Allied American Mutual Fire Insurance v. Commissioner of Motor Vehicles

Hammond, J., delivered the opinion of the Court. The appellants, two mutual insurance companies that write automobile liability insurance, and an insured of each, brought a bill for a declaration that Ch. 836 of the Acts of 1957-—the Unsatisfied Claim and Judgment Fund Law—was unconstitutional and void and for an injunction against the officials named in the Act to prevent its enforcement and administration. The chancellor found the law constitutional and denied the relief sought, and this appeal followed. The Act was passed to meet what the Legislative Council’s Committee on Motor Vehicle Insurance called the “growing and serious social problem stemming from the innocent victims of motor vehicle accidents who were unable to get redress from the other (and uninsured) parties to accidents.” Although the Council’s Committee recommended passage of a compulsory liability insurance law, it said: “In theory, the unsatisfied judgment fund would offer the greatest assur ⁶¹² anee of such recovery.” Report to the General Assembly of 1957, Special Committee Reports, pp. 391-392.

The General Assembly did not follow the Committee’s recommendation but passed the Unsatisfied Claim and Judgment Fund Law as a substitute. The law provides for a fund to indemnify the innocent victims of financially irresponsible owners and operators of motor vehicles. The fund was to be accumulated from the fee of $1.00 required in 1958 from the registrant of each insured motor vehicle in Maryland. Thereafter, registrants of insured motor vehicles are not called upon for any contribution.

In 1958 registrants of uninsured motor vehicles were required to pay a fee of $8.00 to the fund. In 1959 every insurer permitted to write automobile liability insurance in Maryland is required to contribute to the fund a sum equal to one-half of one per cent of its premiums on liability policies covering motor vehicles principally garaged in Maryland. On December 30th of each year, beginning with 1959, the Commissioner of Motor Vehicles is to determine whether there is a need for additional contribution to the fund in the ensuing year. If he finds such a need, he is to assess the estimated deficiency against the insurers and the registrants of uninsured motor vehicles.

The insurers are required to pay annually one-half of one per cent of the total premiums of liability policies insuring motor vehicles in this State, or ten per cent of the estimated deficiency in the fund, whichever is less. The remaining ninety per cent of the estimated deficiency is to be assessed to and paid by registrants of uninsured motor vehicles, in equal shares. The fund is administered by a board of six, the Commissioner of Motor Vehicles, the Insurance Commissioner, and representatives, appointed by the Insurance Commissioner; of each of four classes of insurers. Residents of Maryland or the owner of a motor vehicle registered in the state, or residents of any other state or a province of Canada which has a similar reciprocal law, may claim from the fund.

When one entitled to make claim suffers damage to his property or injury to his person under circumstances which may entitle him to indemnification from the fund, he must give notice of the ⁶¹³ intention to file a claim and supply information about the accident, injury and damage. The board that administers the fund is not authorized, or given a staff, to investigate claims to protect the fund from improper payments. The board is to assign claims for investigation and defense to insurers in proportion to their respective premium writings subject to assessment under the Act. If the claimant files suit against a financially irresponsible tortfeasor, the defendant is represented, and the fund defended, by counsel selected by the insurer to whom the claim has been assigned.

The defendant must cooperate with such counsel, but he may have counsel of his own choosing because he is required to reimburse the fund for any payment it makes to satisfy the judgment against him. Until he does reimburse the fund, he may not register or operate a motor vehicle in this state. There are various provisions with respect to settlements, safeguarding payments from the fund, default actions, cases in which the identity of the tortfeasor is unknown, and criminal penalties for violations of the law. The appellants’ principal arguments are that the title of the Act violates Sec. 29, Art. 3 of the Constitution of Maryland, that the Act, in compelling insurers to contribute money and to render services at their own expense and without compensation, deprives them of their property without due process of law under the Fourteenth Amendment, Art. 23 of the Maryland Declaration of Rights, and Art. 3, Sec. 40 of the Constitution of Maryland, and that the Act is a denial of the equal protection of the laws contrary to the Fourteenth Amendment.

The title of the Act is in the form currently generally used. It recites that there are to be added thirty new sections to Art. 66y2 of the Code, giving their numbers and their place of codification in the article, and that it is an act providing: “for the establishment, maintenance, and administration of an Unsatisfied Claim and Judgment Fund for the payment of damages for injury to or death of certain persons and for damages to property arising out of the ownership, maintenance and use of motor vehicles in this State in certain cases; ⁶¹⁴ and relating generally to said Fund and to the financial responsibility laws of this State.” The appellants say that nowhere in the title do the words “insurance,” or “insurer,” or “insurance company” appear, although such companies are required to contribute monies and services to the fund; therefore, there is nothing to put such companies on notice as to the imposition of these burdens; and, in addition, the title is misleading in that it indicates a narrower scope than the body of the act is made to encompass. Chief reliance is put on Culp v. Comrs. of Chestertown, 154 Md. 620 . We think the Culp case is clearly distinguishable.

