Miller ex rel. State v. Fidelity Union Fire Ins.

88 So. 711, 126 Miss. 301

• Court: Mississippi Supreme Court
• Decided: March 15, 1921
• Docket: No. 21973
• Status: Published

Opinion

Sykes, J.,

delivered the opinion of the court.

Hugh B. Miller, district attorney of the Fourteenth judicial district of the state of Mississippi for the use of the state, by bill in the chancery court of Pike county, seeks to collect certain penalties from the defendant insurance companies. The bill is based upon section 502, Code of 1906, as amended by chapter 119, Laws of 1908. The two sections claimed to be violated being sections 3281 and 3282, Hemingway’s Code, those portions of section 3281 alleged to be violated are as follows:

“A trust and combine is a combination, contract, understanding, or agreement, expressed or implied, between two or more persons, corporations, or firms, or association of persons, or between one or more of either with one or more of the others. . . .

“(h) By which any other persons than themselves, their proper officers, agents and employees shall, or shall have the power to, dictate or control the management of business; or

“(i) To unite or pool interests in the importation, manufacture, production, transportation, or price of a commodity; and is inimical to the public welfare.”

That portion of section 3282, Hemingway’s Code, alleged to have been violated is as follows:

“Any corporation organized under the laws of this or any other state, or country, and transacting or conducting any kind of business in this state, or any partnership or individual, or other association of persons whatever, who are now, or shall hereafter create, enter into, or become a member of, or party to, any pool, trust, combine, agree-ment, combination, confederation or understanding, whether the same is made in this state or elsewhere, with any other corporation, partnership, individual, or with any other person, or association of persons, to regulate, or fix in this state . . . the price or premium to be paid for insuring property against loss or damage by fire, lightning- or tornado, or to maintain said price when so regulated or fixed, or who'are now or shall hereafter enter into, become a member of or party to, any pool, agreement, contract, combination, association or confederation, whether made in this state or elsewhere, to fix or limit in this state . . . the price or premiums to be paid for insuring property against loss or damage by fire, lightning, storm, cyclone, tornado, or any other kind of policy issued by any corporation, partnership, individual, or association of persons aforesaid, shall be deemed and adjudged guilty of a conspiracy to defraud, and subject to the penalties as provided by chapter 145, of the Code of 1906.”

The bill also makes .party defendants certain resident agents of the insurance companies. The bill was filed on March 16, 1921. Among- other things, it charges that the defendant fire insurance companies, since the 1st day of January, 1921, have been actively engaged in the business of fire insurance in this state; that some of the resident-agents are representing some of the insurance companies, and other agents are representing other insurance eompanies, and together all of the agents named defendants represent all of the insurance companies doing business in this state; that on or about the 1st of January, 1921, the insurance companies and each of them entered into and became a party to an agreement and combination with each other and every other fire insurance company to regulate and fix within this state the price or premium to be paid for insuring property; that this agreement and combination is a conspiracy to defraud, and is contrary to chapter 115, Code of 1906, and the amendments thereto, and had the effect of and did injure the insuring public of the state.

Paragraph 7 of the bill alleges that on each and every day since January 1, 1921, the insurance companies and each of them have become-a party to an agreement and combination with each and every other insurance company to fix the price or premium to be paid for insuring property within the state, and constitutes a conspiracy to defraud under this law, and that this unlawful combination and agreement has continued to the time of the filing of the bill, and will continue' as long as the companies are permitted to do business within this state.

Paragraph S charges the manner in which defendants are carrying out this alleged unlawful agreement as follows : That there is within the state a corporation known as the Mississippi Inspection & Advisory Eating Bureau, chartered and doing business under the laws of this state, which corporation declares and fixes the rate to be paid by the public for insuring property from loss by fire or damage, and that each of the insurance companies did enter into and become a party to an agreement and combination with each other to charge the public the prices to be paid for insuring property in this state, whatever prices said bureau should fix; that this bureau would from time to time declare and fix what price or premium should be ■paid by tbe public to' the insurance companies throughout the state, and would so notify said insurance companies.

Paragraph 9 alleges that the insurance companies since January 1, 1921, have issued policies and collected premiums thereon, which premiums were those as prescribed and fixed by the bureau in conformity with the above-mentioned agreement, combination, and conspiracy to defraud, and that each of said insurance companies did contract and agree together and combine with each other to place the control of their business of so insuring property, to the extent of fixing the price or, premium to be paid by the public in the power of this rating bureau.

