Hyatt v. Blackwell Lumber Co.

• Decision Date: 25 June 1918
• Citation: 173 P. 1083,31 Idaho 452
• Parties: W. R. HYATT, as Insurance Commissioner of the State of Idaho, Appellant, v. BLACKWELL LUMBER COMPANY, a Corporation, Respondent
• Court: Idaho Supreme Court

173 P. 1083

31 Idaho 452

W. R. HYATT, as Insurance Commissioner of the State of Idaho, Appellant, v. BLACKWELL LUMBER COMPANY, a Corporation, Respondent

Supreme Court of Idaho

June 25, 1918

CONSTITUTIONAL LAW-DUE PROCESS OF LAW-INSURANCE.

1 Sess. Laws 1913, chap. 185, sec. 15, p. 600, when applied to contracts of insurance made and to be performed outside of the state, covering property within the state, is unconstitutional as depriving persons of liberty without due process of law.

APPEAL from the District Court of the Eighth Judicial District, for Kootenai County. Hon. R. N. Dunn, Judge.

Action to recover taxes and penalty. Judgment for defendant. Affirmed.

Judgment affirmed. No costs awarded.

T. A Walters, Atty. Genl., A. C. Hindman, J. Ward Arney and J. P Pope, Assistants, and Black & Wernette, for Appellant.

The state has a right to impose penalties upon its citizens who seek to transact business with unauthorized companies. (Hooper v. California, 155 U.S. 648, 15 S.Ct. 207, 39 L.Ed. 297; Allgeyer v. Louisiana, 165 U.S. 578, 17 S.Ct. 427, 41 L.Ed. 832; Cooley's Briefs on Insurance, 602.)

The right of a state to make it an offense for a citizen of the state to insure his property in a foreign insurance company which has not complied with the state laws has been recognized in a number of cases. (Commonwealth v. Biddle, 139 Pa. 605, 21 A. 134, 11 L. R. A. 561; Rose v. Kimberly & Clark Co., 89 Wis. 545, 46 Am. St. 855, 62 N.W. 526, 27 L. R. A. 556.)

Courts have refused to enforce, on the grounds of public policy, insurance contracts entered into with unlicensed companies. (Buell v. Breeze Mill & Grain Co., 65 Ill.App. 271; Swing v. Thomas, 120 Ill.App. 235; Seamans v. Temple Company, 105 Mich. 400, 55 Am. St. 457, 63 N.W. 408, 28 L. R. A. 430; Seamans v. Christian Bros. Mill Co., 66 Minn. 205, 68 N.W. 1065; Commonwealth Mut. Fire Ins. Co. v. Hayden, 60 Neb. 636, 83 Am. St. 545, 83 N.W. 922.)

A contract insuring property within the state necessarily involves the doing of business in the state, and hence is subject to its laws. (Stanhilber v. Mutual Mill Ins. Co., 76 Wis. 285, 45 N.W. 221.)

John P. Gray and W. F. McNaughton, for Respondent.

If sec. 15 of chap. 185, Laws of 1913, is to be given extraterritorial effect so as to extend beyond the limits of the state of Idaho and penalize citizens of Idaho in their contract relations with insurance companies in other jurisdictions, it is in conflict with the provision of the federal constitution guaranteeing freedom of contract. (Allgeyer v. Louisiana, 165 U.S. 578, 17 S.Ct. 427, 41 L.Ed. 832; Nutting v. Massachusetts, 183 U.S. 553, 22 S.Ct. 238, 46 L.Ed. 324; Delawater v. South Dakota, 205 U.S. 93, 10 Ann. Cas. 733, 27 S.Ct. 447, 51 L.Ed. 724; New York Life Ins. Co. v. Head, 234 U.S. 149, 34 S.Ct. 879, 58 L.Ed. 1259; Provident Sav. Life Assur. Soc. v. Kentucky, 239 U.S. 103, 36 S.Ct. 34, 60 L.Ed. 167, L. R. A. 1916C, 572; French v. People, 6 Colo. App. 311, 40 P. 463; Atlas Mut. Ins. Co. v. Fisheries Co., 6 Penne. (Del.) 256, 68 A. 4.)

RICE, J. Budge, C. J., and Morgan, J., concur.

OPINION

RICE, J.

--Sess. Laws 1913, chap. 185, sec. 15, p. 600, reads as follows: "All persons, firms, companies or corporations, obtaining fire insurance upon property situated in this state, in companies not authorized to transact business in this state, shall file with the insurance commissioner a statement or declaration under oath setting forth the name of the company and its location, the number of the policy, the amount of insurance, rate, premium and description of property insured in such unauthorized company, and shall be required to pay a tax thereon of ten per cent of the premiums paid on such policies to the said insurance commissioner; and shall pay a further fee to the commissioner of one dollar on each policy in such unauthorized company for making record of said statement or declaration, which record shall be kept for the information of the insurance department of this state.

"If any person, firm, company or corporation obtaining fire insurance in such unauthorized company shall fail or neglect for twenty days after taking such insurance to file the report and to pay the taxes and fees herein provided to be paid to the insurance commissioner, the insurance commissioner is hereby authorized to begin suit against such person, firm, company or corporation, in any court of competent jurisdiction, in his name as insurance commissioner, for said taxes and fees, and in addition thereto shall recover from such person, firm, company or corporation in any such suit a penalty equal to the amount of said taxes so unpaid, plus the sum of one hundred dollars. The attorney general of the state shall file and prosecute all such suits when requested so to do by the insurance commissioner, and the moneys so recovered shall be paid to the state treasurer as other fees received by the insurance commissioner."

The respondent obtained insurance in such unauthorized companies and paid to them $ 5,943.16 as premiums upon 110 insurance policies. A statement or declaration under oath was filed with the insurance commissioner, setting forth the names of the companies and their location, the number of each policy, the amount of insurance, rate, premium and description of the property insured, but respondent refused to pay the ten per cent tax and one dollar per policy for making record of such insurance. This action was instituted to recover the tax and the one dollar recording fee for each such policy, and in addition a penalty equal to the amount of the taxes so unpaid and one hundred dollars provided for by the statute, amounting in all to $ 1,508.64.

The court found that all the contracts of insurance referred to in the complaint and involved in this case, were made and were to be performed outside of the state of Idaho, and that any losses covered by the same were payable outside of the state; that the contracts were valid at the place where made and where they were to be performed. The court further found that none of the companies had an agent within the state soliciting insurance, and did no act, relating thereto within the state, and that none of the companies were engaged in doing business in the state at the time the insurance was procured...