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Going National: The Life Insurance Industry's Campaign for Federal Regulation after the Civil War

Published online by Cambridge University Press:  13 December 2011

Philip L. Merkel
Philip L. Merkel
Affiliation:
Philip L. Merkel is associate professor of law atWestern State University College of Law.
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Extract

Life insurance corporations were among the first businesses to expand their activities across state lines in the mid-nineteenth century. Yet their efforts were often impeded by protectionist state laws and uneven state regulations. The industry reacted by forming a trade association that pressed for federal regulation of multistate insurance sales. This article examines the life insurance industry's attempts in Congress and in the courts to alter the balance of federalism and to promote free trade in a growing national market.

Type
Articles
Information
Business History Review , Volume 65 , Issue 3: Financial Services , Autumn 1991 , pp. 528 - 553
Copyright
Copyright © The President and Fellows of Harvard College 1991

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References

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24 Before the Civil War, the Court had occasion to review the Earle doctrine. It reaffirmed the principle in Layfette Insurance Co. v. French, 59 U.S. (8 How.) 404 (1855).

25 Insurance Times 1 (1868): 555Google Scholar. For a study of Wright's life, see Philip G. Wright and Elizabeth Q. Wright, Elizur Wright, The Father of Life Insurance (n. p., 1937).

26 The National Board of Fire Underwriters was created in response to “the unfriendly legislation in several of the States toward the Insurance Companies of other States, which for several years has been increasing in hostility, and has in some instances created an almost prohibiting burden of deposits, taxes, and other onerous and unnecessary impediments to the prosecution of legitimate business….“ National Board of Fire Underwriters, Proceedings for a Convention of Fire Insurance Companies (1865), 3. See also A. L. Todd, A Spark Lighted in Portland: The Record of the National Board of Fire Underwriters (1966), 8.

27 Stalson, Marketing Life Insurance, 777–80. This early cooperative effort was organized by officials of the Mutual Life Insurance Company of New York.

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29 Insurance Monitor 14 (1866): 417Google Scholar. I have been unable to find official copies of the proceedings of the Chamber of Life Insurance, but transcripts of the group's meetings were reproduced in the Insurance Monitor and in the United States Insurance Gazette.

30 Insurance Monitor 14 (1866): 523Google Scholar; Stalson, Marketing Life Insurance, 798.

31 The group's constitution provided: “Any company chartered in the United States to make insurance on human life, conforming to the rules of this Chamber, shall have the right to be represented in it by one vote, and shall have an additional vote for each million of dollars beyond one million in its premium reserve.” Insurance Monitor 14 (1866): 523Google Scholar.

32 Ibid., 417, 522.

33 The Committee on National Legislation first reported at the December 1867 meeting. Insurance Monitor 15 (1867): 767Google Scholar.

34 Proponents of federal legislation often repeated that they had no intention of limiting the states' ability to regulate intrastate insurance. C. C. Hine, an early advocate of national legislation, wrote in 1866: “it is not the design to ask for a law to regulate the Companies of any State within that State. Congress could not enact such. But under its special grants of power to regulate trade between the States and to promote the general welfare, it can dictate the terms on which Companies may carry on an inter-State business” [emphasis in original]. Insurance Monitor 14 (1866): 56Google Scholar.

35 Graham, Howard J., Everyman's Constitution (Madison, Wis., 1968), 83–85Google Scholar. In its organizational meeting in November 1865, the NBFU adopted a resolution “that congress, in its next session, be memorialized to consider and enact such laws as shall essentially nationalize the business of Insurance in all the States of this Union, and guarantee to all Insurance Companies, complying with such wholesome laws as may be approved by Congress the rights and privileges of equality with the local institutions of such States” [Emphasis in original]. National Board of Fire Underwriters, Proceedings, 5–6.

36 H.R. 675, 39th Cong., 1st Sess. (1866); H.R. 738, 39th Cong., 1st Sess. (1866); H.R. 40, 40th Cong., 1st Sess. (1867); H.R. 94, 40th Cong., 1st Sess. (1867); S.N. 299, 40th Cong., 2d Sess. (1868). The NBFU was behind most of these bills. Insurance Monitor 14 (1866): 58Google Scholar.

37 12 Stat. 665 (1863); 13 Stat. 99 (1864); Insurance Monitor 14 (1866): 102Google Scholar; Dryden, John F., Addresses and Papers on Life Insurance and Other Subjects (Newark, N.J., 1909), 177–78Google Scholar.

38 S.N. 299, 40th Cong., 2d Sess. (1868). This bill was typical of those calling for a National Bureau of Insurance.

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44 New York Evening Post, 10 March 1868, p. 2, col. 1.

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46 See, for example, S.R. 185, 41st Cong., 3d Sess. (1871); H.R. 185, 42d Cong., 1st Sess. (1871).

