FEDERAL CONTROL OF INSURANCE.

At the meeting of the American Bar Association recently held at Narragansett Pier, the majority of the members of the Committee on Insurance made a report to the general body in which they favored the passage by congress of an act which should provide for the federal supervision of insurance and prohibit the use of the mails to all persons, associations or corporations who should transact the business of insurance in disregard of state or federal regulations.

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V.

The validity of the proposed legislation depends of course upon the decision in the affirmative by the Supreme Court of the United States of the (to the majority of the committee at any rate) still mooted question, as to whether or not insurance is commerce and comes within the scope of the national legislation. The minority of the committee (a minority of one as against four) relying upon the well known cases of Paul v. Virginia, 2 Liverpool Ins. Co. v. Massachusetts, Hooper V. California,4 New York Life Ins. Cravens, and Nutting v. Massachusetts, resolved this question in the negative. The majority, however, although recognizing the importance of the cases mentioned, seemed inclined to the opinion that in them the question of insurance and the nature of the modern insurance policy and its commercial uses had not been fully considered, nor in them had any act of congress been directly passed upon, and that in the light of modern conditions and exigencies the Supreme Court of the United States might, and should recede from its former position. The majority report in fact asserteds that in none of the cases cited was there involved the validity of an act of congress. In none did the decision hinge upon the constitutional classification of the business of insurance. In none was there apparent in the record any accurate and de

1 Mr. W. R. Vance of Charlottesville. Virginia. 28 Wall. 168.

$ 10 Wall. 566.

4 155 U. S. 648.

5 178 U. S. 389.

6 183 U.S. 553.

7 Messrs. Ralph W. Breckenridge, of Omaha, Neb.; Burton Smith, Atlanta, Georgia; Alfred Hemenway, Boston, Massachusetts; and Rodney A. Mercur of Towanda, Pennsylvania.

8 See Report of Committee on Insurance Law, presented August 24, 1895.

tailed statement of facts in regard to the character and conduct of the business and the uses made of insurance; but the decisions it was urged "were based upon the misconception of the facts touching the contract of the business as they are recited in Paul v. Virginia, and upon the theory that the business of insurance involves only the making of a contract between a citizen of one state and a corporation of another;" that "the statement of Mr. Justice Field in Paul v. Vir

ginia,10 that 'the policy does not take effect until delivered,' is not true in thousands of insurance transactions of to-day," that "it is true insurance is not a subject of trade and barter but neither is a telegram; it is not a commodity to be shipped or forwarded from one state to another and then put up for sale, but neither is a telephone message." The majority of the committee also argued that outside of the decisions of the Supreme Court of the United States insurance had always been deemed a commodity and commerce; that the supreme court itself had held in the case of Almy v. Californial that a state stamp duty on a bill of lading was void as a regulation of commerce, and, in the recent and in many ways analogous lottery case, 12 had held that the carriage of lottery tickets from one state to another was interstate commerce and a fit subject not merely for congressional regulation but for congressional prohibition. They also advanced the strange though not novel proposition that it was within the province of the congress itself to determine what was and what was not interstate commerce and that that determination was conclusive on the courts. 13

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There can be but little doubt at the time of the handing down of the decision in Paul v. Virginia the court and the public at large had but little idea of what the insurance business would become, of its great commercial and economic usefulness, and of the varieties of form which the policy would assume. It is also undoubtedly true that insurance has everywhere, except in the decisions of the Supreme Court of the United States been looked upon as a commodity, as property, as com

9 8 Wall. 168. This case was decided in 1868. 10 8 Wall. 168.

11 24 How. 169.

12 Champion v. Ames, 188 U. S. 321.

18 See note 23 post.

14 8 Wall. 168.

