laws discriminating against foreign companies or otherwise governing their admission and expulsion. If constitutional, the new system would also mean that every company, in order to do business beyond the state of incorporation, must obtain a federal license which will enable it to transact business throughout the country. Likewise, as regards the collection of millions of dollars of fees and taxes by the states from foreign companies, a radical change would seem likely to follow. To quote from Mr. C. F. Randolph's excellent paper on this subject (Columbia Law Review,, November, 1905): "The withdrawal of state supervision will, of course, withdraw these charges; and all license fees will fail, for interstate commerce cannot be subjected to a privileged tax. A state will retain power to tax a company's real and personal property within its jurisdiction at equal rates with like property, but this tax is comparatively unimportant. The chief interest centers upon taxes on the business of insurance, commonly imposed on the premium receipts." The changes thus outlined, which will follow the introduction of federal supervision, are of the greatest significance, since by far the greater portion of the insurance business is interstate or international in character. In the state of New York the fire-insurance companies with risks of $50,000,000 or more write only about one fourth of their business in the home state, and collect from this business only about one fifth of their premium income. The same companies in Pennsylvania write only about one tenth of their business in the home state. To this fact it must be added that a very large proportion of the country's fire and marine insurance is written by alien corporations. We are informed that “one third of the fire insurance written in this country is written by British corporations, and an additional 7 per cent by American corporations owned and controlled by foreign insurance companies." Likewise in marine insurance alien corporations write over 50 per cent of the total business written in this country, and collect nearly one half of the total premiums. It would seem, thus, that the insurance business is peculiarly interstate and international in character, and is peculiarly fitted for federal control, especially in view. of the inadequacy of the present system of state supervision and the changes which it seems very likely will be ushered in with the establishment of federal regulation. But the opponents of federal supervision argue that all the predictions for the change rest on conjecture and await demonstration, that the states cannot be induced to give up their control, and that, above all, there is the controlling fact that the Supreme Court of the United States has, beginning with 1868, again and again declared that insurance is not a subject for federal control.1 Congress can only exercise those powers delegated to the United States by the Constitution; and the supervision of insurance, if delegated at all by the Constitution, it is generally conceded, finds its legal sanction in Section 8 of Article I, namely: "The Congress shall have the power to regulate commerce with foreign nations and among the several states, and with the Indian tribes." To bring federal supervision of insurance within the scope of this clause, insurance must be declared to be commerce. And here it is pointed out that even as late as 1901, in the case of Nutting vs. Massachusetts, the Supreme Court affirmed its many previous decisions in the following words: "A state has the undoubted power to prohibit foreign insurance companies from making contracts of insurance, marine or other, within its limits, except upon such conditions as the state may prescribe, not interfering with interstate commerce. A contract 1Paul vs. Va., 8 Wall., 168 (1868); Liverpool Co. vs. Mass., 10 Wall., 566 (1870); Hooper vs. Cal., 155 U. S., 684 (1894); N. Y. Life Ins. Co. vs. Cravens, 178 U. S., 389 (1899); Nutting vs. Mass., 183 U. S., 553 (1901). of marine insurance is not an instrumentality of commerce, but a mere incident of commercial intercourse.' The force of this claim of unconstitutionality must be fully recognized, and it has been the great stumbling-block in the way of federal supervision ever since agitation for that measure began in 1868. It cannot be removed except through a test case or by amendment of the Constitution. Until some action is taken by Congress, or until a suit is brought by a state against a foreign company refusing to be regulated, there will continue to be those on the one hand who maintain that the "insurance cases" are conclusive against national supervision; and, on the other hand, those who hold that none of these cases involved the constitutionality of a federal law, but were merely concerned with state laws; that the cases are to be regarded as mere dictum and do not justify a negative policy; that constitutional objections have been raised against most of the country's greatest legislative measures; that the Constitution is a growth to meet the needs of the time; that the Supreme Court has frequently reversed its rulings; and that if Congress should act by passing a law, and the whole matter be squarely brought before the Supreme Court for decision on its real merits, the necessity of the situation would warrant a hope for a favorable decision. Again, it is argued, that there are recent cases to show that the Supreme Court has already retracted in large measure from its earlier position on this question. Chief reliance is placed on the lottery case of February, 1903, where it was decided by a vote of five to four that a lottery ticket is an article of commerce. This decision, it is argued, greatly weakened the force of "the insurance cases." Indeed, the four dissenting judges-Justices Fuller, Brewer, Shiras, and Peckham-did find a sufficient similarity between a lottery ticket and a policy of insurance to hold the majority opinion at variance with the "insurance cases, " and their dissenting opinion contained these significant words: "Is the carriage of lottery tickets from one state to another commercial intercourse? The lottery ticket purports to create contractual relations, and to furnish the means of enforcing a contract right. This is true of insurance policies, and both are contingent in their nature. Yet this court has held that the issuing of fire, marine, and life insurance policies in one state, and sending them to another, to be there delivered to the insured on payment of premium is not interstate commerce." In answer to this dissenting opinion the opponents of federal supervision argue that the definition of a lottery ticket by the court differs essentially from that of a policy, the first being defined as a subject of traffic, something that could be bought and sold, while policies of insurance were considered in Paul vs. Virginia as not "subjects of sale and barter, offered in the market as something having an existence and value independent of the parties in them." |