219 U.S. Argument for Plaintiff in Error. fire underwriters, and not upon others, who may have the same contract, the same defenses, who may have charged the same premium and may be in the same relation to the insured. Gulf, Colorado & Santa Fe Ry. v. Ellis, 165 U. S. 150, 153; Cotting v. Kansas City Stock Yards Co., 183 U. S. 79, 100, 108; Connolly v. Union Sewer Pipe Co., 184 U. S. 540. While classification is allowed, it must not be arbitrary; it must be reasonable with relation to the subject-matter, and such reasonableness is a judicial question. The division is not based on any difference of contract with the plaintiff-claimant. It is not even based on a state of facts necessarily prevailing when the insurance contract was made. The contracts of each insurer may be identical in every respect. Even the membership in a tariff association may have occurred after the policies were all delivered to the assured. It is a law providing one rule for construction of a private contract in one case, where the same contract between other insurance companies and the insured is differently construed. The excess liability under the statute is not a penalty, and adjudged as such for making an illegal combination. The insurer may be ever so flagrant in making a combination as to rates affecting the very risk incurred, and the proof may be conclusive as to this. It may defend successfully alone on a breach of covenant not affecting the happening of the loss, the extent of damage done, or the good faith of the plaintiff. If successful on this defense, the verdict is for the defendant, without damages of any kind. The decisions of the Supreme Court of Alabama on this statute, Continental Ins. Co. v. Parks, 142 Alabama, 650; Firemen's Fund Ins. Co. v. Hellner, 49 So. Rep. 297, overlook the true question involved in the claim made that it is void under the Fourteenth Amendment. These decisions are in conflict with previous decisions Argument for Plaintiff in Error. 219 U.S. of the Supreme Court of Alabama, the principles of which declare this statute invalid both under the constitution of Alabama and the Fourteenth Amendment. See South & North R. Co. v. Morris, 65 Alabama, 193; Louisville & Nashville R. Co. v. Baldwin, 85 Alabama, 627; Randolph v. Builders' & P. S. Co., 106 Alabama, 501. This statute also discriminates against the insurance. companies falling within its terms, as against the rest of the community, in that it penalizes them and vitiates clauses of their contracts for making any agreement fixing prices, while no such penalty or consequence is visited on any other litigant. Wabash &c. R. R. Co. v. Illinois, 118 U. S. 557. The court below erred in sustaining the demurrers to the plea setting up a breach of the iron safe clause of said policy. Scottish Un. & Nat'l Ins. Co. v. Stubbs, 98 Georgia, 754, 761; Georgia Home Ins. Co. v. Allen, 128 Alabama, 451. The Alabama statute is an unconstitutional interference with the liberty of contract. This intrusion into a contract of yesterday, which was lawful yesterday which can be made, merely because of some act of one of the parties, disconnected with the contract and with the other, to-day, is unlawful. Such legislation has no reasonable tendency to aid in the legitimate accomplishment of any purpose under the police power. The right to make contracts in relation to his business is part of the liberty of the individual protected by the Fourteenth Amendment. McLean v. State of Arkansas, 211 U. S. 539, 547; Allgeyer v. Louisiana, 165 U. S. 578; Lochner v. New York, 198 U. S. 45; L. & N. R. R. Co. v. Baldwin, 85 Alabama, 619, 629. This law is invalid in so far as it seeks to alter a contract valid at the time it was entered into, because of the supposed misbehavior of one of the parties in his subsequent relations to the State; it undertakes to deprive one 219 U. S. Argument for Defendant in Error. contracting party of his property in behalf of the other contracting party and thus arbitrarily to enrich the latter at the expense of the former. Mr. Thomas M. Stevens for defendant in error: The Supreme Court of Alabama has upheld the validity of the statute involved in this case, in Continental Ins. Co. v. Parkes, 142 Alabama, 650; Firemen's Fund Ins. Co. v. Hellner, 49 So. Rep. 297; Etna Ins. Co. v. Kennedy, 50 So. Rep. 73. The statute does not discriminate between different insurance companies the only distinction is that which exists between the innocent and the guilty. The statute does not discriminate between those who violate its terms. The penalties imposed by the statute are not directly or indirectly aimed at an impairment of the insurer's right to defend, but they are intended as a punishment for