Case Name: HARTFORD STEAM BOILER INSPECTION & INSURANCE CO. et al. v. HARRISON, INSURANCE COMMISSIONER
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1937-05-24
Citations: 301 U.S. 459
Docket Number: No. 355
Parties: HARTFORD STEAM BOILER INSPECTION & INSURANCE CO. et al. v. HARRISON, INSURANCE COMMISSIONER.
Judges: Me. Justice Brandéis, Mr. Justice Stone, and Mr. Justice Cardozo concur in this opinion.
Reporter: United States Reports
Volume: 301
Pages: 459–468

Head Matter:
HARTFORD STEAM BOILER INSPECTION & INSURANCE CO. et al. v. HARRISON, INSURANCE COMMISSIONER.
No. 355.
Argued February 2, 1937.
Decided May 24, 1937.
Mr. Marion Smith, with whom Mr. Harold Hirsch was on the brief, for appellants.
Mr. B. D. Murphy, Assistant Attorney General of Georgia, with whom Mr. M. J. Yeomans, Attorney General, was on the brief, for appellee.

Opinion:
Me. Justice McReynolds
delivered the opinion of the Court.
The Hartford Steam Boiler Inspection and Insurance Company, a stock corporation organized under the laws of Connecticut, carrying on casualty insurance business in Georgia, and its salaried employee W. M. Francis, citizen of that State, asked the Superior Court, Fulton County, for a mandamus requiring the Insurance Commissioner to license him as resident agent. The Commissioner claimed that while duly qualified in all other respects, the employee could not be so licensed because of the inhibition in § 1, Act of the General Assembly, approved March 28, 1935. Georgia Laws, 1935, p. 140:
"No licensed fire or casualty insurance company or company writing fidelity or surety bonds, shall write or issue any policy or indemnity contract on any risk in this State except through a resident agent licensed by the Insurance Commissioner: Provided . . . The words 'resident agent' as used in this section are deemed to mean resident agents engaged in the solicitation of such business from the public generally and shall not include any salaried employee of any insurance company doing business in this State; but shall include any agents of mutual insurance companies however compensated. . . ."
Appellants claimed that enforcement of the quoted inhibition would deprive them of the equal protection of the laws, contrary to the Fourteenth Amendment.
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 and 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.
The applicable principle in respect of classification has often been announced. It will suffice to quote a paragraph from Louisville Gas & Electric Co. v. Coleman, 277 U. S. 32, 37, 38.
*. . . it may be said generally that the equal protection clause means that the rights of all persons must rest upon the same rule under similar circumstances, Kentucky Railroad Tax Cases, 115 U. S. 321, 337; Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, 293, and that it applies to the exercise of all the powers of the state which can affect the individual or his property, including the power of taxation. County of Santa Clara v. Southern Pac. R. Co., 18 Fed. 385, 388-399; The Railroad Tax Cases, 13 Fed. 722, 733. It does not, however, forbid classification; and the power of the state to classify for purposes of taxation is of wide range and flexibility, provided always, that the classification 'must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.' Royster Guano Co. v. Virginia, 253 U. S. 412, 415; Air-way Corp. v. Day, 266 U. S. 71, 85; Schlesinger v. Wisconsin, 270 U. S. 230, 240. That is to say, mere difference is not enough: the attempted classification 'must always rest upon some difference which bears a reasonable and just relation to the act in respect to which the classification is proposed, and can never be made arbitrarily and without any such basis.' Gulf, Colorado & Santa Fe Ry. v. Ellis, 165 U. S. 150, 155. Discriminations of an unusual character especially suggest careful consideration to determine whether they are obnoxious to the constitutional provision. Compare Martin v. District of Columbia, 205 U. S. 135, 139; Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 232, 237."
Despite the broad range of the State's discretion, it has a limit which must be maintained if the constitutional safeguard is not to be overthrown. Discriminations are not to be supported by mere fanciful conjecture. Borden's Co. v. Baldwin, 293 U. S. 194, 209. They cannot stand as reasonable if they offend the plain standards of common sense. In this instance, the appellant company had been licensed to do business in the State and was entitled to equal protection in conducting that business. The answer of the insurance commissioner admitted that he was "entirely satisfied as to the character, standing, responsibility, ability, and knowledge" of the proposed agent, and that the license was refused solely because he was a "salaried" employee. It is plain that the requirement that the resident agents of stock companies should not work on a salary has no relation to economy or efficiency in management. The answer of the insurance commissioner -states that all of the contracts of mutual fire and casualty insurance companies are "negotiated by salaried employees" and that this method of doing busi ness was adopted "in order to reduce the expenses of operation and thus benefit the policyholders themselves."
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.
Fpr 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.
Reversed.