Clay v. Sun Insurance Office, Limited

PETITIONER:Clay
RESPONDENT:Sun Insurance Office, Limited
LOCATION:Dry Docks at Reed, WV

DOCKET NO.: 349
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 363 US 207 (1960)
ARGUED: Mar 22, 1960 / Mar 23, 1960
DECIDED: Jun 13, 1960

Facts of the case

Question

  • Oral Argument – March 22, 1960
  • Audio Transcription for Oral Argument – March 22, 1960 in Clay v. Sun Insurance Office, Limited

    Audio Transcription for Oral Argument – March 23, 1960 in Clay v. Sun Insurance Office, Limited

    Earl Warren:

    John Clay, Petitioner versus Sun Insurance Office Limited.

    Mr. Kelly, you may proceed with your argument.

    Robert J. Kelly:

    Mr. Chief Justice and may it please the Court.

    Yesterday, at the close of the presentation of Mr. Reese, Mr. Justice Frankfurter posed a question as to whether or not we thought the State of Florida would apply its statute of limitation.

    Felix Frankfurter:

    Did you say would — did you say wouldn’t?

    Robert J. Kelly:

    Would apply.

    Felix Frankfurter:

    My question was not whether it would, but it is has it done so?

    Robert J. Kelly:

    It has not done so in fact to an out-of-state contract.

    However, in the case of Hoagland versus Railway Express Agency, 75 So.2d 822, it’s in the reply brief, there the Court —

    Felix Frankfurter:

    75 Southern?

    Robert J. Kelly:

    Second, appears to have —

    Felix Frankfurter:

    Page?

    Have you got the page?

    Robert J. Kelly:

    822, appears to have applied the spirit of the statute that’s under discussion.

    Florida has a statute number 9506 which is a suit savings clause where a plaintiff wins in the lower court, loses on appeal, within one year he may bring a new suit.

    In the New York Shipping contract involved in that case, there was a provision that suits must be brought within two years.

    The Florida Supreme Court held that that contractual provision must give way to the Florida statute.

    So, they applied the statute, the saving statute of limitations to that situation.

    That is the only direct —

    Felix Frankfurter:

    Have you stated all the circumstances of the situation?

    Is this a contract made outside of the (Voice overlap) —

    Robert J. Kelly:

    This was a contract made as far as the —

    Felix Frankfurter:

    — outside of Florida?

    Robert J. Kelly:

    It was made outside of the State of Florida.

    Felix Frankfurter:

    By persons then outside of Florida, by non — at the time, a non citizen of Florida?

    Robert J. Kelly:

    No.

    This person was a citizen of the State of Florida, shipping — shipping goods into Florida.

    Felix Frankfurter:

    For me, that’s a very different story.

    Robert J. Kelly:

    I wanted to merely call your attention to the case si.

    Charles E. Whittaker:

    (Inaudible)

    Robert J. Kelly:

    That is correct.

    That’s my understanding of the case, sir.

    Charles E. Whittaker:

    (Inaudible)

    Robert J. Kelly:

    It is my understanding that it was outside of the total contract provision of two years in which two years had passed.

    Since the institution of the first suit in the opinions of the Circuit Court in this case they relied on apparently relied on three cases pointing out the policy of the State of Florida in connection with its particular statute of limitations.

    Those cases were respectably decided in, one in 1917, one in 1918.

    Only one of the three dealt specifically with the statute of limitations.

    That was decided in 1920 and dealt with this particular statute.

    This is in 84 Southern 171.

    It’s a Sovereign Camp, Woodman of the World versus Mignon.

    In that case, a foreign contract merely by delivery through the agent in Florida was held to be under the statute.

    The limiting provisions of the statute applied in that instance.

    Presently in Florida, it’s well known to — I’m sure the members of the Court we have a tremendous influx of population.

    We have persons coming into Florida that on quest we are bringing a great deal of personal property that will be covered and can be assumed by insurance policies of this nature.

    It is entirely possible that in once this company does business in Florida that one person may come from an area such as the Chicago area into Florida and at that time by a policy with this company — particular company.

    And nevertheless, next door of this individual in Chicago, the same coverage applies in Chicago based the frame as did Mr. Clay three years in advance comes into Florida.

    Both of them sustained a loss.

    They have two different, entirely two different limitation provisions as far bringing the suit.

    It seems somewhat unreasonable that those men should be differently situated before our Courts.

    Felix Frankfurter:

    May I ask you this question?