Paragraph 10 • alleges that these insurance companies did contract, agree, and combine with each other and every other insurance company by which other persons than themselves, their proper officers, agents, or employees, to wit, the said Mississippi Inspection &, Advisory Eating Bureau, did dictate and control and did have the power to dictate and cpntrol the management of their business in the matter of fixing the prices and premiums to be paid, and that this has continued up until the time of the filing of the bill, all of which constituted an unlawful combination and conspiracy against the interest of the people of the state.

Paragraph 11 alleges an agreement and combination among these insurance companies to maintain the price or premium to be paid for insuring property after the price to so insure had been determined and fixed by this bureau, and that each and every one of these insurance companies have fixed and maintained the prices and premiums as fixed and determined by this bureau in pursuance of this agreement.

Paragraph 12 alleges that these agreements, combinations, and conspiracies, and all acts done by the defendant insurance companies in pursuance thereto, were, and are inimical to the public welfare, unlawful and criminal conspiracies, and did and do now destroy competition in the matter of rates, and did have the effect of, and will have the. effect of and did injure, and will injure, the insuring public of the state, causing great damage to the public.

Paragraph 13 alleges the institution by the revenue agent of suits under these statutes against other insurance companies for alleged violations of these laws, and that the insurance companies sued by the revenue agent have left the state and ceased to do business therein, and that the companies herein sued have come into the state since that suit was instituted. There are other allegations in this paragraph not material to a decision of the case. It is then alleged in this paragraph that the present defendant insurance companies are seeking to evade' the provisions of the anti-trust laws of the state by refusing to subscribe to the information furnished by the Mississippi Inspection & Advisory Rating Bureau, but that they have obtained this information in an effort to evade the laws, but that they have bound themselves by an agreement to obtain this same information as to the hazards and risks, and all other information necessary to form the basis of a fire insurance contract, which really belong to and is furnished by this bureau; but to avail themselves of it they have appointed the same men as agents, who represented the old companies that have left the state, and through these agents procured the information and the rating provided by the bureau; and that they are now acting under the rules and regulations of this bureau, and have bound themselves in an unlawful agreement to be governed entirely as to the rates to be charged and all other things provided by said bureau; and that they are now using these rates and information, and are agreeing unlawfully to be bound in all the insurance business they are doing absolutely by the rates fixed by this bureau; and that they are actually engaged in doing business in a manner that does destroy competition in the matter of rates, which acts are inimical to the public welfare, unlawful, and are criminal conspiracies.

Paragraph 14 alleges that by getting possession of all the information furnished by this bureau and by getting possession of the rates fixed by the bureau, by appointing the agents of old companies who are in possession of this information, that the insurance companies did enter into and become a member of an agreement and combination with each other to charge the public for insuring property the price fixed by this bureau, and whatever price the bureau should fix.

Paragraph 15 alleges that none of the defendant insurance companies has any schedule of rates, but that the schedule of rates of each company is a text-book from which all rates as made by classifications, thé application of which is made to the various properties in the state .by the ra’temakers, showing all the risks attached to said property, and this schedule of rates, with all the information as to risks incident to the property, is contained in this text-book prepared by the Mississippi Inspection & Advisory Rating Bureau, and that none of said defendants are making or having made any physical examination of the property before taking any risks thereon, but all are acting alone upon the information furnished by the text-book of rates fixed by the bureau; and that all of the defendants, by agreement and combination, rely upon tbe information furnished by this text-book prepared by the bureau, and agreed to be bound by the schedule of rates fixed by the bureau; that none of these companies have any books or schedules, neither have they any rates other than those furnished by the bureau, but that they rely upon the text-book and rates and schedules fixed by the bureau.

Paragraph 16 alleges that the complainant is not informed of any express agreement on the part of the defendants authorizing the Mississippi Inspection & Advisory Rating Burean to fix any particular rate or premiums, and is unable to prove by any direct evidence any express agreement whereby the said burean is authorized to represent the defendants in fixing tbe rates, or is given authority by said companies to name the premium or rates for fire insurance in Mississippi, but avers that the continued and persistent use by the defendants of the uniform rates promulgated by the bureau violates the anti-trust laws of the state, and is sufficient to show an implied agreement on the part of the defendants to maintain the price or premiums as promulgated by said bureau, and from this implied agreement complainant charges that there arises an unlawful agreement to maintain rates. or the price of premiums to be charged, and violates these statutes.

Quite an elaborate answer was made by the insurance companies. In paragraph 6 they deny that, on or about the 1st day of January, 1921, they and each of them entered into an agreement and combination with each other and every other fire insurance company to regulate and fix within the state the price or premium to be paid for insuring property. They deny that any such agreement or combination was entered into.

Paragraph 7 denies that on every day since January 1st they became a party to an agreement and combination to fix the price or premium to be paid for insuring property within the state. In this paragraph this denial is also couched in these words:

“Your defendants absolutely and unqualifiedly deny that there was any such combination, agreement or conspiracy as that referred to in said bill of complaint.”

