American law, despite its varied and complex nature, can be classified into two broad, all-inclusive forms: (1) legislative law, which takes the form of legislation as enacted by parliamentary bodies and as promulgated by governmental agencies, and (2) case law, which is developed by courts and administrative agencies.

Legislative law, which we have defined to include regulations, consists of the general rules of conduct promulgated by a legally constituted body vested with the authority and power to issue such rules for all or a given portion of the population. For example, representatives of the people create constitutions; legislatures enact statutes; agencies issue regulations. All of these are forms of legislative law. Legislation is found chiefly in statute books and is generally identified as a "law" or an "act."

Case law consists of the narrow rules of conduct promulgated by the courts and administrative tribunals in the adjudication of particular controversies. Case law is located in the published and unpublished reports of judicial and administrative decisions.

The rule of law represented by legislation and regulation is stated in an official, explicated, textual form. Its future application to the acts of the public is generally quite clear.

This is not true of case law. Although case law settles controversy between the parties to that case, its application to other, future cases may be uncertain. In fact, a proposition of case law that may have an impact on the general public is not always directly stated but often must be inferred from the published opinions of a judicial or an administrative decision. Thus case law is flexible in form, while legislation is rigid.

The forms of legislative law presented here are in descending order of political authoritativeness as follows:

The primary functions of a constitution are to establish the framework of the government and to set forth the fundamental legal and political principles of a society. Thus the Constitution of the United States provides for a national government of three coordinate branches�the legislative, executive, and judicial�and sets down in some detail the powers and functions of each. At the same time it provides safeguards against infringement by the government of the basic human rights, such as freedom of speech, freedom of religious worship, and freedom of peaceful assemblage. In short the federal Constitution prescribes the powers of the various branches of the federal government and imposes limitations on those powers as they affect private individuals and the states.

The federal government of the United States came into being when the Constitution was ratified by the original 13 sovereign and individually independent states. Thus the federal government is a creation of the people of those states through a delegation of power by them to the federal government. As a result no powers can be exercised by the federal government unless they exist in the federal Constitution. This is not true of the states. The states retain all powers not granted to the federal government. This principle is recognized by the Tenth Amendment to the federal Constitution: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Nevertheless, pursuant to Article VI, Section 2 of the federal Constitution, the supreme law of the land in the United States is the Constitution and the federal laws and treaties created under the authority of the federal Constitution. This is known as the Supremacy Clause. Only in those areas where the federal Constitution is silent are the states supreme.

The treaties entered into between the government of the United States and foreign governments sometimes contain provisions as to aliens� rights that conflict with local law. In that event such treaties take precedence over state constitutions or statutes. For example, a treaty in 1850 between the United States and Switzerland provided that the heirs of a Swiss citizen who had died owning land in the United States should be entitled to inherit the land. This treaty was upheld by the Supreme Court of the United States in the face of a contrary legal doctrine of the state of Virginia, in which the land was located. In so holding, the court said, "It must always be borne in mind that the Constitution, laws and treaties of the United States are as much a part of the law of every state as its own local laws and Constitution. This is a fundamental principle in our system of complex national policy."

The federal Constitution was, of necessity, couched in general terms. It was intended that Congress would address itself to matters requiring specialized rules and regulations. The statutes enacted by Congress within the scope of the powers given to the federal government by the Supremacy Clause therefore are of higher authority than any state constitution or statute.

Not all acts of Congress, however, create "law" in the sense in which the term is generally used. Some acts are directed at one individual by name or at a specifically identified group of individuals and are known as "private laws." They do not purport to lay down general rules of human conduct. Statutes of general application are labeled "public laws."

Under Article II of the Constitution, the President of the United States has a power of rather indefinite scope to issue executive orders that, if they prescribe general rules of conduct, are laws, legislative in form. Within their proper scope executive orders are paramount to state law. In addition, many federal administrative bodies, such as the Internal Revenue Service, have power to make general rules, ordinarily identified as regulations. These are legislative in character and, when issued pursuant to a constitutional federal statute, are superior to all forms of state laws.

A state constitution is, within the proper sphere of its operation, the "supreme law" of the state�subject, of course, to the priority of federal legislative law in its proper sphere. There is a significant theoretical difference between the state governments and the federal government. A federal governmental power exists only if it has been granted by the federal Constitution. The states, however, are the sovereign representatives of their people and possess all governmental powers that have not been delegated by the people to the federal government or limited by the state constitution. As a result a federal law is constitutional only if it is based on a delegation of power found within the federal Constitution. In contrast a state law is always presumed to be valid unless the state or federal constitutions specifically prohibit the state from exercising such a power.

In addition to outlining the framework of government and limiting the authority of state officials, state constitutions often prescribe general rules of conduct of the kind normally associated with acts of the state legislature. The purpose of such a provision is to place the rules contained therein beyond the power of alteration by the legislature.

This is a voluminous body of legislative law, since state legislatures have residuary powers to prescribe general rules of conduct. As explained above, state governments have all powers not specifically denied them by the federal Constitution, federal treaties, federal statutes, and the appropriate state constitution. The operations of life insurance companies and the contents of their policies are greatly affected by state statutes. In fact, all states have enacted so-called standard provisions that must be included, in substance, in all life insurance policies issued in the states.

To assist the states in preparing well-designed legislation that responds to the complexities of the life insurance business, the National Association of Insurance Commissioners (NAIC) has developed numerous model acts and regulations. These models may be considered by the state legislatures and insurance departments as they develop the laws that will be enacted in each state.

Administrative bodies or officials as a group are endowed with some of the characteristics of all three branches of government�judicial, executive, and legislative. They sometimes have authority, granted by statute, to adjudicate particular controversies and claims and in so doing perform judicial or quasijudicial functions. Their decisions, with their accompanying explanations, become precedents of administrative case law. In their capacity as prosecuting and law enforcement officials, they exercise executive powers. Finally, they are frequently empowered by statute to make general rules of conduct in their particular areas of responsibility; and these general rules, as "regulations," have the force and effect of law.

Regulations, orders, opinions, and rulings that are issued by the various state insurance departments constitute one of the most important sources of law for insurance companies. Similar regulations that are issued by state and federal securities regulatory authorities are also important to the business of insurance because many types of insurance products are subject to the state and federal securities laws.

The right to govern certain subordinate units of the state�for example, cities, towns, and counties�is delegated by the state to local governmental entities that have legislative powers limited to matters of purely local concern. The general rules enacted by these municipalities are usually called "municipal ordinances."

Case law is a by-product of the settling of disputes. This has been the special province of the courts, and the great body of case law is composed of judicial decisions. However, as government has grown larger, administrative agencies have become an important source of case law. The decisions of administrative tribunals are referred to as administrative case law to distinguish them from the decisions handed down by the judiciary.