laws 1923, p. 235.
Page 275 U. S. 443
following was added: "The court shall have authority to sustain,
set aside, or modify the orders and directions under review."
The complaint alleges that the rates were not excessive before
the reduction; that each company has local agency plants in
Missouri ranging in value from $10,000 in case of small companies
having but few agencies to $50,000 for larger companies having
many, and that the goodwill of the agencies of each is of great
value; that, in Missouri, normal expenses of each are from 35 to 45
percent of earned premiums, and the yearly aggregate of all
expenses is approximately 42 percent of all earned premiums, but
that, in the five-year period ending with 1921, total expenses
amounted to about 44 percent of all premiums earned for insurance
written in that period; that, in accordance with Missouri law, each
company maintains a sum equal to its unearned premiums; that each
should also have a surplus over its capital stock of 3 percent of
its premiums on fire insurance policies in each year to meet the
hazards of conflagration, [Footnote
] and of 10 percent of other premiums against the risk of
other catastrophes, and that each company is entitled to earn
annually an underwriting profit of at least 5 percent of the earned
premiums; that such profit for any period is the amount of premiums
earned, less losses and expenses incurred; that, in the five-year
period ending with 1921, the combined experience of all companies
on all classes of insurance in Missouri was: losses incurred, 64.9
percent of earned premiums; expenses incurred, 44.4 percent, making
a total of 109.3 percent -- without any allowance for a fund to
meet conflagration and catastrophe hazards, or for profits to the
Page 275 U. S. 444
And the complaint shows that, prior to the order here in
question and on January 5, 1922, the superintendent made an order
reducing rates 15 percent. The companies sued him to enjoin its
enforcement. The parties entered into a stipulation reciting that
he had revoked the order and agreeing that the case be dismissed.
And it was stated therein that the superintendent, not earlier than
March 15, 1922, might call a hearing to investigate the necessity
for a reduction of rates; that, at such hearing, the experience of
the companies in Missouri for 1921 should be offered in evidence
and considered by the superintendent, together with such other
evidence as might be offered; that, at the conclusion of the
hearings, the superintendent would make certain findings of fact
and announce his determination. And the stipulation contained the
"That if . . . an order reducing the rates . . . be made, . . .
the said insurance companies, if dissatisfied, . . . will proceed
to secure a review thereof by the trial de novo
Circuit Court of Cole County, Missouri. . . . That in such matter,
the question of the constitutionality of §§ 6283 and 6284 . . .
shall not be raised, nor shall the legality of the hearing above
provided for be questioned."
And the complaint alleges that there was a hearing at which the
companies performed their part of the agreement, but that the
superintendent failed to make the findings specified in the
stipulation. The order (set forth in the bill) stated that the
companies refused to supply necessary data to enable the
superintendent to make such findings, and that his investigation
was based on sworn reports filed by the companies during the
five-year period. The findings contained in the order are that, in
respect of the business in Missouri, the companies in that period
collected net premiums amounting to $81,067,318, interest on
capital and surplus prorated to that state $2,801.660,
Page 275 U. S. 445
and interest on unearned premium reserves $2,418,596, making a
total of $86,287,574; that they paid losses of $45,066,124; that
expenses amounted to $32,534,617, leaving $8,686,833 profits, and
that expenses were excessive by not less than $5,000,000. The order
declared that the rates then in force produced excessive and
unreasonable profits, and that a reduction of 10 percent in the
existing rates would result in profits that are reasonable, and it
directed that rates so reduced take effect November 15, 1922.
The complaint avers that, if § 6283 be construed to authorize
the superintendent of insurance to take into account interest on
earnings, capital stock, surplus, and unearned premium reserves, or
to make his determination of profit or loss on the basis of
premiums received and losses and expenses paid, as distinguished
from premiums earned and losses and expenses incurred, or if it be
held to authorize the superintendent to regulate the expenses of
the companies, or the inspection of their risks, or the amount of
insurance they may write, then the section would violate the due
process clause of the Fourteenth Amendment, and it charges that the
methods and calculations employed and the findings of fact made by
the superintendent are erroneous, unreasonable, and unjust, that
the prescribed rates are unreasonable, inadequate, and
confiscatory, and that the enforcement of the order would operate
to deprive the petitioners, and each of them, of their property
without due process of law.
By his answer, the superintendent denies the allegations of fact
and challenges the grounds on which petitioners contend that the
findings and order are repugnant to the Fourteenth Amendment.
The supreme court considered the evidence and held that the
order reducing rates was justified. It did not pass upon
petitioners' contentions that their rights, safeguarded
Page 275 U. S. 446
by the Fourteenth Amendment, had been or would be infringed by
the state law or by the superintendent's findings and order.
It will be observed that here, the controversy concerns the
basis on which the findings were to be made, and that petitioners
do not challenge the constitutionality of the statute, if
construed, as they contend it should be, to require the
superintendent to make his determinations on the basis of premiums
earned and losses and expenses incurred. Unlike the general power
to prescribe insurance premiums conferred by the Kansas statute
upheld in German Alliance Ins. Co. v. Kansas, 233 U.
