Paul v. Virginia

Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869), is a U.S. corporate law decision by the United States Supreme Court. It held that a corporation is not a citizen within the meaning of the Privileges and Immunities Clause. Of greater consequence, the Court further held that "issuing a policy of insurance is not a transaction of commerce," effectively removing the business of insurance beyond the United States Congress's legislative reach.
Facts.
In the 19th century, the insurance business was exclusively regulated by the states, individually. As a result, a patchwork of separate regulations proliferated to the dismay of insurance companies which sought uniform regulation across states. In an effort to promote federal regulation of the insurance industry, a number of New York insurance companies orchestrated a test case to try to invalidate state regulation. On February 3, 1866, the legislature of Virginia had passed a statute provided that an insurance company not incorporated under the laws of the state should not carry on its business within the State without previously obtaining a license for that purpose and that it should not receive such license until it had deposited with the treasurer of the state bonds in an amount varying from thirty to fifty thousand dollars.
In May 1866, Samuel Paul, a resident of the Commonwealth of Virginia, was appointed the agent of the New York insurance companies, to carry on the general business of insurance against fire. He then applied for a license to act as such agent within the state, offering at the time to comply with all the requirements of the statute with the exception of the provision requiring a deposit of bonds with the treasurer of the state. Based on his failure to comply with the requirements of the statute, the license was refused. Notwithstanding this refusal he undertook to act in the State as agent for the New York companies without any license.
Paul sold a fire insurance policy to a citizen of Virginia. He was then indicted and convicted in the Circuit Court of the city of Petersburg, and was sentenced to pay a fine of $50. Paul claimed that the statute was invalid.
Judgment.
Supreme Court of Virginia.
The Supreme Court of Appeals of the State, the judgment was affirmed, and the case was then appealed to the Supreme Court. Paul claimed that the writ of error on the judgment in the lower court violated Privileges and Immunities Clause, which provides that "The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States" and the Commerce Clause, which empowers Congress "to regulate commerce with foreign nations, and among the several States."
Supreme Court of the United States.
The US Supreme Court held that a corporation is not a citizen within the meaning of the Privileges and Immunities Clause. It also held that "issuing a policy of insurance is not a transaction of commerce," effectively removing the business of insurance beyond the United States Congress's legislative reach.
Significance.
In 1944, the Supreme Court overturned the holding of "Paul v. Virginia" in "United States v. South-Eastern Underwriters Association", finding that insurance transactions were subject to federal regulation under the Commerce Clause.