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merce. It is true, as the majority of the committee so ably urge, that "the powers granted to congress are not confined to the instrumentalities of commerce or the postal system known or in use when the constitution was adopted, but they keep pace with the progress of the country and adapt themselves to the new developments of time and circumstances. 16 It is true that the United States Supreme Court has held that a bill of lading is a subject of interstate commerce, 17 and it is also true that it is extremely difficult to distinguish between a lottery ticket and an insurance policy and to follow the reasoning of the court by which it holds the former to be an article of commerce18 and yet (if absolute silence denotes affirmance) affirms, or at any rate refuses to reconsider or distinguish the long line of cases extending over a period of forty years by which the legal public has been taught to believe that the insurance policy and the insurance business is not. 19 The holding on the subject of bills of lading, 20 however, may, as is pointed out in the minority report, be easily explained and the bill of lading easily distinguished from the insurance policy if we but stop to remember that such bills have for a long time, if not always, been looked upon as property in themselves, as symbols of the thing carried, which pass title by delivery and take the place in a large measure of the goods themselves.21 While

15 "Insurance is a Commodity. Commodity' is defined to be that which affords advantage or profit. Mr. Anderson, in his law dictionary, defines the term as 'convenience, privilege, protit, gain; popularly, goods, wares, merchandise.' *It is common to speak of selling insurance.' It is a term used in insurance business, and law writers have to quite an extent adopted it." Opinion in Beechley v. Mulville, 102 Iowa, 602, 70 N. W. Rep. 107.

16 Mr. Chief Justice Waite, in Pensacola Telegraph Co. v. Western Union Telegraph Co., 96 U. S. 1: "The American constitution has necessarily changed as the nation has changed; has changed in the spirit with which men regard it, and therefore in its own spirit." 1 Bryce, American Commonwealth, 389. 17 Almy v. California, 24 How. 169. 18 Champion v. Ames, 188 U. S. 321.

19 Paul v. Virginia, 8 Wall. 168 (1868); Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566 (1870); Hooper v. California, 155 U. S. 648 (1894); New York Life Ins. Co. v. Cravens, 178 U. S. 389 (1899); Nutting v. Massachusetts, 183 U. S. 553 (1901).

20 Almy v. California, 24 How.169.

21 "A bill of lading * * stands for and represents the property, and an assignment of it passes the title to the property. When issued, it can only be altered or changed, as we have seen, by a surrender of the original, and the contract is that the bill of lading

it can hardly be believed that the members of the majority seriously considered or intended to seriously urge the last of the points mentioned, namely that the congress itself could determine what was and what was not interstate commerce by legislative action alone and that that determination would be binding upon the courts. 22 The proposition, indeed, would seem hardly to be deserving of serious comment had it not been reiterated over and over again by the supreme court of the nation. 23 To grant it, would be to grant the right to violate all the rules and theories of constitutional construction now maintained and to banish John Marshall day from the calendar of legal Saints' Days. If congress by its fiat can decide what is and what is not interstate commerce, it can decide what else does and what else does not come within its supervision and control, and the Supreme Court of the United States loses its commanding position among the courts of the world and sinks to the level of the tribunals of last resort of England and of France. Not only would this be the case, but even the modern modified doctrine of state sovereignty and of state home rule would be destroyed forever. The cases cited in the report,24 it is true, apparently bear out the contention. The statements made in them, however, when closely considered are dicta merely. Rather perhaps they are incautious statements made in connection with and in reference to subjects whose character as commerce had never seri

must be surrendered before the property is delivered." Rothrock, J., in Garden Grove Bank v. Humeston & Shenandoah Ry. Co., 67 Iowa, 526; McClain's Cases on Carriers, 241-247.

22 See Majority Report, page 19.

23 Mr. Justice Catron, in License Cases, 5 How. 504, quoted by Justices Matthews and Field in Bowman v. Railway Co., 125 U. S. 465; Chief Justice Fuller, in Leisy v. Hardin, 135 U. S.100, 125; Austin v.Tennessee, Sup. Ct. Rep. 132, 133. In the License Cases, 5 How 504, 12 L. Ed. 256, Chief Justice Taney says: "But spirits and distilled liquors are universally admitted to be subjects of ownership and property, and are therefore subjects of exchange, barter and traffic, like any other commodity in which a right of property exists. And congress, under its general power to regulate commerce with foreign nations, may prescribe what articles of merchandise shall be admitted and what excluded, and may therefore admit or not, as it shall seem best, the importation of ardent spirits. And inasmuch as the laws of cangress authorize their importation, no state has a right to prohibit their introduction."

