Illinois Commercial Men's Ass'n v. State Board of Equalization

We are asked to determine whether California may impose a tax on gross premiums collected by foreign insurers who solicit business in California by mail from outside the state, and who utilize independent contractors in California to perform functions incident to the acceptance of applications and the administration of claims. The significant element in making this determination is whether the contacts between the insurers and the state justify imposition of the tax under the due process clause of the Fourteenth Amendment to the United States Constitution.

Plaintiffs, Illinois Commercial Men’s Association (IC) and National Liberty Life Insurance Company (NL) are organized in other states and each has its principal place of business in the state in which it is incorporated. Both companies sold accident, health, and life insurance policies in California by advertising in national publications and by direct mail solicitation of prospective customers. NL advertised in local publications as well. Neither plaintiff owned or leased property in California or employed agents or representatives to solicit business in this state. However, independent contractors acting on their…