Source: https://supreme.justia.com/cases/federal/us/233/389/
Timestamp: 2019-04-23 02:39:20+00:00

Document:
The business of insurance is so far affected with a public interest as to justify legislative regulation of its rates.
A public interest can exist in a business, such as insurance, distinct from a public use of property, and can be the basis of the power of the legislature to regulate the personal contracts involved in such business.
Where a business such as insurance is affected by a public use, it is the business that is the fundamental thing; property is but the instrument of such business.
Munn v. Illinois, 94 U. S. 113; Budd v. New York, 143 U. S. 517; Brass v. North Dakota, 153 U. S. 391, demonstrate that a business, by circumstances and its nature, may rise from private to public concern and consequently become subject to governmental regulation, and the business of insurance falls within this principle.
The fact that a contract for insurance is one for indemnity and is personal does not preclude regulation.
A general conception of the lawmaking bodies of the country that a business requires governmental regulation is not accidental, and cannot exist without cause.
What makes for the general welfare is matter of legislative judgment, and judicial review is limited to power, and excludes policy.
The liberty of contract guaranteed by the Fourteenth Amendment is not more intimately involved in price regulation than in other proper forms of regulation of business and property affected by a public use, and so held as to the regulation of rates of fire insurance.
The inactivity of a governmental power, no matter how prolonged, does not militate against its legality when exercised. United States v. Delaware & Hudson Co., 213 U. S. 366.
judgment. This Court can only determine whether the legislature has the power to enact it.
A discrimination is not invalid under the equal protection provision of the Fourteenth Amendment if not so arbitrary as to be beyond the wide discretion that a legislature may exercise, and so held as to a classification exempting farmers' mutual insurance companies doing only a farm business from the operation of an act regulating rates of insurance.
A legislative classification may rest on narrow distinctions. Legislation is addressed to evils as they appear, and even degrees of evil may determine its exercise. Ozan Lumber Co. v. Union National Bank, 207 U. S. 251.
The Kansas statute of 1909, so far as it provides for regulating rates of fire insurance, is not unconstitutional under the Fourteenth Amendment as depriving insurance companies of their property without due process of law, as abridging the liberty of contract, or as denying companies charging regular premiums the equal protection of the law by excepting farmers' mutual insurance companies from its operation.
Bill in equity to restrain the enforcement of the provisions of an act of the State of Kansas entitled, "An Act Relating to Fire Insurance, and to Provide for the Regulation and Control of Rates of Premium Thereon, and to Prevent Discriminations Therein." Chap. 152 of the Session Laws of 1909.
shall go into effect. The superintendent may allow changes upon less notice.
company, or any officer, agent, or representative thereof has violated any of the provisions of the act, revoke the license of such offending company, officer, or agent, but such revocation shall not affect liability for the violation of any other section of the act, and provided that any action, decision, or determination of the superintendent under the provisions of the act shall be subject to review by the courts of the state as provided in the act.
shall be brought in the United States courts until the remedies provided by the act shall have been exhausted. If any company organized under the laws of the state, or authorized to transact business in a state, shall violate the section, the superintendent may cancel the authority of the company to transact business in the state.
Sec. 10. Infractions of the act are declared to be misdemeanors, and punishable by a fine not exceeding $100 for each offense, provided that, if the conviction be for an unlawful discrimination, the punishment may be by a fine or by imprisonment in the county jail not exceeding ninety days, or by both fine and imprisonment.
"provided, that nothing in this act shall affect farmers' mutual insurance companies, organized and doing business under the laws of this state and insuring only farm property."
time conducted the business of fire insurance in Kansas and other states of the United States.
The business of fire insurance, as conducted by it, consists of making indemnity contracts against direct loss or damage by fire for a consideration paid, known as a premium; that the rate or premium is the amount charged for each $100 of indemnity. The property which is the subject of insurance is ordinarily known and designated as the risk. Complainant issues indemnity contracts or fire insurance policies covering all kinds and descriptions of improvements upon real estate and the contents thereof, and all kinds and descriptions of personal property, and also farm houses, barns, and granaries and their contents. The rate of premium varies with the kind of property covered, its physical characteristics and situation, its exposure, the presence or absence of fire protection, and many other causes.