24 McCulloch v. Maryland, 4 Wheat. 316; License Cases, 5 How. 504; Bowmanv. Railway Co., 125 U. S. 465; Leisy v. Hardin, 135 U. S. 100, 125.

ously been questioned. The statement of Chief Justice Fuller which is quoted by the majority of the committee and which is to the effect that "We (the supreme court) cannot hold any articles which congress recognizes as subjects of interstate commerce, are not such,"25 was made in connection with the traffic in intoxicating liquors as a traffic and not in relation to any form thereof, and, in the opinion, pains are taken to point out, as is done in a later case in relation to cigarettes and tobacco, 26 that the traffic and the articles under consideration had not merely been considered commerce by congress for a long period of years but had universally been SO considered by the commercial world and in the American colonies from a very early time. 27 The position of the court was not that congress could determine what was and what was not interstate commerce and that that determination would be binding upon the states and upon the Supreme Court of the nation, but that

25 Leisy v. Hardin, 185 U. S. 100, 125, 10 Sup. Ct. Rep. 690, 30 Cent. L. J. 385, 473, 480, 493. The same is true of the statement of Mr. Justice ('atron and Chief Justice Taney in License Cases, 5 How. 504.

26 Austin v. Tennessee, 21 Sup. Ct. Rep. 132.

27 That ardent spirits, distilled liquors, ale and beer are subjects of exchange, barter and traffic, like any other commodity in which a right of traffic exists, and are so recognized by the usages of the commercial world, the laws of congress and the decisions of courts, is not denied. Being thus articles of commerce, can a state, in the absence of legislation on the part of congress, prohibit their importation?" Leisy v. Hardin, 10 Sup. Ct. Rep. 684. "Whatever product has from time immemorial been recognized by custom or law as a fit subject for b rter or sale, particularly if its manufacture has been made the subject of federal regulation and taxation, must, we think, be recognized as a legitimate article of commerce although it may to a certain extent be within the police power of the states. Of this class of cases is tobacco. From the first settlement of the colony of Virginia to the present day, tobacco has been one of the most profitable and important products of agriculture, and while its effects may be injurious to some, its extensive use over practically the entire globe is a remarkable tribute to its popularity and value. We are clearly of the opinion that it cannot be classed with diseased cattle or meats, decayed fruit or other articles, the use of which is a menace to the health of the entire community. Congress, too, has recognized tobacco in its various forms as a legitimate article of commerce by requiring licenses to be taken for its manufacture and sale. *** Whatever may be our individual views as to its deleterious tendencies, we cannot hold that any article which congress recog. nizes in so many ways, is not a legitimate article of commerce." Mr. Justice Brown in Austin v. Tennessee 179 U. S. 343, 21 Sup. Ct. Rep. 182.

the Supreme Court itself, while exercising its undoubted prerogative of judicial determination, would feel compelled to give at least some weight to and to take into full consideration the contemporaneous construction of the term "interstate commerce" at the time of the adoption of the constitution and that in passing upon the question whether an article or thing or trade was commerce at all, and not merely a nuisance, as disease infected meat, (and this was all that was done in the license cases and in the liquor case of Leisy v. Hardin), the Supreme Court would hesitate long in declaring that to be a nuisance and unworthy of the protection of the interstate commerce clause of the constitution, which congress had repeatedly held to be a fit subject for commerce. The cases were cases in which the Supreme Court of the United States was asked to compel congress to relinquish its rights and powers of protection and control and not to assume jurisdiction. They were cases in which the jurisdiction of congress had before always been assumed as a matter of course, not cases in which it had been doubted for nearly forty years. The statements were made while the court was passing, not on the question as to whether the articles or transaction considered were interstate as opposed to intra-state commerce, but while passing upon the question as to whether they were commerce, that is to say property at all. It was taken for granted in the case of Leisy v. Hardin, for instance, that the packages of liquor were articles of traffic, that they were bought and sold, that they were in the original package, and the point in relation to which the statement quoted was made, was merely, are they, though articles of traffic and though original packages so injurious to the people of the nation generally, that like the germs of disease they have ceased to be property and entitled to the protection of the interstate commerce clause of the constitution. 28

