The mere fact that a citizen may be within the limits of a particular state does not prevent his making a contract outside its limits while he himself remains within it.
A state statute prohibited out-of-state insurance corporations from conducting business within the state without maintaining at least one authorized agent in the state. The state, Louisiana, enacted this law under its police powers. The state trial court held for the corporation, finding the state law unconstitutional under the fourteenth amendment.
Was Louisiana’s exercise of police powers valid under the fourteenth amendment?
No, the court held the state law was unconstitutional because it violated the due process clause of the fourteenth amendment.
The Court held that a state is not allowed to prohibit its citizenry from forming contracts outside the state. It held that the fourteenth amendment guarantees a person to contract for insurance, thus the state cannot deprive a citizen of that right. Any state action to this effect is an illegal interference with the conduct of the citizen, even if the state is acting in the interest of health, safety or general welfare of its citizens.