The California Compulsory Assigned Risk Law requires all
insurers transacting liability insurance in the State to
participate in a plan for the equitable apportionment among them of
those applicants for automobile liability insurance who are in good
faith entitled to such insurance (to enable them to retain drivers'
licenses) but are unable to procure it through ordinary methods.
Uninsurable risks are excluded from the plan, policies issued may
be limited to coverages of $5,000-$10,000, and premiums
commensurate with abnormal risks may be charged. Appellant is an
unincorporated association engaged in writing reciprocal liability
insurance solely for members of an automobile club having a
selected membership, and the plan would require it to write
insurance for nonmembers of the club who are poor risks.
Held: as applied to appellant, the statute does not
violate the Due Process Clause of the Fourteenth Amendment. Pp.
341 U. S.
106-111.
96 Cal. App. 2d
876, 216 P.2d 882, affirmed.
A California court sustained the California Compulsory Assigned
Risk Law, Cal.Stat. 1947, c. 39, p. 525, as amended, against a
claim that it violated the Due Process Clause of the Fourteenth
Amendment.
96 Cal. App. 2d
876, 216 P.2d 882. On appeal to this Court,
affirmed,
p.
341 U. S.
111.
Page 341 U. S. 106
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
Appellant is an unincorporated association which the California
District Court of Appeal analogizes to a mutual insurance
corporation. The details of its organization and operation are not
important here. It is supervised by the Insurance Commissioner of
California, like other insurance companies doing a liability
insurance business. It was formed to write automobile insurance to
a select group of members at a lower cost than the then prevailing
rate. A California law requiring proof of financial responsibility
from certain people before issuing them a license to drive a car,
provides that a person who does not pay a judgment of $100 or more
arising out of an automobile accident has his driver's license
suspended, and the suspension can be lifted only by paying the
judgment and establishing his ability to pay claims arising from
future accidents. That ability to pay may be established by proof
that the person is insured, by posting a surety bond, or by deposit
of $11,000 in cash. Cal.Vehicle Code, 1943, §§ 410, 414. Another
law requires operators of trucks for hire to supply such evidence
of financial responsibility before they may get permits to operate
trucks. Cal.Stat. 1935, c. 312, Gen.Laws, Act 5134.
One result of these laws was to make it impossible for a large
number of drivers -- classified as poor risks by the insurance
companies and not possessing enough resources
Page 341 U. S. 107
to get a surety bond or to make the cash deposit -- to receive
drivers' licenses to operate motor vehicles. Some of these people
were poor risks, others were not. Many hardship cases developed
among people who were dependent on the use of the highways for a
living. There was a proposal that California go into the insurance
business and insure these and other risks. The insurance companies
countered by adopting a voluntary assigned risk plan under which
all automobile insurance companies doing business in California
undertook to insure some, though not all, of the groups unable to
obtain insurance. This plan, approved by California's Insurance
Department, provided for the allocation of applicants to the
subscribing insurers in proportion to the amount of automobile
insurance written by each in the preceding year.
The voluntary plan did not reach all applicants. Moreover,
appellant withdrew from it, causing the other insurers to be
reluctant to continue it. Thereupon the legislature enacted the
Compulsory Assigned Risk Law. Cal.Stat. 1947, c. 39, p. 525, as
amended, c. 1205. It provides that the Insurance Commissioner shall
approve "a reasonable plan for the equitable apportionment" among
insurers of applicants for automobile insurance "who are in good
faith [
Footnote 1] entitled to
but are unable to procure such insurance through ordinary methods."
Cal.Insurance Code 1947, § 11620. It is mandatory on all insurers
to subscribe to the plan.
Id., §§ 11625, 11626.
Page 341 U. S. 108
The plan approved by the Commissioner was objectionable to
appellant, who refused to subscribe to it. The Commissioner, acting
pursuant to authority granted him, suspended appellant's permit to
transact automobile liability insurance in California. Appellant
contested the suspension in the California courts. The District
Court of Appeal sustained the act against the claim that it
violated the Due Process Clause of the Fourteenth Amendment.
96 Cal. App. 2d
876, 216 P.2d 882. A petition for hearing was denied by the
Supreme Court. The case is here on appeal. 28 U.S.C. § 1257(2).
Appellant assails the constitutionality of the Act under the Due
Process Clause of the Fourteenth Amendment on the following
grounds: it commands insurers to enter into contracts and to incur
liabilities against their will; it forces on insurers contracts
that have abnormal risks and from which financial loss may be
expected; it requires appellant to alter its type of business from
a cooperative with a select membership to a venture insuring
members of the general public.
Appellant, in support of its contentions, presses
Michigan
Public Utilities Commission v. Duke, 266 U.
S. 570, and
Frost Trucking Co. v. Railroad
Comm'n, 271 U. S. 583, on
us. Those cases held that private carriers by motor vehicle could
not, consistently with Due Process, be converted into public
carriers by legislative fiat, nor be allowed to use the public
highways only on condition that they become common carriers. We put
those cases to one side. To be sure, appellant is required to
insure members of a different group than the select one it
voluntarily undertook to serve. But there are important
restrictions on the financial commitments incident to the broadened
undertaking. We were advised on the argument that the premiums
chargeable can be commensurate with the greater risks of the new
business. Confiscation is therefore not a factor in the case.
Moreover, the California statute provides
Page 341 U. S. 109
for an equitable apportionment of the assigned risks among all
insurers, not that appellant serve all comers. Furthermore,
uninsurable risks are eliminated from the plan, and policies issued
may provide limited coverage of $5,000-$10,000.
