Aetna Ins Co v. Hyde

• Decision Date: 03 January 1928
• Docket Number: No. 112,112
• Parties: AETNA INS. CO. et al. v. HYDE, Superintendent of Insurance Department of Missouri
• Court: U.S. Supreme Court

275 U.S. 440

48 S.Ct. 174

72 L.Ed. 357

AETNA INS. CO. et al.

v HYDE, Superintendent of Insurance Department of Missouri.

No. 112.

Argued Dec. 2, 1927.

Decided Jan. 3, 1928.

Messrs. Charles E. Hughes, of New York City, Robert J. Folonie, of Chicago, Ill., William S. Hogsett, of Kansas City, Mo., Ashley Cockrill, of Little Rock, Ark., and John S. Leahy, of St. Louis, Mo., for petitioners.

Messrs. John T. Barker and Floyd E. Jacobs, both of Kansas City, Mo., and North T. Gentry, of Jefferson City, Mo., for respondent.

Mr. Justice BUTLER delivered the opinion of the Court.

October 9, 1922, respondent, acting under section 6283, Revised Statutes of Missouri 1919, made findings of fact and an order directing a reduction of 10 per cent. in the rates charged by stock companies for fire, lightning, hail, and windstorm insurance. The petitioners, 156 companies, were all the stock fire insurance companies engaged in that business in Missouri. November 10, 1922, they brought this suit under section 6284, praying that the order be reviewed and set aside. The complaint challenges the methods employed by respondent to make the calculations provided for, and alleges that the findings and order are unreasonable, confiscatory, and in contravention of the due process clause of the Fourteenth Amendment. Issue was joined and a trial was had. The circuit court, confirming the report of a referee appointed to hear the evidence and report his findings of fact and conclusions of law, found the order unreasonable and confiscatory and entered a decree setting it aside. The Supreme Court reversed and dismissed the case. 285 S. W. 65. This court granted a writ of certiorari. 273 U. S. 681, 47 S. Ct. 113, 71 L. Ed. 837.

Respondent insists that the case presents no federal question. In order to determine whether that contention has merit, it is necessary to examine the statutory provisions under which the respondent made the findings and order complained of, the grounds on which petitioners seek to have them set aside, and the decision of the Supreme Court.

Section 6283, as it was at the time the order was made,¹ provided:

That the superintendent of insurance 'is hereby empowered to investigate the necessity for a reduction of rates, and if, upon such investigation, it appears that the result of the earnings in this state of the stock fire insurance companies for five years next preceding such investigation shows there has been an aggregate profit therein in excess of what is reasonable, he shall order such reduction of rates as shall be necessary to limit the aggregate collections by insurance companies in this state to not more than a reasonable profit. * * *'

Section 6284, as it stood when this suit was commenced, provided:

'The orders and directions of the superintendent of insurance, together with his findings or determinations of facts upon which such order or determination is founded, shall be reviewable by a proper action in the courts, and upon such review the entire matter shall be treated and determined de novo. * * *'

This section was amended before the trial Laws 1923, p. 235. The following was added:

'The court shall have authority to sustain, set aside or modify the orders and directions under review.'

The complaint alleges that the rates were not excessive before the reduction; that each company has local agency plants in Missouri ranging in value from $10,000 in case of small companies having but few agencies to $50,000 for larger companies having many, and that the good will of the agencies of each is of great value; that in Missouri normal expenses of each are from 35 to 45 per cent. of earned premiums and the yearly aggregate of all expenses is approximately 42 per cent. of all earned premiums, but that in the five-year period ending with 1921 total expenses amounted to about 44 per cent. of all premiums earned for insurance written in that period; that, in accordance with Missouri law, each company maintains a sum equal to its unearned premiums; that each should also have a surplus over its capital stock of 3 per cent. of its premiums on fire insurance policies in each year to meet the hazards of conflagration² and of 10 per cent. of other premiums against the risk of other catastrophes, and that each company is entitled to earn annually an underwriting profit of at least 5 per cent. of the earned premiums; that such profit for any period is the amount of premiums earned, less losses and expenses incurred; that in the five-year period ending with 1921 the combined experience of all companies on all classes of insurance in Missouri was: Losses incurred, 64.9 per cent. of earned premiums; expenses incurred, 44.4 per cent., making a total of 109.3 per cent.-without any allowance for a fund to meet conflagration and catastrophe hazards, or for profits to the companies.

And the complaint shows that prior to the order here in question and on January 5, 1922, the superintendent made an order reducing rates 15 per cent. The companies sued him to enjoin its enforcement. The parties entered into a stipulation reciting that he had revoked the order and agreeing that the case be dismissed. And it was stated therein that the superintendent, not earlier than March 15, 1922, might call a hearing to investigate the necessity for a reduction of rates; that at such hearing the experience of the companies in Missouri for 1921 should be offered in evidence and considered by the superintendent, together with such other evidence as might be offered; that at the conclusion of the hearings the superintendent would make certain findings of fact and announce his determination. And the stipulation contained the following:

'That, if * * * an order reducing the rates * * * be made, * * * the said insurance companies, if dissatisfied, * * * will proceed to secure a review thereof by the trial de novo in the circuit court of Cole county, Missouri. * * * That in such matter the question of the constitutionality of sections 6283 and 6284 * * * shall not be raised, nor shall the legality of the hearing above provided for be questioned.'

And the complaint alleges that there was a hearing at which the companies performed their part of the agreement, but that the superintendent failed to make the findings specified in the stipulation. The order (set forth in the bill) stated that the companies refused to supply necessary data to enable the superintendent to make such findings, and that his investigation was based on sworn reports filed by the companies during the five-year period. The findings contained in the order are that, in respect of the business in Missouri, the companies in that period collected net premiums amounting to $81,067,318, interest on capital and surplus prorated to that state $2,801.660 and interest on unearned premium reserves $2,418,596, making a total of $86,287,574; that they paid losses of $45,066,124; that expenses amounted to $32,534,617, leaving $8,686,833 profits, and that expenses were excessive by not less than $5,000,000. The order declared that the rates then in force produced excessive and unreasonable profits, and that a reduction of 10 per cent. in...