1. The business of insurance is so far affected with a public
interest that the state may regulate the rates, and likewise the
relations of those engaged in the business. P. 282 U. S.
Page 282 U. S. 252
2. A New Jersey statute declaring that rates of insurance
against the hazards of fire shall be reasonable, and making it
unlawful for fire insurance company to allow a commission to any
person for acting a its local agent respecting such insurance, in
excess of that allowed to any of its local agents on such risks in
the state upheld,
upon the record in the case, as within
the power of the state to regulate such rate. P. 282 U. S.
3. A state statute, dealing with a subject clearly within the
police power, cannot be declared void, upon the ground that the
specific method of regulation prescribed by it is unreasonable, in
the absence of any factual foundation in the record to overcome the
presumption of constitutionality. Id.
4. It does not appear upon the face of the statute here in
question, or from fact of which the Court must take judicial
notice, that, in New Jersey, evils do not exist in the business of
fire insurance for which the statutory provision is an appropriate
remedy. P. 282 U. S.
105 N.J.L. 642 affirmed.
Appeals from judgments affirming judgments against the appellant
in actions which it brought against the insurance companies to
recover moneys claimed to be due to it for services as local agent.
105 N.J.L. 645.
Page 282 U. S. 254
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
These cases, which are here on appeals from the highest court of
New Jersey, were argued together. They present the question whether
the following statutory provision,
Page 282 U. S. 255
effective March 29, 1928, is consistent with the due process
clause of the Fourteenth Amendment:
"In order that rates for insurance against the hazards of fire
shall be reasonable, it shall be unlawful for any such insurer
licensed in this state to . . . allow . . . any commission . . . in
excess of a reasonable amount to any person for acting as its agent
in respect to any class of such insurance, nor . . . to allow any
commission . . . to any person for acting as its local agent in
respect to any class of such insurance in excess of that . . .
allowed to any one of its local agents on such risks in this
New Jersey Laws 1928, c. 128, p. 258.
In each case, O'Gorman & Young, Inc., a domestic corporation
licensed as an insurance broker, sues a licensed foreign fire
insurance company to recover a balance alleged to be due for
services performed as local agent at Newark after the effective
date of the statute. In the Phoenix Assurance Company
case, the complaint is on a contract terminable at will, made prior
to the enactment of the statute. by which the company agreed to pay
to the agent twenty-five percent of the premiums. In the
Hartford Fire Insurance Company
case, the complaint is on
a contract, made after the enactment of the statute, by which the
defendant agreed to pay as compensation "what such services were
reasonably worth," and the complaint alleges that the services were
reasonably worth twenty-five percent of the premiums. Each
complaint alleges that the defendant has paid the plaintiff only
twenty percent of the premiums. Each answer admits the facts
alleged in the complaint. As a defense, it sets up the statute and
the fact that the defendant had, at the date of its enactment, and
ever since has had, several persons acting as its local agents
within the state to whom the compensation allowed in respect to the
same class of business has been only twenty percent of the
Page 282 U. S. 256
Each case was heard upon a motion to strike out the answer and
for judgment on the ground that the statute is void under the due
process clause of the Fourteenth Amendment. In each case, the trial
court denied the motion and entered judgment against the plaintiff,
the facts alleged in the answer being admitted. In an opinion
discussing the question presented, that court said:
"Our statute provides that the rates for fire insurance 'shall
be reasonable.' Since the commissions paid to local agents
naturally enter into the cost of such insurance to the public, and
therefore influence the rates which must be charged to the public
for such insurance, it is within the police power of the state to
require that the commissions must be reasonable, otherwise such
large commissions might be allowed as to impair the financial
stability of the insurance companies, and thus imperil their
ability to meet their financial obligations to their
"Since twenty percent is the amount of commissions paid to some
of its local agents, the effect of this legislation is to determine
that a commission in excess of that is unreasonable. The
presumption is in favor of the reasonableness of the law until the
contrary is made to appear."
"In the facts or argument, there is nothing to overcome that
presumption. . . ."
105 N.J.Law 645, 146 A. 370, 371. [Footnote 1
Page 282 U. S. 257
On that opinion, the Court of Errors and Appeals affirmed the
judgments of the trial court. 105 N.J.Law, 642, 146 A. 370. We
think it was right in so doing.