    Robert J. Kelly:

    Yes, Justice.

    Felix Frankfurter:

    As I understood to that, your associate say yesterday this company — this insurance company, the Sun Insurance Company is authorized to do business in Florida, is that right?

    Robert J. Kelly:

    They are licensed and authorized and are doing business in Florida.

    Felix Frankfurter:

    That is you can keep them out if you wanted to, but you allowed them to come in?

    Robert J. Kelly:

    They have registered and qualified with the Insurance Commission of the State of Florida and are presently doing business.

    Felix Frankfurter:

    Could you meet your problem in a very different way to changing the terms of the contract because of the terms of the contract are changed presently but you may change it in view of your local policy, that’s true isn’t it?

    Robert J. Kelly:

    I think that is the whole points of what was faced.

    Felix Frankfurter:

    Couldn’t you – couldn’t you deem with the problems very effectively by conditioning admission of this company or any other company it imply and doing business imply by a requirement that —

    Robert J. Kelly:

    I think that such a requirement and I think by legislation would be — would be correct.

    Felix Frankfurter:

    Is there any difficulty about that?

    Robert J. Kelly:

    I don’t think there would be.

    Felix Frankfurter:

    So, are we not?

    Robert J. Kelly:

    Presently we do not have such a situation.

    Felix Frankfurter:

    I understand that.

    All I’m suggesting is that Florida is hopeless or helpless in dealing with the problems which you just – (Inaudible)

    Robert J. Kelly:

    We are — that is exactly correct.

    We are not —

    Hugo L. Black:

    May I ask you, had Florida could’ve known — but the case of the Watts case which this Court decided and it would have to have it to legislation need to pass a law like that in order to get service on these people or to make — applies laws to the contract?

    Robert J. Kelly:

    Excuse me.

    Hugo L. Black:

    We had a case of Louisiana several years ago in which questions similar to this came up.

    How can anyone assume setting on this bench the legislature applied in view that anyone sitting on this bench would say that they were not doing this because they were not using the right language and none on which they did it.

    Robert J. Kelly:

    I am at loss to understand your question, sir, forgive me.

    Hugo L. Black:

    Well, I’m just wondering how the legislature of Florida could know would have to meet the condition that just an ineptitude from the bench?

    From my —

    Robert J. Kelly:

    I don’t — I don’t know how they suitable — I know —

    Hugo L. Black:

    I doubt about it and now I rather thought, maybe we have laid it to rest.

    Felix Frankfurter:

    But you read the Watson case, haven’t you?

    Robert J. Kelly:

    I have not.

    I’m not familiar with that case.

    Felix Frankfurter:

    Because that suppose Justice Black’s question and mine, I think.

    Hugo L. Black:

    There was a — there was an opinion by eight members, an opinion by concur and they approached the case quite differently.

    Robert J. Kelly:

    Well —

    Felix Frankfurter:

    May I suggest to you that in the Watson case, it arose in connection of the resident Louisiana citizen.

    Robert J. Kelly:

    What’s that?

    Felix Frankfurter:

    Which you haven’t got here.

    William O. Douglas:

    Has this man been a resident?

    Robert J. Kelly:

    This man is presently a resident, or was a resident at the time the loss occurred.

    Felix Frankfurter:

    Well, he’s a resident when the policy was taken.

    Robert J. Kelly:

    The policy where he was a resident of the State of Illinois.

    The facts are different.

    Felix Frankfurter:

    (Voice overlap) —

    Robert J. Kelly:

    The facts are — the facts are quite different.

    The McGee case, California case decided by this Court appears to be of some assistance to Florida as far as the denial of due process in the application of this statute to the out of the state conflict.

    We —

    Charles E. Whittaker:

    you have a question of due process here?

    Robert J. Kelly:

    Well, there — there has been a question of due process asserted by the — I believe in the opinion of the Circuit Court is whether the taking involved if there is a taking is a denial of —

    Hugo L. Black:

    Does the record show whether there was any question raised by the defendant in this case as to whether the statute of Florida applied?

    I see an answer which indicates that it might be unconstitutional, but is there one which raised the question and challenged the application of the laws.

    The statute applied on grounds that it didn’t cover this case?

    Robert J. Kelly:

    My answer to some of this case was subsequent to the petition for rehearing in the —

    Hugo L. Black:

    Who sat on the case?

    Who tried it?

    Robert J. Kelly:

    Justice — in the Circuit Court?

    Hugo L. Black:

    Yes.