The establishment of the basis rate for the premium to be charged is a matter of technical and mathematical deduction from the experience of all fire insurance companies, covering a long period of years, and, territorially, the whole civilized world. To make such deduction it is necessary not only to be in possession of the compiled statistics of fire insurance business, but also to be skilled in the mathematical "theory of probabilities" and in the "law of large numbers" so as to be able to apply with technical accuracy such laws and such data, and that no one not specially trained as an insurance statistician is competent to make such deductions.
the size, material of which, and the manner in which it is constructed, the character of the occupancy, and the character of the occupancy and construction of adjacent buildings, also the character of the contents of the buildings, and the manner in which they are stored, and the precautions used to detect and prevent fires are necessary to be ascertained.
Complainant and others engaged in the insurance business employ a large number of men skilled as inspectors to report upon individual risks, and it is impossible to fix and adjust a reasonable rate of premium for each and every individual risk without the information so obtained and having the same applied by experts. And such training and information are necessary to determine whether a basic rate or actual rate, as applied to any particular risk, is or is not reasonable, and the respondent is not possessed of the requisite information or special training necessary to qualify for such determination, and any conclusion to which he might come would be a mere guess or arbitrary determination, and the provisions of the act can only be properly administered, in any event, by the employment by the state of a corps of inspectors and experts specially trained in the business of fixing rates of fire insurance.
The complainant has complied with all of the laws of the state, and has received the regular license or authorization of the state to transact the business of fire insurance therein.
it comes into direct competition with various farmers' mutual insurance companies organized and doing business under the laws of the state and insuring only farm property.
The business of fire insurance is purely and exclusively a private business, and may be transacted by private persons in their individual capacity, or by unincorporated or incorporated companies; that the amount of indemnity and the premium is a matter of private negotiation and agreement, and the act of the Legislature of the State of Kansas attempts to regulate the business insofar as the fixing of the rate of premium is concerned, and in the attempted regulation distinguishes between fire insurance companies and individuals and partnerships, and thereby denies to complainant and other companies the equal protection of the law, contrary to the Fourteenth Amendment to the Constitution of the United States, and is therefore unconstitutional and void.
"that nothing in this act shall affect farmers' mutual insurance companies organized and doing business under the laws of this state and insuring only farm property."
The complainant and many other companies insure farm property and come into direct competition with farmers' mutual companies of the character specified, and the act of the legislature in excepting the latter companies deprives complainant of the equal protection of the laws, and is therefore repugnant to the Fourteenth Amendment of the Constitution of the United States and is unconstitutional and void.
The business of fire insurance is private, with which the state has no right to interfere, and the right to fix by private contract the rate of premium is a property right of value; the business is not a monopoly, either legally or actually; it may not be legally conducted by the national government or by the State of Kansas or other states under their respective constitutions, and is not a business included within the functions of government. Neither complainant nor others engaged in fire insurance receive or enjoy from the State of Kansas or any government, state or national, any privilege or immunity not in like manner and to like extent received and enjoyed by all other persons, partnerships, and companies, incorporated or unincorporated, respectively, engaged in the conduct of other lines of private business and enterprises. Complainant therefore is deprived of one of the incidents of liberty and of its property without due process of law, in violation of the Fourteenth Amendment to the Constitution of the United States.
The act distinguishes between fire insurance companies and other insurance companies, individuals, and persons, and distinguishes between insurance and other lines of business, and thereby offends the equality clause of the Constitution of the United States.
protest, and reserving the rights which it had under the law, comply with the provisions of the order.
The risks included in the order, and not excepted therefrom, comprise all ordinary mercantile risks in the state, and that the reduction of 12% will result in a rate which is much less than the cost of carrying the risks.
