The provision in section 5897 of c. 89, art. 4 of the Revised
Statutes of Missouri, that
"in all suits upon policies of insurance against loss or damage
by fire hereafter issued or renewed, the defendant shall not be
permitted to deny that the property insured thereby was worth at
the time of the issuing of the policy the full amount insured
therein on said property, and in case of total loss of the property
insured, the measure of damage shall be the amount for which the
same was insured, less whatever depreciation in value below the
amount for which the property is insured, the property may have
sustained between the time of issuing the policy and the time of
the loss, and the burden of proving such depreciation shall be upon
the defendant, and in case of partial loss, the measure of damages
shall be that portion of the value of the whole property insured,
ascertained in the manner hereinafter described, which the part
injured bears to the whole property insured,"
and the provision in section 5898 "that no condition of any
policy of insurance contrary to the provisions of this article
shall be legal or valid," are not, when applied to a foreign
insurance corporation insuring property within the state, in
conflict with the provisions of the Fourteenth Amendment to the
Constitution of the United States forbidding a state to make or
enforce a law which shall abridge the privileges or immunities of
citizens of the United States or to deprive any person of life,
liberty or property without due process of law or to deny to any
person within its jurisdiction, the equal protection of the
laws.
A corporation is not a citizen within the meaning of that
Amendment, and hence has not the privileges and immunities secured
to citizens against state legislation.
Page 172 U. S. 558
That which a state may do with corporations of its own creation
it may do with foreign corporations admitted into it.
Hooper v.
California, 155 U. S. 648,
cited, approved and applied.
This is an action at law upon a policy of insurance issued by
the plaintiff in error, a corporation organized under the laws of
the State of Connecticut. The policy was issued in June, 1893,
insuring the defendant in error against loss or damage by fire to a
certain barn situated in Scotland County, Missouri, in a sum not to
exceed $800. The barn was, within less than three months after the
issuing of the policy, entirely consumed by fire, and an action was
brought upon the contract to compel the payment of the entire sum
of $800.
The petition filed in the case avers the delivery of the policy
of insurance to the defendant in error, and says that the company,
by virtue of said policy, promised to pay the plaintiff the sum of
$800 in case said barn should be destroyed by fire, and attaches a
copy of the policy to the petition as the basis of the action.
The answer filed by the company stated that the
"defendant is a corporation, organized and existing under and by
virtue of the laws of the State of Connecticut, doing a general
fire insurance business in the State of Missouri, and avers it has
been doing such business continually since and prior to the 1st day
of June, 1873, and that said defendant was and is fully authorized
to do such business in the State of Missouri."
The answer admitted the delivery of the policy and the total
destruction of the barn by fire, that the plaintiff was the owner
thereof, and that proofs of loss had been made.
The defendant, further answering, stated that the contract of
insurance sued on in the case was the contract between the parties,
and that it provided that
"said insurance company shall not be liable beyond the actual
cash value of the property at the time any loss or damage occurs,
and that the loss or damage shall be ascertained or estimated
according to the actual cash value of the property at the time of
the fire, and shall in no case exceed what it will cost to replace
the same, deducting therefrom a suitable amount for any
depreciation of said property from age, use, or location, or
otherwise. "
Page 172 U. S. 559
The answer further averred that at the time of the burning of
the building in question, it was not worth to exceed $100, which
amount the plaintiff in error then offered to pay, with interest
from the date of the fire, and to return the premium. The answer of
the defendant further averred as follows:
"The defendant says that section 5897 of chapter 89, article 4,
Revised Statutes of the State of Missouri, compiled in the year
1889, provides as follows:"
" In all suits brought upon policies of insurance against loss
or damage by fire, hereafter issued or renewed, the defendant shall
not be permitted to deny that the property insured thereby was
worth at the time of the issuing of the policy the full amount
insured therein on said property, and in case of total loss of the
property insured, the measure of damages shall be the amount for
which the same was insured, less whatever depreciation in value
below the amount for which the property is insured the property may
have sustained, between the time of issuing the policy and the time
of the loss, and the burden of proving such depreciation shall be
upon the defendant. . . ."
"And that section 5898 of said chapter provides that no
condition in any policy of insurance contrary to the provisions of
this article, meaning thereby article 4, shall be legal or valid.
The defendant says that said statute was enacted prior to the
issuing of said policy, and has not been repealed."