    Robert J. Kelly:

    Judge (Inaudible) in the District Court.

    Potter Stewart:

    Where does she has live?

    Robert J. Kelly:

    In Miami, Florida, Southern District of Miami, but the — as the question of whether there’s a Florida statute should apply, we believe that it is the reasonableness of the change in the contract if that be what it can be called.

    The contract provision relates to the beginning of suit, our statute merely postpones the time frames.

    It does not destroy any of the substantive provisions so to speak of the contract.

    The McGee case indicated that under certain circumstances, it’s a context in the State were adequate that a reasonable taking, if that what it legally amounts to, is proper, a limited taking and it is the position of the State of Florida that the taking involved in this situation is reasonable when the fact of the loss occurring in Florida, the fact that the company is authorized and was authorized to do business, at the time they had issued the contract in Illinois, that the contracts used in Florida contained exactly the same provision as the one in Illinois, that the situation can exist where a man who purchases a policy in Florida from the same company ends up with a different — applying for appearance before the Courts than does the man who brings his personality becomes a resident of the State and brings a contract of insurance in his pocket (Inaudible) through the man.

    Thank you.

    Earl Warren:

    Well, Mr. Cotton.

    Bert Cotton:

    Mr. Chief Justice, may it please the Court.

    I would like to first, if I may, to address myself to the question put by Mr. Justice Black with respect to whether or not the Florida legislature would be in a position to be aware of the requirements found to be sufficient in the Watson case.

    The legislature of the Florida has two statutes as part of the Florida Insurance Law, wherein they reach out beyond the state borders and wherein in so doing, they have all of the requirements which were found in the Watson case, a full declaration of policy, a full declaration of the evil or problem to be dealt with and a positive assertion of the need and necessity and desire to reach out beyond state borders.

    I refer specifically to one — one of the statutes to which I refer is the very statute that this Court had before it in the McGee case, service on — on unauthorized insurers who send policies in or do things by mail.

    Florida has a complete statute probably word for word in respect to the statute that Your Honors have before you which was a California statute.

    I would like to point out further that Florida, its courts have never sought to give their statutes extraterritorial effect except for these instances to which I refer.

    There is a case decided by the Florida Supreme Court, a case involving a Florida statute which provides that if a person dies in the State of Florida, leaving life insurance, then there are certain restrictions on the manner in which the proceeds of that insurance maybe payable, must go to wife, children, or certain protection for the family.

    In that case, the insurer had procured his policy elsewhere, I believe in Alabama, some other state where there was no such restriction.

    Bert Cotton:

    He thereafter became a resident of Florida.

    He died in Florida and there was a dispute between those who would be entitled to the proceeds of the policy if the Florida statute applied and those who would be entitled to the proceeds if the designation made by the assured was valid.

    And the Court said very expressly that although the statute doesn’t have any — anything in it to say it applies only to life insurance policies issued in the State and although the statute says if any person dies in the State leaving insurance, this shall be the rule, nevertheless, it is the law of the place where the contract was made which governs and we have no right to extend our statute outside of state borders to attach itself to such contract.

    Felix Frankfurter:

    Let’s see if I understand it?

    I understand you to say that Florida has one — one provision for distribution of a deceased state.

    Bert Cotton:

    And under a life insurance policy.

    Felix Frankfurter:

    Under life insurance policy that a deceased who was a citizen or resident of — so far as —

    Bert Cotton:

    At the time of his death.

    Felix Frankfurter:

    At the time of time of his death had — was insured in a non-Florida company?

    Bert Cotton:

    Your Honor, I can’t say that it’s a non-Florida company.

    I’m quite sure that the company must have been authorized to do business in Florida, because it was sued in Florida.

    Felix Frankfurter:

    Under a contract made outside of Florida under a state law of that State which had a different policy or distribution?

    Bert Cotton:

    The state law or the state law — the policy was issued had no regulation.

    Felix Frankfurter:

    Had none?

    Bert Cotton:

    Had none and the designation of beneficiary which the insured had made.

    Felix Frankfurter:

    In the contract?

    Bert Cotton:

    In the contract, that’s right.

    Felix Frankfurter:

    That would’ve fallen under Florida law?

    Bert Cotton:

    Correct, correct.

    Felix Frankfurter:

    And — and your Court held what?

    Bert Cotton:

    The Florida Court held that —

    Felix Frankfurter:

    Florida Court, I beg your pardon.

