State Ex Rel. MacKey v. Hyde

*686 RAGLAND, J. This cause has been argued and submitted a second time. On the original hearing an opinion was prepared which contains a statement of facts adequate for an understanding of the legal questions' involved-. The statement follows: “Relator has instituted in this court a mandamus proceeding to compel the Superintendent of Insurance to issue a license to him as an insurance broker. The authority thus sought is conferred by the following statute:- « . “ ‘Whoever; for compensation, acts or aids in any manner in negotiating contracts of insurance or reinsurance, or placing risks or effecting insurance or- reinsurance for any person other than himself, and not being the appointed agent or officer of the company in which such insurance or reinsurance is effected, shall be deemed an insurance broker, and no person shall act as such insurance broker save as provided in this section. The Superintendent of Insurance may; lipón the payment of a fee of ten dollars, issue to any person a certificate of authority to act' as an insurance broker to negotiate contracts of insurance or reinsurance, or place risks, or effecting insurance or reinsurance with any qualified insurance company or *687 its agents, and with the authorized agents in this State of any foreign insurance company duly admitted to do business in this State.' Such certificate shall remain in force one year, unless* revoked by the' Superintendent of Insurance for cause. Any person who shall act as broker or agent in negotiating insurance or reinsurance, as above stated, without first having obtained a certificate of authority' or' broker’s license for such purpose, shall be deemed guilty of a misde-' meanor and on conviction thereof shall be fined not less than ten nor more' than one hundred dollars for each offense to be recovered and applied in the manner prescribed in Section 6322, Revised Statutes' of" Missouri, 1919.’ [Section 6317, R. S. 1919.] ' “The relator’s petition alleges'that the requirements of the statute have been complied with by him in applying for the license, ’ blit notwithstanding such compliance, the respondent . : Í 'omitting the relator’s adjectives . . . has failed and refused ttí issue such' license. Upon the filing of this petition the Attorney General, representing the respondent, waived the issuance of an alternative writ and this court directed that the petition be taken as and for such' writ, whereupon the Attorney-General filed his return therein which' admits the formal allegations of the petition. In addition, 'it is' pleaded in said return that it is a prerequisite to the issuance''of' such a license that an application for the same be filed" with the Superintendent of Insurance in compliance with the form prepared,' furnished and required by the State Insurance Department to be' used by all applicants; that the relator fáiled and has’'refused to make such application in the required form, but has Used an old and obsolete blank, which does not conform in material matters to that required. It is further alleged that the character of the insurance business is such that a compliance ’ with the required form'is necessary to enable the Superintendent of Insurance to select proper persons to pursue the vocation of brokers; that such failure will prevent the respondent, as such superintendent; from knowing whether the applicant is a proper person to^ become an insurance broker' within the meaning and purpose of the statute above quoted; that answers required to be made to the questions propounded' in the form of application embody no more than is reasonably necessary to'authorize the relator to secure a license as an insurance broker and to enable the respondent to intelligently'discharge his duty in the issuance of same as required by Sections 6317, 6278 ánd 6095, Revised Statutes 1919; that the relator, by his refusal to execute said application and file the same with the Insurance Department, was not entitled to have the authority conferred on him by the State to trans act the business of an insurance broker; that under and by virtue of Section 6278, Revised Statutes 1919,. it is provided'that': “ ‘No company or other insurer or ...agents shall directly or indirectly, by any special rate, tariff, drawback, rebate, concession, *688 device or subterfuge, charge, demand, collect or receive from any person, persons or corporation any compensation and premium different from the rate or premium properly applicable to the property so rated, as indicated by its public ratin'g record, and no company or other insurer shall discriminate unfairly between risks of essentially the same hazard and substantially the same degree of protection. ’ . “By w,ay of innuendo and as stating argumentatively the construction placed by the respondent upon the statutes regulating the conduct, of the business, of insurance in this State and as• definitory of his duty under such statutes and the reasons for requiring applicants for licenses as insurance brokers to comply with the required form of .application, the return further alleges: ‘‘ ‘That it was the common practice prior to January 1, 1925, for persons to procure an insurance broker’s license for the purpose of placing insurance upon their own property and upon the property of other persons, .firms or corporations by whom such brokers were employed and in which firms and corporations such- brokers were financially interested, for the unlawful purpose of enabling those insured to; indirectly secure rebates upon their property, in violation of the sections of the statutes cited and not for the purpose of negotiating contracts of. insurance for other people as required by said Section 6317; that it was the further common practice on and prior to January 1, 1925, for persons to procure an insurance broker’s license in order to- place contracts of insurance with foreign companies who were not authorized to do -business in this State in violation of said Section 6317, such persons not at the time having a license to place excess lines pf insurance as provided by Section 6313 of the Revised Statutes of Missouri for 1919; that, all of said practices resulted