Respondent filed a demurrer stating that he demurred to so much of the bill as charges the act of the State of Kansas to be repugnant to the Constitution of Kansas and the Constitution of the United States. The demurrer was sustained. Subsequently, upon the bill's being amended, a general demurrer was filed which was also sustained by the court, and the bill dismissed. Prior, however, to this action, it having been suggested that the term of office of Charles W. Barnes as superintendent of insurance had expired, and that Ike Lewis had succeeded to that office and to all of its duties and powers, he was made defendant in the place and stead of Charles W. Barnes.
complainant asserts that the business of fire insurance is a private business, and therefore there is no constitutional power in a state to fix the rates and charges for services rendered by it. An exercise of such right, it is contended, is a taking of private property for a public use. The contention is made in various ways, and, excluding possible countervailing contentions, it is urged that the act under review cannot be justified as an exercise of the police power or of the power of the state to admit foreign corporations within its borders upon such terms as it may prescribe, or of any other power possessed by the state; that no state has the power to impose unconstitutional burdens either upon private citizens or private corporations engaged in a private business.
The basic contention is that the business of insurance is a natural right, receiving no privilege from the state, is voluntarily entered into, cannot be compelled, nor can any of its exercises be compelled; that it concerns personal contracts of indemnity against certain contingencies merely. Whether such contracts shall be made at all, it is contended, is a matter of private negotiation and agreement, and necessarily there must be freedom in fixing their terms. And "where the right to demand and receive service does not exist in the public, the correlative right of regulation as to rates and charges does not exist." Many elements, it is urged, determine the extending or rejection of insurance; the hazards are relative, and depend upon many circumstances upon which there may be different judgments, and there are personal considerations as well -- "moral hazards," as they are called.
"test of whether the use is public or not is whether a public trust is imposed upon the property, and whether the public has a legal right to the use which cannot be denied,"
or, as we have said, quoting counsel, "[w]here the right to demand and receive service does not exist in the public, the correlative right of regulation as to rates and charges does not exist." Cases are cited which, it must be admitted, support the contention. The distinction is artificial. It is, indeed, but the assertion that the cited examples embrace all cases of public interest. The complainant explicitly so contends, urging that the test it applies excludes the idea that there can be a public interest which gives the power of regulation, as distinct from a public use, which, necessarily, it is contended, can only apply to property, not to personal contracts. The distinction, we think, has no basis in principle (Noble State Bank v. Haskell, 219 U. S. 104), nor has the other contention that the service which cannot be demanded cannot be regulated.
"for the application of a long known and well established principle in social science, and this statute simply extends the law so as to meet this new development of commercial progress."
The principle was expressed as to property, and the instance of its application was to property, but it is manifestly broader than that instance. It is the business that is the fundamental thing; property is but its instrument, the means of rendering the service which has become of public interest.
of some interest was a relaxation of a prohibition of the common law against charging any interest; but this explanation overlooked the fact that both the common law and the act of Parliament were exercises of government regulation of a strictly private business in the interest of public policy -- a policy which still endures and still dictates regulating laws. Against that conservatism of the mind which puts to question every new act of regulating legislation, and regards the legislation invalid or dangerous until it has become familiar, government -- state and national -- has pressed on in the general welfare, and our reports are full of cases where, in instance after instance, the exercise of regulation was resisted and yet sustained against attacks asserted to be justified by the Constitution of the United States. The dread of the moment having passed, no one is now heard to say that rights were restrained or their constitutional guaranties impaired.
legislative regulation all of the businesses and affairs of life and the prices of all commodities. Whether we may apprehend such result by extending the principle of the cases to fire insurance we shall presently consider.
"[t]hat the statutes of Illinois and New York [passed on in the Munn and Budd cases] are intended to operate in great trade centers where, on account of the business being localized in the hands of a few persons in close proximity to each other, great opportunities for combinations to raise and control elevating and storage charges are afforded, while the wide extent of the State of North Dakota and the small population of its country towns and villages are said to present no such opportunities."
"obvious aim of the reasoning that prevailed was to show that the subject matter of these enactments fell within the legitimate sphere of legislative power, and that, so far as the laws and Constitution of the United States were concerned, the legislation in question deprived no person of his property without due process of law."
