State ex rel. Prewitt v. Thompson

• Decision Date: 06 December 1933
• Parties: State ex rel. Ray P. Prewitt v. Joseph B. Thompson, State Superintendent of Insurance, Appellant
• Court: Missouri Supreme Court

66 S.W.2d 109

334 Mo. 144

State ex rel. Ray P. Prewitt v. Joseph B. Thompson, State Superintendent of Insurance, Appellant

Supreme Court of Missouri

December 6, 1933

Appeal from Cole Circuit Court.

Affirmed.

Roy W. McKittrick, Attorney-General, and Gilbert Lamb, Assistant Attorney-General, for appellant; G C. Weatherby of counsel.

(1) The Superintendent of Insurance may issue a license to any person to act as an insurance broker, and, he may for cause revoke such license. Whether he shall issue such license rests in the exercise of his sound discretion. Sec. 5904, R. S. 1929. (2) Said Section 5904 is a police regulation and constitutional. State ex rel. Mackey v. Hyde, 315 Mo. 681. (3) It is alleged in the return and here stands confessed that in 1915 the Department of Insurance promulgated a rule, in force at all times since said date declaring the practice of twisting life insurance contracts whether with or without the presence of misrepresentation, to be detrimental and harmful to the insuring public; and so regarded by all companies and by them prohibited; that such practice would not be tolerated by the department but would be considered sufficient grounds for refusing or revoking licenses to agents and brokers indulging therein. This is a reasonable exercise of the discretion reposed in the head of the department by statute to grant, refuse or revoke licenses to insurance agents and brokers, and a reasonable regulation in aid of his general statutory duties to administer and enforce the insurance laws of the State. State ex rel. Mackey v. Hyde, supra; Noble v. English, 183 Iowa 893; Merchants Exchange v. Knott, 212 Mo. 616; State ex rel. Carpenter v. St. Louis, 318 Mo. 870.

Cullen, Fauntleroy & Edwards for respondent.

(1) The Superintendent of Insurance had no power or authority to make or to enforce the rule promulgated by him in 1915 purporting to define "twisting." Annaly v. Home Ins. Co., 250 Mo. 453; Hays v. Poplar Bluff, 263 Mo. 517; Secs. 5670, 5684, 5733, 5773, 5868, 5904, R. S. 1929; State of Washington v. Superior Court, 193 P. 845, 12 A. L. R. 1428, and annotation 1435; Seattle v. Dencker, 137 Am. St. Rep. 1084. (2) Even if such authority had been granted by the Legislature to the Superintendent of Insurance, the rule as made is unreasonable, arbitrary, unconstitutional and void. An act of the Legislature to the same effect as the rule would have been subject to the same objections. Fiske v. Kansas, 274 U.S. 380, 71 L.Ed. 1108; Bonnett v. Vallier, 128 Am. St. Rep. 1061; Yee Gee v. San Francisco, 235 F. 757; Lochner v. New York, 198 U.S. 45, 49 L.Ed. 937; Seattle v. Dencker, 137 Am. St. Rep. 1084; Yick Wo v. Hopkins, 118 U.S. 356, 30 L.Ed. 220; Dobbins v. Los Angeles, 195 U.S. 223, 49 L.Ed. 169; Barbier v. Connolly, 113 U.S. 27, 28 L.Ed. 923; Mugler v. Kansas, 123 U.S. 623, 31 L.Ed. 205; Minnesota v. Barber, 136 U.S. 313, 34 L.Ed. 455; Holden v. Hardy, 169 U.S. 366, 42 L.Ed. 780; Atkin v. Kansas, 191 U.S. 207, 48 L.Ed. 148; Lawton v. Steele, 152 U.S. 133, 38 L.Ed. 385; Land & Gravel Co. v. Commission Co., 138 Mo. 446; McGuire v. Gerstley, 204 U.S. 503.

Sturgis, C. Ferguson and Hyde, CC., concur.

OPINION

STURGIS

This is a suit for mandamus brought in the Circuit Court of Cole County seeking to compel the State Superintendent of Insurance, appellant, to issue to relator a license as an insurance broker as provided by Section 5904, Revised Statutes 1929. That statute defines the term "insurance broker" and provides that the State Superintendent of Insurance may on payment of a fee of ten dollars issue to any person a license or certificate of authority to act as an insurance broker, and prohibits under penalty any person from so acting without such license. Such statute also gives the Superintendent of Insurance the power to revoke such license "for cause."