in great discriminations in rates of premium among the policyholders in . this State: applicable to the same kinds of property, as indicated by .the .public rating records of said insurance companies, and also in unfair discrimination in rates between risks of essentially the same hazard and substantially the same degree of protection, and enabled large property owners to'secure unlawful rebates on their insurance at the expense of the small property owners who were compelled to absorb in Their premiums such unlawful rebates; that such unlawful rebates also: resulted ip great losses to the small policyholders and brought about great confusion,' dissatisfaction and ■ other illegal , practices among the insurance companies and their agents in the . State of Missouri, to the great damage and detriment to the people of .this State; that as a direct result of the conditions resulting from such' unlawful practices the respondent was compelled to and did prepare the new blank form of application for license as an insurance broker. ’ ' *689 ‘ ‘ This form, which is attached to the return as an exhibit, omitting formal superscriptions, is as follows : “ ‘The undersigned hereby makes application for license as an Insurance Broker and in accord with said application makes the following sworn statements: • ‘1. ’ Name ................................................. “ ‘ 2. Address............................:................. Street and number City “ ‘3. Is the Insurance Business your principal occupation?...... “ ‘4. If not, what is your principal occupation?................ “ ‘5. What part of your' time do you devote to the insurance business ? ............................................ “ ‘ 6. What knowledge have you of the Insurance Business ?...... “ ‘7. What Agency will your business be brokered through? “ ‘8. Are you licensed by this Department as an Insurance Agent? ..................■................:........... “ ‘9. If so, what company are you licensed for? .............. “ ‘10. Are you in the employ of any licensed agent? If so, whom ? .............................................. “ ‘11. Previous license expires........................192... “ ‘Applicant “ ‘Subscribed and sworn to before me, a Notary Public, in the County of ...................., City of ................., State of......... .......this :........day of ........;......: 192... “ ‘My Commission expires............................ 192... “ ‘Notary Public.’ " “[Here follows the indorsement of an officer of the local Association of Insurance Agents, or of two licensed agents where there is no local association; such indorsement.certifying'to the correctness of the facts as stated herein.] ‘ ‘ ‘ The above application approved .................... 192... “ ‘Approval refused........i......................... 192... “ [Name of local Association “‘Local Agent “‘By............'............ “ ‘Name and title of officer signing same. “ ‘Local Agent.’ “For further return the respondent denies the good faith of the relator in making the application for a license and states that this proceeding to compel the granting of a license is instituted and pros *690 ecuted by persons, firms and corporations to secure unlawful rebates upon their own insurance in violation of Sections 6317, 6278 and 6095, Revised Statutes 1919. “In addition the return alleges, in effect, that if this writ is made peremptory the regulatory provisions and salutary purposes of the statutes concerning the conduct of the insurance business in this-State will be rendered nugatory and their enforcement prevented. “The respondent, in defining his attitude in the discharge of his duty under the laws, as construed by him, further pleads: “ ‘That he does not claim the arbitrary right and power to grant or refuse an insurance broker’s license at his discretion, but only contends that he has the right to insist that all applicants for such license shall bring themselves within the provisions of the sections of the statute before referred to by a proper application duly verified by oath. Respondent does not contend that he has the right to determine the truth or falsity of the statements made in such applications provided they comply with said sections of the statute, but that such applicants should verify such statements under oath in order that thejr may be subjected to the criminal laws against false affidavits in the event such statements and answers are false.’ ” Relator, segregating from Section 6317, Revised Statutes 1919, the sentence, “The Superintendent of Insurance may, upon the payment of a fee of ten dollars, issue to any'person a certificate of authority to act as an insurance broker,” says that in order for the statute to be constitutional “may” must be read as “shall.” Upon this reconstruction he predicates his contention, namely: “The statute gives the insurance superintendent no sort of power in the premises except the power to take the fee and issue the license.” If his position is sound, the statute is simply a revenue measure and nothing more, the fee required being merely an occupation tax. Such a conclusion, based as it is on an arbitrary construction of a single sentence culled from the statute, cannot be accepted. The insurance business, being affected with a public interest, is subject to control and regulation under the police power; and this State has not been at all hesitant in the exercise of its power with reference to it. Our Insurance Code, Chapter 50, Revised Statutes 1919, discloses a scheme of regulation which is not only comprehensive, but which descends into the minutest details. Its general object is to make certain: that the citizen secures the indemnity for which he contracts, and that the rates and charges for insurance which may be required of him shall be reasonable and non-discriminatory. The agency of the State charged with the enforcement of its regulatory provisions is the Insurance Department, the chief officer of which is its superintendent. [Secs. 6082, 6083, R. S. 1919.] *691 All persons, whether individuals, associations or corporations, are prohibited from engaging in the insurance business in this State, unless and until they have