There the title of the act was misleading because it stated that the municipal improvements for which it provided were to be financed by a bond issue. The act levied an assessment on owners of adjoining property. The title stated one source of revenue; the body provided for an additional source. There is no such affirmative infirmity in the title of the act before us.

The commands of Sec. 29 of Art. 3 of the Maryland Constitution that every law shall embrace but one subject, which must be described in the title, have been said by this Court to be designed to prevent the combination in one act of several and distinct incongruous subjects and to require that the Legislature and the people of the state be fairly advised of the real nature of pending legislation. State v. Norris, 70 Md. 91, 95; Neuenschwander v. Wash. San. Com., 187 Md. 67, 78-80.

This Court has never leaned to a narrow interpretation of the constitutional requirements but has been of a disposition to uphold rather than defeat the enactment wherever possible. Baltimore City v. Flack, 104 Md. 107, 118 ; Board of Education v. Wheat, 174 Md. 314, 318 . Numerous cases have said that while the title must indicate the subject, it need not give an abstract of the act nor mention the means by which the general purpose is to be accomplished, although it must not be misleading. Painter v. Mattfeldt, 119 Md. 466, 474 ; Pressman v. State Tax Commission, 204 Md. 78 .

It has been held that titles need do no more than indicate the precise article and section of the Code in which the new legislation appears. Dean v. Slacum, 149 Md. 578, 580 . Since ⁶¹⁵ the description in the title which follows the codification language fairly apprised the Legislature and the people of the purpose of the Act, and was not misleading, it is not fatal that the means and methods by which the legislation is to be carried into effect are not spelled out. Baltimore City v. Flack, supra; Bond v. State, 78 Md. 523, 525 ; Oursler v. Tawes, 178 Md. 471, 487 ; Baltimore v. Reitz, 50 Md. 574, 579 ; Benesch v. State, 129 Md. 505, 510 .

The Supreme Court of New Jersey recently sustained the Unsatisfied Claim and Judgment Fund Law of that state against an attack on its title. The New Jersey Constitution has the same provision as Maryland that every law shall embrace but one object and that shall be expressed in the title. The title of the New Jersey Act is not distinguishable from the title of the Maryland Act, and the New Jersey Court held that the title complied with the constitutional requirements, and said: “A title to an act need not be an index to all that it contains and need not set forth all of its exclusions or conditions. It is a label and need only set forth its object, not its product.” Robson v. Rodriquez, 141 A. 2d 1, 7 .

We find no constitutional infirmity in the title of the Maryland Act. Appellants do not seriously argue that the purpose of the law, to mitigate hardships caused by highway accidents for which uninsured and impecunious motorists are liable, is not a proper public purpose. They do not as seriously challenge the imposition of the monetary payments required by the Act as they do the requirements for services to be performed. They say, assuming the proper public purpose of the law, the means invoked by the Legislature to accomplish the purpose, that is, the requirement that the insurers investigate and defend claims upon the fund, impose an unconstitutional burden upon them which amounts to the taking of property without just compensation, and that this cannot be done under the police power but only under the power of eminent domain.

We consider the questions raised on this aspect of the case in the light of the fact that the Fourteenth Amendment, Art. 23 of the Maryland Declaration of Rights, and Art. 3, Sec. 40, of the Maryland Constitution, have been said to have the ⁶¹⁶ same meaning and effect in reference to an exaction of property; Leonard v. Earle, 155 Md. 252, 260 ; and, therefore, the decisions of the Supreme Court on the Fourteenth Amendment are practically direct authorities. Home Utilities Co. v. Revere, 209 Md. 610. We think insurers have no sound ground on which to challenge the right of the State to levy the small percentage of the Maryland premiums they are required to pay annually to the fund. It is clearly established that the State may raise funds by taxation to expend for general welfare, and it is for the Legislature and not the taxpayers or the courts to choose the methods and subjects of taxation.

It is no proper objection to a scheme of taxation that the benefits paid and those to whom they are paid are unrelated to the persons taxed and the amount they pay, or that those who have to pay may not have contributed to the conditions requiring the tax and may not be benefited by the expenditure of the tax money. If the tax qua tax is good and the purposes for which it is laid would sustain a separate appropriation from the general funds, neither the tax nor the purpose is invalidated by being associated in the same legislation. Carmichael v. Southern Coal Co., 301 U. S. 495 , 81 L. Ed. 1245 . The right to impose the obligation the Act puts on insurers to supply the labor and skill to investigate and defend claims must rest on and be justified as an exercise of the police power, if it is to be valid.

