A statute of Wisconsin requires that the unearned premium
reserve of every insurance company doing business within the State
shall be computed by a specified percentage of premiums received
and shall be shown as a liability in the annual statement required
to be filed. As applied to the appellant -- a foreign insurance
company which operated in some States on a membership fee plan
(unlawful in Wisconsin) -- the statute as construed requires that,
in computing the reserve, there be included membership fees as well
as premiums received in all States. For failure to comply with the
statute, appellant was denied a license to do business within the
State.
Held:
1. The statute does not violate the due process clause of the
Fourteenth Amendment. P.
324 U. S.
157.
(a) The reserve requirement was relevant to the financial
stability of insurance companies doing business within the State,
and was therefore within the power of the State for the protection
of its citizens. P.
324 U. S.
158.
(b) The due process clause does not demand uniformity in the
requirements of the States with respect to financial statements of
companies doing a multi-state business. P.
324 U. S.
159.
(c) The statute does not regulate out-of-state activities. P.
324 U. S.
159.
2. The statute does not violate the full faith and credit clause
of the Constitution. P.
324 U. S.
159.
(a) That the State of incorporation does not treat membership
fees as premiums does not preclude Wisconsin's doing so. P.
324 U. S.
159.
(b) The full faith and credit clause does not bar a State from
imposing stricter financial standards for corporations doing
business within its borders than are imposed by the State of
incorporation. P.
324 U. S.
159.
(c) The appellant, challenging the power of Wisconsin to enforce
its own statutes in its own courts, did not meet the burden
Page 324 U. S. 155
of showing that the interests of the State of incorporation were
superior. P.
324 U. S.
160.
3. As to the appellant's contention that the statute, as
construed and applied, violates the commerce clause of the
Constitution -- which question was not raised or passed upon below,
but emerged after this Court's decision in
United States v.
South-Eastern Underwriters Assn., 322 U.
S. 533 -- it appears that the appellant is not
foreclosed under Wisconsin procedure from obtaining a determination
of that question in the Wisconsin courts, either in the present
suits or in another pending proceeding, so it is not necessary to
vacate the judgment below in order that the appellant may have an
opportunity to obtain the ruling. Pp.
324 U. S. 160,
324 U. S.
163.
244 Wis. 429, 12 N.W.2d 696, affirmed.
Appeal from a judgment sustaining the constitutionality of a
state statute as construed and applied.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This is an appeal under § 237(a) of the Judicial Code, 28 U.S.C.
§ 344(a), from the judgment of the Wisconsin Supreme Court which
sustained the constitutionality as construed and applied to
appellant of § 201.18 of the Wisconsin Statutes 1943. 244 Wis. 429,
12 N.W.2d 696.
Sec. 201.18 reads as follows:
"Reserves, basis for. (1) The unearned premium or reinsurance
reserve for every insurance company, when no other statutory
provision is made therefor, shall be computed by the commissioner
by setting up fifty percent of the premiums received on all risks
that have one year or less to run, and
pro rata of all
premiums on risks that have
Page 324 U. S. 156
more than one year to run. In the case of perpetual risks or
policies, the whole amount of premium paid shall be set up as a
reserve. Every such company shall show its reserve, computed upon
this basis, as a liability in the annual statement required by
section 201.50."
"(2) Where no other provision is made therefor by law, the
reserves of any insurance company shall be calculated upon such
basis, method, and plan as shall fully provide for all liabilities,
and any basis, method, and plan fixed by the order of the
commissioner shall be
prima facie just, reasonable, and
proper."
The insurance commissioner of Wisconsin refused appellant a
license in 1942 and also in 1943 for failure to comply with that
provision. Appellant accordingly brought suits to enjoin the
commissioner from interfering with its business and to require him
to issue it a license to do business in the State for the years in
question. The facts may be briefly stated.
