Orient Insurance Co. v. Daggs, 172 U.
S. 557;
Waters-Pierce Co. v. Texas,
177 U. S. 28;
New York Life Insurance Co. v. Cravens, 178 U.
S. 389, approved and affirmed.
Section 3625 of the Revised Statutes of Ohio, dealing with the
subject of answers to interrogatories in applications for policies
of life insurance, applicable to all life insurance companies doing
business in the Ohio, and in force at the time the policy of
insurance sued on in this case was issued, was within the power of
the state over corporations, and not in violation of the
Constitution of the United States.
This action was brought in the Common Pleas Court of Delaware
County, Ohio, on a policy of insurance issued September 27, 1895,
by the John Hancock Mutual Life Insurance Company on the life of
George E. Warren and for the benefit of William M. Warren. The
insurance company resisted payment on the ground that the policy
had been fraudulently obtained by the decedent in that the answers
made by him in his application made a part of the policy, and which
were expressly warranted to be complete and true, the policy
providing that, if any of the statements were untrue it should be
void, were false, and that he made them for the purpose of
defrauding the insurance company, which would not have issued the
policy had it known of the falsity of the answers.
Section 3625 of the Revised Statutes of Ohio provided that:
"No answer to any interrogatory made by an applicant, in his or
her clearly proved that such answer is willfully recover upon any
policy issued upon such application, or be used in evidence upon
any trial to recover upon such policy, unless it be clearly proved
that such answer is willfully false and was fraudulently made, that
it is material, and induced the company to issue the policy, and
that but for such answer, the policy would
Page 181 U. S. 74
not have been issued, and, moreover, that the agent of the
company had no knowledge of the falsity or fraud of such
answer."
Rev.Stat. Ohio, 1898, p. 1900.
The trial judge charged the jury as follows:
"This law, being in force at the time this policy of insurance
was taken out, is applicable to the policy of insurance involved in
this case. And is applicable to the questions and answers in the
application that by the terms of the policy are made express
warranties, as well as those that are not."
The defendant duly excepted to that portion of the charge and to
other portions of the same purport. The defendant also requested
the court to give the jury the following instruction:
"The policy or contract upon which this action is based, and the
application made by George E. Warren for the same, constitute a
warranty that all answers by said Warren contained therein are
true, and if any one or more of said answers is untrue, though made
without actual fraud, and under an innocent misapprehension of the
purport of the questions and answers, no contract of insurance is
thereby made, and the contract is void
ab initio, and your
verdict will be for the defendant."
The court declined to give this instruction, and defendant duly
excepted.
The jury returned a verdict for the plaintiff, and judgment was
entered thereon which was affirmed by the circuit court, and
finally by the Supreme Court of Ohio.
John Hancock Mutual Life
Insurance Company v. Warren, 59 Ohio St. 45.
MR. CHIEF JUSTICE FULLER delivered the opinion of the Court.
In
State v. Ackerman, 51 Ohio St. 163, it was ruled
that, as foreign insurance companies and associations, whether
incorporated or not before commencing business in the state,
were
Page 181 U. S. 75
required to obtain a certificate of authority to do so, which
conferred on the company or association receiving it the right and
privilege of carrying on its business in the state, the privilege
so conferred was a franchise. In the course of the opinion, the
court quoted with approval, from Spelling on Extraordinary Relief,
as follows:
"Where, by statute, the legal exercise of a right which at
common law was private is made to depend upon compliance with
conditions interposed for the security and protection of the
public, the necessary inference is that it is no longer private,
but has become a matter of public concern -- that is, a franchise,
the assumption and exercise of which without complying with the
conditions prescribed would be a usurpation of a public or
sovereign function. . . . There was no class of business the
transaction of which, as a matter of private right, was better
recognized at common law than that of making contracts of insurance
upon the lives of individuals. But now, by statute, in almost if
not quite all the states, stringent requirements as to security of
the persons dealing with insurers and the making and filing reports
of public officers for public information are provided, and must be
strictly observed and complied with before any person, association,
or corporation may make any contract of life insurance. The effect
of such statute is to make that a franchise which previously had
been a matter purely of private right."
In the present case, the Supreme Court of Ohio sustained the
constitutionality of section 3625 of the Revised Statues, which was
in force at the time this policy was issued, upon the ground that
the state had a right
"to prescribe the terms and conditions upon which it grants such
franchise, and the insurance company, having accepted the franchise
with its terms and conditions, is bound thereby, and must accept
the burdens with the benefits."
The legal effect was held to be the same "as if the section was
copied into and made a part of the policy." And it was said that
the statute had also been held constitutional in
National Life
Insurance Co. v. Brobst, 56 Ohio St. 728, where no opinion
seems to have been delivered.
The section in question applies to all life insurance companies
doing business in the State of Ohio, and the state can
certainly
Page 181 U. S. 76
do with foreign corporations what it may do with corporations of
its own creation.
In
Orient Insurance Company v. Daggs, 172 U.
S. 557, we held that provisions in the Revised Statutes
of Missouri that
"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,"
etc., and "that no condition in any policy of insurance contrary
to such provision [of this article] shall be legal or valid," were
not in conflict with the Constitution of the United States. And
this was affirmed in
New York Life Insurance Company v.
Cravens, 178 U. S. 389.
In
Waters-Pierce Oil Company v. Texas, 177 U. S.
28, where a statute of Texas was assailed on the ground
that it took away the liberty of contract, MR. JUSTICE McKENNA,
delivering the opinion of the Court, said:
"The plaintiff in error is a foreign corporation, and what right
of contracting has it in the State of Texas? This is the only
inquiry, and it cannot find an answer in the rights of natural
persons. It can only find an answer in the rights of corporations
and the power of the state over them. What those rights are, and
what that power is, has often been declared by this Court. A
corporation is the creature of the law, and none of its powers are
original. They are precisely what the incorporating act has made
them, and can only be exerted in the manner which that act
authorizes. In other words, the state prescribes the purposes of a
corporation and the means of executing those purposes. The purposes
and means are within the state's control. This is true as to
domestic corporations. It has even a broader application to foreign
corporations."
And as the state court had held that the statute was a condition
imposed on the oil company on doing business within the state, it
was said of it that
"whatever its limitations were upon the power of contracting,
whatever its discriminations were, they became conditions of the
permit, and were accepted with it."
And see Tullis v. Railroad Company, 175 U.
S. 348;
Equitable &c. Assurance Society v.
Clements, 140 U. S. 226.
It was for the Legislature of Ohio to define the public
policy
Page 181 U. S. 77
of that state in respect of life insurance and to impose such
conditions on the transaction of business by life insurance
companies within the state as was deemed best. We do not perceive
any arbitrary classification or unlawful discrimination in this
legislation, but, at all events, we cannot say that the federal
Constitution has been violated in the exercise in this regard by
the state of its undoubted power over corporations.
Judgment affirmed.