The case, in its broadest reach, is one in which the state
requires in the public interest each member of a business to assume
a
pro rata share of a burden which modern conditions have
made incident to the business. It is therefore not unlike
Noble
State Bank v. Haskell, 219 U. S. 104,
which sustained a state law assessing each state bank for the
creation of a depositors' guaranty fund. What was there said about
the police power -- that it "extends to all the great public
needs," and may be utilized in aid of what the legislative judgment
deems necessary to the public welfare, 219 U.S. at
219 U. S. 111
-- is peculiarly apt when the business of insurance is involved --
a business to which the government has long had a "special
relation." [
Footnote 2]
See Osborn
Page 341 U. S. 110
v. Ozlin, 310 U. S. 53,
310 U. S. 65-66.
Here, as in the banking field, the power of the state is broad
enough to take over the whole business, leaving no part for private
enterprise.
Mountain Timber Co. v. Washington,
243 U. S. 219;
Osborn v. Ozlin, supra, at
310 U. S. 66.
The state may therefore hold its hand on condition that local needs
be serviced by the business.
Osborn v. Ozlin, supra, was
such a case; it sustained on that theory Virginia's law requiring
Virginia residents to have a share in writing casualty and surety
risks in Virginia. The principle of
Osborn v. Ozlin now
presses for recognition in a situation as acute as any with which
the states have had to deal. Highway accidents, with their train of
property and personal injuries, are notoriously important problems
in every community. Clearing the highways of irresponsible drivers,
devising ways and means for making sure that compensation is
awarded the innocent victims, and yet managing a scheme which
leaves the highways open for the livelihood of the deserving are
problems that have taxed the ingenuity of lawmakers and
administrators.
Whether California's program is wise or unwise is not our
concern.
See Olsen v. Nebraska, 313 U.
S. 236;
Lincoln Federal Labor Union v. Northwestern
Iron & Metal Co., 335 U. S. 525. The
problem is a local one on which views will vary. We cannot say
California went beyond permissible limits when it made the
liability insurance business accept insurable risks which
circumstances barred from insurance,
Page 341 U. S. 111
and hence from the highways. Appellant's business may, of
course, be less prosperous as a result of the regulation. That
diminution in value, however, has never mounted to the dignity of a
taking in the constitutional sense.
See Noble State Bank v.
Haskell, supra, at
219 U. S. 110;
Block v. Hirsh, 256 U. S. 135,
256 U. S.
155.
Affirmed.
MR. JUSTICE BLACK would dismiss the appeal on the ground that
the constitutional questions are frivolous.
[
Footnote 1]
Under the plan approved by the Commissioner, Cal.Administrative
Code 1947, Tit. 10, §§ 2400-2498, there are several categories of
people excluded. Those excluded cover a wide range. The following
are illustrative: those convicted more than once, within three
years of application, of manslaughter or negligent homicide
resulting from operation of the vehicle; those convicted more than
twice, in the same three-year period, of driving while intoxicated
or under the influence of liquor; those addicted to use of drugs. §
2431.
[
Footnote 2]
State regulation of the insurance business has been upheld in a
wide variety of circumstances against the claim that the law
violated the Due Process Clause of the Fourteenth Amendment:
see Hooper v. California, 155 U.
S. 648, requirement of license and bond;
Orient
Insurance Co. v. Daggs, 172 U. S. 557,
fixing recovery at insured value;
Nutting v.
Massachusetts, 183 U. S. 553,
license and deposit of security;
Carroll v. Greenwich Insurance
Co, 199 U. S. 401,
prohibition of combinations or agreements between companies;
Northwestern National Life Ins. Co. v. Riggs, 203 U.
S. 243, limitation of defenses;
Whitfield v. Aetna
Life Ins. Co., 205 U. S. 489,
same;
German Alliance Ins. Co. v. Hale, 219 U.
S. 307, statutory penalty against rate-fixing
combinations;
German Alliance Ins. Co. v. Lewis,
233 U. S. 389,
rate regulations;
Mountain Timber Co. v. Washington,
243 U. S. 219,
workmen's compensation act;
La Tourette v. McMaster,
248 U. S. 465,
licensing of brokers;
National Union Fire Ins. Co. v.
Wanberg, 260 U. S. 71,
limiting the time for rejection of hail insurance policies;
Merchants Mutual Automobile Liability Ins. Co. v. Smart,
267 U. S. 126,
regulation of liability under indemnity policies;
Aetna
Insurance Co. v. Hyde, 275 U. S. 440,
rate regulations;
O'Gorman & Young v. Hartford Fire Ins.
Co., 282 U. S. 251,
regulation of agents' commissions;
Hardware Dealers Mutual Fire
Ins. Co. v. Glidden, 284 U. S. 151,
prescribing compulsory arbitration provisions;
Life &
Casualty Ins. Co. v. McCray, 291 U. S. 566,
additional recovery for failure to pay on demand;
Osborn v.
Ozlin, 310 U. S. 53,
requiring participation by resident agents;
Hoopeston Canning
Co. v. Cullen, 318 U. S. 313,
regulation of reciprocal insurance associations;
State Farm
Mutual Automobile Ins. Co. v. Duel, 324 U.
S. 154, reserve requirements;
Robertson v.
California, 328 U. S. 440,
licensing of brokers;
Daniel v. Family Security Life Ins.
Co., 336 U. S. 220,
separation of life insurance and undertaking businesses.