The defendant pleaded that said statute is contrary to the
Constitution of Missouri and that the same is unconstitutional,
null, and void, and proceeded to aver as follows:
"The defendant, further answering, says that sections 5897 and
5898 of chapter 89, article 4, of the Revised Statutes of State of
Missouri, are contrary to and in contravention of the Constitution
of the United States, which provides that no state shall pass any
bill of attainder or
ex post facto law, or laws impairing
the obligation of contracts."
"Defendant, further answering, says that said sections, and each
of them, are contrary to and in contravention of Article XIV of the
Constitution of the United States, commonly called the 'Fourteenth
Amendment,' and particularly of article 1 of said amendment, which
is as follows: "
Page 172 U. S. 560
"All persons born or naturalized in the United States and
subject to the jurisdiction thereof are citizens of the United
States and of the state wherein they reside. No state shall make or
enforce any laws which shall abridge the privileges or immunities
of citizens of the United States; nor shall any state deprive any
person of life, liberty or property without due process of law; nor
deny to any person within its jurisdiction the equal protection of
the laws."
"And that said sections 5897 and 5898 of chapter 89, article 4,
of the Revised Statutes of Missouri, are unconstitutional and
contrary to the Constitution of the United States, and are null and
void."
"That the defendant has the constitutional right to limit its
liability by contract to actual damages caused by fire."
To this answer, the plaintiff and assured filed a demurrer,
which demurrer the court sustained, and, the defendant electing to
stand upon the ruling upon said demurrer, judgment was entered in
favor of the plaintiff, and in due course the cause was appealed to
the Supreme Court of Missouri. At October term, 1896, the Supreme
Court of Missouri rendered an opinion in said case affirming the
judgment of the court below. 136 Mo. 282. The case then came to
this Court in due course upon petition in error.
There are twenty-three assignments of error which present the
claim of plaintiff in error under the Constitution of the United
States and the alleged error of the state court denying the
claim.
MR. JUSTICE McKENNA, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The statute of Missouri is alleged to violate the Fourteenth
Amendment of the Constitution of the United States in the following
particulars: (1) that it abridges the privileges or immunities of
citizens of the United States; (2) denies to
Page 172 U. S. 561
persons within its jurisdiction the equal protection of the
laws, and (3) deprives persons of property without due process of
law.
1. It is not clear that this ground is relied on. It is,
however, not available to plaintiff in error. A corporation is not
a citizen within the meaning of the provision, and hence has not
"privileges and immunities" secured to "citizens" against state
legislation. This was decided in
Paul v.
Virginia, 8 Wall. 168, against a corporation upon
which were imposed conditions for doing business in the State of
Virginia, and has been repeated in many cases since, including one
at the present term.
Blake v. McClung, ante, p.
172 U. S. 239.
2. It is not easy to make a succinct statement of the objections
of plaintiff in error under this provision. Counsel says:
"The business of insurance includes insurance against damages on
account of death, accident, personal injury, liability for acts of
employees, damages to plate glass, damages by hail, lightning, high
wind, tornadoes, and against damages to personal property on
account of fire or casualty by other elements, as well as insurance
against loss or damage to buildings on account of fire. . . . No
other business is subject to the discrimination, in case such
business is involved in litigation, of having the damages assessed
without due process of law. The statute singles out persons engaged
in fire insurance as against all other kinds of assurance, and as
against all other kinds of business, and imposes the onerous and
unusual conditions provided in the statute against such
persons."
And again:
"The statute thus discriminates as to the subject matter, as to
the parties, as to the mode of trial of actions at law and equity,
and imposes upon this particular class of underwriters, as
distinguished from all the rest of the world, conditions which
abrogate its contracts, and compels it to pay damages never
sustained, and prevents it from having an investigation upon the
trial by due process of law."
This mingles grounds of objection, and confounds the
prohibitions of the provision we are considering with that of the
next provision. Whether the statute of Missouri provides for "due
process" we shall consider hereafter, and upon that
consideration
Page 172 U. S. 562
determine how much of the complaint against it in that regard is
true. Now we may confine ourselves to the more specific contention
that it discriminates between fire insurance corporations or
companies and those engaged in other kinds of insurance.
It is not necessary to state the reasoning upon which
classification by legislation is based or justified. This Court has
had many occasions to do so, and only lately reviewed the subject
in
Magoun v. Illinois Trust & Savings Bank,
170 U. S. 283. We
said in that case that "the state may distinguish, select, and
classify objects of legislation, and necessarily the power must
have a wide range of discretion," and this because of the function
of legislation and the purposes to which it is addressed.