The question then is this, will the Supreme Court of the United States recede from the

28 The supreme court has repeatedly held that that which is a common nuisance or injurious to health or morals, is not property or the subject of interstate commerce. Bowman v. Chicago, etc., R. Co., 125 U. S. 489; Leisy v. Hardin, 135 U. S. 100; Missouri, etc., R. Co. v. Haber, 169 U. S. 613; Kimmish v. Ball, 129 U. S. 217; Hannibal, etc., R. Co. v. Husen, 95 U. S. 465.

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position taken in the case of Paul v. Virginia29 and in the line of decisions which, by dicta at any rate, and in many instances by positive holdings have for nearly forty years followed that case,' or I will that tribunal yield to the supposed exigencies of the hour and to the undoubted fact that, although the utterances of congress are not final on the question of what constitutes interstate commerce, under an elastic constitution and with a progressive court, the construction and opinion of the economic and commercial world should be allowed some weight in the determination of the meaning of doubtful words and phrases. So, too is the question before us as to whether or not the so-called Lottery Case 1 has opened the way for such a determination, or for congressional action upon the subject of insurance, even without the determination.

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The controlling opinion in the Lottery Case is an unsatisfactory one at the best. Opposed to it is the opinion of four dissenting judges. 32 It, contrary, no doubt to the expectations of the majority of the American bar, decides that lottery tickets are the subjects of interstate commerce, and yet makes no reference whatever to the case of Pau v. Virginia33 and the other insurance cases which have followed it,34 and which were deemed to be of such moment by the four dissenting judges. 35

What is to be inferred from the decision? What was the intention of the court in promulgating it? What light does it cast upon this much mooted and all important question of interstate commerce? Was the intention to impliedly overrule the insurance cases in question and to pave the way for a new line of decisions, or was it rather to adopt a new principle, a new theory of congressional power and jurisdiction. The latter, to the writer, is the only logical conclusion to be derived from a perusal of the decision in question, if examined in connection with

29 8 Wall. 168.

30 See cases cited in note 19, ante.

31 Champion v. Ames, 188 U. S. 321.

32 Chief Justice Fuller and Justices Brewer, Shiras and Peckham.

33 8 Wall. 168.

34 Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566; Hooper v. California, 155 U. S. 648; New York Life Ins. Co. v. Cravens, 178 U. S. 389; Nutting v. Massachusetts, 183 U. S. 553.

25 See dissenting opinion of Chief Justice Fuller.

the insurance cases which it ignores, and, if this be the case, the decision is of great importance and will be a leading one for many years to come. If the latter is the fact, however, it was unnecessary for the court to pass upon the question as to whether a lottery ticket was strictly speaking a subject of interstate commerce, and the nature of the contract which it evidences, or to refer to or review the insurance cases, and if this be so, since the insurance cases were not referred to or distinguished, it is unfortunate that the question of commerce was passed upon at all. ·

The underlying and controlling theory of the lottery cases, indeed, appears to have been, not so much that lottery tickets were the subjects of interstate commerce, as that they were common nuisances, and no property at all, and that, being nuisances and no property, the owners of them had no rights which congress was bound to respect; that congress has a governmental duty, as a residuary trustee of the welfare of all and of all of the several states, and as the only agency with direct supervision over national and interstate matters and lines of communication, to supplement the police activities of the constituent states. For, if indeed, lottery tickets were really deemed property and the subjects of interstate commerce, then the refusal to allow their transportation, and the activity of congress in destroying their value would be nothing more or less than the destruction of property without due process of law, for it will be borne in mind that the act in question did not seek to regulate but to destroy.