    Bert Cotton:

    That the — that the statute did not apply and therefore, the insurer’s designation of beneficiary remained.

    It was not voided by the Florida statute.

    Felix Frankfurter:

    Although — although a contract made in further which such a designation of the beneficiary would’ve fallen because of the Florida statute?

    Bert Cotton:

    Correct, sir.

    Felix Frankfurter:

    Where is that case?

    Bert Cotton:

    Equitable Life Insurance Society against McRee, 75 Fla. 257, 78 So. 22.

    Felix Frankfurter:

    Well, that’s a — I think the Attorney General mentioned the case in 75.

    Robert J. Kelly:

    75, Southern Federal Circuit, sir.

    Felix Frankfurter:

    75 Federal Circuit — I beg your pardon.

    And this is 75 Fla.

    and — and what are the other?

    Bert Cotton:

    78 So.

    22.

    Hugo L. Black:

    Is the — is the chart in the Court here before us?

    Bert Cotton:

    Yes, Your Honor.

    Hugo L. Black:

    It’s not in this printed record.

    It’s in — I don’t see it in the record.

    Maybe it’s — that’s the reason I was asking you (Inaudible)

    Bert Cotton:

    Oh, I — I believe it is sir, I mean —

    Hugo L. Black:

    I thought part of —

    Bert Cotton:

    There are excerpts —

    Hugo L. Black:

    Yes.

    Bert Cotton:

    — from the chart page 25 and 26.

    Hugo L. Black:

    Now, where is the place where you raised the question about the Florida statute?

    If it was constitutional to apply, would not be applied in that way by Florida?

    Where did you raise that petition in the record?

    Bert Cotton:

    Well, that was raised in this fashion.

    I would submit, the answer —

    Hugo L. Black:

    I read the answer.

    Is all the answer in here?

    Bert Cotton:

    Yes, sir.

    Hugo L. Black:

    That you made?

    Bert Cotton:

    Yes, sir it is.

    Hugo L. Black:

    Is that the only object that you raised?

    Bert Cotton:

    So far as the —

    Hugo L. Black:

    So far as the state (Inaudible) of Florida was — is this applicability was confirmed and that somebody is constitutionally or the contract law.

    Assuming it applied — assuming that Florida law could go in, where did you raise the question that the Florida statute which was not as the Florida judge, Judge (Inaudible) held it to be applicable?

    Bert Cotton:

    Your Honor, I submit that that would have been raised —

    Hugo L. Black:

    I’m talking about (Inaudible) where was it raised?

    Bert Cotton:

    I say within the framework of this answer, of this very answer which alleges that it was a contract made in Illinois.

    Hugo L. Black:

    That’s right, it says there.

    Bert Cotton:

    In which event, I was — I would judge that – the balance would be a question of law as to whether or not the Florida statute would be held to apply to a contract made in Illinois.

    Hugo L. Black:

    I agree to that insofar as your challenge to applying Florida law is concerned.

    Where is your challenge, either there or in your appeal to the Court of Appeals or in your brief in the Court of Appeals argued as a matter of fact that even if Florida could apply, this statute didn’t govern?

    Bert Cotton:

    It was in the brief to the Court of Appeals.

    I cannot cite —

    Hugo L. Black:

    Was that the first time you raised it?

    Bert Cotton:

    No, it was raised below.

    Hugo L. Black:

    Where?

    It’s not in the record.

    I can’t find it in the record.

    Bert Cotton:

    Well, it is not the record and therefore, it would be raised in connection I believe that there was a motion for summary judgment where the entire defense was eliminated from the case the Court holding two fold that the Florida statute applied and that it could constitutionally apply and therefore the defense was not even litigated in the trial.

    It was out by the time the trial started.

    It’s not —

    Hugo L. Black:

    When you — when you appeal that the Court of Appeals, did you have to assign errors or give notes of the challenges you’re making?

    Bert Cotton:

    The appeal —

    Hugo L. Black:

    Under the rules in the Fifth Circuit, how do you do that?

    Bert Cotton:

    Your Honor I am unable to answer your question with respect to the rules of the Fifth Circuit.

    Hugo L. Black:

    Okay, did you state when you took the case up what the points were on which you challenged the judgment?

    Bert Cotton:

    That would — that was stated in several places.

    If Your Honor will give me one moment, I will —

    William O. Douglas:

    On page 7, you — your motion for new trial — you — you apparently don’t raise this point?

    Hugo L. Black:

    I asked because it seems to me that the point is being raised that you didn’t raise yourself.