Appellant is an Illinois corporation doing business in many
States. It started doing business in Wisconsin in 1939. It writes
various forms of automobile insurance on the mutual plan. When it
writes a policy for a new customer, it charges him a membership fee
in addition to a premium. The membership fee is not returnable, but
entitles the insured to insure one automobile so long as he remains
a desirable risk and so long as the company continues to write such
coverage. It is said that the membership fee gives a life option to
the insured to purchase insurance at a saving of from twenty to
thirty-five percent of the usual cost. Appellant has contended that
the membership fees are no part of the premiums, furnish no
insurance protection, and merely reimburse it for the expense of
obtaining the new business. Wisconsin took a different view. The
commissioner refused renewal of appellant's license for the years
ending May 1, 1940, and
Page 324 U. S. 157
May 1, 1941. Litigation followed which resulted in the decision
of
Duel v. State Farm Mutual Automobile Ins. Co., 240 Wis.
161, 1 N.W.2d 887, 2 N.W.2d 871. The Wisconsin Supreme Court held
as a matter of law that the membership fees were part of
appellant's premiums, and that 50 percent of them must be included
in the reserve required by § 201.18. Thereupon, appellant adopted
and submitted to the commissioner a new scheme for doing business
in Wisconsin. The plan was to abandon the membership fee in
Wisconsin, to require none of its Wisconsin policyholders, and to
do business in Wisconsin on a level premium basis. The result was
that the premiums required to be paid in Wisconsin were 27 percent
higher than those required in States which construed premiums as
not including membership fees. The commissioner refused to grant
appellant the licenses for these later years because its reserve
required by § 201.18 did not include 50 percent of the membership
fees obtained on business written in other States. The present
litigation ensued. The Wisconsin Supreme Court sustained the
commissioner, holding (1) that § 201.18 required a reserve which
covered the overall liability of the appellant and (2) that §
201.18, as construed and applied, did not contravene appellant's
constitutional rights.
Of the three constitutional questions argued here, two were
raised below. They are that the statute violates (1) the due
process clause of the Fourteenth Amendment, and (2) the full faith
and credit provision of Art. IV, Sec. 1. We think neither of the
two has merit.
I. So far as due process of law is concerned, this case is
governed by the principles announced in
Osborne v. Ozlin,
310 U. S. 53, and
Hoopeston Canning Co. v. Cullen, 318 U.
S. 313. In
Osborne v. Ozlin, supra, p.
310 U. S. 62, we
stated that
"The mere fact that state action may have repercussions beyond
state lines is of no judicial significance
Page 324 U. S. 158
so long as the action is not within that domain which the
Constitution forbids."
We sustained in that case Virginia legislation which forbade a
licensed company to write insurance in Virginia except through a
resident agent, and which provided that the resident agent could
not retain less than one-half of the customary commission even
though the business originated with an out-of-state broker, the
resident agent rendering only a perfunctory service. We held that,
by such measures, Virginia was seeking to protect the interests of
her citizens, not to prohibit the making of contracts beyond her
borders. In
Hoopeston Canning Co. v. Cullen, supra, we
sustained provisions of the New York Insurance Law as applied to
reciprocal insurance associations licensed to do business in New
York but with headquarters in Illinois. The regulations which New
York had imposed included stipulated operating reserves for payment
of losses, a contingent liability of subscribers of not less than
one nor more than ten times the amount of the annual premium
expressed in the contract, and a requirement for the maintenance of
an unimpaired surplus. We said,
"Neither New York nor Illinois loses the power to protect the
interests of its citizens because these associations carry on
activities in both places. . . . We think the regulations
themselves, since they are aimed at the protection of the solvency
of the reciprocals or at promoting the convenience with which New
York residents may do their insurance business, are all within the
scope of state power."
318 U.S. at
318 U. S.
321.
Wisconsin has a legitimate concern with the financial soundness
of companies writing insurance contracts with its citizens. The
reserve which it requires under § 201.18 is designed to measure the
entire future contingent liability on unexpired risks. That
contingent liability is obviously relevant in any appraisal of the
financial soundness and stability of the company. It is, to be
Page 324 U. S. 159
sure, a bookkeeping requirement. But it is more than that: it is
one of Wisconsin's measuring rods of financial stability and
strength. Any financial statement required by Wisconsin or any
other State would need reflect all assets and liabilities of the
company in the interests of truth. Their inclusion does not mean
that out-of-state activities are being regulated by Wisconsin. It
only means that solvency of a multi-state business can hardly be
determined on a single state basis. Accounting is no exact science.
