The State ex rel. Waterworth v. Harty

• Decision Date: 25 June 1919
• Citation: 213 S.W. 443,278 Mo. 685
• Parties: THE STATE ex rel. JAMES A. WATERWORTH et al. v. A. L. HARTY, Superintendent of Insurance, Appellant
• Court: Missouri Supreme Court

213 S.W. 443

278 Mo. 685

THE STATE ex rel. JAMES A. WATERWORTH et al. v. A. L. HARTY, Superintendent of Insurance, Appellant

Supreme Court of Missouri

June 25, 1919

Appeal from Cole Circuit Court. -- Hon. John G. Slate, Judge.

Reversed.

Frank W. McAllister, Attorney-General, and John T. Gose, Assistant Attorney-General, for appellant.

The State has the absolute power to condition the doing of business in this State by insurance companies or to exclude them at will. Hooper v. California, 155 U.S. 652; New York Life Ins. Co. v. Cravens, 178 U.S. 397; Waters-Pierce v. Oil Co., 177 U.S. 46.

John S Leahy and Charles G. Revelle for respondents.

(1) Acts of the General Assembly, Laws 1915, p. 313, unlike the laws relating to the Public Service Commission (Laws 1913, p 556), contains no provision that the official act of the official shall be reviewable in the Circuit Court "as suits in equity;" nor does it contain any provision providing for an appeal from the decision of the circuit court. Laws 1915, sec. 15, p. 318; Duluth Street Ry. Co v. Railroad Com., 161 Wis. 271; Chicago, B. & Q. Ry. Co. v. Public Service Com., 266 Mo. 340. (2) This legislation must be construed with reference to its principal purpose to provide for the protection of the public, not only in the matter of the reasonableness of rates, but likewise as regards the continued solvency of the insurers. Ins. Co. v. Welch, 49 Okla. 626; Citizens Ins. Co. v. Clay, 197 F. 437; State ex rel. Martin v. Howard, 96 Neb. 293; German Alliance Ins. Co. v. Lewis, 233 U.S. 414; State ex rel. Rhodes v. Public Service Com., 270 Mo. 547, 563. (3) The Rating Act of 1915 is constitutional only if it permits reasonable earnings by the insurance companies. Minn. Ry. Co. v. Minn., 186 U.S. 267; Covington v. Sanford, 164 U.S. 592; Railroad Co. v. Minn., 134 U.S. 418, 33 L.Ed. 979; Ball v. Railway Co., 93 F. 516; Atty. Genl. v. Road Co., 55 Pa. St. 466; State v. Railway Co., 46 Neb. 682; Western Union Teleg. Co. v. Com., 74 Miss. 80; State ex rel. v. Pub. Service Com., 270 Mo. 579, 583; Nalley v. Home Ins. Co., 250 Mo. 452.

BLAIR, J. Walker, Williams and Graves, JJ., concur; Bond, C. J., and Faris, J., concur in the result; Woodson, J., not sitting.

OPINION

In Banc

BLAIR J.

This is an appeal from a judgment of the Cole County Circuit Court whereby the State Superintendent of Insurance is commanded to permit to be filed and to approve a ten-per-cent increase on all fire insurance rates in force in Missouri. Relators sue in behalf of one hundred and thirty insurance companies in business in Missouri.