Classification for such purposes is not invalid because not
depending on scientific or marked differences in things or persons
or in their relations. It suffices if it is practical, and is not
reviewable unless palpably arbitrary. The classification of the
Missouri statute is certainly not arbitrary. We see many
differences between fire insurance and other insurance, both to the
insurer and the insured -- differences in the elements insured
against and the possible relation of the parties to them, producing
consequences which may justify, if not demand, different
legislative treatment. Of course it is not for us to debate the
policy of any particular treatment and the freedom of discretion
which we have said the state has is exhibited by analogous, if not
exact, examples to the Missouri statute in
Railway Company v.
Mackey, 127 U. S. 204,
and in
Minneapolis & St. Louis Railway v. Beckwith,
129 U. S. 26.
In
Railway Company v. Mackey, 127
U. S. 204, a law of Kansas was passed which abrogated as
to railroads the rule of the common law exempting masters from
liability to one servant for the negligence of another. It was
sustained as a valid classification notwithstanding that it did not
apply to other carriers, or even to other corporations using steam.
The law was objected to, as the statute of Missouri is objected to,
on the ground that it violated the provisions of the Constitution
which we are now considering.
Page 172 U. S. 563
To the first contention, the Court, by Mr. Justice Field,
said:
"The plain answer to this contention is that the liability
imposed by the law of 1874 arises only for injuries subsequently
committed; it has no application to past injuries, and it cannot be
successfully contended that the state may not prescribe the
liabilities under which corporations created by its laws shall
conduct their business in the future where no limitation is placed
upon its power in this respect by their charters. Legislation to
this effect is found in the statute books of every state."
And, after further comment, added: "That its passage was within
the competency of the legislature we have no doubt." To the second
contention it was said:
"It seems to rest upon the theory that legislation which is
special in its character is necessarily within the constitutional
inhibition, but nothing can be further from the fact."
The legislation was justified by the character of the business
of railroad companies, and it was declared to be a matter of
legislative discretion whether the same liability should or should
not be applied to other carriers, or to persons and corporations
using steam in manufactures.
In
Minneapolis Railway Company v. Beckwith,
129 U. S. 26, a law
of Iowa making a class of railroad corporations for special
legislation was sustained.
3. "What it is for a state to deprive a person of life, liberty,
or property without due process of law" is not much nearer to
precise definition today than it was said to be by Mr. Justice
Miller in
Davidson v. New Orleans, 96 U. S.
97.
The process "of judicial inclusion and exclusion" has proceeded,
and yet this Court, in
Holden v. Hardy, 169 U.
S. 366, again declined specific definition. MR. JUSTICE
BROWN, speaking for the Court, said:
"This Court has never attempted to define with precision the
words 'due process of law,' nor is it necessary in this case. It is
sufficient to say that there are certain immutable principles of
justice which inhere in the very idea of free government which no
member of the Union may disregard, as that no man shall be
condemned in his person or property without due notice and an
opportunity of being heard in his own defense."
These principles were extended to the right
Page 172 U. S. 564
to acquire property and to enter into contracts with respect to
property, but it was said: "This right of contract, however, is
itself subject to certain limitations which the state may lawfully
impose in the exercise of its police powers."
The legislation sustained was an act of the State of Utah making
the employment of workingmen in all underground mines and workings,
and in smelters, and all other institutions for the reduction and
refining of ores or metals, eight hours per day, except in cases of
emergency where life or property should be in imminent danger. The
violation of the statute was made a misdemeanor. It was undoubtedly
a limitation on the right of contract -- that of the employer and
that of the employed -- enforced by a criminal prosecution and
penalty on the former and on his agents and managers. It was held a
valid exercise of the police powers of the state. These powers were
not defined except by illustration, nor need we now define them.
The case is a precedent to support the validity of the Missouri
statute now under consideration.
The statute provides as follows:
"In all suits brought upon policies of insurance against loss or
damage by fire, hereafter issued or renewed, the defendant shall
not be permitted to deny that the property insured thereby was
worth at the time of the issuing of the policy the full amount
insured therein on said property,
and in case of total loss of
the property insured, the measure of damages shall be the amount
for which the same was insured, less whatever depreciation in
value below the amount for which the property is insured the
property may have sustained between the time of issuing the policy
and the time of the loss, and the burden of proving such
depreciation shall be upon the defendant. . . ."
