CERTIORARI TO THE COURT OF CIVIL APPEALS OF TEXAS, THIRD SUPREME JUDICIAL DISTRICT.
Warren, Black, Douglas, Clark, Harlan, Brennan, Stewart; Frankfurter took no part in the decision of this case; White took no part in the consideration or decision of this case.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
When we held in United States v. South-Eastern Underwriters Assn., 322 U.S. 533, that the modern business of insurance was "interstate commerce," we put it in a category which Congress could regulate and which, if our prior decisions controlled, could not in some respects be regulated by the States, even in absence of federal regulation. See Frankfurter, The Commerce Clause (1937); Rutledge, A Declaration of Legal Faith (1947).
Congress promptly passed the McCarran-Ferguson Act, 59 Stat. 33, 15 U. S. C. § 1011, which provided that the regulation and taxation of insurance should be left to the States, without restriction by reason of the Commerce Clause.*fn1 Subsequently, by force of the McCarran-Ferguson Act, we upheld the continued taxation and regulation by the States of interstate insurance transactions. Prudential Ins. Co. v. Benjamin, 328 U.S. 408.
Prior to the South-Eastern Underwriters decision, we had given broad scope to local regulation of the insurance business. Osborn v. Ozlin, 310 U.S. 53; Hoopeston Canning Co . v. Cullen, 318 U.S. 313. The Osborn case upheld a Virginia requirement that insurance companies authorized to do business in that State must write policies through resident agents. The Hoopeston case, while it involved the making of out-of-state insurance
contracts, also involved servicing of policies in New York, the regulating State.
Here, unlike the Osborn and Hoopeston cases, the insurance companies carry on no activities within the State of Texas. Of course, the insured does business in Texas and the property insured is located there. It is earnestly argued that, unless the philosophy of the Osborn and Hoopeston decisions is to be restricted, the present Texas tax*fn2 on premiums paid out-of-state on out-of-state contracts should be sustained. We are urged to follow the approach of the Osborn and Hoopeston decisions, look to the aspects of the insurance transactions taken as a whole, and decide that there are sufficient contacts with Texas to justify this tax under the requirements of due process.
Were the Osborn and Hoopeston cases and the bare bones of the McCarran-Ferguson Act our only criteria for decision, we would have presented the question whether three prior decisions -- Allgeyer v. Louisiana, 165 U.S. 578; St. Louis Cotton Compress Co. v. Arkansas, 260 U.S. 346; Connecticut General Life Ins. Co. v. Johnson, 303 U.S. 77 -- have continuing vitality. The first two were distinguished in the Osborn (310 U.S., at 66-67) and Hoopeston (318 U.S., at 318-319) cases. The Allgeyer case held that Louisiana by reason of the Due Process Clause of the Fourteenth Amendment could not make it a misdemeanor
to effect insurance on Louisiana risks with an insurance company not licensed to do business in Louisiana, where the insured through use of the mails contracted in New York for the policy. The St. Louis Cotton Compress case held invalid under the Due Process Clause an Arkansas tax on the premiums paid for a policy on Arkansas risks, made with an out-of-state company having no office or agents in Arkansas. The Connecticut General Life Insurance case held invalid under the Due Process Clause a California tax on premiums paid in Connecticut by one insurance company to another for reinsurance of life insurance policies written in California on California residents, even though both insurance companies were authorized to do business in California. The Court stated:
"All that appellant did in effecting the reinsurance was done without the state and for its transaction no privilege or license by California was needful. The tax cannot be sustained either as laid on property, business done, or transactions carried on within the ...