47 At the Chamber's first annual meeting in December 1867, Elizur Wright discussed the implications of winning a test case on only the Privileges and Immunities grounds. “It seems to me almost certain that the decision of the Supreme Court will fall very short of what we need. It will go no further than this: to restrict the taxation of the States upon Companies chartered in other States to the rule they apply to their own corporations. That is, an impartial tax. They may burden the business of their own and other Companies very much; and undoubtedly will do so… I think this is not the ground we occupy. We are not dealing with the citizens but with corporations; and the question is whether the States or Congress shall make the laws regulating their action. This is a commerce between states, and we claim that Congress shall determine the intercourse between the States so far as it fairly comes under the denomination of commerce.” United States Insurance Gazette 26 (1868): 128Google Scholar.

48 Insurance Monitor 16 (1868): 523Google Scholar.

49 The lawsuit that challenged the license fee and premium tax laws of Pennsylvania was brought by the Germania Life Insurance Company of New York. Insurance Monitor 15 (1867): 488Google Scholar. The other was filed by the Equitable Life Assurance Society, involving the laws of Tennessee. Insurance Monitor 15 (1867): 609; 627–28Google Scholar.

50 75 U.S. (8 Wall.) 168 (1869).

51 Minutes of the Executive Committee, National Board of Fire Underwriters (1867), 14. The background of the Paul v. Virginia litigation is detailed in Nehemkis, Peter R. Jr., “Paul v. Virginia: The Nee d for Re-examination,” Georgetown Law Journal 27 (1939): 519Google Scholar. See also Proceedings of the Executive Committee of the National Board of Fire Underwriters (1869), 28; Proceedings of the Third Annual Meeting of the National Board of Fire Underwriters (1869), 41.

52 Paul v. Virginia, 168, 177, 181.

53 Ibid., 181-82.

54 Ibid., 177, 181.

55 91 U.S. 275(1876)

56 Robbins v. Shelby County Taxing District, 120 U.S. 489 (1887); Minnesota v. Barber, 136 U.S. 313 (1890).

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58 Brief for Plaintiff in Error, 5.

59 Paul v. Virginia, 183.

60 Ibid., 184.

61 Liverpool Insurance Co. v. Massachusetts, 77 U.S. (10 Wall.) 566 (1870); Ducat v. Chicago, 77 U.S. (10 Wall.) 410 (1870); Philadelphia Fire Association v. New York, 119 U.S. 110 (1886); Hooper v. California, 155 U.S. 648 (1895).

62 Pensacola Telegraph Co. v. Western Union Telegraph Company, 96 U.S. 1 (1877). In a vigorous dissent, Justice Field argued that even Congress could not force a state to admit foreign corporations against its will. Ibid., 23–24.

63 156 U.S. 1 (1895); McCurdy, Charles W., “The Knight Sugar Decision of 1895 and the Modernization of American Corporation Law, 1869–1903,” Business History Review 53 (1979): 304CrossRefGoogle Scholar.

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65 McCurdy, “American Law and the Marketing Structure of the Large Corporation”; see also Pembina Mining Co. v. Pennsylvania, 125 U.S. 181 (1887). In its first opinion recognizing the concept of substantive due process, the Court held that a person could purchase an insurance policy from a foreign corporation by mail. Allgeyer v. Louisiana, 165 U.S. 578 (1897). Allgeyer, however, reaffirmed the states' ability to limit marketing through agents by foreign corporations within their borders.

66 At the first annual meeting of the Chamber of Life Insurance in 1866, one company president argued, “If we could not get a national Bureau we want to get State legislation which shall secure us uniformity…. We ought to operate on the public mind and the legislatures to secure that end.“ Insurance Monitor 14 (1866): 519Google Scholar. One of the group's first resolutions called for “the procuring of National or uniform State legislation.” Ibid., 522.

67 Delegates from nineteen of the thirty-seven states attended the first meeting. Report of the Proceedings of the National Insurance Convention of the United States (1872), x.

68 Ibid., xii-xiii.

69 J. McCall, A Review of Life Insurance from the Date of the First National Convention of Insurance Officials, 1871–1897 (n.p., n.d.), 6-7.

70 Aside from noncontroversial topics, like the use of a uniform company report form, there was little consensus. Ibid., 8–9; Buley, , American Life Convention, 1: 84–85Google Scholar.

71 Keller, Morton, The Life Insurance Enterprise, 1885-1910 (Cambridge, Mass., 1963)CrossRefGoogle Scholar. Two bills designed to create a National Bureau of Insurance were introduced, but Congress passed neither. H.R. 7054, 58th Cong. 2d Sess. (1903); H.R. 16274, 58th Cong., 3d Sess. (1904). From December 1904 through May 1906, more than twenty separate bills were proposed, but none was passed. One bill even called for a constitutional amendment to permit congressional regulation of insurance. H.J.R. 64, 59th Cong., 1st Sess. (1905). The new movement for federal regulation ended when the Supreme Court reaffirmed the Paul v. Virginia holding that insurance transactions were not interstate commerce. New York Life Insurance Company v. Dee r Lodge County, 231 U.S. 495 (1913).

72 United States v. South Eastern Underwriters Association, 322 U.S. 533 (1944).

73 McCarran-Ferguson Act, 15 U.S.C. Sections 1011-55 (1982).

74 470 U.S. 869(1984).