Why is the case important?
An insurance company contracted to insure property within the Plaintiff state, Louisiana (Plaintiff) with a citizen of the state. The contract was formed in New York, but a notification of coverage was written in the Plaintiff state. The Plaintiff state’s constitution prohibited foreign insurance companies from doing business in the state if they were not incorporated in the state.
Facts of the case
“A Louisiana statute prohibited foreign (out-of-state) insurance corporations from conducting business in Louisiana without maintaining at least one place of business and an authorized agent in the State. Louisiana implemented the statute as an exercise of its police powers, intending to protect its citizens from deceitful insurance companies. Allgeyer & Company violated this statute by purchasing insurance from a firm based in the State of New York.The state trial court ruled for Allgeyer, finding the law violated the Due Process Clause of the Fourteenth Amendment.”
Is Article 236 of the Louisiana state constitution a violation of the Fourteenth Amendment of the Constitution?
“Yes. The statute as written does not provide due process of law because it prohibits an act that the Plaintiff had a right to do under the Constitution. The term liberty in the Due Process Clause embraces the right of the citizen to be free in the enjoyment of all his faculties
- to be free to use them in all lawful ways
- to live and work where he will
- to earn his livelihood by any lawful calling
- to pursue any likelihood or avocation, and for that purpose to enter into all contracts which may be proper, necessary and essential to his carrying out to a successful conclusion the purposes above mentioned. This is an improper and illegal interference with the conduct of a citizen’s right to contract and carry out the terms of the contract.
The Court held that a state is not allowed to prohibit its citizenry from forming contracts outside the state. It held that the fourteenth amendment guarantees a person to contract for insurance, thus the state cannot deprive a citizen of that right. Any state action to this effect is an illegal interference with the conduct of the citizen, even if the state is acting in the interest of health, safety or general welfare of its citizens.
- Case Brief: 1897
- Petitioner: Allgeyer
- Respondent: Louisiana
- Decided by: Fuller Court
Citation: 165 US 578 (1897)
Argued: Jan 6, 1897
Decided: Mar 1, 1897