    Well, I see — I do not see any place in the record where you raised that point.

    You’ve been asked questions about it here but I do not see where you raised it.

    Bert Cotton:

    All right, Your Honor, it is raised –

    Hugo L. Black:

    The Court could take it up of its own motion, it may well do so.

    Bert Cotton:

    Yes, sir.

    Bert Cotton:

    But I believe it is raised and I believed —

    Hugo L. Black:

    Where?

    Bert Cotton:

    Well, on page 7 of the transcript.

    There is the assertion that the law to be applied in regard to the clause is the substantive law of Illinois and not and the law of the forum.

    Hugo L. Black:

    That I understand, that’s raised, undoubtedly that is raised that the law of Illinois — you raised the question contract should be governed by the law of Illinois because that’s the constitutional point that you have.

    Bert Cotton:

    Well, Your Honor, I don’t believe that it is only the constitutional point.

    I believe sir that in raising the question that the law of Illinois governs, that necessarily raises the question of whether or not the Florida statute should be construed to apply to it.

    Not as matter of constitutional —

    Hugo L. Black:

    Well, have you ever put that anywhere in the record?

    Bert Cotton:

    Well —

    Hugo L. Black:

    — (Voice Overlap) include that?

    Bert Cotton:

    It is certainly in the brief to the Court of Appeals.

    It is very strongly argued.

    As a matter of fact, the Court of Appeals has a section in its opinion in which it discusses whether or not the Florida statute would be held to apply to an Illinois contract.

    Felix Frankfurter:

    You’ll be good enough to submit the reach that they submitted to the Court of Appeals —

    Bert Cotton:

    Sure sir.

    Felix Frankfurter:

    — and decided what to do with it.

    Hugo L. Black:

    And if you have any other part of the record that show you ever raised this question, if you did raise it in the brief before the brief, will you include that you and your adversary, get it — can some way to us so I can see where you raised that question?

    Bert Cotton:

    Certainly, sir.

    Now, with respect to the basic question of whether or not the interest of the State of Florida in this contract in relation to the — its status of an Illinois policy or an Illinois contract was concerned, I would like to call Your Honor’s attention to the following.

    Aside from the fact that the policy was issued and delivered in Illinois and the full premium paid in Illinois and the insured was at that time a resident of Illinois, we have the following things.

    Under Illinois — under the Illinois Insurance Code, this form of policy must be filed with the Insurance Commissioner, must be approved by the Insurance Commissioner and the issuance of any policy of a different form would be illegal and a violation of Illinois law.

    It’s fully controlled both as to form and as to rates by the filings to the Illinois Commissioner.

    The plaintiff, Mr. Clay was a resident of Illinois.

    Therefore, this was not a matter of this company choosing issue policy in Illinois.

    It had no choice but to issue this policy because that’s what the law of Illinois required.

    The premiums attached in Illinois.

    The honorary premium reserves, this being the policy issued in Illinois are governed by the law of Illinois.

    Loss reserves are subject to control, subject to review by the Illinois Commissioner.

    At the time the policy was issued, Mrs. Clay owned the residence which is named as the residence of the assured.

    Bert Cotton:

    They are attached to the policy of fine arts writer which covers six paintings.

    The writer says that these paintings are covered for the full amount of insurance in that place and for only 10% elsewhere.

    Not one single act occurred after the assured move from Illinois to Florida.

    No endorsements, no premiums, no contact whatever, nothing.

    We tried to the interest of Florida and we find that all we have is that after the policy attached and if I might to address for a minute say, “Mr. Reese said that they moved shortly after the policy was taken out, and it was probably two or three months.”

    Well, the case can’t be controlled by whether three months or two years.

    It was sometime during the policy term that they moved.

    At the time of this loss, they had some — they had property in Florida.

    They also had property elsewhere.

    This is all movable property.

    These are all personal property.

    As Mr. Justice Stewart asked yesterday about the bank that this covers worldwide, it covers worldwide on property that had no situs just as in the Delta & Pine case this Court pointed out that what was insured there had no situs.

    It would cover all of them.

    Now, with respect to Delta & Pine and its application to this case, there were more reasons in Delta & Pine for giving Mississippi the right to have its statute reach out to a contract made in Tennessee than there are in this case.

    In Delta & Pine, the insured was a resident cooperate — was a cooperation of the State of Mississippi at the time that the policy was issued.