In paragraph 8 the defendants deny that they have carried out any unlawful agreement or combination whatever in the' manner and form as stated in paragraph 8 of the bill, copying therein for the purpose of denial the allegation of that paragraph of the bill. This paragraph relates to the agreements to intrust and the intrusting to the bureau of the matter of fixing the rates. They deny that they have ever subscribed for the services of the Mississippi Inspection & Advisory Eating Bureau, and deny that they have ever used the rates of this bureau, and deny that any of them became a member of any agreement or combination to charge the public the price to be paid for insurance fixed by this bureau.

In paragraph 9 the defendants deny that the premiums charged by them were those prescribed and fixed by this bureau in conformity iyith an agreement, combination, or conspiracy to defraud, and deny that the insurance companies did contract and agree together and combine with each and every other insurance company to place the control of their business of so insuring property to the extent of fixing the price or premium to be paid by the insuring public in the power of this bureau. They deny the allegations of section 9 of the bill as being false and untrue in every particular.

In paragraph 10 the defendants deny that each and every one of them did contract, agree, and combine with each other, by which other persons than themselves, their proper officers, agents, or employees, to wit, the Mississippi Inspection & Advisory Eating Bureau, to dictate and control, and did have the power to dictate and control, the management of their business in the matter of fixing the price and premiums to be charged. They deny any continuation, of any such alleged agreement. ,

In paragraph 11 they deny that each of them did enter into any agreement and combination with each find every other insurance company to maintain the price or premiums to be paid, as the price had been determined and fixed by this bureau, and deny that since January 1st and up to this time they have maintained the price or premium as fixed by this bureau, in pursuance of an agreement.

In paragraph 12 they deny any agreement, combination, or conspiracy between them, or any acts done by them as charged, and deny that there is any such agreement or combination as is inimical to the public welfare, unlawful or a criminal conspiracy, or that they entered into such combination or agreement so that as a result thereof such agreement destroyed competition in the matter of rates, and deny any continuance of any such alleged agreement.

Paragraph 13 admits the institution of a suit by the state revenue agent against other insurance companies, and denies matters not necessary to be here set out. It denies that these defendants have come into the state and are seeking to evade, or have evaded, the provisions of the anti-trust laws of the state by refusing to become subscribers and pay for the information furnished by the Mississippi Inspection & Advisory Rating Bureau, and de: nies that they have obtained the.same information in an effort to evade or defraud the insuring public of the state. It states that they did not subscribe to this bureau because the state revenue agent in his suit had charged that the securing of this information was a violation of the antitrust laws of the state. It denies that the defendants have bound themselves by an agreement to obtain this information as h basis for making an insurance contract. It denies that to avail themselves of this information they have appointed the same men as agents who were agents of the old.companies who have left the state; and denies, that they have ever procured the information provided by the bureau, and denies that they are now acting under the rules and regulations provided by this bureau; and denies that they have bound themselves in any agreement to be governed entirely as to rates to be charged by the bureau. They deny .that by employing these agents of the old companies which have left the state that they have come into possession of all the information to be derived from the bureau, and that they are now using- it, and deny that they have any agreements to be bound in all insurance business by the rates fixed by the bureau. They deny that the manner in which they are doing business in the state of Mississippi destroys competition, and deny that the rates charged by them are inimical to public welfare, or are unlawful, or a criminal conspiracy.

Paragraph 14 is in substance a denial of the corresponding paragraph in the bill in substance in the language of the allegation.

Paragraph 15 denies that none of the defendants have any schedule of rates. It. denies that the schedule of rates is the text-book from which all rates are made by classification-as contained in the textbook prepared by the Mississippi Inspection & Advisory Eating Bureau. It denies that none of these defendants is making a physical examination of the property before taking the risks, and denies that they are all acting alone upon the information furnished by the text-book of the bureau. It denies that they and each of them by agreement and combination rely upon the information furnished by the text-book prepared by this bureau, and denjes that they agreed to be bound by the schedule or rates fixed by the bureau. It denies that they are not mailing schedules of their own, In -short, there is a detailed denial in this paragraph of the allegations in the corresponding paragraph of the bill.

Paragraph 16 of the answer is immaterial.

Paragraph 17 is a denial by the defendants that they, or any of them, have subscribed to the rates or information furnished by the Mississippi Inspection &. Advisory Eating Bureau, or any other rating company, or that they agreed among themselves or with each other or with any other insurance company to use the said rates, information, or advice, furnished by said rating bureau in fixing rates on property insured in this state.