The business of insurance is so far affected with a public
interest that the state may regulate the rates, German Alliance
Insurance Co. v. Lewis, 233 U. S. 389
likewise the relations of those engaged in the business, La
Tourette v. McMaster, 248 U. S. 465
Stipcich v. Metropolitan Life Insurance Co., 277 U.
, 277 U. S. 320
Compare McCarter v. Firemen's Insurance Co.,
372, 382, 73 A. 80, 414. The agent's compensation, being a
percentage of the premium, bears a direct relation to the rate
charged the insured. The percentage commonly allowed is so large
that it is a vital element in the rate structure and may seriously
affect the adequacy of the rate. Excessive commissions may result
in an unreasonably high rate level or in impairment of the
financial stability of the insurer. It was stated at the bar that
the commission on some classes of insurance is as high as
thirty-five percent. Moreover, lack of a uniform scale of
commissions allowed local agents for the same service may encourage
unfair discrimination among policyholders by facilitating the
forbidden practice of rebating. In the field of life insurance,
such evils led long ago to legislative limitation of agents'
commissions. [Footnote 2
The statute here questioned deals with a subject clearly within
the scope of the police power. We are asked to declare it void on
the ground that the specific method of regulation prescribed is
unreasonable, and hence deprives the plaintiff of due process of
law. As underlying questions of fact may condition the
constitutionality of legislation of this character, the presumption
Page 282 U. S. 258
must prevail in the absence of some factual foundation of record
for overthrowing the statute. [Footnote 3
] It does not appear upon the face of the
statute, or from any facts of which the court must take judicial
notice, that, in New Jersey, evils did not exist in the business of
fire insurance for which this statutory provision was an
appropriate remedy. The action of the legislature and of the
highest court of the state indicates that such evils did exist.
] The record is
barren of any allegation of fact tending to show
It is the settled practice in New Jersey that, where the subject
regulated is properly within the scope of the police power of the
state, a charge of discrimination or lack of reasonable relation
between the object of the act and the means employed must be
supported by facts in the record sufficient to overcome the general
presumption of constitutionality. Hopper v. Stack,
N.J.Law, 562, 56 A. 1; Meehan v. Board of Excise
75 N.J.Law, 557, 562, 70 A. 363; Commercial
Trust Co. v. Hudson County Board,
86 N.J.Law, 424, 92 A. 263,
87 N.J.Law, 179, 92 A. 799; State v.
83 N.J.Law, 46, 49, 84 A. 1057, aff'd,
N.J.Law, 192, 193, 94 A. 788, aff'd, 244 U. S. 244
258; Public Service Ry. Co. v. Public Utility
89 N.J.Law, 24, 27, 28, 98 A. 28,
aff'd, 254 U. S. 254
394; compare Thorne v. Town of Kearny,
100 N.J.Law, 228,
126 A. 613, aff'd sub. nom. Thorne v. Casale,
418, 128 A. 174.
Laws of New York 1906, c. 326, § 97, pp. 794-796; Insurance Law
of New York (Baldwin), 1930 Edition, § 97, pp. 96-101. See
Report of Joint (Armstrong) Insurance Investigating Committee, Feb.
22, 1906, pp. 399-417; Laws of New Jersey 1927, c. 167, pp. 324,
325; Laws 1928, c. 128, p. 257.
Close v. Glenwood Cemetery, 107 U.
, 107 U. S. 475
Powell v. Pennsylvania, 127 U. S. 678
127 U. S. 685
Lindsley v. Natural Carbonic Gas Co., 220 U. S.
, 220 U. S. 79
220 U. S. 83
Chicago Dock Co. v. Fraley, 228 U.
, 228 U. S. 687
Rast v. Van Deman & Lewis Co., 240 U.
, 240 U. S. 357
Wampler v. Lecompte, ante,
p. 282 U. S. 172
Compare Minnesota Rate Cases, 230 U.
, 230 U. S. 461
H. W. Bikle , "Judicial determination of facts affecting the
constitutional validity of legislative action," 38 Harv.L.Rev.