    It happened to have its principal place of business in Tennessee and that’s where it happened to get the policy, but the policy or bond covered employees in Memphis and employees in five named cities in Mississippi at the time it was issued.

    The fact that the treasurer who was in the home office in Memphis then moved when the company moved its main office to a state of incorporation back to state of incorporation was held by this Court to be insufficient.

    So, we have a policy issued to a resident corporation of Mississippi covering property or covering people or activities in Mississippi at the time of issuance and nevertheless, as the Court held that the contacts of Mississippi were inadequate.

    Now, we contrast that with the policy and the principles which underlie the Watson Case.

    In the Watson Case, where you have as this Court pointed out an interstate business, a business that goes all over the country, it’s only home permanence (Inaudible) consequently when the Gillet Company was negotiated — or when the Gillet Company procured its policy with the employers’ liability in Massachusetts or Illinois whichever State is the one that was the site of the contact, there came into being a contract which at that very moment was of interest to the State of Louisiana because Tony was sent into Louisiana and people in Louisiana might be injured.

    And the State of Louisiana had a very manifest interest in the protection of its citizens because they might have to travel to Massachusetts to sue the Gillet Company if they were injured.

    This Court observed that the statute was a part of an overall and comprehensive insurance law that it made it very clear dealing with an evil and it was seeking to overcome the evil.

    We tried to the statute involved in this case.

    It’s been one of the sections of the Statute of Limitation since 1913, unchanged since 1913.

    In the Insurance Commissioner’s — before the Insurance Commissioner’s compilation of the laws of Florida affecting insurance, a booklet which includes all of the insurance code and many other laws affecting insurance, you do not find this section.

    The manner of the strong public policy is to some extent negated by the fact that pursuant to a Florida Statute which authorizes the Insurance Commissioner to issue pamphlets and booklets and to distribute them to the public and to the governor and the members of the cabinet and authorizes there being in question and to form for the education of agents for the justice and what have you, there appears under the Fire and Allied Alliance which is the kind of policy we’re talking about here a question, “What is the limit of time for the bringing of suit on a policy?”

    Answer – 12 months from the occurrence of the loss.

    Now, we are criticized by counsel for the petitioner and by the Attorney General for citing a — a publication issued by the Insurance Commissioner saying that doesn’t make the law and Insurance Commissioner that doesn’t make the policy.

    We do not claim that this shows what the law of Florida is.

    We claim only that if they were a strong public policy in the State of Florida against one year suit clauses, then most certainly, the man charged with the administration of the Insurance Law of Florida certainly would be the one to know about it and to state it in an educational pamphlet on which Florida adjustor was supposed to be governed and to learn their trade.

    Earl Warren:

    Do they have all the statutes of limitations in that book that affect — that could affect insurance?

    Bert Cotton:

    In this booklet —

    Earl Warren:

    Yes.

    Bert Cotton:

    — issued by the commissioner?

    Not the limitations, but they do have these things which do indicate that it was drawn in reference to the Florida insurance laws.

    Florida has a value policy law which of course is different from the provisions of the New York Standard Fire Policy which has been adopted by Florida.

    There’s a special reference in the value policy law.

    Florida has another statute to similar import that you must collect insurance for the amount on which you pay the premium, that’s mentioned.

    Earl Warren:

    That’s insurance law and nothing else?

    Bert Cotton:

    Yes, sir.

    Earl Warren:

    But these other ones are general statutes which could affect the insurance or any other kind of contract I think?

    Bert Cotton:

    The statute is very general and —

    Earl Warren:

    All right and what I wanted to ask was, does that booklet that the Insurance Commissioner puts out include all of the general statutes of limitations that could under any conceivable situation applied to insurance or does he purport put in there only those limitations that are directed at the insurance?

    Bert Cotton:

    Your Honor, I don’t believe that I can reliably answer that because —

    Earl Warren:

    No, it’s all right.

    I thought — I thought you might know.

    I just – it doesn’t make the difference.

    Bert Cotton:

    Well, I want to say that the pamphlet covers many things, disability insurance and life insurance and we did not study it for that purpose so I cannot answer this question.

    Now, the question of whether or not the one year suit clause has been evil, whether or not it is something which creates a problem on which the State should have or can have and in this case we say Florida did not have any positive opposing policy.

    The New York Standard of Fire Insurance Policy since the first addition back in 1883 has always contained the one year suit clause.

    The latest version of it which is the 1943 Standard Policy contains the — in substance the same clause requiring the suit be brought within one year from the inception of the loss, incidentally a harsher provision than this one because this one says one year from discovery.

