John Hancock Mutual Life Insurance Company v. Warren/Opinion of the Court

In ''State ex rel. Richards v. Ackerman'', 51 Ohio St. 163, 24 L. R. A. 298, 37 N. E. 828, it was ruled that as foreign insurance companies and associations, whether incorporated or not, before commencing business in the state, were required to obtain a certificate of authority to do so, which conferred on the company or association receiving it the right and privilege of carrying on its business in the state, the privilege so conferred was a franchise. In the course of the opinion the court quoted with approval, from Spelling on Extraordinary Relief, as follows: 'Where, by statute, the legal exercise of a right, which at common law was private, is made to depend upon compliance with conditions interposed for the security and protection of the public, the necessary inference is that it is no longer private, but has become a matter of public concern, that is, a franchise, the assumption and exercise of which, without complying with the conditions prescribed, would be a usurpation of a public or sovereigh function. . . . There was no class of business the transaction of which, as a matter of private right, was better recognized at common law than that of making contracts of insurance upon the lives of individuals. But now, by statute, in almost if not quite all the states, stringent requirements as to security of the persons dealing with insurers and the making and filing reports of public officers for public information are provided, and must be strictly observed and complied with before any person, association, or corporation may make any contract of life insurance. The effect of such statute is to make that a franchise which previously had been a matter purely of private right.'

In the present case the supreme court of Ohio sustained the constitutionality of § 3625 of the Revised Statues, which was in force at the time this policy was issued, upon the ground that the state had a right 'to prescribe the terms and conditions upon which it grants such franchise; and the insurance company, having accepted the franchise with its terms and conditions, is bound thereby, and must accept the burdens with the benefits.' The legal effect was held to be the same 'as if the section was copied into and made a part of the policy.' And it was said that the statute had also been held constitutional in ''National L. Ins. Co. v. Brobst'', 56 Ohio St. 728, 49 N. E. 1113, where no opinion seems to have been delivered.

The section in question applies to all life insurance companies doing business in the state of Ohio, and the state can certainly do with foreign corporations what it may do with corporations of its own creation.

In ''Orient Ins. Co. v. Daggs'', 172 U.S. 557, 43 L. ed. 552, 19 Sup. Ct. Rep. 281, we held that provisions in the Revised Statutes of Missouri, that 'in all suits brought upon policies of insurance against loss or damage by fire, hereafter issued or renewed, the defendant shall not be permitted to deny that the property insured thereby was worth at the time of the issuing of the policy the full amount insured therein on said property,' etc.; and 'that no condition in any policy of insurance contrary to such provision [of this article] shall be legal or valid,'-were not in conflict with the Constitution of the United States. And this was affirmed in ''New York L. Ins. Co. v. Coavens'', 178 U.S. 389, 44 L. ed. 1116, 20 Sup. Ct. Rep. 962.

In Waters-Pierce Oil Co. v. Texas, 177 U.S. 28, 44 L. ed. 657, 20 Sup. Ct. Rep. 518, where a statute of Texas was assailed on the ground that it took away the liberty of contract, Mr. Justice McKenna, delivering the opinion of the court, said: 'The plaintiff in error is a foreign corporation, and what right of contracting has it in the state of Texas? This is the only inquiry, and it cannot find an answer in the rights of natural persons. It can only find an answer in the rights of corporations and the power of the state over them. What those rights are, and what that power is, has often been declared by this court. A corporation is the creature of the law, and none of its powers are original. They are precisely what the incorporating act has made them, and can only be exerted in the manner which that act authorizes. In other words, the state prescribes the purposes of a corporation and the means of executing those purposes. The purposes and means are within the state's control. This is true as to domestic corporations. It has even a broader application to foreign corporations.' And as the state court had held that the statute was a condition imposed on the oil company on doing business within the state, it was said of it that 'whatever its limitations were upon the power of contracting, whatever its discriminations were, they became conditions of the permit, and were accepted with it.' And see Tullis v. Lake Erie & W. R. Co. 175 U.S. 348, 44 L. ed. 192, 20 Sup. Ct. Rep. 136; ''Equitable Life Assur. Soc. v. Clements, 140 U.S. 226, sub nom. Equitable Life Assur. Soc. v. Pettus'', 35 L. ed. 497, 11 Sup. Ct. Rep. 822.

It was for the legislature of Ohio to define the public policy of that state in respect of life insurance, and to impose such conditions on the transaction of business by life insurance companies within the state as was deemed best. We do not perceive any arbitrary classification or unlawful discrimination in this legislation, but, at all events, we cannot say that the Federal Constitution has been violated in the exercise in this regard by the state of its undoubted power over corporations.

Judgment affirmed.