Wiley Blount Rutledge

“ Study of Legal Reserve Life Insurance Companies, T.N.E.C. Monograph No. 28, Section XV. It would be idle to require licensing of insurance agents, in order to secure honesty and competence, yet to place no restraint upon the kind of insurance to be sold or the kinds of companies allowed to sell it, and then to cover their representatives with their immunity. This could only result in placing domestic and complying foreign insurers at great disadvantage and eventually in nullifying all controls unless or until Congress should take over the regulation. ”

“ That the admission requirements and the surplus line broker provisions, as they relate to nonadmitted insurers and their agents, are invalid for discrimination against out-of-state insurers and in favor of domestic ones; (2) that California, as a result of the South-Eastern decision, no longer can require foreign insurance corporations seeking to do business there to maintain minimum reserves for protection of policyholders in the state or compel agents or brokers to refrain from representing them there notwithstanding such noncompliance. ”

“ To become a surplus line broker one must procure a special license pursuant to the requirements of § 1765. This license also is issued upon application, if the commissioner of insurance finds that the applicant is 'trust-worthy and competent to transact an insurance brokerage business in such a manner as to safeguard and interest of the insured.' The applicant also must file with the commissioner a faithful performance bond in the amount of $5000 and pay a filing fee of $50. ”

“ Section 1639 declares that the purpose of these and other provisions of the Code is 'to protect the public by requiring and maintaining professional standards of conduct on the part of all insurance agents * * * acting as such within this State.' The statutory requirements apply to all agents, without discrimination, whether they represent California or out-of-state insurance companies and whether the business done is interstate or local in character. They apply only to agents acting in California, not to acts done outside the state. ”

“ In the absence of any showing that it is administered arbitrarily, the requirement that the license shall issue only after a finding of trustworthiness and competence by the commissioner cannot be taken to be other than an appropriate means of safeguarding the public against the obvious evils arising from the lack of those qualifications. ”

“ Neither the commerce clause nor the South-Eastern decision dictates such a result.
We do not intimate that this particular society's insurance is unsound or fraudulent. As to that no showing has been made. We only say that California has imposed its reserve requirements as a allowable standards for securing minimum assurance to the state's policyholders in respect to performance of their policies by the insurer, not as a mere exclusionary measure in exercise of the power to bar foreign corporations altogether ”

“ Apart from this classification, which is clearly within the state's power, the discrimination argument becomes identical with the contention thta the state cannot exclude foreign companies, such as the First National Benefit Society, or their agents, from carrying on their business in California for failure to meet her reserve requirements.
This is the crucial contention. It too is without merit. The evils flowing from irresponsible insurers and insurance certainly are not less than those arising from the activities of irresponsible, incompetent or dishonest insurance agents. ”

“ Furthermore, the state apparently concedes, as appellant contends, not only that the Society is exclue d from transacting insurance business by the admission requirements and its failure to comply with them, but also that appellant would be forbidden to place insurance with it by the provisions relating to surplus line insurance, even if he had secured the surplus line broker's license. ”

“ Californa in effect concedes this, alternatively to maintaining that no question concerning the validity of those provisions is presented. The short effect of the admission provisions, for purposes now pertinent, the state admits, is to forbid either foreign or domestic companies to do a life insurance business in California other than on a legal reserve basis, [16] except as to companies engaged in doing such business there prior to January 1, 1940. ”

“ And no argument is needed to show that these evils are most apt to arise in connection with the activities of the less reliable and responsible insurers, as well as insurance brokers or salesmen, and vitally affect the public interest. [7]
Such being the purpose and effect of § 1642, there can be no substantial question concerning its validity on commerce clause grounds. That is true whether appellant's acts are taken, in their setting, as being 'in' commerce or only as 'affecting' it. For the case is ruled, so far as § 1642 is concerned, by decisions such as State of California v. ”

“ Premiums necessary to maintain the Certificate in force are not fixed amounts and in event of Premium insufficiency may be adjusted, with the written approval of the Corporation Commission, for the purpose of payment of claims and general operating expenses. ”

“ The Union Brokerage case involved an instance of state regulation of foreign commerce.↑ See text infra following note 32.↑ See note 14, as to 'surplus line insurance.' In general this is insurance involving special risks or for some other reason not falling within the usual lines of authorized business.↑ Appellant also points out that by § 1775.5 an annual tax equal to three per cent of the gross premiums upon business done during each calendar year is imposed upon each surplus line broker. ”