    I mean, that’s the delay and discovery that is not something that prejudice will be assured.

    The New York Standard Policy is adopted in 42 states and in the District of Columbia — I’m sorry, 46 states and the District of Columbia, as is, without a change.

    In 42 states — I’m stating it wrong, 46 states but in 42 plus the District of Columbia, there was no change as to the one year suit clause.

    In four of the States, they’ve adopted longer limitation, 15 months in California, two years in two of the other States.

    It’s been recognized in the opinions of courts and recognized by Insurance Commissioners that the longer the time to sue, the longer the necessity for maintaining reserves and they snowball because of the number of losses reported only a fraction of thereafter pursued for any one of the number of reasons.

    If — Kentucky has a 15-year statute of limitations on contract.

    Kentucky happens to be a State by the Court which held that its statute — its invalidating statute does not apply to contracts made elsewhere.

    But, if you have reserves piled up one on top of another, year after year, you reach a point where your reserves make the company insolvent as far as its balance is concerned and the only remedy for maintaining a solvent position would be the increase of premiums.

    And so, there is an overall public interest in seeing to it that there is some reasonable limit on the duration of time for which a reserve has to be maintained.

    Bert Cotton:

    And so, for that reason, we find that 42 states plus the District of Columbia have accepted the one year limit as a proper and reasonable limit.

    Felix Frankfurter:

    May I ask you this question, Mr. Cotton?

    There are two limitations in policies, aren’t they?

    There is limitation on — limitation I am using the word loosely and not on the statute on the limitation then which one, the requirement is to give notice within definite period.

    Bert Cotton:

    That’s true.

    Felix Frankfurter:

    And the other is the state statute of limitation or — or — one requirement — limitation of time for giving notice of the injury or loss.

    Two, the requirement of the limitation of time within which suit must be brought.

    Bert Cotton:

    That’s true, sir.

    Felix Frankfurter:

    Now, does this — are both relevant — are both considerations relevant to or do they clear part in either the fixation of the premiums or the requirement of the reserves or do they fulfill — are they directed to different functions?

    Bert Cotton:

    They are —

    Felix Frankfurter:

    I can see the notice of the — of the injury — of an injury or loss that you may witness, but it may not get stale et cetera, et cetera.

    Now, are those what — what is the bearing of those two considerations?

    What are the — what is the bearing of those two considerations on what might be called and I am about to use the word “legitimate interest” as against trapping the unwary by having short — short notices?

    Bert Cotton:

    They are related in many respects although in certain respects, they perform different functions.

    They are related in this sense that immediate notice to enable prompt investigation before the facts get stale and witnesses are unavailable or witnesses die is tied-in with the requirement that the suit be brought on time because of same considerations applied in the suit clause.

    I would assume that with respect to the limitation on the time to sue, that limitation controls the time when you can slide off your reserves whereas the notice controls the time when you start — when you put the reserve on them in the first place so that they move in opposite directions so to speak to that extent, but the opinions that have spelt the same kind of problem.

    Felix Frankfurter:

    Does the fixing of the scale of premiums (Inaudible)?

    Bert Cotton:

    Well, the premiums are in an overall — on an overall basis affected by the length of time on which — for which you have to maintain your reserves.

    If your reserves pile up, your premiums have to go up in order for you to be solvent.

    So they — they are affected and it is for that reason that you maintain that the one year limitation is not a trap for the unwary.

    As a matter of fact, I should like to point out this.

    The one year limitation is easily waived.

    The courts have found all the time, if there is any conduct on the part of the insured which misleads the insured so that it doesn’t bring suit in time the floor – it is waved.

    If there is any impossibility which prevents the insured from bringing the suit in time, the insured is not thus precluded from his lawsuit.

    This is not a trap.

    This is not anything but an attempt in line with what I submit has been the generally policy of the Boards to not to expand the time when matters remain open and undisposed of, but to contract that period to the extent possible.

    Can I ask you a question?

    Bert Cotton:

    Yes, Sir.

    Was any suggestion made by either of you and either of the two courts below that party should be readmitted to the state courts to get a ruling on the question of state law?

    Bert Cotton:

    No, Your Honor no — no suggestion was made by either side.

    Hugo L. Black:

    Now, you were stating about the number of States that have laws — I didn’t quite understand.

    You say how many have — how many States have law and that do not have laws that provide that state statute of limitation shall not be shortened by the company’s contract?

