FEDERAL CONTROL OF LIFE
INSURANCE.

GEORGE J. BENSON, ELDORADO.

[The most meritorious of the papers of the Senior class of the State University Law School, in contest for this honor.]

The increase of Federal activity and authority over the authority of the States, which is alarming all close students of state-craft, is caused chiefly by a seeming inability on the part of the States to cope with the problems and situations presented them by a highly organized people. And we may concede that the people will continue to press their demand for better State regulation of the numerous corporations, societies and other vast business concerns, and should the States fail, they must from necessity, yield to a higher authority. Indeed it may be said at the present that this demand is made because of mismanagement or no management at all on the part of the different states.

This agitation, extending over the past forty or fifty years and now at its height, must speedily culminate in some positive and final action if public interests are to be served. The congress now in session will have but few matters of graver public interest to consider than the Federal regulation and control of insurance. No interest comes nearer to the life of our people and no interest demands a more conservative remedial policy on the part of our government.

It has been estimated that the sum of all policies held by persons in the United States, exclusive of fraternal beneficiary associations and local mutual fire insurance companies, amounts to $50,000,000,000, that this insurance costs as much as $1,000,000,000 annually, that about 20,000,000 persons carry insurance and received from the various companies in 1904 the sum of $800,000,000.

A glance at the resources and magnitude of results helps only to emphasize the fact that insurance has become indispensable; a necessity. If we measure insurance by its importance as a safe-guard of the home, no interest is more preeminently entitled to a careful and vigilant consideration. If we defer vigorous action longer, the insurance companies will control our whole financial world. Indeed they are now the greatest single money power. Not only are they powerful factors in our financial world but they are equally powerful in our political world; and the two, money and politics, they have combined producing powerful "machines" whose abuses of power and opportunities we are but learning. Late disclosures show that high finance has kept close fellowship with low politics.

We cannot blind ourselves to the disclosures made by the New York state legislative committee nor can we dull our sense of honor and square dealing by overlooking them; for our faith in life insurance, the great institution that it is, has been sorely tried; our confidence in high finance has been disturbed, and our honor and respect for the men, who it seems have controlled both, is entirely lost. The volume and magnitude of this popular demand for an explanation of the inner mechanism of these "machines" and syndicates; this demand for investigation and regulation, precludes any idea of its untimeliness or that it is unfounded and unjust.

That there are existing ills the public is convinced, and policy holders, legislators and public officials are demanding a thorough and efficient investigation that must in a measure compensate for its tardiness. Further, they are demanding a remedy for these ills; something that we must admit is not easy to prescribe. Undoubtedly the tendency of today is strongly toward Federal regulation and control but before we adopt such a plan we must inquire of its legality, if insurance is properly a subject of Federal supervision; we must consent to the authority of the States being taken from

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them, and we should to a reasonable certainty ascertain and satisfy ourselves with the possibilities of Federal control.

Before determining if any given subject is capable of Federal regulation we must determine; first, the authority of the Federal Government and second, the nature and qualities of the given subject. To ascertain this authority we must look alone, to the Constitution of the United States and for the application and interpretation of the Constitution we must look to the decisions of the courts.

That part of the Constitution that is relied upon to give Congress authority to control insurance is Article I, section 8, paragraph 3,

"That Congress shall have power to regulate commerce with the foreign nations, and among the several states, and with the Indian tribes."

Therefore the validity of Federal control can only be sustained as a regulation of commerce "among the several states" and the question becomes-Does commerce embrace insurance?

The leading case under the commerce clause of the
Constitution is Gibbons vs. Ogden, 9 Wheat, 1.
Chief Justice Marshall at that time said:

"The subject to be regulated is commerce; and
our Constitution, being, as it was aptly said at the
bar, one of enumeration, and not of definition, to
ascertain the extent of the power it becomes neces-
sary to settle the meaning of the word."
Black's Dictionary defines commerce as,

"The various agreements which have for their
object to facilitate the exchange of the products of
the earth or the industries of man, with an attempt to
realize a profit; a general term including specific
contracts of sale and exchange."

Mr. Justice Field, in Glouchester Ferry Co. vs. Pennsylvania, said:.

"Commerce among States consists of intercourse and traffic between their citizens, and includes the transportation of persons and property and the navi

gation of public waters for that purpose, as well as
the purchase, sale and exchange of commodities."

In Brown vs. Maryland, 12 Wheat, 419, 446, Chief Justice Marshall, speaking for the court, said: "Commerce is intercourse; one of its most ordinary ingredients is traffic."

In the case, In re Christian cited in Swift vs. Stutphin, 39 Fed. Rep. 637, the court said:

"The word 'commerce' as used in the clause, whether with foreign nations,' 'among the several States', or 'with the Indian tribes,' embraces all transportation, purchase, sale, and exchange of all such commodities as are transported, bought, and sold by the usages of the commercial world.'

We might quote a score or more definitions of "commerce among the several states" but enough have been given to show that there is a conflict of opinion, or rather, that some courts and jurists favor a liberal construction or interpretation, while others are opposed to such a course. Those of liberal views assert that "commerce" means intercourse in its broadest sense, that transportation is commerce and that neither the method of transportation nor the subject of transportation is important; while those holding restricted views challenge the definition that "commerce" is intercourse of any kind and contend with much reason and learning that the subject matter or thing is of vital importance.

The subject to which this power of the Congress to regulate, is next applied to commerce, "among the several States" and in this as in the matter of "commerce' it is well to quote from judicial decisions. The opinions of the jurists must again guide us. In Gibbons vs. Ogden, supra, Chief Justice Marshall said:

"The word among' means intermingled with. A thing which is among others is intermingled with them. Commerce among the states cannot stop at the external boundary line of each State, but may be introduced into the interior."

Mr. Justice Harlan in the Lottery Case, 188 U. S.

321, made the quotation given above a part of his decision and, as far as we are able to ascertain from the judicial decisions brought to our notice, such an interpretation meets with unanimous favor.

We have yet to determine the nature of our subject matter-insurance. Perhaps no vital point in the determination of the question here discussed depends upon any certain definition or enumeration of the essentials of insurance, but a definition at this place in the discussion will certainly not be amiss.

Vance says:

"Insurance is a conditional contract, whereby one party undertakes to indemnify another against loss, damage, or liability arising from some specified but contingent event.'

The references heretofore given, to prior adjudications, could be extended without limit were it necessary to do so, but the cases cited are, however, sufficient to indicate the grounds upon which we must reach our decision. From two almost opposing lines of decisions, we must upon principle, decide, What is commerce? And we must, it seems, satisfy ourselves with an unbroken line of decisions interpreting, "among the several states." This brings us to the inquiry-Is there any solid foundation upon which the exponents of Federal control of life insurance may base their contention?

Since the case of Paul vs. Virginia, 8 Wall, 168, but few cases involving the question of insurance, as a subject of interstate commerce, have been decided without making mention of the principles therein laid down. It is also worthy of notice that those principles are today the law of the land and to our knowledge in no instance have they been doubted. It was there decided that insurance contracts were not articles of commerce in any proper meaning of the word.

"An insurance policy purports to create contractual relations and to furnish the means of enforcing a contract right."