The petition was filed in the Circuit Court of Cole County. It alleges, among other things, that (1) relators are authorized under the Act of 1915 to make and file with the Insurance Department of this State rates and charges to be charged by fire insurance companies doing business in Missouri; (2) March 27, 1918, they filed with the Superintendent a schedule of rates "by which they proposed to increase for the companies represented by them all fire insurance rates in the State of Missouri to the extent of ten per cent" above the rates in force, and "requested (a) the approval of the Superintendent of insurance of such increase in rates and (b) his permission to put the increased rates in force;" (3) that at a time and place designated by the Superintendent, relators, produced proof "which warranted and made necessary said increase . . . and that it thereupon became the duty of the said Superintendent . . . to permit said increase in rates to become effective and operative in Missouri, but that, notwithstanding the premises," the Superintendent rejected the increase and refused to permit it to become effective and still so refuses; (4) relators offer to show that during the five years prior to March 27, 1918, the existing rates were inadequate and that the proposed increase is necessary to pay losses, operating expenses, and discharge lawful obligations; (5) that rates in force are and will be insufficient to cover "legitimate losses and necessary operating expenses" during 1918 and following years, and that unless the proposed increase is permitted the fire companies operating in Missouri must operate at a loss or cease business in the State; (6) that since the war began losses and operating expenses have greatly increased; that about eighty per cent of losses in Missouri are partial losses; that these are measured by cost of replacement, which cost has greatly increased and represents "approximately twenty per cent of the premium income received" by insurers on Missouri risks under existing rates; that taxes, "Federal, State and municipal," have increased since the war began to an amount about equal to six per cent of the premium income in Missouri under existing rates; that other expenses have increased proportionately, and that the proposed increase of rates is necessary to enable the companies to meet legitimate expenses and pay legal obligations; (7) that during the ten years preceding March 27, 1918, the rates in force have been approximately the same as existing rates, and during that period a loss of "many millions of dollars" has been incurred, and that the rates in force are "confiscatory and result in the taking of the property of the insurance companies without due process of law;" (8) that a motion to set aside the Superintendent's refusal to approve the proposed schedule was filed, and relators offered to adduce convincing proof of the necessity of the proposed increase, but that this motion the Superintendent overruled. This sufficiently epitomizes the allegations of the petition. Its prayer is as follows:

"Whereupon relator prays that in accordance with the laws of the State of Missouri regulating fire insurance rates, this honorable court make an order requiring respondent to certify to this court within five days from the date hereof all books, papers and files relating to or filed in connection with said filing of increased rates and application for approval thereof, together with a copy of his order and finding relating to said proposed increase in rates, and that this honorable court proceed at once to judicially review de novo and in all things the said ruling and finding of respondent, and that this honorable court hear the evidence and determine the facts as to the truthfulness of the allegations herein contained, and that upon a final hearing this court order and direct said Superintendent of the Insurance Department to permit said James A. Waterworth and said Harold M. Hess to file and publish said proposed rates and schedule of rates and said proposed increase in rates, and that they and the companies which they represent be authorized and permitted to collect in the State of Missouri said increased rates, and for such other and further relief as to the court may seem just."

The answer admits (1) the filing of the proposed increased rates and affidavits in support thereof; (2) the Superintendent's refusal to approve the increase; (3) the filing of "a motion to reopen the whole matter," and (4) the overruling thereof. The answer then denies the remaining allegations and, continuing, avers (1) that appellant's power to approve or disapprove rate increases is a discretionary one and not subject to control by the courts; (2) that the court had no power or jurisdiction "through a new and independent hearing" in court to control appellant's action in refusing to approve increased rates after he had heard and acted upon evidence offered; (3) that acquiescence by insurance companies in appellant's action on proposals for increased rates is a condition precedent to their doing business in this State, which condition the Legislature has imposed and the courts cannot "in an independent investigation" annul; (4) that appellant has no authority to approve a flat ten-per-cent increase of rates; (5) that within the preceding year a rate increase was approved and sufficient time had not elapsed to authorize the approval of a further increase; (6) that this proceeding is an attempt to compel appellant to act in a particular manner; and (7) that this is an effort to increase insurance rates by action of courts of the State in direct violation of Article III of the Constitution of Missouri.

The matter was referred June 30, 1918. January 6, 1919, the referee filed his report in which he found that the refusal of the Superintendent to grant the increase requested was unreasonable. Exceptions were filed and overruled. The judgment sets out the conclusions of the referee; finds that the action of the Superintendent in refusing to approve the proposed increase was "unreasonable, erroneous and in derogation to the just rights of the petitioners;" sets aside the Superintendent's order, and adjudges that relators be permitted to file in the Superintendent's office "the proposed schedule and the said proposed increase of all fire insurance rates in the State of Missouri to the extent of ten per cent over and above the rates now charged and permitted to be charged by the insurance companies in the State of Missouri, and that said A. L. Harty, Superintendent of Insurance of the State of Missouri, approve such filings and increase of rates so filed by said James A. Waterworth and Harold M. Hess, attorneys-in-fact for said insurance companies as aforesaid, and that said increase of rates be and are effective in the State of Missouri forthwith." Then follow the allowances and judgment for costs.

I. Respondents suggest that the Act of 1915 (Laws 1915, p. 313) under which this proceeding purports to have been begun, does not provide for an appeal from the judgment of the circuit court. Section 15 of that act contains the only provision under which it could be...