La Tourette v. McMaster

Background

La Tourette, a resident and citizen of New York, sought a South Carolina license to act as an insurance broker but could not meet a state law requiring brokers to be residents of South Carolina and to have been licensed insurance agents in the State for at least two years. He sued in a South Carolina court, arguing that the residency requirement violated the State Constitution, the privileges-and-immunities clause of Article IV §2, and the Fourteenth Amendment by denying him rights and due process. The Insurance Commissioner refused to issue a license, the State courts sustained a demurrer, and the case reached this Court.

Reasoning

The Court treated insurance as a business affected with a public interest and therefore open to regulation. It accepted the South Carolina Supreme Court’s reading that the law discriminates by residence and not by citizenship, meaning citizens who actually live in the State are eligible while nonresidents are not. The Court said resident brokers are easier to supervise and that the State may require competence and fidelity from brokers to protect insured people and insurers. Because the residency and experience conditions are tied to that regulatory purpose, the Court held they do not violate the federal Constitution.

Real world impact

The ruling affirms that a State may limit broker licenses to residents with in-state licensing experience, which can prevent out-of-state citizens from obtaining a broker’s license in that State. States may also require brokers to report transactions, permit inspection of books, and obtain solvency certificates for insurers, increasing oversight and administrative duties. Individuals and companies seeking to place insurance across state lines may face state-by-state licensing hurdles.