When a court is called upon to decide a case involving a point on which there is no legislation or for which there is no clear legislative answers, it will look to the appropriate state or federal Constitution and to prior cases for precedents. If there is no clear statutory answer, the prior case law will control. If the court finds an applicable case law precedent, it will ordinarily decide the current dispute on the basis of the principles enunciated in the earlier case. If it finds no precedent squarely in point or applicable by analogy, it must originate a rule to resolve the dispute. Presumably the rule will reflect proper consideration of history, customs, morals, and sound social policy.

In creating new rules courts are making case law. The more situations coming before the courts for which there are no existing rules, the more new case law there will be. Moreover, each new rule becomes an integral part of the whole body of rules that the courts may use in the future.

American case law is rooted in the law of England as it existed at the time of the colonization of America. This is natural, since the early settlers brought with them the only law they knew. This law was composed of the rules followed by the English courts in the settlement of disputes and the existing statutory enactments of Parliament. Since the decisions of the English courts were assumed to reflect those principles, maxims, usages, and rules of action that had regulated people�s affairs from time immemorial, they were designated as the "common law" of England. The influence of the common law of England on the development of American law continued well into the 19th century. Since the English common law was the fountainhead of American case law, the latter likewise came to be known as the "common law." In this sense the term common law distinguishes case law from statutory or constitutional law.

A broader use of the term common law distinguishes the entire system of English law from the legal systems developed in other parts of the world. It has acquired special significance in distinguishing between the English legal system�and systems based on it�and the code developed in the Old Roman Empire that today serves as the foundation of the legal systems in continental Europe and in the state of Louisiana.

The Roman civil law originated as the law of the city of Rome but was gradually extended to the entire Roman Empire. After the fall of the Roman Empire in the fifth century, this law was compiled into a code called "Corpus Juris Civilis." Since the compilation was carried out during the reign of Justinian, it is often referred to as the "Justinian Code."

The Justinian Code attempted to develop a rule to cover every possible type of legal conflict. One example is the rule to settle the question of survivorship when two people perished under circumstances that made it impossible to determine who died first. While there are many substantive differences between the Roman civil law and the Anglo-American common law, the most significant difference lies in the impact on the entire legal system of the adjudication of a particular case. Under the civil law code, a case is brought within one of the general provisions and is settled by application of the rule contained therein to the facts of the case. The decision in a particular case is little influenced by previous litigation on the point involved and, in turn, will exert little�if any�influence on similar disputes arising in the future. Under the system of common law, however, a controversy not covered by legislation is decided only after a guiding rule has been sought in previously litigated cases; and�more important�once a decision has been made, it forms the basis for the settlement of future disputes. The more frequently a decision is used as a guide to action, the stronger it becomes as a precedent.

The term common law is also used to designate the rules applied by the courts of common law as contrasted with the rules applied by courts of equity. This is a third meaning of the expression.

The term "equity" is peculiar to Anglo-American law. It arose because of the failure of the common law to give adequate and proper remedy in some cases. In the early courts of England, the procedure for pursuing a legal remedy was very rigid. There were a fixed number of "forms of action," and every remedial right had to be enforced through one of these forms. The first step in any action was to apply to the king for a writ, which was a document addressed to the person responsible for the alleged wrong. This writ gave a brief summary of the facts upon which the right of action was based, and it contained certain technical formulas indicating the form of action being brought and the amount of money damages sought. The nature of these writs was fixed and could not be substantially altered. A writ had been developed not only for each form of action but also for the facts, circumstances, and events that would constitute the subject matter of the particular action. If no writ could be found that corresponded substantially to the facts constituting the basis for complaint, the injured party could obtain no relief in the courts. The only course of action available was a direct appeal to the conscience of the king.

Over a period of time the number of direct petitions became so great that the king had to delegate responsibility for dealing with them. Since the appeal was to the king�s conscience, he began to refer such matters to his spiritual adviser, the chancellor, who, being an official of the Church, usually favored the ecclesiastical law or the civil law over common law. Once begun, the practice of delegating cases to the chancellor for his sole decision rapidly became the established method of dealing with such controversies. Eventually a separate court functioning under the chancellor and called the Chancery Court was created.

Following the English precedent, the American colonies (and later the states) established two sets of courts, one applying the rules of common law and called "courts of law," and the other applying rules of equity and good conscience and called "courts of equity." England still maintains separate courts of law and equity, but in this country, the two systems have been merged to the extent that the same court can hear both types of cases. Whether the case is heard in law or equity depends on the remedy sought. If there is a legal remedy the action must be brought in law; if there is no legal remedy or the legal remedy is inadequate, the suit can be brought in equity.

The distinction between law and equity is extremely important to life insurance companies. Equity gives them access to remedies that are otherwise unavailable and that are essential to their operation. Among the equitable remedies frequently invoked by life insurance companies are suits for rescission and restitution, suits for reformation of contracts, and bills of interpleader. (All of these terms will be explained later in this book.) Suits in equity are usually tried without a jury, which�in view of the traditionally hostile attitude that juries usually have toward insurance companies�is considered to be a major procedural advantage.

Administrative agencies are normally created by legislative enactment and are charged with the administration of laws that are general in character and that affect the rights and privileges of private citizens. When administrative agencies apply a law to a particular set of facts, they are making case law. Their decisions, when officially or unofficially reported and published, have the status of precedents. Precedents in this area, however, are regarded with less sanctity than are judicial decisions and are less likely to be applied to a different set of facts. An administrative tribunal, unlike the usual court of law, has jurisdiction over a limited class of cases.