Aetna Ins. Co. v. Hyde

• Citation: 34 F.2d 185
• Decision Date: 13 April 1929
• Docket Number: No. 962-1116.,962-1116.
• Parties: ÆTNA INS. CO. v. HYDE, State Superintendent of Insurance, et al., and 154 other cases.
• Court: U.S. District Court — Western District of Missouri

34 F.2d 185 (1929)

ÆTNA INS. CO. v. HYDE, State Superintendent of Insurance, et al., and 154 other cases.

Nos. 962-1116.

District Court, W. D. Missouri.

April 12, 13, 1929.

COPYRIGHT MATERIAL OMITTED

Robert Follonie, of Chicago, Ill., Ashley Cockrell, of Little Rock, Ark., J. S. Leahy, of St. Louis, Mo., and William S. Hogsett, of Kansas City, Mo., for petitioners.

Floyd E. Jacobs and John T. Barker, both of Kansas City, Mo., and North Todd Gentry, of Columbia, Mo., for defendants.

Before STONE, Circuit Judge, and REEVES and KENNAMER, District Judges.

STONE, Circuit Judge.

Section 6283, Rev. St. Mo. 1919, authorizes the superintendent of insurance of that state to reduce the rates of stock fire insurance companies, whenever the earnings of such companies, for five years, show "an aggregate profit therein in excess of what is reasonable," so as to limit the "aggregate collections by insurance companies in this state to not more than a reasonable profit." Section 6284 provides a review of such orders "by a proper action in the courts" wherein the "entire matter shall be treated and determined de novo" and pending which the rates fixed in such orders shall be in force.

Acting under section 6283, the superintendent made three orders reducing rates. The first was a reduction of 15 per cent. and was made January 5, 1922. Shortly thereafter, the companies filed a joint equitable action in the state court against the superintendent and a temporary restraining order was entered preventing enforcement of the order. A few days later, a stipulation was entered into between the parties to that suit, one result of which was rescission of the order by the superintendent. Although the above order is not involved in the present actions, the above stipulation and matters thereafter arising therefrom present one of the issues in these actions and will be discussed hereinafter.

The second order, made October 9, 1922, required a reduction of 10 per cent. in rates. A month later, all of the companies affected thereby joined in a review proceeding under section 6284 in the proper state trial court. That court set aside the order as unreasonable and confiscatory. On appeal to the state Supreme Court, the decree of the trial court was reversed. 315 Mo. 113, 285 S. W. 65. The Supreme Court of the United States granted a writ of certiorari. 273 U. S. 681, 47 S. Ct. 113, 71 L. Ed. 837. After hearing, the Supreme Court dismissed the writ on the sole ground that no federal question was presented. 275 U. S. 440, 48 S. Ct. 174, 72 L. Ed. 357.

While the above action for review was in course, the superintendent, on November 9, 1923, made a third order which required a reduction of 15 per cent. in rates.

Shortly after the above decision by the Supreme Court of the United States, 155 companies filed separate actions in this court against the superintendent and the Attorney General of the state for the purpose of enjoining the enforcement of the two orders made on October 9, 1922, and on November 9, 1923, respectively. Shortly thereafter, and before hearing in this court, the superintendent rescinded the order of November 9, 1923. The bills attack, in a similar manner, the order of November 9, 1923, and section 6283 as then amended (Laws Mo. 1923, p. 234), but the fact that this order was rescinded before hearing and the fact that the 10 per cent. order was made before amendment of section 6283 eliminate the 1923 order and the section as amended from our consideration. Taking the situation at the time of the hearing, our concern is with the validity of section 6283, unamended, and with the validity and the force of the order of October 9, 1922. As each of these cases involves the same issues, they were heard at one time, upon the applications for temporary injunctions, by a statutory court of three judges.

This hearing was upon the verified bills, motions to dismiss the bills, motions to dismiss the bills or to stay proceedings until complete restitution has been made to every policyholder in Missouri of any amount collected "in excess of such 10 per cent. reduction," affidavits and other testimony at the hearing.

