Merchants Mut Automobile Liability Ins Co v. Smart

• Citation: 267 U.S. 126,69 L.Ed. 538,45 S.Ct. 320
• Decision Date: 02 March 1925
• Docket Number: No. 223,223
• Parties: MERCHANTS' MUT. AUTOMOBILE LIABILITY INS. CO. v. SMART
• Court: United States Supreme Court

267 U.S. 126

45 S.Ct. 320

69 L.Ed. 538

MERCHANTS' MUT. AUTOMOBILE LIABILITY INS. CO.

v SMART.

No. 223.

Argued Jan. 22, 1925.

Decided March 2, 1925.

Mr. Anthony J. Ernest, of New York City, for plaintiff in error.

Mr. J. P. Bramhall, of Washington, D. C., for defendant in error.

Mr. Chief Justice TAFT delivered the opinion of the Court.

The Merchants' Mutual Automobile Liability Insurance Company, the plaintiff in error, is a New York corporation authorized to insure against recoveries of damages by persons injured by automobiles and other vehicles, for whose operation the insured is responsible. It issued a policy November 16, 1919, to Frank Coron, thus to indemnify him in the operation of his automobile truck to the extent of $5,000, together with interest and costs. The policy contained a provision, inserted pursuant to the requirement of section 109 of the Insurance Law of New York. Laws 1919, c. 182. The section reads as follows:

'On and after the first day of January, nineteen hundred and eighteen, no policy of insurance against loss or damage resulting from accident to or injury suffered by an employee or other person and for which the person insured is liable, or, against loss or damage to property caused by horses or by any vehicle drawn, propelled or operated by any motive power, and for which loss or damage the person insured is liable, shall be issued or delivered to any person in this state by any corporation, * * * authorized to do business in this state, unless there shall be contained within such policy a provision that the insolvency or bankruptcy of the person insured shall not release the insurance carrier from the payment of damages for injury sustained or loss occasioned during the life of such policy, and stating that in case execution against the insured is returned unsatisfied in an action brought by the injured, or his or her personal representative in case death results from the accident, because of such insolvency or bankruptcy, that then an action may be maintained by the injured person, or his or her personal representative, against such corporation under the terms of the policy for the amount of the judgment in the said action not exceeding the amount of the policy.'

Smart was injured by the truck of Coron. He brought suit against Coron for damages and recovered a judgment for $11,000. He issued execution against Coron upon the judgment, which was returned unsatisfied, and supplemental proceedings were undertaken against him without success.

The Supreme Court of the state held that on the record Coron was insolvent, that under the clause of the policy embodying the provision of section 109 the action lay, and because of a failure to set up any good defense a summary judgment was entered for $5,000 and interest and costs in favor of Smart against the company.

The case has been brought here by the company under section 237 of the Judicial Code (Comp. St. § 1214), upon the claim that section 109 is invalid, first, in that it deprives the insurance company of its property without due process of law; and, second, because it is in conflict with the bankruptcy laws of the United States. It is well settled that the business of insurance is of such a peculiar character, affects so many people, and is so intimately connected with the common good, that the state creating insurance corporations and giving them authority to engage in that business may, without transcending the limits of legislative power, regulate their affairs, so far, at least, as to prevent them from committing wrongs or injustice in the exercise of their corporate functions. Northwestern Life Insurance Co. v. Riggs, 203 U. S. 243, 254, 27 S. Ct. 126, 51 L Ed. 168, 7 Ann. Cas. 1104; Whitfield v. AEtna Life Insurance Co., 205 U. S. 489, 27 S. Ct. 578, 51 L. Ed. 895; German Alliance Insurance Co. v. Lewis, 233 U. S. 389, 412, et seq., 34 S. Ct. 612, 58 L. Ed. 1101, L. R. A. 1915C, 1189; La Tourette v. McMaster, 248 U. S. 465, 467, 39 S. Ct. 160, 63 L. Ed. 362; National Insurance Co. v. Wanberg, 260 U. S. 71, 73, 43 S. Ct. 32, 67 L. Ed. 136. Such regulation would seem to be peculiarly applicable to that form of insurance which has come into very wide use of...