Compare Heath & Milligan Mfg. Co. v. Worst,
207 U. S. 338
207 U. S. 355
Welch v. Swasey, 214 U. S. 91
214 U. S. 108
Laurel Hill Cemetery v. San Francisco, 216 U.
, 216 U. S. 365
Adams v. Milwaukee, 228 U. S. 572
228 U. S. 583
Barrett v. Indiana, 229 U. S. 26
229 U. S. 29
Patsone v. Pennsylvania, 232 U. S. 138
232 U. S. 144
Price v. Illinois, 238 U. S. 446
238 U. S. 452
Bunting v. Oregon, 243 U. S. 426
243 U. S. 438
Dominion Hotel v. Arizona, 249 U.
, 249 U. S. 268
The alleged existence of such evils throughout the United States
led recently to an inquiry by the National Convention of Insurance
report of proceedings at annual meeting
Sept. 9, 1930. The United States Daily, Supplement, Sept. 23,
The separate opinion of MR. JUSTICE VAN DEVANTER, MR. JUSTICE
McREYNOLDS, MR. JUSTICE SUTHERLAND, and MR. JUSTICE BUTLER.
We are of opinion that the judgments below should be
The appellees (defendants below) are separate fire insurance
companies. The facts are not in dispute; both
Page 282 U. S. 259
records present like circumstances and questions of law. It will
suffice here to point out the essentials disclosed in No. 12.
O'Gorman & Young, a New Jersey corporation, under proper
license, transacts business as an insurance broker. For many years,
it has been the agent of appellee, a Connecticut corporation
authorized to issue fire policies in New Jersey. Prior to March 29,
1928, the agreement of employment provided that, for negotiating
and selling such policies, the agent should receive 25% of
prescribed premiums. On that day, the original contract was
changed, and now it provides that the agent shall be paid "what
such services were reasonably worth."
Acting under this modified arrangement, O'Gorman & Young
negotiated and sold policies upon which the premiums amounted to
$2,454.61. As reasonable compensation, demand was made for $613.68
-- 25% of the premiums. The insurance company paid $490.92, 20%,
and denied further liability.
Thereupon (October, 1928), asserting that its services were
reasonably worth 25% of the premiums, O'Gorman & Young brought
an action against the insurance company in the circuit court, Essex
county, New Jersey to recover $122.76. The complaint sets out the
foregoing facts and asks for judgment; it says nothing concerning
any New Jersey statute.
The answer admits the allegations of the complaint except
"defendant denies that it owes the plaintiff the sum of $122.76 as
in said complaint alleged for the reasons hereinafter in this
answer set forth." They are set out in the three paragraphs
Chapter 128, *
Act of the New
Jersey Legislature approved March 29, 1928, provides (Section
Page 282 U. S. 260
that rates for insurance against the hazards of fire shall be
reasonable, it shall be unlawful for any such insurer licensed in
this state to directly or indirectly pay or allow, or offer or
agree to allow, any commission or other compensation
Page 282 U. S. 261
or anything of value, in excess of a reasonable amount, to any
person for acting as its agent in respect to any class of such
insurance, nor to directly or indirectly pay or allow, or offer or
agree to allow, any commission or
Page 282 U. S. 262
other compensation or anything of value, to any person for
acting as its local agent in respect to any class of such
insurance, in excess of that offered, paid or allowed to any one of
its local agents on such risks in this state."
Also (section 2):
"Any insurer, agent, expert, person or corporation violating any
of the provisions of this act shall be subject to a penalty of five
hundred dollars for each and every violation to be sued for and
recovered by the Commissioner of Banking and Insurance, or by any
citizen of this state and paid to the state treasurer. In case any
insurer is convicted of a violation of this act, every local agent
of the insurer in this state shall be
Page 282 U. S. 263
entitled to the same commission or compensation, or other thing
of value, for business done for the insurer during the calendar
year in which the discrimination took place, on risks in this
state, and any local agent may recover from the insurer in any
court of competent jurisdiction, the amount of such excess
commission or compensation, or other thing of value, if any, to
which he may become entitled under the provisions of this Act."
