Holland v. State

Decision Date08 May 1962
Docket NumberNo. 50647,50647
Citation115 N.W.2d 161,253 Iowa 1006
PartiesJames D. HOLLAND and George Kranovich, Appellants, v. STATE of Iowa, Insurance Department of Iowa, W. E. Timmons, Commissioner of Insurance of State of Iowa, Appellees.
CourtIowa Supreme Court

Max Putnam, Des Moines, and Scott Swisher and Marion R. Neely, Iowa City, Iowa, for appellants.

Evan Hultman, Atty. Gen. of the State of Iowa, and Wilbur N. Bump, Sol. Gen. of the State of Iowa, for appellees.

THOMPSON, Justice.

The major question before us on this appeal concerns the right of the Commissioner of Insurance of the State of Iowa to revoke the licenses of the plaintiffs to engage in the insurance business in the state. The commissioner, after hearing upon complaint filed, found each plaintiff guilty of illegal practices, specifically of what is known as 'twisting', and revoked their licenses. Upon appeal the trial court dismissed the plaintiffs' petition for review under Section 507B.8, Code of 1958, I.C.A., and annulled the writ of certiorari which had been issued. The plaintiffs appeal to this court.

I. Statutes which regulate the insurance business are within the police power of the state. This business is one peculiarly impressed with a public interest and subject to public supervision and control. Bankers Life and Cas. Co. v. Alexander, 242 Iowa 364, 373, 374, 45 N.W.2d 258, 263, 264, and citations.

II. Section 507B.4 of the 1958, I.C.A. code says in part:

'The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:

'* * * making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance.'

This defines what is known in the insurance trade as 'twisting'. It is aimed at any attempt by misrepresentation to induce a policyholder to surrender a policy in one company in order that he may be sold a policy in another company. It is universally condemned as unethical and is generally prohibited by statute. That the power of the state to prohibit it and to prescribe penalties for its practice is within the police power cannot be denied. As the commissioner said in the case before us: 'The great loss to the unsophisticated policyholder is rights that he has earned through the holding of a policy, such as waiting periods, intervening illness, and such other policy defenses.' There was competent and substantial evidence before the commissioner at the hearing that each defendant there, the plaintiffs here, had been guilty of 'twisting' as defined in Section 507B.4, supra.

III. However, the plaintiffs challenge the right of the commissioner to revoke their licenses, on technical grounds. A consideration of this contention requires as examination of the statutes. Chapter 507B deals with insurance trade practices and sets out a number of them, including 'twisting', which are condemned. Provisions are made for notice and hearing before the commissioner whenever he has reason to believe any person has been engaged in prohibited practices; and if, after hearing, he finds such person has been engaged in such practices, the remedy is defined by sections 507B.7, which provides for a 'cease and desist' order, and 507B.11, which fixes a penalty for a violation of such order. Section 507B.12 says: 'The powers vested in the commissioner by this Act shall be additional to any other powers to enforce any penalties, fines or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive.'

No cease and desist order was issued by the commissioner in this case. He proceeded under what he thought was the authority given him not only by Chapter 507B but also by Section 522.3 of the Code, I.C.A., and Rule 12 of the insurance department, to revoke the license of each of the plaintiffs. Thereupon they brought their action in the Polk District Court asking a review under Chapter 507B, supra, and a writ of certiorari based on the claim that the commissioner was acting illegally. Apparently because no cease and desist order had been issued under the provisions of Chapter 507B, the trial court dismissed the petition so far as it asked a review. We think this was error, since the commissioner in his ruling referred to violations of Chapter 507B, and seemed to rest it in part at least on such violations, although he did not impose the penalties specifically provided by that chapter. So plaintiffs should not have been denied their right of review. However, in view of our final conclusion as to the penalty actually imposed by the commissioner, this matter is of slight if any importance.

IV. The decisive question remains: Did the commissioner have the power to revoke the licenses? Clearly he did not have it under Chapter 507B. The only penalty provided there, as we have pointed out above, was to issue a cease and desist order. But this does not exclude the power to enforce any other penalties, fines or forfeitures authorized by law. Section 507B.12, supra. The commissioner thought he had such power under Section 522.3 and Rule 12 of the department. We quote Section 522.3, so far as material here: 'The commissioner shall require of each first-time applicant such reasonable proof of character and competency with respect to the type and kind of insurance the applicant proposes to sell as will protect public interest, before issuing such license and may, for good cause, after hearing held within sixty days from the date of application, decline to issue such license or may, for like cause, after hearing, revoke same. * * *.'

Rule 12 provides: 'The commissioner will revoke the license of any agent who is found guilty of inducing any individual to lapse or cancel a policy of one insurer in order that such individual procure a policy of another insurer which in any way would operate to the prejudice of the interests of the individual.'

Without doubt, Rule 12, supra, in terms authorizes the commissioner to revoke the licenses of persons using the methods of which substantial evidence showed plaintiffs were guilty here. But administrative rules cannot go father than the law permits. An administrative body may not use the device of promulgating rules to change or add to the law; they are not to be taken as law in themselves, but must be reasonable and used for the purpose of carrying out the legislative enactments. An administrative body may not make law or change the legal meaning of the common law or the statutes. City of Ames v. Iowa State Tax Commission, 246 Iowa 1016, 1022, 71 N.W.2d 15, 19; Kistner v. Iowa State Board of Assessment and Review, 225 Iowa 404, 415, 280 N.W. 587, 593. Accordingly, Rule 12 may not be used to revoke plaintiffs' licenses unless it is supported by statutory or common law authority.

V. Section 522.3, supra, fails to give the commissioner the power which he attempted to exercise here. This section was maneded into its present form by Chapter 248, Acts of the 57th General Assembly, which took effect July 4, 1958. Prior to that time its language was definite. It provided: 'The commissioner may, for good cause, decline to issue such license or may, for like cause, revoke the same.' This gave the commissioner the power to revoke any license for good cause. But as we read the language of the present statute, the commissioner is now given power to revoke only the licenses of 'first-time' applicants. We have set out the material part above; and it will be noted that after stating the requirements as to character and...

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