Hardware Dealers Mutual Fire Insurance v. Glidden Co.

Background

A Wisconsin insurance company licensed to write fire insurance in Minnesota issued a standard-form policy covering personal property in the state. Minnesota law required that form and made refusal to use it punishable, including possible license revocation. After a fire, the insured appointed an arbitrator, the insurer refused to participate, an umpire was appointed, and the arbitrators awarded a sum. The insured sued to recover that award. The insurer argued the law forcing arbitration of the amount of loss violated the Fourteenth Amendment’s guarantees of due process and equal protection.

Reasoning

The Court asked whether the state could require arbitration to decide only the dollar amount of a fire loss. It held the right to make contracts is not absolute and that states may adopt reasonable procedures to enforce rights. The Court accepted that liability questions remain for courts while the statute substitutes a summary arbitration process solely for determining the amount of loss. It found a rational basis for the law, noted the presumption of constitutionality, and said the arbitration method can provide reasonable notice, a hearing, and prompt expert appraisal. The Court therefore rejected the insurer’s constitutional challenge and affirmed the state court’s judgment enforcing the award unless it is grossly excessive or tainted by fraud.

Real world impact

Insurers and policyholders in Minnesota must use the prescribed appraisal process to fix loss amounts in these standard policies. That process is intended to speed payments, rely on expert inspection, and avoid full court trials over the dollar value of damage.