It is then admitted in the answer that the defendants have employed as their agent in the state many of the local agents of the old insurance companies which have ceased to do business here because these agents have established an insurance business, and it was therefore advantageous to these defendants to employ them. They aver that the old insurance companies were subscribers to the rates furnished by the rating bureau, and that these agents, employed by them are either in possession of These rates or are acquainted with them; that these rates were furnished to these agents by the old insurance companies to be used by the agents at their discretion, but under no instruction to use the same except for the information of the agents in writing policies and determining proper rates. It is then admitted that these agents after inspecting the various risks would use and adopt as the basis for fixing rates on policies for these defendants the rates, information, and advice promulgated by this rating bureau. The defendants deny that the use of these rates was authorized by them, but aver that the use of these rates, even if authorized by them, which in fact was not true, as a basis for fixing rates for insuring property, was in no sense a violation of the anti-trust laws.

The answer then sets out in detail' the object and purpose of the incorporation of the Mississippi Inspection & Advisory Rating Bureau and the manner in which the.information collected by it was used by the old-line • insurance companies, none of which is necessary to be considered for a determination of this case.

Without going further into the detailed statements of the answer it is sufficient to say that all of the material averments in the bill were denied in detail in the answer, the answer following as a rule with its denials the specified charges of the bill. It will be noted that the material allegations of the bill are twofold: First, that they (the insurance companies) agreed among themselves to allow the Mississippi Inspection & Advisory Rating Bureau to absolutely fix the price or premium to be charged for fire insurance within the state and to be bound by the rates so fixed by this bureau. It is contended' that the agreement to be absolutely bound by the rate fixed by the rating bureau was a delegation or turning over to this bureau of the conducting of its business in the matter of fixing its rates, and is alleged in the bill to be inimical to the public welfare, which it is claimed is a violation of subsections (h) and (i) section 3281, Hemingway’s Code.

Second, that the insurance companies agreed among themselves as to the price or premium which should be charged for fire insurance, which is prohibited by section 3282 of Hemingway’s Code. That either of these agreements Avould be a violation of the anti-trust statutes above quoted.

It Avill be noted that the bill alleges that the complainant is not informed of any express agreement by the defendants authorizing this bureau to fix these -rates/ but avers that the continued and persistent use of the rates of this bureau by the defendants is sufficient to show an implied agreement to maintain the rates promulgated by the bureau. The answer in explicit terms denies every character of agreement between the insurance companies as to the fixing of the rates among themselves, or a delegation of the power to fix these rates to this bureau. The cause was set down by the complainant upon bill and answer before the time had elapsed for the taking of testimony; consequently, we must take the denials, the averments, and the admissions in the answer as being true. Section 603, Code 1906 (section 363, Hem. Code).

In this answer every conceivable character and kind of an agreement, confederation, or combination, either directly to fix rates among themselves or to delegate to this bureau the power to fix these rates is positively denied. The admissions in the answer, which we have set out, taken most strongly against the defendants, are merely to the effect that their agents, after making a physical examination of the property to be insured, have used the rates promulgated by this rating bureau as the basis upon which to arrive at a proper rate of insurance; that these defendants- knew that these rates as promulgated by this bureau were in the hands of these agents, and knew that, these agents used these rates in determining what rate was to be charged. One of the material averments in the bill, which must be either admitted by the -answer or proved, is the fact of an unlawful agreement, either directly among the companies themselves, or-an agreement to absolutely delegate this power to this rating bureau and be bound by the rate established by the bureau. These agreements are denied specifically in the answer. One insurance company, in the absence of an agreement, could not violate this law by independently adopting as its rate of insurance the advisory rate of this bureau. This would not be an unlawful agreement with anybody. The fact that several insurance companies have adopted the rate promulgated by this bureau, where the answer specifically denies any agreement of any kind among them, or an agreement to delegate this rate-fixing power to the bureau, is in no sense an adminission of a violation of the anti-trust laws, but is an express denial of one of the necessary facts to be proven, namely, the agreement.

It is unnecessary to consider in this opinion what would constitute an unlawful agreement under these laws or the character of proof necessary to sustain such an allegation, because the allegation is- denied. Neither are we called upon in this opifiion to discuss these anti-trust laws. They have been learnedly and exhaustively discussed by this court in the cases of Fire Insurance Companies v. State, 75 Miss. 24, 22 So. 99; Railroad Co. v. Searles, 85 Miss. 520, 37 So. 939; Cumberland Tel. Co. v. State, 100 Miss. 116, 54 So. 670, 39 L. R. A. (N. S.) 277; Railroad Co. v. Crawford, 107 Miss. 355, 65 So. 462, L. R. A. 1915C, 250.

The lower court was correct in dismissing the bill and which decree is affirmed.

Affirmed.