"On and subsequently to March 29, 1928, this defendant had and
now has several persons acting as its local agents duly authorized
to represent it in writing fire insurance in the New Jersey; that
the commissions allowed by this defendant to its said several
agents so acting as aforesaid in respect to the class of insurance
mentioned in the said complaint was, on said last mentioned day and
from thence hitherto and now is, twenty percentum on each premium
charged; that, pursuant to the terms of the said statute, it became
and was unlawful on and after March 29, 1928, to pay to the
plaintiff herein the commission of twenty-five percentum of the
premium charged, theretofore paid by this defendant to the said
Admitting that, since March 29, 1928, a commission of 20% had
been regularly allowed by the insurance company to certain agents
in New Jersey and asserting the invalidity of the Act of that date
because of conflict with the Fourteenth Amendment, complainant
moved to strike out the answer as insufficient. This motion was
denied, and final judgment went for the defendant upon the
pleadings and admission.
The Circuit Court (Judge Dungan) said:
"The other question is whether of not the act deprives the
plaintiff of its property without due process of law, and therefore
is a violation of the 14th Amendment to the federal Constitution.
Page 282 U. S. 264
"Federal and state laws are in favor of the regulation of the
business affairs of persons and corporations which affect the
public interest, and there are federal and state decisions in
almost every state in this country upholding the constitutionality
of such laws, provided they are reasonable. Of course, the mere
statement in the law itself as to the reasonableness of its
provisions does not make them so, but that is a question to be
decided sometimes by the court and sometimes by a jury. Whether or
not the business of a fire insurance company is affected with a
public interest is not an open question in this state. In
McCarter, Attorney General v. Firemen's Ins. Co.,
N.J.Eq. 372 (at p. 383), our Court of Errors and Appeals said,"
"The business of the defendants [insurance companies] is in
point of fact one that directly affects the interests of the
public, and such public interest has been recognized as a
subsisting one by the legislature of this state, and that, in point
of law, the business of the defendants is affected with a public
"If the regulations prescribed are reasonable, they are valid.
Our statute provides that the rates for fire insurance 'shall be
reasonable.' Since the commissions paid to local agents naturally
enter into the cost of such insurance to the public, and therefore
influence the rates which must be charged to the public for such
insurance, it is within the police power of the state to require
that the commissions must be reasonable, otherwise such large
commissions might be allowed as to impair the financial stability
of the insurance companies, and thus imperil their ability to meet
their financial obligations to their policyholders."
"Since twenty percent is the amount of commissions paid to some
of its local agents, the effect of this legislation is to determine
that a commission in excess of that is
Page 282 U. S. 265
unreasonable. The presumption is in favor of the reasonableness
of the law until the contrary is made to appear."
"In the facts or arguments, there is nothing to overcome that
presumption, and therefore the answers should not be stricken out
as an unlawful deprivation of the plaintiff of his property without
due process of law."
The Court of Errors and Appeals affirmed the questioned judgment
"for the reasons expressed in the opinion by Judge Dungan in the
The matter for our consideration comes to this: a foreign
insurance company, licensed to operate in New Jersey, employed an
agent and agreed to pay reasonable compensation. The agent demanded
25% of the premiums collected. The company paid 20% of these and
successfully resisted the claim for more upon the sole ground
"since twenty percent is the amount of commissions paid to some
of its local agents, the effect of this legislation [Act March 29,
1928] is to determine that a commission in excess of that is
Abstractly stated, the principal paid "A" commissions at the
rate of 20%; therefore, it has been held, solely because of the Act
nothing above 20% can be recovered by "B," who claims under a
contract fair on its face and not expressly inhibited, which
definitely provides for reasonable compensation.
It cannot rightly be said that the burden of establishing any
underlying disputable fact rests upon the appellant before it can
successfully challenge the validity of the questioned enactment.
This is not a proceeding to enjoin enforcement of a statute because
of alleged discrimination or other circumstance, the existence of
which requires consideration of facts not known to the court.