    Bert Cotton:

    We —

    Hugo L. Black:

    I thought you stated it, maybe the other —

    Bert Cotton:

    Well, we have the analysis sir to this extent.

    In the appendix to our brief, we have dealt with the Statutory Fire Policy because that is the policy which has nationwide acceptance, nationwide contacts so that we can make a survey desk with the Standard Fire Policy.

    Out of the 46 States plus the District of Columbia which have adopted the New York Standard Policy either by statute or by insurance — the Insurance Commissioner, 42 have adopted it without any statutory change.

    Certain of them have special provision for increased time.

    We have not attempted to catalogue those States which have provisions of general nature invalidating these when you’re —

    Hugo L. Black:

    These are fire — these are fire policies.

    Bert Cotton:

    These are fire policies sir which have the —

    Hugo L. Black:

    When you look it up, I had an idea that frankly all of the States bar contract to the clauses and held in act that might try to short the state statute of limitations.

    Am I wrong in that?

    Maybe I am I —

    Bert Cotton:

    Well, Sir, I — I would not —

    Hugo L. Black:

    Did you look it up by the —

    Bert Cotton:

    No, no, not with respect to just really policies.

    As a matter of fact, Florida has in its own insurance code, a shortening of the — of their own statute of limitations on disability.

    Hugo L. Black:

    But that’s not attached —

    Bert Cotton:

    By statute, Sir in the insurance code.

    Felix Frankfurter:

    Do you mean that they’ve got a shortest statute limitation for disability than the fire lawsuit?

    Bert Cotton:

    Yes, sir.

    Earl Warren:

    Mr. Cotton, in stating the facts, you — you rarely stressed I thought the fact that the property was in Illinois at the time that the contract was made.

    I was going to ask you this.

    In a worldwide policy of this — of this kind, does it make any difference to the company whether the property is in Illinois or in the neighboring state or at some distance?

    Bert Cotton:

    In this policy, although it is worldwide and would cover loss no matter where it occurs, there is a requirement on the face of the policy that the insured state what portion of its property is in the place of principle residence which is the address stated in the policy.

    The premiums — and this is not on the record, Your Honor as I am —

    Earl Warren:

    Yes.

    Bert Cotton:

    — stating this without identifying the record, the premiums are determined by rating bureaus dependent on the particular risks in the State where the policy is issued.

    This, despite the fact that if a man moves from the place of issuance to another resident — in another State, the company has no way of doing anything about it.

    Earl Warren:

    Right, but they would write — they would write the insurance policy of this kind if the property had been in the State other than Illinois at the time.

    Bert Cotton:

    But if the insured are resident of Illinois and —

    Earl Warren:

    (Voice overlap) —

    Bert Cotton:

    — yes.

    Thank you.

    Earl Warren:

    Thank you, Mr. Cotton.

    Tom C. Clark:

    They — they moved property under Illinois’ authority?

    Bert Cotton:

    They moved some of the property.

    The record shows that at the time of the loss, they had property in somewhere other than Florida than so where that they had property other than in Florida at the time.

    Tom C. Clark:

    Oh — it (Inaudible) the suit is in the Florida (Inaudible)?

    Bert Cotton:

    Yes, sir, personal property.

    Tom C. Clark:

    And then, what (Inaudible)?

    Bert Cotton:

    No, sir they were not.

    Tom C. Clark:

    They didn’t have the right to say?

    Bert Cotton:

    They didn’t have to do anything and in the brief of the Attorney General, it is stated that the company knew that they had moved.

    I think the statement reads too much into a very brief bit of testimony.

    The — there was a general agent in Chicago to whom this policy had been issued to Mr. Clay while he was a resident of Chicago.

    This general agent carried all of Mr. Clay’s insurance and various claims and it had nothing to do with his company.

    The question is, “Did you get in touch with Bartholomew after — after you moved to Florida?”

    The answer is yes, but we don’t know when.

    That may have been after the loss occurred.

    This may have been in connection with the policies of some other company have nothing to do with this defendant.

    That’s all there is all the requirements that the company be notified.

    Tom C. Clark:

    (Inaudible)

    Bert Cotton:

    I don’t believe so, unless it has to do with the notification of loss after the loss occurred.

    I think the only sentence with respect to anything other than notification of loss is the one question, “Did you get in touch with them after you moved to Florida?”

    The answer is yes.

    Earl Warren:

    Thank you, Mr. Cotton.