The due process clause certainly does not require uniformity in
requirements for financial statements of companies doing a
multistate business. Each State must necessarily have leeway in
providing its own accounting standards for companies doing business
within its borders. If a state undertook to regulate out of state
activities through such a requirement, different questions would be
posed. But we fail to see Wisconsin has done that here. We cannot
say that the reserve required by Wisconsin has any purpose but the
protection of its own citizens. Its adequacy or appropriateness as
a standard for qualification to do business in Wisconsin is
therefore a question for Wisconsin to determine.
II. Little need be said in reply to the contention that the
Wisconsin statute, as construed and applied, violates the full
faith and credit provision of the Constitution. Appellant's
argument comes down to this: Illinois, the state of incorporation,
does not treat the membership fees as a part of the premiums.
Therefore, Wisconsin may not do so. The result would be that no
State could impose stricter financial standards for foreign
corporations doing business within its borders than were imposed by
the State of incorporation. The full faith and credit provision
requires no such result. This Court has recognized that,
"In the case of statutes, the extra-state effect of which
Congress has not prescribed, where the policy of one
Page 324 U. S. 160
state statute comes into conflict with that of another, the
necessity of some accommodation of the conflicting interests of the
two states"
is imperative.
Alaska Packers Assn. v. Industrial Accident
Commission, 294 U. S. 532,
294 U. S. 547.
The full faith and credit provision may not be used to compel one
State "to substitute the statutes of other states for its own
statutes dealing with a subject matter concerning which it is
competent to legislate."
Pacific Employers Ins. Co. v.
Industrial Accident Commission, 306 U.
S. 493,
306 U. S. 501.
He who challenges the power of one State to enforce in its own
courts its own statutes on such grounds carries the burden of
showing that, "of the conflicting interests involved, those of the
foreign state are superior to those of the forum."
Alaska
Packers Assn. v. Industrial Accident Commission, supra, p.
294 U. S. 548.
That burden has not been carried here. Wisconsin obviously has a
considerable interest in the financial soundness and stability of
foreign as well as domestic companies doing business in Wisconsin.
It is not apparent how Illinois has a superior interest. As among
the several States, it is Wisconsin's prerogative to select the
appropriate means of protecting its own citizens by establishing
financial standards for companies which exploit the opportunities
which Wisconsin affords.
III. Appellant's remaining contention is that this Wisconsin
statute, as construed and applied, violates the Commerce Clause of
the Constitution. Art. I, Sec. 8. This question was not raised
below. It emerged after the jurisdictional statement was filed here
on June 1, 1944. For, on June 5, 1944, we decided
United States
v. South-Eastern Underwriters Assn., 322 U.
S. 533, holding that the fire insurance business was
commerce within the meaning of the Commerce Clause and the Sherman
Act. 26 Stat. 209, 15 U.S.C. § 1 and 2. Since the Wisconsin Supreme
Court did not pass on the question, we may not do so.
McGoldrick
Page 324 U. S. 161
v. Compagnie Generale Transatlantique, 309 U.
S. 430,
309 U. S. 434.
But our decision in the
South-Eastern Underwriters case
was a supervening event arising in the course of this litigation.
We do not think appellant should be prejudiced by the fact that the
decision came too late for it to obtain a ruling by the Wisconsin
court. The question is what disposition we should make of this
appeal so that in the interests of justice appellant may have a
hearing on the commerce point.
A customary procedure has been for the Court to vacate the
judgment of the state court where there has been a supervening
event since its rendition which alters the basis upon which the
judgment rests, and to remand the case so that the court from which
it came might reconsider the question in light of the changed
circumstances.
Gulf, Colorado & S.F. R. Co. v. Dennis,
224 U. S. 503;
Missouri v. Public Service Commission, 273 U.
S. 126;
Pagel v. MacLean, 283 U.
S. 266;
Patterson v. Alabama, 294 U.
