1. By the terms of a "blanket" contract entered into in Michigan
between a South Carolina insurance company and a Michigan sales
company, engaged in marketing all the automobiles of a particular
make, the insurance company insured future purchasers of the cars
against fire and theft; the insurance was to become
Page 272 U. S. 296
automatically effective whenever anyone bought a car and took
delivery or a bill of sale, without regard to the wish of the
purchaser; the sales company was to make monthly reports to the
insurance company of all cars for which insurance was thus
provided, and pay premiums accordingly, in Michigan, and the
insurance company was to send certificates of insurance to the
respective purchases.
Held, that, where such insurance became effective
through sales of cars in other states, though sold by distributors
and retail dealers who owned them and were not agents of the sales
company, laws of those states regulating and taxing insurance were
constitutionally applicable to such local transactions, and that
the fact that the cost of the insurance was taken up in the price
of the cars so sold did not prevent the insurance from being
reached. P.
272 U. S.
304.
2. The courts of the United States should not go beyond
necessity to instruct officials of a state as to the meaning of a
state law. P.
272 U. S.
305.
9 F.2d 202;
id., 666;
id., 674, affirmed.
The first of these cases is an appeal from an order of the
district court refusing an interlocutory injunction in a suit by
the Palmetto Fire Ins. Co., a South Carolina corporation, to
restrain Conn, the Superintendent of Insurance of Ohio, from
revoking the plaintiff's license to do business in Ohio. The other
four cases are appeals from like orders in suits brought in Maine
and Wisconsin by dealers in automobiles to enjoin the insurance
commissioners of those states from sending out letters, etc.,
accusing the plaintiffs of violating the local insurance laws and
announcing publicly that insurance on the cars they sold was void,
and to enjoin them from bringing criminal prosecutions, or actions
for penalties, or otherwise interfering with the sale of the cars
in those two states, respectively. Johnson, Commissioner of
Insurance, appellee in Nos. 286 and 287, was substituted in this
Court for Smith, his predecessor in office.
Page 272 U. S. 303
MR. JUSTICE HOLMES delivered the opinion of the Court.
These cases all raise the same question. The first,
Palmetto
Fire Insurance Co. v. Conn, is a suit to enjoin the Ohio
Superintendent of Insurance from revoking the license of the
plaintiff, a corporation of South Carolina, to do business in Ohio
on the ground that it has violated statutes of the latter state.
These statutes forbid the insurance of property in the state except
by a legally authorized agent, resident in Ohio, and tax the
business lawfully done there. They provide also that anyone who
procures an application for insurance shall be held to be the agent
of the party thereafter issuing the policy. The plaintiff says
that, if the statutes are held to apply to what it has done, they
are invalid under the Fourteenth Amendment of the Constitution of
the United States. The case was tried before a statutory court of
three judges, and an injunction was refused. 9 F.2d 202.
Page 272 U. S. 304
The facts are simple. The plaintiff made a contract of insurance
in Michigan with the Chrysler Sales Corporation, a Michigan
corporation which sells all the automobiles made by the Chrysler
Corporation. This contract purported to insure purchasers of
Chrysler cars against fire and theft, and to become automatically
effective from the date on which the purchaser took delivery or a
bill of sale of the car, the Chrysler Company to send a monthly
report to the plaintiff of all cars for which insurance was thus
provided, and to pay premiums accordingly at Detroit. If anyone
bought a car, he got the insurance whether he wished it or not, as
part of his bargain, and a certificate was sent to him by the
plaintiff. The question is whether this transaction brought the
plaintiff within the taxing power of Ohio. If it did not, the power
of the state to exclude the Company altogether could not be used as
means to accomplish a result beyond the state's constitutional
power.
Fidelity & Deposit Co. of Maryland v. Tafoya,
270 U. S. 426.
Manifestly there was nothing in the contract between the
plaintiff and the Chrysler Sales Corporation, without more, that
Ohio could lay hold of, even if it insured property in Ohio. But
the contract contemplated and provided for a benefit to third
persons if, when, and where they complied with its conditions. When
a man bought a car in Ohio, by that act, he made effective the
agreement of the Company to insure future purchasers, and imposed
upon it an obligation that did not exist before. It is true that
the obligation arose from a contract made under the law of another
state, but the act was done in Ohio, and the capacity to do it came
from the law of Ohio, so that the cooperation of that law was
necessary to the obligation imposed. It would be held in some
jurisdiction that the purchaser became party to a contract with the
insurance company. By universal consent, he at least would become
the beneficiary of a contract for his benefit.
Page 272 U. S. 305
Whatever technical form may be given to the reasoning, the
substance is that, by acts done in Ohio, the purchaser obtains for
himself the advantage of insurance that before that moment did not
exist. It does not matter whether his getting it was a large or an
inconspicuous feature of his bargain. It was part of it, in any
event, and we cannot doubt that the lower court was right in
holding that, in such circumstances, the state could insist upon
its right to tax. It would be extravagant to say that the state's
general power to deny to the plaintiff the right to enter or remain
within it for business unless it paid for these transactions as a
part of the price must be denied upon constitutional grounds.
The two suits in Wisconsin,
Clark Motor Co. v. Smith,
Commissioner of Insurance, and
Chrysler Sales Corp. v.
Smith, were begun about the same time as the Ohio case. The
Clark Motor Company described itself as a distributor, buying cars
from the Chrysler Sales Company and selling them to retail dealers,
known as dealers. Neither distributor nor dealer acts as agent for
the Chrysler Sales Company, but each buys and sells on its own
behalf. The position of the Chrysler Sales Company, the other
plaintiff, has been described. The Commissioner of Insurance treats
the sales as contravening statutes of Wisconsin similar to those of
Ohio. A court of three judges refused an injunction against his
enforcing the Acts. 9 F.2d 666. We are of opinion that the decision
was correct. It is argued that the statutes were misconstrued by
the court. An appeal to this Court is allowed when an injunction is
granted or refused on the ground of the alleged unconstitutionality
of a state law. If we assume that other questions are open, still
it is not desirable that the courts of the United States should go
beyond necessity to instruct the officials of a state as to the
meaning of a state law. Unless the case is very clear, their action
should be left to the control of the state
Page 272 U. S. 306
courts. There are plausible reasons in this case for following
the local interpretation, and we think that the court below was
right in accepting the Commissioner's view. Other arguments thrown
in as makeweights do not need to be discussed. The fact that the
cost of the insurance was taken up into the price of a machine
otherwise lawfully sold does not prevent the insurance being
reached.
See Herbert v. The Shanley Co., 242 U.
S. 591. The question raised by these bills is the
general one whether the state laws can be applied to this
insurance. That we have answered. Exactly how far the laws can go
and what proceedings can or cannot be taken may be left to be
determined, if the questions arise, in the state courts.
The cases from Maine,
Chrysler Sales Corp. v. Spencer,
Insurance Commissioner, and
Utterback-Gleason Co. v.
Spencer, are like the last, and follow the Wisconsin decision
after a full discussion. 9 F.2d 674. These decisions also must
stand.
Decrees affirmed.
