Hutchins Mut. Ins. Co. v. Hazen

• Decision Date: 10 April 1939
• Docket Number: No. 7316.,7316.
• Citation: 105 F.2d 53,70 App. DC 174
• Parties: HUTCHINS MUT. INS. CO. OF DISTRICT OF COLUMBIA v. HAZEN et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

70 App. DC 174, 105 F.2d 53 (1939)

HUTCHINS MUT. INS. CO. OF DISTRICT OF COLUMBIA v. HAZEN et al.

No. 7316.

United States Court of Appeals for the District of Columbia.

Argued February 6, 1939.

Decided April 10, 1939.

Rehearing Denied May 18, 1939.

Irvin Goldstein and William R. Lichtenberg, both of Washington, D. C., for appellant.

Elwood H. Seal, Corp. Counsel, D. C., Vernon E. West, Principal Asst. Corp. Counsel, D. C., and Lloyd B. Harrison, Sp. Asst. Corp. Counsel, D. C., all of Washington, D. C., for appellees.

Before GRONER, Chief Justice, and MILLER and VINSON, Associate Justices.

GRONER, C. J.

This is an appeal from an order and judgment of the District Court denying plaintiff's (appellant's) application for injunction and dismissing the complaint.

Appellant is a local mutual insurance company and is licensed to do business in the District of Columbia under authority of an Act of Congress passed in 1922 entitled "An Act To regulate marine insurance in the District of Columbia, and for other purposes".¹ The Act covers not only what is called marine insurance but as well practically all other kinds of insurance, including insurance "on automobiles against loss or damage from collision or theft, and against liability of the owner or user for injury to person or property caused by his automobile". Section 3. Section 4 provides certain conditions precedent to the organization of "domestic mutual companies" and requires that such a company, before obtaining a license to do business, shall have "received in cash, with respect to each * * * class of insurance written, at least one advance periodical premium on each * * * application, aggregating at least $10,000"; and shall have a surplus of $10,000 in money or other lawful investments above its liabilities including the liability equal to the aggregate amount of premiums so advanced. Appellant was in the automobile liability insurance business in the District of Columbia prior to 1938. In that year Congress passed a compulsory taxicab insurance act,² the effect of which was to impose on each taxicab owner or operator the duty to file with the Public Utilities Commission "for each motor vehicle to be operated a * * * policy * * * of liability insurance * * in a solvent and responsible * * * insurance company authorized to do business in the District of Columbia * * * in such form and on such terms or conditions as the Commission may direct".³ The language in the act particularly pertinent to this controversy is as follows:

"Any such policy of liability insurance shall be issued only by such insurance companies as may have been authorized to do business in the District of Columbia * * *. The Superintendent of Insurance of the District of Columbia shall be empowered to make all reasonable rules and regulations relating to the writing of taxicab insurance and shall be empowered to govern the maximum rates to be charged on such insurance. * * * It shall be unlawful to operate any vehicle subject to the provisions of this paragraph unless such vehicles shall be covered by * * * a policy of liability insurance as provided herein. The Public Utilities Commission shall have the power to make all reasonable rules and regulations which, in its opinion, are necessary to make effective the purposes of this section.

* * * * * *

"Any violation of this section or of the regulations lawfully promulgated thereunder shall be deemed a misdemeanor and upon conviction shall be punishable by a fine of not more than $300 or by imprisonment for not more than ninety days, and/or cancelation of license."

Claiming to act under authority of this statute, the Superintendent of Insurance promulgated nineteen regulations applicable to companies writing taxicab insurance:

1 & 2. Policies must be in a form approved by the Superintendent. 3. Maximum rates are fixed. 4 & 5. Premiums must be collected in advance and five-day notice of cancelation given to the Commission. 6, 7 & 8. Complete records must be kept of accidents, claims, suits, etc., and payments must be made by company check. 9. Rebating is defined and attention is called to the statutory prohibition. 10. Companies must keep a register of all policies issued, lapsed, etc.

Rules 11 to 15, inclusive, relate exclusively to mutual companies.

No. 11 requires such companies to set aside for the purpose of paying claims, taxes, and dividends, not less than 75% of all net premiums received.

No. 12 confines expenses for equipment, supplies, rents, salaries, fees, commissions, and other expenses required to operate the company to 15% of net premiums received.

No. 13 confines the cost of investigation, adjustment, court costs, and services of attorneys to 10%.

No. 14 makes the written consent of the Superintendent essential to the declaration of any dividends.

No. 15 makes the approval of the Superintendent necessary to any contract for salary or fee to any person.

No. 16 provides that no charge or policy fee shall be collected for any service whatsoever in addition to the premium expressed in the policy.

No. 17 forbids a promise to pay a dividend or reward to any policyholder unless approved by the Superintendent.

No. 18 requires that all companies shall subscribe and agree to full compliance with the rules; and

No. 19 authorizes the Superintendent to withdraw certification of any company upon failure to comply.

Shortly after the promulgation of the rules appellant protested their illegality and declared it would not be bound by them, and was informed by the Superintendent that in that case he would withdraw appellant's certification and prevent its writing taxicab insurance. Appellant then brought this suit to enjoin and restrain appellees from enforcing the regulations, from cancelling its license, and from taking any action against it affecting its right to transact its lawful business. The District Court denied the injunction and dismissed the complaint, but four days prior to the entry of final judgment the Superintendent of Insurance carried his threat into effect, withdrew appellant's certification, and directed it to accept no further premiums for taxicab insurance. This appeal followed, and we granted a stay pending hearing and decision.

While appellant's challenge is to all the rules, the question as to their validity relates principally to Nos. 11-15 and 19. The answer requires an examination not only of the Act of 1938 but also of the District of Columbia insurance code, D.C. Code 1929, T. 5, § 171 et seq. The former provides that the policy of insurance required by its terms shall be written only by an insurance company authorized to do business in the District of Columbia. This condition appellant admittedly fulfills, and under its license it has written policies covering 826 public motor vehicles with a total possible liability thereunder in excess of $9,000,000. It collects premiums approximating $4,000 weekly, and its present assets apparently aggregate slightly less than $40,000. Notwithstanding this shocking disparity, its financial set-up is within all the requirements of the general insurance laws of the District of Columbia.

The case turns, therefore, upon the authority of the Superintendent (1) to make rules and regulations governing the internal management of a licensed company and (2) to make disobedience of the rules ground for revocation.

Considering first the authority conferred on the Superintendent by the Taxicab Act (Act of 1938), we find there nothing more than the power to make reasonable rules and regulations relating to the writing of taxicab insurance and the fixing of maximum rates to be charged. The words — to write insurance and to fix maximum rates — given their broadest meaning, as we have every desire to do in the interest of securing enforcement of the objects of the Act, can, we think, be construed to go no further than to authorize the Superintendent to control the solicitation of the insurance, the terms and conditions of the contract, the rate to be charged, and the enforcement of the provisions of the Act and the general insurance law. So interpreted, the language of the Act, considered in relation to the provision in the general law⁴ prohibiting rebates either in the form of commissions or otherwise, is sufficiently broad to enable the Superintendent to prohibit unreasonable commissions to agents, private or corporate, as to which much was said in the argument. But even so, it does not settle the questions involved in the regulations under consideration.

Turning, then, from the special act to other provisions of the general insurance law of the District, we...