The case was tried in the trial court on the pleadings. The relator, respondent here, filed his petition on which the circuit court issued its alternative writ commanding the respondent, appellant here, to issue the license as prayed for by relator or show cause for not doing so. The respondent, Superintendent of Insurance, made his return to the alternative writ stating his reasons why he had refused to issue the license. To this return the relator filed his demurrer challenging the return as not stating any sufficient facts or reasons for refusing the license. The court sustained the demurrer to the return and ordered a peremptory writ of mandamus to issue. The respondent below, appellant here, has duly appealed. The appeal is here because of the constitutional question involved. We must, therefore, go to the pleadings for the facts and issues.

The relator in his petition for mandamus, which is copied in the alternative writ, anticipating the defenses of the respondent, set up the reasons why respondent refused relator a license and states that a committee of the General Agents' and Managers' Association of St. Louis, where relator resides and carries on his insurance business, had reported to the State Department of Insurance that relator together with four other named persons, had been guilty of "twisting or attempted twists by misrepresentation;" that on a hearing of this charge by the State Insurance Department the charge of using any misrepresentation in procuring or writing insurance was abandoned as being immaterial, but that relator was found guilty of "twisting" insurance within the meaning of that term as defined and used in a ruling made by the State Insurance Department relative to licensing insurance agents and brokers, as follows:

"(a) The Missouri Insurance Department defines it as follows 'Twisting' is inducing or attempting to induce the holder of a life insurance policy to surrender that policy and then take out new insurance in the company represented by the agent who advises the surrender. The advice may be direct or indirect. The element of misrepresentation may or may not be present.

"(b) The Superintendent defines 'Twisting' as I read it in the original statement, and it is his position that it may be accomplished with or without misrepresentation, and that he will revoke, refuse to issue or suspend any license in any case where 'twisting' is indulged in, either with or without misrepresentation."

Relator then averred that said Superintendent of Insurance "intends to invoke said rules (a) and (b) and under and by virtue of said rules to refuse to issue to relator his license as a broker because he told the truth about all matters relating to the insurance he was selling and the insurance which the prospective buyer of insurance carrier, and that said Superintendent will refuse to issue to him said license as a broker and has so stated, and your relator further states that the proceedings instituted and followed as aforesaid are in excess of the jurisdiction and authority of said Superintendent of Insurance."

The relator then avers that he was for a long time and until recently the general agent of the Lincoln National Life Insurance Company of St. Louis, a solvent company organized and doing a large business under and in full compliance with the laws of this State; that such company, among others, issues a policy known as a "Modified Whole Life Policy" on a plan known as the "Emancipator Plan," which policy "is issued at a lower premium up to the age of 72 than was and is now charged by companies issuing policies having high reserve features." This form of policy and plan of insurance is described and set out at some length and its claimed advantages over what may be called "Unmodified Whole Life Policies" are pointed out. Such policies doubtless have low reserve features, which, under some circumstances at least, would be a disadvantage. For the purposes of this case it is unnecessary to discuss at length or determine whether these claimed advantages are in fact real or merely apparent. To one not an insurance expert it would seem that the "Emancipator Plan" is to insure a person at a premium rate based on his life expectancy at the insured's then age with the privilege, or rather stipulation, that if the insured lives to a period five years short of his life expectancy, he shall then either reduce the amount of the policy or increase the rate of his insurance, in default of which his insurance will end at the age of seventy-two. Another claimed advantage to the policyholder in switching a policy to one on the "Emancipator Plan" is based on the fact that insurance companies find that they earn only about three or three and one-half per cent net on their reserve funds, while money can be loaned by individuals at five or six per cent. So the inducement is held out to a policyholder who has carried a policy, say a twenty-year endowment, for several years and has a large cash reserve which will be paid on the surrender of the policy, that by cashing out the reserve he can loan the money, or, if he has already borrowed from the company, pay off that loan, and with the interest on the cash reserve pay the premium on a low rate policy on the Emancipator Plan at a considerable saving. This argument, however, may have the same infirmities as the argument that it is better to loan money at six or seven per cent on real estate or other supposedly good securities than to invest in government or municipal bonds at three or three and one-fourth per cent. The only point we desire to make in this connection is that, after all, the right to contract as he pleases should be preserved to each individual, however unwisely it may be exercised, unless the contract is tainted with fraud or induced by misrepresentation or deceit.

In this connection relator alleges that "the 'Modified Whole Life Policy' written on the ...