The cases need no explanatory or fortifying comment. They demonstrate that a business, by circumstances and its nature, may rise from private to be of public concern, and be subject, in consequence, to governmental regulation. And they demonstrate, to apply the language of Judge Andrews in the Budd case (117 N.Y. 27), that the attempts made to place the right of public regulation in the cases in which it has been exerted, and of which we have given examples, upon the ground of special privilege conferred by the public on those affected, cannot be supported.
"The underlying principle is that business of certain kinds hold such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation."
Is the business of insurance within the principle? It would be a bold thing to say that the principle is fixed, inelastic, in the precedents of the past, and cannot be applied though modern economic conditions may make necessary or beneficial its application. In other words, to say that government possessed at one time a greater power to recognize the public interest in a business and its regulation to promote the general welfare than government possesses today. We proceed, then, to consider whether the business of insurance is within the principle.
take us far in the solution of the question presented. Its personal character certainly does not, of itself, preclude regulation, for there are many examples of government regulation of personal contracts, and, in the statutes of every state in the Union, superintendence and control over the business of insurance are exercised, varying in details and extent. We need not particularize in detail. We need only say that there was quite early (in Massachusetts, 1837, New York, 1853) state provision for what is known as the unearned premium fund or reserve; then came the limitation of dividends, the publishing of accounts, valued policies, standards of policies, prescribing investment, requiring deposits in money or bonds, confining the business to corporations, preventing discrimination in rates, limitation of risks, and other regulations equally restrictive. In other words, the state has stepped in and imposed conditions upon the companies, restraining the absolute liberty which businesses strictly private are permitted to exercise.
the mere machinery by which the inevitable losses by fire are distributed so as to fall as lightly as possible on the public at large, the body of the insured, not the companies, paying the tax. Their efficiency, therefore, and solvency, are of great concern. The other objects, direct and indirect, of insurance we need not mention. Indeed, it may be enough to say, without stating other effects of insurance, that a large part of the country's wealth, subject to uncertainty of loss through fire, is protected by insurance. This demonstrates the interest of the public in it, and we need not dispute with the economists that this is the result of the "substitution of certain for uncertain loss," or the diffusion of positive loss over a large group of persons, as we have already said to be certainly one of its effects. We can see, therefore, how it has come to be considered a matter of public concern to regulate it, and governmental insurance has its advocates and even examples. Contracts of insurance therefore have greater public consequence than contracts between individuals to do or not to do a particular thing whose effect stops with the individuals. We may say in passing that, when the effect goes beyond that, there are many examples of regulation. Holden v. Hardy, 169 U. S. 366; Griffith v. Connecticut, 218 U. S. 563; Muller v. Oregon, 208 U. S. 412; Mutual Loan Co. v. Martell, 222 U. S. 225; Schmidinger v. Chicago, 226 U. S. 578; Chicago, Burlington & Quincy R. Co. v. McGuire, 219 U. S. 549; Noble State Bank v. Haskell, 219 U. S. 104.
necessarily, in the first instance, a matter of legislative judgment, and a judicial review of such judgment is limited.
"The scope of judicial inquiry in deciding the question of power is not to be confused with the scope of legislative considerations in dealing with the matter of policy. Whether the enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired result, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner, are matters for the judgment of the legislature, and the earnest conflict of serious opinion does not suffice to bring them within the range of judicial cognizance."
Chicago, Burlington & Quincy Railroad Co. v. McGuire, 219 U. S. 549, 219 U. S. 569.
transactions, and, as we have seen, according to the sense of the world from the earliest times -- certainly the sense of the modern world -- is of the greatest public concern. It is therefore within the principle we have announced.