S. 600,
294 U. S. 607;
Ashcraft v. Tennessee, 322 U. S. 143,
322 U. S. 156.
See Dorchy v. Kansas, 264 U. S. 286,
264 U. S. 291.
In those cases, the supervening event had raised questions of state
law which might have warranted a reversal of the judgment. If they
were adequate, it would be unnecessary to reach the federal
questions which were presented. Moreover, it appeared in some of
those cases that, unless the judgment of the state court were
vacated, the opportunity to raise the new questions which had
emerged might be lost.
See Gulf, Colorado & S.F. R. Co. v.
Dennis, supra; Pagel v. MacLean, supra. It is suggested that
the course should be followed here so that this additional federal
question may be passed upon by the Wisconsin Supreme Court. We
would not hesitate to adopt that procedure in the interests of
justice if it appeared that, otherwise, appellant would be
foreclosed from an adjudication of the issue. Appellant does not
show that it would be. Respondent assumes in its brief that
appellant will not be foreclosed.
Page 324 U. S. 162
And we think that assumption is warranted for the following
reasons.
We are advised that appellant has pending in the Wisconsin
courts another suit in respect to the license year commencing May
1, 1944. Wisconsin has the familiar rule that, though the validity
of the law in question might have been determined in an earlier
suit, the prior judgment is not
res judicata where the
second suit is on a different cause of action in absence of
evidence to show that the question was actually presented to the
court and decided in the earlier litigation.
Wentworth v.
Racine County, 99 Wis. 26, 31, 74 N.W. 551;
Grunert v.
Spalding, 104 Wis.193, 213, 214, 79 N.W. 606, 80 N.W. 589;
Lindemann v. Rusk, 125 Wis. 210, 237, 104 N.W. 119. But,
if that principle is inapplicable here, it is nevertheless the
general rule that
res judicata is no defense where,
between the time of the first judgment and the second, there has
been an intervening decision or a change in the law creating an
altered situation. 2 Freeman on Judgments (5th ed.1925) § 713;
Blair v. Commissioner, 300 U. S. 5,
300 U. S. 9;
West Coast Life Ins. Co. v. Merced Irr. Dist., 114 F.2d
654, 662;
In re Pomeroy, 51 Mont. 119, 151 P. 333;
Hurd v. Albert, 214 Cal. 15, 26, 3 P.2d 545. We cannot
find that Wisconsin has a different rule.
The Wisconsin statute, moreover, gives the court power to allow
an amendment "at any stage of any action or special proceeding
before or after judgment, in furtherance of justice and upon such
terms as may be just," provided that
"the amended pleading states a cause of action arising out of
the contract, transaction or occurrence or is connected with the
subject of the action upon which the original pleading is
based."
Wis.Stat. 1943, § 269.44. That power has been construed very
liberally.
Kennedy v. Waugh, 23 Wis. 468;
Post v.
Campbell, 110 Wis. 378, 85 N.W. 1032;
Mallon v. Tonn,
163 Wis. 366, 157 N.W.
Page 324 U. S. 163
1098;
Micek v. Wamka, 165 Wis. 97, 161 N.W. 367;
Turner Mfg. Co. v. Gmeinder, 183 Wis. 664, 198 N.W. 611;
Kaegi v. Industrial Commission, 232 Wis. 16, 285 N.W. 845.
And it exists after the case has been remanded to the trial court
following an affirmance by the Wisconsin Supreme Court.
See
Angers v. Sabatinelli, 235 Wis. 422, 293 N.W. 173, 239 Wis.
364, 1 N.W.2d 765.
We conclude that appellant is not foreclosed under Wisconsin
procedure from obtaining a determination in the Wisconsin courts of
the commerce clause question either in the present suits or in the
other pending one. Accordingly, we do not think it is necessary to
vacate the judgment below in order that appellant may have an
opportunity to obtain the ruling.
Affirmed.
MR. JUSTICE ROBERTS dissents.
MR. JUSTICE JACKSON.
I think that the judgment below should be vacated, rather than
affirmed, and do not, therefore, reach the constitutional questions
dealt with in the Court's opinion. I doubt that the Wisconsin
Supreme Court can open and reexamine a judgment after it is
affirmed by this Court. As the Court recognizes, to vacate is the
procedure that has been followed when similar situations have been
presented heretofore.