O'gorman And Young, Incorporated v. Hartford Fire Insurance Company

Facts

A state statute held that it was unlawful for any such insurer licensed in this State to . . . allow . . . any commission . . . in excess of a reasonable amount, to any person for acting as its agent in respect to any class of such insurance. P was licensed as an insurance broker. P sued Ds, licensed foreign fire insurance companies to recover a balance alleged to be due for services performed as local agent. With one insurance company, the complaint is on a contract terminable at will, made prior to the enactment of the statute, by which D agreed to pay to P twenty-five per cent of the premiums. Another with a contract made after the statute, D agreed to pay as compensation 'what such services were reasonably worth'; and the complaint alleges that the services were reasonably worth twenty-five per cent. of the premiums. Ds paid P only twenty per cent of the premiums. P was suing for the unpaid 5 per cent. Ds pled the statute as a defense. Each case was heard upon a motion to strike out the answer and for judgment on the ground that the statute is void under the due process clause of the Fourteenth Amendment. The trial courts denied the motion and entered judgment against P. One court held that since the commissions paid to local agents naturally enter into the cost of such insurance to the public, and therefore influence the rates which must be charged to the public for such insurance, it is within the police power of the state to require that the commissions must be reasonable, otherwise such large commissions might be allowed as to impair the financial stability of the insurance companies, and thus imperil their ability to meet their financial obligations to their policy holders. The Court of Errors and Appeals affirmed the judgments of the trial court. The Supreme Court granted certiorari.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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