But it is said that the reasoning of the opinion has the broad reach of subjecting to regulation every act of human endeavor, and the price of every article of human use. We might, without much concern, leave our discussion to take care of itself against such misunderstanding or deductions. The principle we apply is definite and old, and has, as we have pointed out, illustrating examples. And, both by the expression of the principle and the citation of the examples, we have tried to confine our decision to the regulation of the business of insurance, it having, become "clothed with a public interest," and therefore subject "to be controlled by the public for the common good."
regulate at the time of the creation of the power, there was no prophecy or conception. Nor was regulation immediate upon their existence. It was exerted only when the size, number, and influence of those agencies had so increased and developed as to seem to make it imperative. Other illustrations readily occur which repel the intimation that the inactivity of a power, however prolonged, militates against its legality when it is exercised. United States v. Delaware & Hudson Co., 213 U. S. 366. It is oftener the existence of necessity, rather than the prescience of it, which dictates legislation. And so with the regulations of the business of insurance. They have proceeded step by step, differing in different jurisdictions. If we are brought to a comparison of them in relation to the power of government, how can it be said that fixing the price of insurance is beyond that power and the other instances of regulation are not? How can it be said that the right to engage in the business is a natural one when it can be denied to individuals and permitted to corporations? How can it be said to have privilege of a private business when its dividends are restricted, its investments controlled, the form and extent of its contracts prescribed, discriminations in its rates denied, and a limitation on its risks imposed? Are not such regulations restraints upon the exercise of the personal right -- asserted to be fundamental -- of dealing with property freely, or engaging in what contracts one may choose, and with whom and upon what terms one may choose?
to speak of a liberty of contract." It is in the alternative presented of accepting the rates of the companies or refraining from insurance, business necessity impelling if not compelling it, that we may discover the inducement of the Kansas statute, and the problem presented is whether the legislature could regard it of as much moment to the public that they who seek insurance should no more be constrained by arbitrary terms than they who seek transportation by railroads, steam, or street, or by coaches whose itinerary may be only a few city blocks, or who seek the use of grain elevators, or to be secured in a night's accommodation at a wayside inn, or in the weight of a five-cent loaf of bread. We do not say this to belittle such rights or to exaggerate the effect of insurance, but to exhibit the principle which exists in all and brings all under the same governmental power.
We have summarized the provisions of the Kansas statute, and it will be observed from them that they attempt to systematize the control of insurance. The statute seeks to secure rates which shall be reasonable both to the insurer and the insured, and, as a means to this end, it prescribes equality of charges, forbids initial discrimination or subsequently by the refund of a portion of the rates, or the extension to the insured of any privilege; to this end, it requires publicity in the basic schedules and of all of the conditions which affect the rates or the value of the insurance to the insured, and also adherence to the rates as published. Whether the requirements are necessary to the purpose, or -- to confine ourselves to that which in under review -- whether rate regulation is necessary to the purpose, is a matter for legislative judgment, not judicial. Our function is only to determine the existence of power.
and doing business under the laws of the state and insuring only farm property. The charge is not discussed in the elaborate brief of counsel, nor does it seem to have been pressed in the lower court; it is, however, covered by the assignments of error.
"That nothing in this act shall affect farmers' mutual insurance companies, organized and doing business under the laws of this state, and insuring only farm property."
The distinction is therefore between cooperative insurance companies insuring a special kind of property and all other insurance companies. It is only with that distinction that we are now concerned. There are special provisions in the statutes of Kansas for the organization of cooperative companies, and if the statute under review discriminates between them, the German Alliance Company cannot avail itself of the discrimination. A citation of cases is not necessary, nor for the general principle that a discrimination is valid if not arbitrary, and arbitrary in the legislative sense -- that is, outside of that wide discretion which a legislature may exercise. A legislative classification may rest on narrow distinctions. Legislation is addressed to evils as they may appear, and even degrees of evil may determine its exercise. Ozan Lumber Co. v. Union County Bank, 202 U.S. 623. There are certainly differences between stock companies, such as complainant is, and the mutual companies described in the bill, and a recognition of the differences we cannot say is outside of the constitutional power of the legislature. Orient Ins. Co. v. Daggs, 172 U. S. 557.
the safety or morals of the public. It presents no question of monopoly in a prime necessity of life, but relates solely to the power of the state to fix the price of a strictly personal contract. The court holds that fire insurance, though personal, is affected with a public interest, and therefore that the business may not only be regulated, but that the premium or price to be paid to the insurer for entering into that personal contract can be fixed by law.
and the intangible character of its contracts are such as to indicate the far-reaching effect of the principle announced, and warrants a statement of some of the grounds of dissent.
