State Versus Federal Jurisdiction

In the United States the general supervision of all forms of insurance is undertaken solely by the several state governments, and since many of the larger life-insurance companies transact business in all; or nearly all, of the states, there has long existed a strong movement in favor of supervision by the federal government under its powers to regulate interstate commerce. The United States Supreme Court, however, beginning with the famous case of Paul v. Virginia has repeatedly refused to declare aoa insurance contract an instrumentality of commerce, and has asserted the doctrine that "there is no doubt of the. power of the state (using that term as contrasted with the federal government) to prohibit foreign insurance companies from doing business within its limits. The state can impose such conditions as it pleases upon the doing of any business by those companies within its borders, and unless the conditions be complied with the prohibition may be absolute." In the absence of national supervision the entire oversight of the insurance business is relegated to the several state governments, and this situation, according to leading authorities, can only be changed by enabling Congress to legislate on the subject through an amendment of the federal Constitution. Under existing conditions, therefore, the several states can prohibit non-resident companies from making contracts within their borders, except upon such conditions as the states may prescribe, and it follows that a company doing business in many states will be subject to the supervisory control of numerous separate governments.