a violation of the laws of the State. The statute does not impair the obligation of contracts, as its operation is limited to those contracts made after its adoption. Denny v. Burnett, 128 U. S. 489; Edwards v. Kearzey, 96 U. S. 595; McLean v. Arkansas, 211 U. S. 546, 547; Gundling v. Chicago, 177 U. S. 183. The purpose of the regulation being laudable and proper, it is not so utterly unreasonable and extravagant in its nature as to be condemned upon that ground. The contention that the effect of imposing the penalty is to take one person's property and bestow it upon another is manifestly unsound. The selection of those who may recover the statutory penalty is based upon a reasonable classification well within the legislative discretion. L. & N. R. R. v. Baldwin, 85 Alabama, 619. The purpose of the law is, not to reimburse the insured, but to punish the insurer for violating the law against combinations and there can be no reason for distinguish ing between contracts of insurance made before, and those made after, the entering into the prohibited combination. The punishment is not so severe and far-reaching as to be classed as unreasonable and arbitrary. To so hold, the court must decide that the punishment goes so far beyond what is necessary as to shock the conscience, and there is nothing in the character, nature or extent of the punishment imposed by the statute which can authorize this court to set aside and hold for naught the legislative will and judgment expressed in and by the enactment of the said statute. The well-established rule that contracts of insurance are to be construed most strictly against the insurer, is here applicable and relevant. MR. JUSTICE HARLAN delivered the opinion of the court. This action was brought in one of the courts of Alabama by the defendant in error, Hale, on a policy of fire insurance issued by the German Alliance Insurance Company, a New York corporation. The policy covered "lumber and square timber while stacked on the banks of Byrne's Mill Pond near Bay Minette, Baldwin County, Alabama, said lot of lumber and timber containing 300,000 feet," etc. Upon the petition of the defendant, the case was removed into the Circuit Court of the United States for the Southern District of Alabama, where a verdict was returned for $5,198.93 in favor of the plaintiff. For that amount judgment was rendered against the company. The Circuit Court suggested that the verdict was excessive, and that the motion for new trial would be granted, unless the plaintiff reduced the verdict to $4,112. The required reduction was made and the new trial denied. Northern Pacific R. R. Co. v. Herbert, 116 U. S. 642, 647. The principal question presented by the assignments of error arises out of certain provisions of the Code of Alabama, as follows: "SECTION 2619. Every contract or policy of insurance hereafter made or issued shall be construed to mean that in the event of loss or damage thereunder, the assured or beneficiary thereunder may, in addition to the actual loss or damage suffered, recover twenty-five per cent of the amount of such actual loss, any provision or stipulation in such contract or policy to the contrary notwithstanding. Provided, at the time of the making of such contract or policy of insurance, or subsequently before the time of trial, the insurer belonged to, or was a member of, or in any way connected with, any tariff association or such like thing by whatever name called, or who had made any agreement or had any understanding with any other person, corporation or association engaged in the business of insurance as agent or otherwise about any particular rate of premium which should be charged or fixed for any kind or class of insurance risk; and, provided further, no stipulation or agreement in such contract or policy of insurance to arbitrate loss or damage nor to give notice or make proofs of loss or damage shall in any such case be binding on the assured or beneficiary, but right of action accrues immediately upon loss or damage. "SECTION 2620. If it is shown to the reasonable satisfaction of the jury by a preponderance of the weight of the testimony that such insurer at the time of the making of such agreement or policy of insurance or subsequently before the time of trial belonged to, or was a member of, or in any way connected with any tariff association or such like thing by whatever name called, either in or out of this State, or had made any agreement or had any understanding either in or out of this State with any other person, corporation or association engaged in the business of insurance as agent or otherwise about any particular rate of premium which should be charged or fixed for any risk of |