It is held in the opinion "that the power of congress does not stop merely at regulation, in so far as the transportation of any particular article or product is concerned; that it is commerce generally concerning which congress has merely the power to regulate, and that it does not appear that in a general scheme of regulation it may not absolutely forbid interstate traffic in cases where the welfare of all of the states seem to demand the prohibition. The power of congress to regulate," the court says, "is plenary, complete in itself and subject to no limitations except such as may be found in the constitution, and the only clause of that instrument that could possibly be invoked by those who assert their right to send lottery tickets from

state to state is the provision which forbids the taking of property without due process of law, and it cannot be said to be a part of anyone's liberty, as recognized by the supreme law of the land, that he shall be allowed to introduce into commerce among the states an element that will be confessedly injurious to the public morals. As a state may, for the purpose of guarding the morals of its own people, forbid all sales of lottery tickets within its limits, so congress, for the purpose of guarding the people of the United States, against 'the widespread pestilence of lotteries' and to protect the commerce which concerns all the states, may prohibit the carrying of lottery tickets from one state to another. In legisIn legislating upon the subject of the traffic in lottery tickets, as carried on through interstate commerce, congress only supplemented the action of those states-perhaps all of them— which, for the protection of public morals, prohibit the drawing of lotteries as well as the sale or circulation of lottery tickets within its limits. It said in effect that it would not permit the declared policy of the states which sought to protect their peoples against the mischiefs of the lottery business, to be overthrown or disregarded by the agency of interstate commerce." An analogy is also 'drawn between the act under consideration and the various congressional statutes creating quarantines and regulating the transportation of diseased meats and infected articles.3

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This is the only theory on which the case can be logically reconciled with those which precede it and which, under such decisions, would justify congress in interfering in insurance matters. The mooted question as to what does and what does not constitute interstate commerce is not in it necessarily involved. The only thing necessary is that the thing or practice aimed at is against the public policy or under legislative ban, or, what is the same thing, a nuisance in the states in which it is sought to be introduced. To make this theory applicable to the subject of insurance, however, the subject, the nature of the policy and all that fundamentally pertains to the business should, as suggested in the minority report, be mat

36 Opinion of Harlan, J., in Champion v. Ames, 23 Sup. Ct. Rep. 327, 328.

ters of uniform state action in the first instance and a public policy of insurance thus instituted which should be as general and farreaching as the public policy of the states in regard to the lottery business. The difficulty in the way of federal legislation upon the subject of insurance and the bringing of the question under the decision in the lottery cases at the present time is, that in the lottery cases the original legislation was not attempted by congress but, on the other hand, what contracts were and what contracts were not lotteries and against the public policy of the respective states had long been decided and known. Such contracts had long been considered injurious in all of the American states, and congress simply forbade the transportation of the other tickets issued in furtherance of that which was everywhere under the ban of the law. Under the analogy, therefore, the legislation of congress on the subject of insurance must be secondary and supplementary, not basic, primary or fundamental. But the subject is a serious one. It involves a question of broad national public policy which is far-reaching in its consequences. It is the old question of state sovereignty, only in a modern form. If the theory be carried to its logical conclusion, home rule, as far as the several states is concerned, is directly jeopardized. If it be once conceded that congress has the power to drive a traffic which is confessedly injurious to the public morals or welfare out of commerce among the states," a wide power of local regulation is "37 conceded to that body restrained and controlled only by the social and political ideas of the members of the supreme court of the nation, or rather of the majority of the judges of which the tribunal at the time happens to be constituted. It can indeed be perfectly conceivable that a traffic or business, such as was formerly the lottery business, or slavery, or the sale of intoxicating liquors, of tobacco, of oleomargarine, or of firearms, might be sanctioned in a large number of the states, but repudiated by the political majority or by the political party whose president or presidents had the nomination of the members of the supreme court in their hands, and that, under the decision in question, the majority could absolutely deny to

37 See opinion of Harlan, J., in Champion v. Ames, 23 Sup. Ct. Rep. 321.