Generally stated, the position of each complainant is that section 6283, as construed (315 Mo. 113, 285 S. W. 65) and as applied to it, in the light of its separate experience, is unreasonable and confiscatory, and therefore the order reducing rates by 10 per cent. is void as to it. The attack of complainants may be placed under three general headings: First, the state has no power to regulate insurance rates; second, the regulation prescribed in section 6283 is violative of constitutional rights, and therefore that section is void; third, the method pursued by the superintendent in determining the basic facts for his action is unconstitutional, and therefore the order based thereon is void.

In their motions to dismiss and motions to dismiss or to compel restitution, defendants urge three matters as a bar to our consideration of the above contentions of complainants. These are as follows: First, that complainants are estopped to file or prosecute these bills by the terms of the above stipulation; second, that the matters presented in these bills are all foreclosed by the decision in the review proceedings under section 6283 — such decision being res adjudicata thereof; third, that without the restitution to policyholders demanded in the motions filed herein, the complainants come into equity with unclean hands and should be denied all relief, or, at least, denied relief until such restitution be made.

The Stipulation.

Shortly after the reduction order of January 5, 1922, had been made, the companies affected thereby joined in an action in the state circuit (trial) court in Cole county, Missouri. This action was an ordinary injunction proceeding to prevent enforcement of that order. A restraining order was issued therein. At that stage of the controversy, the parties agreed upon a course of action which was embodied in a written stipulation. This is the stipulation urged by the present defendants as a bar to each and all of the present complainants. Of the present complainants, 33 were not parties to the stipulation (Complainants' Exhibit 3, printed copy, p. 7) and, therefore are not bound thereby. Our further discussion of the effect of the stipulation is applicable to, and only to, the complainants which were parties thereto. The stipulation is as follows:

"In the Circuit Court of Cole County, Missouri, November Term, 1921.

"Ætna Insurance Company et al., Plaintiffs, v. Ben C. Hyde, Superintendent of the Insurance Department of the State of Missouri, Defendant.

"Stipulation.

"Whereas, Ben C. Hyde, Superintendent of the Insurance Department of the State of Missouri, has this day withdrawn and revoked the order published and declared by him on the 5th day of January, 1922, effective February 15, 1922, reducing the rates of insurance charged by all stock fire insurance companies doing business in the State of Missouri on all fire, lightning, hail and windstorm business written by them in this State; now, therefore, it is hereby stipulated by and between the parties hereto that the following order may be entered of record in this cause:

"1. The above entitled cause is hereby dismissed, and the restraining order heretofore entered therein is hereby dissolved, and all liability under the bond given pursuant to the conditions of said restraining order is hereby satisfied and discharged, and the surety on said bond is hereby released.

"2. It is further stipulated and agreed that the said Superintendent of the Insurance Department, defendant herein, may, not earlier than March 15, 1922, call a hearing to investigate the necessity for a reduction in rates charged by the stock fire insurance companies doing a fire, lightning, hail and windstorm insurance business in this State; that at such hearing, if and when called, the stock fire insurance companies will appear by counsel and will produce such evidence as may be required by the Insurance Department, or they may see fit to present, bearing upon such question; that at such hearing the experience of said companies in the State of Missouri for the year 1921 shall be offered in evidence and considered by the Superintendent of the Insurance Department, together with such other evidence as may be offered in reaching his determination; that at the conclusion of such hearing the Superintendent of the Insurance Department will make findings of fact and announce his determination thereon and that he shall, in writing, find all essential, material and competent matters of fact disclosed by the evidence; that he shall make the following findings:

"(a) What was the profit of said stock fire insurance companies during the five years preceding said investigation, including the year 1921;

"(b) What is a reasonable profit on the business written in this State;

"(c) What per cent. of premiums received is allowed for the conflagration hazard;

"(d) What is the basis upon which earnings in Missouri should be determined and ascertained;

"(e) What is the ratio of expenses incurred to premiums earned in this State during said period;

"(f) What is the ratio of losses incurred to premiums earned in this State during said period;

"(g) What is the total amount of earned premiums during said period.

"3. That if, based upon such findings of fact and the determination of the Superintendent of the Insurance Department, an order reducing the rates charged by such stock companies on all fire, lightning, hail and windstorm insurance business written by them in the State of Missouri be made by said Superintendent of the Insurance Department such order shall apply to all classes alike, and the said insurance companies, if dissatisfied with said order, will proceed to secure a review thereof by the trial de novo in the Circuit Court of Cole County, Missouri.

"4. That no injunction shall be...