Opinions in cases of that character are not in point. The court
Page 282 U. S. 266
ruled, in effect, that, without regard to any evidence which
might be presented, the complainant, although relying upon a
contract fair upon its face, could recover nothing above the rate
allowed to another agent -- that the statute restricted the right
to contract for services for reasonable compensation. And we must
determine whether, thus construed, and in the absence of any
emergency, the statute necessarily conflicts with the Fourteenth
Amendment. Is such legislation permissible in the ordinary
circumstances of which the court must take judicial notice?
Under German Alliance Ins. Co. v. Lewis, 233 U.
, the appellant does not deny that, because of the
public interest involved, reasonable rates for issuing fire
insurance policies may be fixed by statute. But that decision
"marks the extreme limit to which this Court thus far has gone in
sustaining price-fixing legislation." Tyson & Bro. v.
Banton, 273 U. S. 418
273 U. S.
The German Alliance Company questioned the validity of an order
by the Superintendent of Insurance of Kansas which undertook to
reduce its duly announced basic schedule of rates. The definite
point for decision was thus stated:
"Whether a contract of fire insurance is private, and as such
has constitutional immunity from regulation. Or, to state it
differently and to express an antithetical proposition, is the
business of insurance so far affected with a public interest as to
justify legislative regulation of its rates? And we mean a broad
and definite public interest."
An affirmative answer followed.
The decision is authoritative as to the point so ruled, but not
otherwise. Nothing there determined would permit regulation of all
the undertakings of an insurance company. Here, we are not dealing
directly with a contract to insure. And certainly it does not
follow that, because the state has power to regulate the rate for
Page 282 U. S. 267
she may control every agreement having any possible relation
The public has no direct, immediate interest in the agency
contract here set up. Its concern is with rates. Like any other
expense item, brokers' commissions may ultimately affect the rate
charged for policies; but this is true of the wages of office boys,
printers, bookkeepers, actuaries, officers; the price paid for
pens, ink, or other supplies -- indeed, whatever expense may be
incurred. Broadly speaking, the funds of an insurance company come
from premiums collected, and necessarily all disbursements are made
therefrom, and therefore in some sense may be said to affect the
necessary rate of charge.
The state may not permit a foreign insurance company to do
business within her limits upon condition that it shall submit to
deprivation of rights guaranteed by the Constitution. Western
Union Tel. Co. v. Kansas, 216 U. S. 1
Hanover Ins. Co. v. Harding, 272 U.
, 272 U. S.
This Court has steadfastly upheld the general right to enter
into private contract, and has definitely disapproved attempts to
fix prices by legislative fiat.
"Freedom of contract is, nevertheless, the general rule, and
restraint the exception, and the exercise of legislative authority
to abridge it can be justified only by the existence of exceptional
circumstances. . . . That the right to contract about one's affairs
is a part of the liberty of the individual protected by this clause
[of the Fourteenth Amendment] is settled by the decisions of this
Court, and is no longer open to question."
Adkins v. Children's Hospital, 261 U.
, 261 U. S.
-546; Adair v. United States, 208 U.
, 208 U. S.
-175; Coppage v. Kansas, 236 U. S.
, 236 U. S. 14
Wilson v. New, 243 U. S. 332
Adams v. Tanner, 244 U. S. 590
Truax v. Corrigan, 257 U. S. 312
257 U. S. 338
Meyer v. Nebraska, 262 U. S. 390
Wolff Co. v. Industrial
Page 282 U. S. 268
522; Tyson & Bro. v. Banton, supra; Ribnik v.
McBride, 277 U. S. 350
Liggett Co. v. Baldridge, 278 U.
, 278 U. S.
Also it must be accepted as settled that the right to regulate a
business does not necessarily imply power to fix the scale for
services therein, or to trespass on the duties of private
management. Adams v. Tanner, supra; Truax v. Corrigan, supra;
Tyson & Bro. v. Banton, supra; Southwestern Bell Tel. Co. v.
Public Service Commission, 262 U. S. 276
262 U. S. 289
Wolff Co. v. Industrial Court, supra.
Even if it be admitted that the power of the legislature to
establish reasonable rates for insurance necessarily presupposes
existence of the right to command or inhibit what is essential to
the accomplishment of that end, certainly this implied right
extends to nothing which does not clearly appear to be necessary
for such purpose.