, the Missouri statute before us narrowly limits
the authority of the superintendent of insurance. He is not
authorized to determine whether, when applied to the Missouri
business of the several companies, or of any of them, the existing
or prescribed rates had been or would be just and reasonable.
Section 6283 requires consideration en masse
"result of the earnings" of all the companies, and, upon finding an
excessive "aggregate profit," it becomes the duty of the
superintendent to limit the "aggregate collections" to not more
than a reasonable profit. The reduced rates are applicable to the
business of all companies alike, and without regard to the amount
of the past or prospective profits or losses of any of them, and
the attack is by joint action of all the companies. It is not
claimed by or on behalf of any company that, when applied to its
business, the reduced rates are or would be too low to permit the
company to make a reasonable profit or to have just compensation
for its contracts of insurance.
No company receiving just compensation is entitled to have
higher rates merely because of the plight of its less fortunate
competitors. Companies whose constitutional rights are not
infringed may not better their position by urging the cause of
others. Supervisors v.
Page 275 U. S. 447
U.S. 305, 105 U. S. 311
Heald v. District of Columbia, 259 U.
, 259 U. S. 123
As a practical matter of business, it is impossible in the long run
for some companies to collect higher premiums than those charged by
others in the same territory. Rates sufficient to yield adequate
returns to some may be confiscatory when applied to the business of
others. But the latter have no constitutional right to prevent
their enforcement against the former. The Fourteenth Amendment does
not protect against competition. Moreover, "aggregate collections"
sufficient to yield a reasonable profit for all do not necessarily
give to each just compensation for the contracts of insurance
written by it. It has never been and cannot reasonably be held that
state-made rates violate the Fourteenth Amendment merely because
the aggregate collections are not sufficient to yield a reasonable
profit or just compensation to all companies that happen to be
engaged in the affected business.
The complaint was framed to secure judicial review (§ 6284) of
the determination of the respondent. The ground of attack was that
the aggregate profits were not excessive, and that the aggregate
collections permitted under the reduced rates were too low.
Allegations asserting in general language that the findings, order,
and reduced rates are confiscatory and repugnant to the Fourteenth
Amendment are not sufficient. In order to invoke the constitutional
protection, the facts relied on to restrain the enforcement of
rates prescribed under the sanction of state law must be
specifically set forth, and from them it must clearly appear that
the rates would necessarily deny to the plaintiff just compensation
and deprive it of its property without due process of law.
Louisville & Nashville R. Co. v. Garrett, 231 U.
, 231 U. S. 314
Atlantic Coast Line v. Florida, 203 U.
. Jurisdiction of this Court to set aside
state-made rates as confiscatory will be exercised only in clear
cases, and the burden is on one
Page 275 U. S. 448
seeking that relief to bring forward and satisfactorily prove
the invalidating facts. Chicago, etc., Ry. Co. v. Wellman,
143 U. S. 339
143 U. S.
-345; San Diego Land & Town Co. v.
Jasper, 189 U. S. 439
189 U. S. 441
189 U. S. 446
Knoxville v. Water Co., 212 U. S. 1
212 U. S. 8
212 U. S. 16
Minnesota Rate Cases, 230 U. S. 352
230 U. S. 433
230 U. S. 452
Brush Elec. Co. v. Galveston, 262 U.
, 262 U. S. 446
Neither of the sections authorized a determination of the
reasonableness of rates when applied to the business of any
company. The complaint did not allege any facts to show that the
reduced rates were confiscatory as to any company. The court was
not called upon to determine whether the order would operate to
deprive any company of its property without due process of law. It
treated the suit as one to obtain the review provided for by §
The petitioners are competitors, and each carries on business
for itself. While they may be joint action pursue the remedy given
by § 6284, it does not follow that the Constitution safeguards
aggregate profits sufficient to constitute just compensation for
all the companies. The complaint fails to show any joint interest
or right in or to the business covered by the rates or the
protection sought to be invoked, and it fails to show that the
business in Missouri of each is so well and economically organized
and carried on that petitioners are entitled, as of right protected
by the Constitution, to have premiums amounting in the aggregate
enough to yield a reasonable return or profit to all the companies.
Assuming that, upon any state of facts, the petitioners would be
entitled jointly to have such protection, and, as to that, no
opinion is expressed, it is enough to say that the facts brought
forward in this case are not sufficient to raise the question
whether the state law or the superintendent's finding of facts or
his order is repugnant to the due process clause of the Fourteenth
Amendment. No federal question is presented.
This section has since been amended.Laws 1923, p. 235.
The referee reported that a conflagration is any loss in excess
of $1,000,000, and that it is customary to charge that amount of
the loss against the state in which it occurs, and prorate the
remainder among all the states.