Insurance is not production; nor manufacture; nor transportation; nor merchandise. And this Court, in N.Y. Life Co. v. Deer Lodge Co., 231 U. S. 495, at the present term, reaffirmed its previous rulings that "insurance is not commerce," "not an instrumentality of commerce," "not a transaction of commerce," "but simply contracts of indemnity against loss by fire." Such a contract is personal, and in the state whose statute is under consideration, insurance companies are classed among those "strictly private." Leavenworth County v. Miller, 7 Kan. 520. The fact that insurance is a strictly private and a personal contract of indemnity puts it on the extreme outside limit, and removes it as far as any business can be from those that are in their nature public. So that, if the price of a private and personal contract of indemnity can be regulated -- if the price of a chose in action can be fixed -- then the price of everything within the circle of business transactions can be regulated. Considering, therefore, the nature of the subject treated and the reasoning on which the court's opinion is based, it is evident that the decision is not a mere entering wedge, but reaches the end from the beginning, and announces a principle which points inevitably to the conclusion that the price of every article sold and the price of every service offered can be regulated by statute.
that the Constitution recognizes the liberty to contract and right of private property. They include not only the right to make contracts with which to acquire property, but the right to fix the price of its use while it is held, and the further right to fix the price if it is to be sold. To deprive any person of either is to take property, since there can be no liberty of contract and true private ownership if the price of its use or its sale is fixed by law. That right is an attribute of ownership. State Freight Tax Case, 15 Wall. 278, top.
This is most freely conceded. But it is equally true that the failure for more than one hundred years to attempt to fix the rates of insurance is indubitable evidence of the general public and legislative conception that the business of insurance did not belong to the class whose rates could be fixed. That settled usage is not an accident. For ratemaking is no new thing, and neither is insurance. Its use in protecting the owner of property against loss, its value as collateral in securing loans, its method of averages and distributing the risk between many persons widely separated, and all contributing small premiums in return for the promise of a large indemnity, has been known for centuries. All these considerations were recently pressed upon the Court in an effort to secure a ruling that insurance was commerce. In refusing to accede to the sufficiency of the argument, the court, in the Deer Lodge case, pointed out that the size of the business of insurance did not change the inherent nature of the business itself, saying that "the number of transactions do not give the business any other character than magnitude."
its magnitude or by the fact that more policies and for greater amounts are now written than in the centuries during which no effort has ever before been made to fix their rates. It is, however, undoubtedly true that, during all of that period, regulatory statutes were, from time to time, adopted to protect the public against conditions and practices which were subject to regulation. The public had no means of knowing whether these corporations were solvent or not, and statutes were passed to require a publication of the financial condition. The policies were long and complicated, with exceptions and qualifications and provisos. They were often unread by the policyholder, and sometimes not understood when read. Statutes were accordingly passed providing for a standard form of policy in order to protect the assured against his inexperience, to prevent hard bargains, and to avoid vexatious litigation, and as similar evils appear they may be dealt with by regulatory or prohibitory legislation just as statutes were passed, and can still be passed to punish combinations, pooling arrangements, and all those practices which amount to unfair competition.
regulated, the price charged by all can be regulated. Or if great size is the test, if the number of customers is the test, if the scope of the business throughout the nation is the test, if the contributions of the many to the value of the business is the test -- or if it takes a combination of all to meet the condition -- then every business with great capital and many customers distributed throughout the country, and making a large business possible, must be treated as affected with a public interest, and the price of the goods on its shelves can be fixed by law. Then could the price of newspapers, magazines, and the like be fixed, because certainly nothing is more affected with a public interest, nothing is so dependent on the public, nothing reaches so many persons, and so profoundly affects public thought and public business. Such a business is, indeed, affected with a public interest, justifying regulation (Lewis Pub. Co. v. Morgan, 229 U. S. 288), but not the fixing of the price of the paper or periodical or the rates of advertising. For great and pervasive as is the power to regulate, it cannot override the constitutional principle that private property cannot be taken for private purposes. Missouri Pacific v. Nebraska, 164 U. S. 403. That limitation on the power of government over the individual and his property cannot be avoided by calling an unlawful taking a reasonable regulation. Indeed, the protection of property is an incident of the more fundamental and important right of liberty guaranteed by the Constitution, and which entitled the citizen freely to engage in any honest calling, and to make contracts as buyer or seller, as employer or employee, in order to support himself and family.