The statute under review does not prescribe a schedule of rates
or point out the basis for determination of reasonable rates; it
leaves with each company the primary right and duty of deciding
upon rates to be demanded. But it inhibits payment to any agent,
irrespective of the worth of his services and without regard to any
contract with him, of anything in excess of what may be actually
paid to another agent. As construed, it declares that the smallest
compensation voluntarily paid to any agent shall thereby become
reasonable for every other agent. And it permits an agent who has
been paid according to his agreement to recover more if he can show
that some other agent has received greater compensation.
The objections to the statute, no extraordinary conditions
having been disclosed by the defendant, should be obvious. It goes
far beyond the mere regulation of the business of insurance and
interferes directly with the right of insurers to control the
conduct of their internal affairs; it restricts the right of both
company and agent to make reasonable private agreements in respect
Page 282 U. S. 269
for ordinary services, and the restrictions have no immediate or
necessary relation to the maintenance of insurance rates fair to
The difference between regulation and management is pointed out
in the cases cited above. Congress has power, for example, to
regulate interstate commerce; but generally at least, it may not
say what shall be paid to employees or interfere with the freedom
of the parties to contract in respect of wages. This was distinctly
pointed out in Wilson v. New, 243 U.
, 243 U. S.
"It is also equally true that, as the right to fix by agreement
between the carrier and its employees a standard of wages to
control their relations is primarily private, the establishment and
giving effect to such agreed-on standard is not subject to be
controlled or prevented by public authority."
In order to justify the denial of the right to make private
contracts, some special circumstances sufficient to indicate the
necessity therefor must be shown by the party relying upon the
denial. Here, the right freely to agree upon reasonable
compensation has been abridged, and no special circumstances
demanding such action have been disclosed. Under the construction
placed upon the statute, no agent can make an enforceable agreement
with an insurance company definitely fixing his compensation.
Always the company can defeat his claim for the agreed amount,
reasonable in fact, by paying less to another agent.
The inability of the company to make enforceable agreements with
necessary agents has no appreciable relation to fair rates. One
agent's efforts often produce much more valuable results than those
of another. Such interference with the freedom of the parties
hinders the proper conduct of the business, and may ultimately
cause increased rates. The statute prescribes no definite rate of
compensation; under it, no two companies are required to pay
Page 282 U. S. 270
at the same rate for like services in the same locality, and
competition for business is necessarily abridged. And in order to
operate at all at some points, the insurer may find it necessary to
pay agents much more than prudent management would require, and
beyond the real value of their services at such places.
Although agents are usually paid a specified percentage of
premiums collected, the statute is not limited to that situation.
Certainly we cannot say that exercise by the companies of the
ordinary right freely to contract touching compensation for
services will tend materially to interfere with reasonable rates
for insurance. Rates constitute the matter of public concern, not
the compensation of employees or representatives, which is, after
all, only an item of expense. And, so far as we can see, this
legislation will afford no protection to those who wish to
The statute before us goes far beyond the usual provisions of
state laws concerning the insurance business. We are advised that a
similar one was enacted by the Mississippi in 1924 and by the
Louisiana in 1926. Diligent counsel have disclosed no others. The
restrictions are novel, and lack the sanction of general assent and
In our view, the statute is arbitrary, unreasonable, and beyond
the power of the legislature.
"An Act to amend an act entitled "A further supplement to an act
entitled An act to provide for the regulation and incorporation
of insurance companies and to regulate the transaction of insurance
business in this state,' approved April third, one thousand nine
hundred and two," which said supplement was approved March
eighteenth, one thousand nine hundred and thirteen."
