Source: https://caselaw.findlaw.com/us-supreme-court/301/459.html
Timestamp: 2019-04-25 11:00:51+00:00

Document:
Appeal from the Supreme Court of the State of Georgia. [301 U.S. 459, 460] Mr. Marion Smith, of Atlanta, Ga., for appellants.
Mr. B. D. Murphy, of Atlanta, Ga., for appellee.
Appellants claimed that enforcement of the quoted inhibition would deprive them of the equal protection of the laws, contrary to the Fourteenth Amendment. [301 U.S. 459, 461] The trial court ruled 'that said act, in discriminating against stock companies and the agents thereof, and in favor of mutual companies and the agents thereof, sets up an arbitrary classification bearing no reasonable relationship to the subject-matter of the legislation, and is discriminatory, depriving both petitioner, The Hartford Steam Boiler Inspection & Insurance Company, as an insurance company, and petitioner, W. M. Francis, as an individual, of their constitutional rights.' Accordingly, it directed that mandamus issue.
In the State Supreme Court counsel agreed that the sole question involved was the constitutionality of the statute. That Court, being of opinion that the act prescribed no undue discrimination and did not otherwise conflict with the Federal Constitution, reversed the trial court. The cause is here by appeal.
It is idle to elaborate the differences between mutual and stock companies. These are manifest and admitted. But the statutory discrimination has no reasonable relation to these differences. We can discover no reasonable basis for permitting mutual insurance companies to act through salaried resident employees and exclude stock companies from the same privilege. If there were any such basis, it would have been discovered by the state courts. The trial court said there was none. Two Justices of the Supreme Court were of the same opinion. The prevailing opinion in that court fails to disclose any good reason for the discrimination. The diligence of counsel for appellee has not been more successful. Thus the efforts in the state courts, and here, to find support for the statute have conspicuously failed. Statements as to the extent of the business written by stock companies are obviously beside the mark.
For the error indicated, the questioned judgment must be reversed and the cause returned to the Supreme Court for further proceedings not inconsistent with this opinion.
The appellants petitioned the superior court of Fulton county, Georgia, for a mandamus directed to the appellee as Insurance Commissioner requiring him to issue a license to Francis, a salaried employe of the Hartford Company, as an insurance agent for the writing of casualty insurance in the State of Georgia pursuant to the Act of the General Assembly of March 28, 1935. The petition alleged that Francis possessed all the statutory qualifications for a license save only that he was a salaried employe of the insurance company and that the pro- [301 U.S. 459, 464] vision of the statute excluding salaried employes of insurance companies from licensure is unconstitutional.
The ground upon which the act is held invalid is that it unreasonably discriminates between salaries employes of mutual insurance companies and similar employes of stock companies.
The answer alleges that there is a wellrecognized difference between stock and mutual insurance companies in that, in the case of the former, the relationship between the company and its policy-holders is one of contract merely, they dealing at arm's length, whereas in the latter the policy-holders are the owners of the company and constitute its membership. Other well known differences between mutual and stock insurance are detailed in the answer and will be referred to hereinafter.
The case was heard upon the petition and answer and the trial court, in the view that the act was unconstitutional, ordered that a mandamus issue. Upon appeal the Supreme Court of Georgia reversed the judgment. I [301 U.S. 459, 465] am of the opinion that its decision was right and should be affirmed.
Second. The appellant Francis asserts he is denied equal protection because agents of mutual insurance companies may be licensed even though their compensation consists of a salary rather than commissions. The answer sets up that mutual insurance companies are organized on a different basis from stock companies, do business in a wholly different way and sustain an altogether different relation to their policy-holders than do stock companies. This is matter of common knowledge. Section 56- 1401 of the Georgia Code 1933 is: 'The contract of insurance is sometimes upon the idea of mu- [301 U.S. 459, 466] tuality, by which each of the insured becomes one of the insurers, thereby becoming interested in the profits and liable for the losses; without a charter, such an organization would be governed by the general law of partnership; when incorporated, they are subject to the terms of their charters.' Sections 56-1401 to 56-1433 deal exclusively with the incorporation and government of mutual insurance companies setting up for them a system quite apart from that prescribed for the incorporation and regulation of stock companies. The decision law of the state also recognizes the fundamental different between the two kinds of company. 5 The Supreme Court of Georgia quoted and relied upon its earlier decision as to the radical difference between stock and mutual companies and their methods of transacting business, and refused to hold the classification of the statute arbitrary or unreasonable.
Reference to the report of the Insurance Commissioner of Georgia for 1934, the year preceding the adoption of the statute under review, furnishes interesting data on the relative business of stock and mutual insurance companies in the State of Georgia. For that year the total of risks carried by stock fire insurance companies in the state was $1,512, 181,296. Foreign mutual fire insurance companies carried onl $82,727,816. Two domestic mutual companies doing a state-wide business carried $73,370, 177, and fourteen small local mutuals carried $10,893,603. Thus, mutual companies carried about 10 per cent. of the total fire insurance business of the state and, of that 10 per cent., over one-half was written by Georgia mutual companies.
While Georgia does not exclude foreign mutuals and requires them, like foreign stock companies, to register and comply with certain statutory rules in order to write business within the state, it is evident that the total mutual business written in Georgia is of minor importance [301 U.S. 459, 468] when compared with the vast amount written by stock companies. This fact in itself may well be a persuasive reason for not extending to agents of mutual companies the requirement that they shall not work upon a salary. 10 When to this is added the fact that ordinarily such agents work on salary because, in effect, they are the agents of the policyholders rather than of independent owners of a stock corporation, it is plain that there is reason for classifying them differently from agents of stock companies. In the light of the facts the classification of the agents of the two sorts of company cannot be said to be arbitray or unreasonable, and so to deny the agents of the stock companies the equal protection of the laws.
[ Footnote 1 ] Act of March 28, 1935. Georgia Acts 1935, p. 140.
[ Footnote 2 ] La Tourette v. McMaster, 248 U.S. 465 , 39 S.Ct. 160.
[ Footnote 3 ] O'Gorman & Young v. Hartford Insurance Co., 282 U.S. 251, 257 , 51 S. Ct. 130, 131, 72 A.L.R. 1163.
[ Footnote 4 ] O'Gorman & Young v. Hartford Insurance Co., supra, 282 U.S. 251, 257 , 258 S., 51 S.Ct. 130, 131, 132, 72 A.L.R. 1163; Borden's Farm Products Co. v. Baldwin, 293 U.S. 194, 208 , 209 S., 55 S.Ct. 187, 191.
[ Footnote 5 ] Carlton v. Southern Mutual Insurance Company, 72 Ga. 371.
[ Footnote 6 ] Enc. of the Social Sciences, vol. VI, 255; Yale Readings in Insurance, Property, chapter IV.
[ Footnote 7 ] Enc. of the Social Sciences, vol. VI, 258.
[ Footnote 8 ] Enc. of the Social Sciences, vol. VIII, p. 100.
[ Footnote 9 ] Best's Insurance News, October 1935, p. 314.
[ Footnote 10 ] Compare Citizens' Tel. Co. v. Fuller, 229 U.S. 322 , 33 S.Ct. 833.

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