Hardware Dealers Mut Fire Ins Co of Wisconsin v. Glidden Co

Decision Date23 November 1931
Docket NumberNo. 4,4
PartiesHARDWARE DEALERS' MUT. FIRE INS. CO. OF WISCONSIN v. GLIDDEN CO. et al
CourtU.S. Supreme Court

Messrs. Mortimer H. Boutelle and Nathan H. Chase, both of Minneapolis, Minn., for appellant.

[Argument of Counsel from pages 152-154 intentionally omitted] Messrs. Homer C. Fulton, of Duluth, Minn., E. M. O'Neill and Arthur E. Nelson, both of St. Paul, Minn., and Edward L. Boyle, of Duluth, Minn., for appellees.

Mr. Justice STONE delivered the opinion of the Court.

This case is here on appeal, section 237 (a) of the Judicial Code, 28 USCA § 344(a), from a judgment of the Supreme Court of Minnesota, upholding the constitutionality of the arbitration provisions of the standard fire insurance policy prescribed by Minnesota statutes. 181 Minn. 518, 233 N. W. 310.

Appellant, a Wisconsin corporation licensed to carry on the business of writing fire insurance in Minnesota, issued, within the state, its policy insuring appellees' assignor against loss, by fire, of personal property located there. The policy was in standard form, the use of which is enjoined by statutes of Minnesota on all fire insurance companies licensed to do business in the state. Mason's Minn. Stat. 1927, §§ 3314, 3366, 3512, 3515, 3711. Failure to comply with the command of the statute is ground for revocation of the license to do business, section 3550, and willful violation of it by any company or agent is made a criminal offense, punishable by fine or imprisonment. Sections 3515, 9923.

A fire loss having occurred, the insured appointed an arbitrator, and demanded of petitioner that the amount be determined by arbitration as provided by the policy.1 The appellant having refused to participate in the arbitration, the insured, in accordance with the arbitration clause, procured the appointment of an umpire to act with the arbitrator designated by the insured. The arbitrator and umpire thus selected proceeded to determine the amount of the loss, and made their award accordingly.

In the present suit, brought to recover the amount of the award, the appellant set up by way of defense, the single point relied on here, that so much of the statutes of Minnesota as require the use by petitioner of the arbitration provisions of the standard policy infringes the due process and equal protection clauses of the Fourteenth Amendment. In rejecting this contention and in sustaining a recovery of the amount of the award, the Supreme Court of Minnesota, consistently with its earlier decisions, ruled that the authority of the arbitrators did not extend to a determination of the liability under the policy, which was a judicial question, reserved to the courts, but that their decision as to the amount of the loss is conclusive upon the parties, unless grossly excessive or inadequate, or procured by fraud. See Glidden Co. v. Retail Hardware Mut. Fire Ins. Co., 181 Minn. 518, 521, 522, 233 N. W. 310; Abramowitz v. Continental Ins. Co., 170 Minn. 215, 212 N. W. 449; Harrington v. Agricultural Ins. Co., 179 Minn. 510, 229 N. W. 792, 68 A. L. R. 1340.

This type of arbitration clause has long been commonly used in fire insurance policies, both in Minnesota and elsewhere, and, when voluntarily placed in the insurance contract, compliance with its provisions has been held to be a condition precedent to an action on the policy. Gasser v. Sun Fire Officer, 42 Minn. 315, 44 N. W. 252; Hamilton v. Liverpool, London & Globe Ins. Co., 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419; Scott v. Avery, 5 House of Lords, 811, 854. See Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 121, 44 S. Ct. 274, 68 L. Ed. 582.

Appellees insist that the use of the clause here was voluntary, since the appellant was not compelled to write the policy, and that in any case appellant, by long acquiescence in the statute, is estopped to challenge, after the loss, the right of the insured to rely upon it. Without stopping to examine these contentions, we assume that appellant's freedom of contract was restricted by operation of the statute, and pass directly to the question decided by the state court, whether the Fourteenth Amendment precludes the exercise of such compulsion by the legislative power.

The right to make contracts embraced in the concept of liberty guaranteed by the Fourteenth Amendment is not unlimited. Liberty implies only freedom from arbitrary restraint, not immunity from reasonable regulations and prohibitions imposed in the interests of the community. Chicago, Burlington & Quincy R. R. Co. v. McGuire, 219 U. S. 549, 567, 31 S. Ct. 259, 55 L. Ed. 328. Hence legislation otherwise within the scope of acknowledged state power, not unreasonably or arbitrarily exercised, cannot be condemned because it curtails the power of the individual to contract. McLean v. Arkansas, 211 U. S. 539, 29 S. Ct. 206, 53 L. Ed. 315; Schmidinger v. Chicago, 226 U. S. 578, 33 S. Ct. 182, 57 L. Ed. 364; German Alliance Insurance Co. v. Kansas, 233 U. S. 389, 34 S. Ct. 612, 58 L. Ed. 1011, L. R. A. 1915C, 1189; Erie R. R. v. Williams, 233 U. S. 685, 34 S. Ct. 761, 58 L. Ed. 1155, 51 L. R. A. (N. S.) 1097; Keokee Cons. Coke Co. v. Taylor, 234 U. S. 224, 34 S. Ct. 856, 58 L. Ed. 1288.

The present statute substitutes a determination by arbitration for trial in court of the single issue of the amount of loss suffered under a fire insurance policy. As appellant's objection to it is directed specifically to the power of the state to substitute the one remedy for the other, rather than to the constitutionality of the particular procedure prescribed or followed before the arbitrators, it suffices to say that the procedure by which rights may be enforced and wrongs remedied is peculiarly a subject of state regulation and control. The Fourteenth Amendment neither implies that all trials must be by jury, nor guarantees any particular form or method of state procedure. See Missouri ex rel. Hurwitz v. North, 271 U. S. 40, 46 S. Ct. 384, 70 L. Ed. 818. In the exercise of that power and to satisfy a public need, a state may choose the remedy best adapted, in the legislative judgment, to protect the interests concerned, provided its choice is not unreasonable or arbitrary, and the procedure it adopts satisfies the constitutional requirements of reasonable notice and opportunity to be heard.

The record and briefs present no facts disclosing the reasons for the enactment of the present legislation or the effects of its operation, but, as it deals with a subject within the scope of the legislative power, the presumption of constitutionality is to be indulged. O'Gorman & Young, Inc., v. Hartford Fire Ins. Co., 282 U. S. 251, 51 S. Ct. 130, 75 L. Ed. 324; see Standard Oil Co. v. Marysville, 279 U. S. 582, 584, 49 S. Ct. 430, 73 L. Ed. 856; Ohio ex rel. Clarke v. Deckebach, 274 U. S. 392, 397, 47 S. Ct....

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