"BE IT ENACTED by the Senate and General Assembly of the
State of New Jersey:
"1. Section one of the act of which this act is amendatory be
and the same is hereby amended so that the same shall read as
" 1. No corporation, firm, association, individual or
aggregation of individuals, hereinafter called 'insurer,' doing the
business of insurance within this state shall fix or make any rate
or schedule of rates, or charge, demand, collect or receive,
directly or indirectly, or through any special rate, tariff,
drawback, rebate, concession, device or subterfuge, a rate for
insurance, which discriminates unfairly between risks within this
essentially the same hazard, nor shall any insurer against the
hazards of fire or legal liability of employers make any such
insurance within this state except in accordance with general basis
schedules, embodying basis rates, charges, credits, terms,
conditions, permits, standards, and other data necessary to the
computation of equitable rates and rules of practice for such
insurance, which general basis schedules, embodying basis rates,
charges, credits, terms, conditions, permits, standards and other
data used for the determination of rates shall be filed by such
insurer or its agent or expert duly authorized, with the
Commissioner of Banking and Insurance within three months after
this act goes into effect, or with the amendments to such general
basis schedules which may be filed with the Commissioner of Banking
and Insurance from time to time thereafter. Any one or more of such
insurers, singly or jointly, may employ for the making of such
general basis schedules and rates and the filing of the same the
services of such experts as it, or they, may deem advisable for
such purpose. In order that rates for insurance against the hazards
of fire shall be reasonable, it shall be unlawful for any such
insurer licensed in this state to directly or indirectly pay or
allow, or offer or agree to allow, any commission or other
compensation or anything of value, in excess of a reasonable
amount, to any person for acting as its agent in respect to any
class of such insurance, nor to directly or indirectly pay or
allow, or offer or agree to allow, any commission or other
compensation or anything of value, to any person for acting as its
local agent in respect to any class of such insurance, in excess of
that offered, paid, or allowed to any one of its local agents on
such risks in this state. On the written complaint of any insurer
or any agent licensed in this state that there has been any
violation of the provisions of this act, or when the commissioner
deems it necessary without such complaint, the commissioner shall
inquire whether or not there has been any violation of the
provisions of this act in the commissions paid or payable on such
risks in this state."
" Every such insurer or agent shall, within ten days after
written demand therefor, furnish to any person, upon whose property
or risk a rate has been made by said insurer, or to his authorized
representative, full information as to such rate, and if such
property or risk be rated by schedule applying particularly to each
risk, a copy of such schedule, and shall provide such means as may
be approved by the Commissioner of Banking and Insurance whereby
any person or persons affected by such rate may be heard on an
application for a change in such rate. Whenever it is made to
appear to the satisfaction of the Commissioner of Banking and
Insurance that any such rate or general basis schedule or amendment
thereof discriminates unfairly between risks within this
essentially the same hazard, or that any insurer has made any
insurance within this state at any rate not in accordance with the
general basis schedule or amendment thereof filed by it, he may,
after a full hearing, either before himself or before any salaried
employee of the Department of Banking and Insurance whose report he
may adopt, order such discrimination removed, or such rate
corrected in accordance with such general basis schedule or
amendment thereof, and all such insurers affected thereby shall
forthwith comply with such order; nor shall such insurers or any of
them remove such discrimination by increasing the rates on any risk
or class of risks affected by such order unless it is made to
appear to the satisfaction of the Commissioner of Banking and
Insurance that such increase is justifiable."
" This supplement shall not apply to any contract of life
insurance, nor to any contract of insurance upon or in connection
with marine or transportation risks or hazards other than contracts
for automobile insurance, nor to contracts of insurance upon
property or risks located without this state, nor to contracts of
title insurance or mortgage guaranty."
"2. Section two of the act of which this act is amendatory be
and the same is hereby amended so that the same shall read as
" 2. Any insurer, agent, expert, person, or corporation
violating any of the provisions of this act shall be subject to a
penalty of five hundred dollars for each and every violation to be
sued for and recovered by the Commissioner of Banking and
Insurance, or by any citizen of this state, and paid to the state
treasurer. In case any insurer is convicted of a violation of this
act, every local agent of the insurer in this state shall be
entitled to the same commission or compensation, or other thing of
value, for business done for the insurer during the calendar year
in which the discrimination took place, on risks in this state, and
any local agent may recover from the insurer in any court of
competent jurisdiction the amount of such excess commission or
compensation or other thing of value, if any, to which he may
become entitled under the provisions of this act."
" If any section, provisions or part of this act be questioned
in any court of competent jurisdiction, and declared to be
unconstitutional, the said section, clause or part shall be
exscinded and the remainder of the act shall continue in full force
"3. This act shall take effect immediately."
Passed March 29, 1928.