It is also provided that no condition in any policy of insurance
contrary to such provision shall be legal or valid.
The specific objections which, it is claimed, bring the statute
within the prohibition of the Constitution, in the last analysis,
may be reduced to the following: that the statute takes away a
fundamental right, and precludes a judicial inquiry of liability on
policies of fire insurance by a conclusive presumption of fact.
Page 172 U. S. 565
The right claimed is to make contracts of insurance. The essence
of these, it is said, is indemnity, and that the statute converts
them into wager policies -- into contracts (to quote counsel)
having for their bases speculation and profit, "contrary to the
course of the common law." The statement is broad, and counsel in
making it ignores many things. The statute tends to assure, not to
detract from, the indemnity of the contracts, and, if elements of
chance or speculation intrude, it will be on account of
carelessness or fraud. It is admitted that the effect of the
statute is to make valued policies of those issued, and the
conclusive effect which has been ascribed to their valuation has
never been condemned as making them wager policies or as
introducing elements of speculation into them.
The statute, then, does not present the alternative of wager
policies to indemnity policies. The change is from one kind of
indemnity policy to another kind -- from open policies to valued
policies -- both of which are sanctioned by the practice and law of
insurance, and this change is the only compulsion of the law. It
makes no contract for the parties. In this it permits absolute
freedom. It leaves them to fix the valuation of the property upon
such prudence and inquiry as they choose. It only ascribes estoppel
after this is done -- estoppel, it must be observed, to the acts of
the parties, and only to their acts, in open and honest dealing.
Its presumptions cannot be urged against fraud, and it permits the
subsequent depreciation of the property to be shown.
We see no risk to insurance companies in this statute. How can
it come? Not from fraud and not from change, because, as we have
seen, the presumptions of the statute do not obtain against fraud
or change in the valuation of the property. Risk, then, can only
come from the failure to observe care; that care which it might be
supposed, without any prompting from the law, underwriters would
observe, and which, if observed, would make their policies true
contracts of assurance -- not seemingly so, but really so; not only
when premiums are paying, but when loss is to be paid. The state
surely has the power to determine that this result is desirable,
and to
Page 172 U. S. 566
accomplish it even by a limitation of the right of contract
claimed by plaintiff in error.
It would be idle and trite to say that no right is absolute.
Sic utere tuo ut alienum non laedas is of universal and
pervading obligation. It is a condition upon which all property is
held. Its application to particular conditions must necessarily be
within the reasonable discretion of the legislative power. When
such discretion is exercised in a given case by means appropriate
and which are reasonable, not oppressive or discriminatory, it is
not subject to constitutional objection. The Missouri statute comes
within this rule.
The cases cited by plaintiff in error, which hold that the
legislature may give the effect of
prima facie proof to
certain acts, but not conclusive proof, do not apply. They were not
of contract nor gave effect to contracts. It is one thing to
attribute effect to the convention of parties entered into under
the admonition of the law, and another thing to give to
circumstances, may be accidental, conclusive presumption and proof
to establish and force a result against property or liberty.
The statute is not subject to the condemnation that it regulates
contracts made or rights acquired prior to its enactment, and we
may repeat the language of Mr. Justice Field in
Railway Co. v.
Mackey that
"it cannot be successfully contended that the state may not
prescribe the liabilities under which corporations created by its
laws shall conduct their business in the future where no limitation
is placed upon its power in this respect by their charters.
Legislation to this effect is found in the statute books of every
state."
That which a state may do with corporations of its own creation
it may do with foreign corporations admitted into the state. This
seems to be denied, if not generally, at least as to plaintiff in
error. The denial is extreme, and cannot be maintained. The power
of a state to impose conditions upon foreign corporations is
certainly as extensive as the power over domestic corporations, and
is fully explained in
Hooper v. California, 155 U.
S. 648, and need not be repeated.
Page 172 U. S. 567
It is urged that the statute is not made a condition upon
foreign corporations, but this view is not open to our acceptance.
The Supreme Court of Missouri, exercising its function of
interpretation, decides that it is. But we do not care to enter
fully into the subject of conditions on corporations, foreign or
domestic. The statute is sustained on the grounds that we have
given.
The other contentions of plaintiff in error we do not consider
it is necessary to review.
Judgment affirmed.