Essentially the police power of a state is no more than the power to govern. Baltimore Gas Co. v. State Roads Comm., 214 Md. 266, 279 ; Capital Transit Co. v. Bosley, 191 Md. 502, 514 . The power justifies regulations designed to promote the public convenience or the general prosperity, as well as those to promote public safety, health and morals, since it extends to the satisfying of great public needs and the promotion of the general welfare. Maryland Coal and Realty Co. v. Bureau of Mines, 193 Md. 627 ; Bacon v. Walker, 204 U. S. 311 , 51 L. Ed. 499 ; C. B. & Q. Railway v. Drainage Comm’rs, 200 U. S. 561 , 50 L. Ed. 596 ; Nebbia v. New York, 291 U. S. 502 , 78 L. Ed. 940 .

The current thinking of the Supreme Court would seem to be illustrated by Williamson v. Lee Optical Co., 348 U. S. 483 , ⁶¹⁷ 99 L. Ed. 563 , where the Court, in effect, held that state legislation, imposing regulations under the police power to correct an evil at hand, is valid if it might have been thought by the legislature that the particular measure was a rational way to correct it. The due process clause does not, any more than the contract clause, inhibit a state from insisting that all contract and property rights are held subject to the fair exercise of the police power. Atlantic Coast Line v. Goldsboro, 232 U. S. 548, 558 , 58 L. Ed. 721 . The exercise of the power is fair when the purpose is a proper public one and the means employed bear a real and substantial relation to the end sought and are not arbitrary or oppressive.

The Supreme Court said in Erie R. R. Co. v. Williams, 233 U. S. 685, 700 , 58 L. Ed. 1155 : “It is hardly necessary to say that cost and inconvenience (different words, probably, for the same thing) would have to be very great before they could become an element in the consideration of the right of a State to exert its reserved power or its police power.” There are many holdings that enforcement of uncompensated obedience to a regulation passed in the legitimate exercise of the police power is not a taking without payment of just compensation. N. O. Public Service v. New Orleans, 281 U. S. 682, 687 , 74 L. Ed. 1115 ; Chicago, Burlington & Q. R. Co. v. Chicago, 166 U. S. 226, 255 , 41 L. Ed. 979 ; Noble State Bank v. Haskell, 219 U. S. 104, 110 , 55 L. Ed. 112 ; Capital Transit Co. v. Bosley, supra, at page 514 of 191 Md. Most governmental regulations of business necessarily cause inconvenience, effort and financial burdens for which no compensation is, or need be, paid. These uncompensated efforts are a part of the cost of participating in the complications of modern life and society. They may reduce the net return of the enterprise but, of itself, that brings about no constitutional weakness in the legislation that demands them.

Day-Brite Lighting, Inc. v. Missouri, 342 U. S. 421 , 96 L. Ed. 469 . The general principles have been applied concretely to facts and in areas analogous to those with which we are concerned. There can be no doubt that the providing of adequate roads and of measures for the safety and protection of ⁶¹⁸ those who use the roads are primary functions of government. Similarly, the business of insurance, as one affected with a public interest, is subject to complete regulation by government.

Osborn v. Odin, 310 U. S. 53, 66 , 84 L. Ed. 1074 . The state can use to the fullest its power to achieve desirable ends in both areas. The case of California Automobile Assn. v. Maloney, 341 U. S. 105, 109-110 , 95 L. Ed. 788 , both illustrates this proposition and substantially controls the case at bar, as we see it. There an automobile liability insurer refused to obey, as void under the due process clause, a California statute requiring insurers to write liability policies on uninsured motorists who had to have such policies in order to retain their drivers’ licenses.

It urged that the statute was invalid because it commanded insurers to enter into contracts against their will; it forced on insurers contracts with abnormal risks from which extraordinary financial loss might be expected; and it required the challenging insurer, which had selected only the best risks with the most favorable loss ratio and consequent low premiums, to alter its policy so as to insure more doubtful risks. The Supreme Court held that the insurer could be excluded from the state unless it obeyed the statute and accepted its proportionate share of undesirable risks. The Court said: “The case in its broadest reach is one in which the state requires in the public interest each member of a business to assume a pro rata share of a burden which modern conditions have made incident to the business. It is therefore not unlike Noble State Bank v. Haskell, 219 U. S. 104 , which sustained a state law assessing each state bank for the creation of a depositors’ guaranty fund.

What was there said about the police power—that it ‘extends to all the great public needs’ and may be utilized in aid of what the legislative judgment deems necessary to the public welfare (p. Ill)—is peculiarly apt when the business of insurance is involved—a business to which the government has long had a ‘special relation.’ * * * Here, as in the.banking field, the power ⁶¹⁹ of the state is broad enough to take over the