It said, however, that the validity of rates statutes has often been recognized, notably in the Munn case (94 U.S. 126), where a statute was sustained which regulated the price to be charged for storing grain in elevators.
"Enough has already been said to show that, when private property is devoted to a public use, it is subject to public regulation. It remains only to ascertain whether the warehouses of these plaintiffs in error and the business which is carried on there come within the operation of this principle."
Not only does the Munn case show that the right to fix prices depends on the concurrence of public interest and the employment of property devoted to a public use, but, with the exception of the Louisiana Bread case, 12 La.Ann. 432, it is believed that every American rate statute since the requirement that property should not be taken without due process of law related to a business which was public in its character and employed visible and tangible property which had been devoted to a public use.
booms; bridges and ferries; wharves, docks, elevators, and stockyards; telegraph, telephone, electric, gas, and oil lines; turnpikes, railroads, and the various forms of common carriers, including express and cabs. To this should be added the case of the innkeeper (as to which no American case has been found where the constitutional question as to the right to fix his rates has been considered), the confessedly close case of the irrigation ditches for distributing water ( 189 U. S. 189 U.S. 439), and the toll mill acts. This, of course, does not include the case of condemnation for governmental purposes or for roads and ways where no question of rates is involved. There may be other instances not found, but it is believed that the foregoing numeration exhausts the list of what has heretofore been treated as a public business justifying the exercise of the price-fixing power against persons or corporations.
It is to be noted that, in each instance, the power to regulate rates is exercised against a business which in every case used tangible property devoted to a public use. Some of them had a monopoly (Spring Valley Water Co. v. Schottler, 110 U. S. 347, 110 U. S. 354). Some of them had franchises. Most of them used public ways or employed property which they had acquired by virtue of the power of eminent domain. They were therefore subject to the correlative obligation to have the use of what had been thus taken by law fixed by law. And as further pointing out the characteristics of the public use justifying the fixing of prices, it will be noted that, with the exception of toll mills (which, however, to employ property devoted to a public use), they all have direct relation to the business or facilities of transportation or distribution -- to transportation by carriers of passengers, goods, or intelligence by vehicle or wire; to distribution of water, gas, or electricity through ditch, pipe, or wire; to wharfage, storage, or accommodation of property before the journey begins, when it ends, or along the way.
When thus enumerated, they appear to be grouped around the common carrier as the typical public business, and all employing in some way property devoted to a public use.
It will be seen, too, that the size of the business is unimportant, for the fares of a cabman, employing a broken-down horse and a dilapidated vehicle, can be fixed by law as well as the rates of a railroad with millions of capital and thousands of cars transporting persons and property across the continent.
The fact that rate statutes, enacted and sustained since the adoption of constitutional government in this country, all had some reference to transportation or distribution is a practical illustration of the accepted meaning of "public use" when that phrase was first employed in American Constitutions, and when turnpikes and carriers, wharfingers and ferrymen, had rates, tolls, and fares fixed by law. No change was made in the meaning of the words or in the principle involved when it opened to take in new forms and facilities of transportation, whether by vehicle, pipe, or wire, and new forms of storage, whether on the wharf or in the grain elevator.
"Property is devoted to a public use when, and only when, . . . all the public has a right to demand and share in [it].' . . . In a broad sense, it is the right in the public to an actual use, and not to an incidental benefit."