received from the Superintendent of Insurance a certificate stating that they have complied with all the' requirements of its insurance laws; even then they can undertake no business or risks except as specifically provided in those laws. [Secs. 6308, 6309, R. S. 1919.] And no person can act as agent or solicitor for an insurance company in procuring' risks until there-has been delivered to him a copy of the certificate showing his principal’s authorization to do business. [Sec. 6308, R. S. 1919.] The affairs and management of every insurance company, including, the doings of its officers, agents and attorneys', are subject to visitation;- and consequently are under the continued scrutiny of the State. [Sec. 6095, R. S. 1919.] There’is one individual engaged in. effecting insurance, however, who is neither an. insurer nor .the appointed agent of an insurer, and - whose activities are by no means an open book. This, individual is the insurance- broker, and unless-he- were somehow brought within the scheme of regulation it would not be. complete. There can be no- doubt but that the Legislature could have prohibited any person who was not an insurer, ■ or the appointed agent of- one,from intermeddling in any way in effecting insurance, if it - had deemed such a prohibition necessary to accomplish.the general purposes of the insurance laws of the State heretofore adverted to. Instead, however, it provided that within prescribed limits-persons-who were specially- authorized by the State might aid in negotiating contracts of insurance, though they were neither insurers "nor the agents of insurers. -. It seems clear that this provision is in its very nature a police regulation, and not a tax measure. This view is confirmed by the further provision of Section 6317 which - impliedly authorizes the Superintendént • of Insurance to revoke for cause a. certificate of' authority to act as an insurance broker. • As the language'used in investing the Superintendent' of Insurance with power to license insurance brokers .is not mandatory in its' terms, but permissive only, it carries with it the right, to exercise dis-cretion — not arbitrarily, but reasonably. [Samuels v. Couzens, 183 N. W. 925 ; 25 Cyc. 622, n. 21.] But relator says that if such language be given this its plain and obvious meaning, it renders the statute unconstitutional, in that it. attempts to vest in the Superintendent an unregulated discretion. It is true that no rules of conduct are .p-re-. scribed to govern the action of the Superintendent, but that fact.does not necessarily render the statute invalid. The validity of a grant of discretion depends largely upon the nature of the business or thing with respect to ¡which-it is to be exercised. For example, it is well established that in order for a- statute or ordinance to be valid which places restrictions upon lawful conduct or *692 lawful business, in themselves harmless, it must specify the rules and conditions to be observed in such conduct or business, and must admit of the exercise of the privilege by all citizens alike who will comply with such rules and conditions. [Monticello v. Bates, 169 Ky. 258; Yick Wo v. Hopkins, 118 U. S. 356.] On the other hand, it is equally well settled that it is not necessary that statutes or ordinances prescribe a rule of action where they deal with situations which require the vesting of some discretion in public officials, as for instance, where it is difficult or impracticable to lay down a definite, comprehensive rule; or where the discretion relates to the administration of a police regulation and is necessary to protect the public morals, health, safety and general welfare; or where personal fitness is a factor to be taken into consideration. [State ex rel. Makris v. Superior Court, 12 A. L. R. 1428, and cases cited in Note III, a and b, page 1447 et seq.] We are of the opinion that the statute in question falls within the latter class. As already pointed out it is a part and parcel of the general scheme of insurance regulation and contributes in an essential way to the securing of its objectives. If brokers’ licenses may be made use of to defeat the non-discriminatory provisions of the rate statute, as stands admitted on the pleadings, then in order that those provisions may not become a dead letter it is necessary that some discretion be exercised in the issuance of such licenses. The bona tides of an applicant in the very nature of things cannot be tested by a definite and comprehensive rule. But whether he intends in good faith to engage in the activities of an insurance broker as defined by the statute, or whether he purposes to use the license as such as the means of reducing the cost of insurance through commissions, for himself or an employer, or otherwise evading the insurance laws of the State, must be judged by a variety of circumstances including the personal antecedents of the applicant. In the instant case relator declined to answer the following questions contained in the form prepared by the Insurance Department for applications for license as insurance broker: ‘Ms the insurance business your principal business? What part of your time will you devote to the insurance business? What knowledge have you of the insurance business?” These questions called for information reasonably necessary to the exercise of the discretion vested by the statute in the Superintendent of the Insurance Department.' The failure of relator to comply with the regulations of the department calling for such information was therefore a sufficient reason for refusing him a license. Whether respondent can refuse to issue a license as insurance broker on the ground that the applicant is not actually engaged in the insurance business, of that he does not devote the greater portion of *693 Ms time to that business, or that he has no actual knowledge of the business, we need not determine, because not before us. It follows from the views herein expressed that the peremptory writ should be denied and the proceeding dismissed. It is so ordered. Blair, G. J., Walker, White and Atwood, JJ., concur, Walker, J., in separate opinion; Graves, J., absent; Otto, J., not sitting.