The effect of the difference between public use and public interest appears from the application; for the Supreme Court of Kansas, on the authority of this and numerous other cases, held that a steam flour mill was not such a public use as would authorize its owners to exercise the power of eminent domain, though it was a useful and important business instrumentality which contributed to the growth and development of the locality where the [mills] are situated. This may also be said, however, of every legitimate business. To a limited extent, every honest industry adds to the general sum of prosperity and promotes the public welfare.
convicted of arson. But if an insurance company is indeed public, it is bound to insure the property of the man who is suspected of having set fire to his own house, or whose statements of value it is unwilling to take. This is manifestly inconsistent with the contract of insurance, which requires the utmost good faith not only in making truthful answers to questions asked, but in not concealing anything material to the risk. If the company has the discretion to insure or the right to refuse to insure, then, by the very definition of the terms, it is not a public business. If, on the other hand, the company is obliged to insure bad risks or the property of men of bad character, of doubtful veracity, or known to be careless in their handling of property, the law would be an arbitrary exertion of power in compelling men to enter into contract with persons with whom they did not choose to deal where confidence is the very foundation of a contract of indemnity. Indeed, it seems to be conceded that a person owning property is not entitled to demand insurance as a matter of right. If not, the business is not public, and not within the provision of the Constitution which only authorizes the taking of property for public purposes -- whether the taking be of the fee, for a lump sum assessed in condemnation proceedings, or whether the use be taken by rate regulation, which is but another method of exercising the same power.
The suggestion that the public interest is found in the characteristics of the business of insurance justifies a brief examination of those characteristics and a statement of the results that logically must follow from such a test. For if the power is to develop out of the characteristics, it must necessarily follow that other occupations, having similar characteristics, must be subject to the same rate regulating power.
private property, and break down the barriers which the Constitution has thrown around the citizen to protect him in his right of property -- which includes his right of contract to make property -- his right to fix the price at which his property shall be used by another. By virtue of the liberty which is guaranteed by the Constitution, he also has the right to name the wage for his labor and to fix the terms of contracts of indemnity, whether they be contracts of indorsement or suretyship or contracts of indemnity against loss by fire, flood, or accident.
In view of what Judge Cooley calls the general supposition that "the right to fix prices was inconsistent with constitutional liberty," it is not surprising that little is to be found in the books relating to a statute like this. It is, however, somewhat curious that among the few expressions to be found on the subject is the intimation by Lord Ellenborough in Allnutt v. Inglis, 12 East 535, that insurance rates were not on the same basis as a public business using property devoted to a public use. For, in answering the argument that, if the rates of a public wharf could be fixed, insurance rates could also be fixed, he clearly intimates that this could not be done, since the wharf was a monopoly, and "the business of insurance and of counting-houses may be carried on elsewhere."
to regulate is limited by the constitutional prohibition against the taking of private property. Guillotte v. New Orleans, 12 La.Ann. 432, is the only American case found which sustains the right to fix prices for other than a commodity or service furnished by a public utility company of the kind already pointed out. In that case, the court said that the city could fix the price of bread, and that, if the baker did not desire to do business within the limits of such city, he could go elsewhere. That reasoning would support any statute, for every citizen at least has the right to go out of business. But it has been repeatedly held by this Court that such an answer cannot sustain an invalid statute, the Constitution being intended to secure the citizen against being driven out of business by an unconstitutional statute or regulation.
There is, in the opinion, an allusion to usury laws as instances of fixing rates for other than public service corporations. We do not understand that the opinion is founded on that proposition, for even the usury laws do not fix a flat rate, but only a maximum rate, and do not require lenders to make loans to all borrowers, similarly situated at the same rate of interest. Moreover, interest laws were in their inception not a restriction upon the right of contract, but an enlargement, permitting what theretofore had been regarded both as an ecclesiastical and civil offense. This fact may have been coupled with the idea that, as the sovereign had the prerogative to coin money and make legal tender for all claims, he could fix the price that should be charged for the use of that money.
and settled usage that sustains a usury law also sustains the right of the contracting parties to agree upon the charge for insurance. For centuries before the Constitution, and continuously ever since, they have themselves fixed this charge, and this makes most strongly in favor of their right to continue to agree upon the price of a private contract of indemnity against loss by fire.
the same sort of property, and on exactly the same terms, is to make a discrimination which amounts to a denial of the equal protection of the law.
* The statute fixing the premium rates on surety bonds was held to be void in American Surety Co. v. Shallenberger, 183 F. 636.

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