State Ins. Commissioner v. National Bureau of Cas. Underwriters

Decision Date13 December 1967
Docket NumberNos. 600,639,s. 600
Citation236 A.2d 282,248 Md. 292
PartiesSTATE INSURANCE COMMISSIONER v. NATIONAL BUREAU OF CASUALTY UNDERWRITERS et al. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. STATE INSURANCE COMMISSIONER of Maryland et al.
CourtMaryland Court of Appeals

Lewis A. Noonberg, Asst. Atty. Gen. (Francis B. Burch, Atty. Gen., Baltimore, on the brief) for appellant.

George W. Shadoan, City Atty., and Roger W. Titus, Asst. City Atty., Rockville, for appellee, The Mayor and Council of Rockville.

Norman P. Ramsey, Thomas Waxter, Jr., Baltimore, and John N. Reid, New York City, on the brief, for appellee, National Bureau of Casualty Underwriters.

James J. Doyle, Jr., Baltimore (Sherbow, Shea & Doyle, Baltimore, and Russell H. Matthias and Meyers & Matthias, Chicago, Ill., on the brief) for appellant.

Lewis A. Noonberg, Asst. Atty. Gen. (Francis B. Burch, Atty. Gen., Baltimore, on the brief) for appellee, Insurance Commissioner of Maryland. George W. Shadoan, City Atty., and Roger W. Titus, Asst. City Atty., Rockville, for appellee, The Mayor and Council of Rockville.

Before HAMMOND, C. J., and HORNEY, MARBURY, BARNES and McWILLIAMS, JJ.

HAMMOND, Chief Judge.

By Ch. 553 of the Laws of 1963 the legislature repealed Art. 48A of the Code, titled 'Insurance,' and enacted in lieu thereof a new Art. 48A, titled 'Insurance Code,' to comprehensively govern and control insurers and the insurance business in Maryland. Rates were to be regulated so that they were to be neither excessive, inadequate, nor unfairly discriminatory by requiring insurers to file with the Insurance Commissioner schedules of proposed rates for his approval or disapproval.

In September 1965 State Farm Mutual Insurance Company filed for approval a proposed schedule of substantial increases on various classes of motor vehicle risks. In November the National Bureau of Casualty Underwriters filed a similar schedule. The statute (§ 243(b)(1)) directs that rates be made upon consideration of past and prospective loss experience, catastrophe hazards, if any, underwriting profits and contingencies and other relevant factors within and without Maryland. The Commissioner denied both requests and thereafter, upon demand, held a hearing in each case as the statute, § 245(1), requires. The Bureau's request was heard first in December 1965, and State Farm's in May 1966. Each applicant for increased rates presented evidence in support of its request, and various protestants, including the City Of Rockville and the Chairman of the Unsatisfied Claim and Judgment Fund, appeared in opposition. The Commissioner had the benefit of the views of his staff members and a consulting actuary. Section 245 directs the Commissioner, after the hearing, to 'affirm, reverse or modify his previous action, specifying his reason therefor * * *' and requires that his 'order shall contain specific findings of fact * * * in relation to the matter before him, such findings to be supported by a preponderance of the evidence on consideration of the record as a whole.' Any party may file with him proposed findings of fact which he may accept or reject.

The Commissioner's rejection of the request of both the Bureau and State Farm was based on two main determinations: one, that earned premiums should be compared with paid losses rather than the customary incurred losses, and two, that underwriting income must include investment income derived from invested unearned premium reserves.

Both the Bureau and State Farm appealed to the Baltimore City court under § 245(2), which directs the Commissioner when an appeal is noted to prepare an official record containing his findings and order and a transcript of the testimony and exhibits, and requires the court to affirm, reverse or modify the order or decision in whole or in part if it finds that the order or decision is 'not in accordance with law,' or is 'not supported by the preponderance of the evidence on consideration of the record as a whole.'

Chief Judge Foster heard the Bureau's case first and dismissed the appeal, holding that rate regulation under Art. 48A is legislative action, that under Article 8 of the Declaration of Rights of the Constitution of Maryland legislative and judicial functions must be and remain separate, that the judiciary cannot be called upon to act as legislators, and that if the court followed the statute by deciding whether the Commissioner's order was supported by a preponderance of the evidence it would unconstitutionally be finding facts and substituting its judgment on the facts found for that of the Commissioner. He held further that there was no other standard of review the court could apply even if he held the first sentence of § 245(2), providing that 'all orders or decisions of the Commissioner shall be subject to review by appeal to the Baltimore City court,' could stand independent and unimpaired after the 'preponderance of the evidence' provision was stricken as unconstitutional. His reasons for this conclusion were that (1) no part of § 245(2) is severable inasmuch as § 245(3) provides that 'the provisions of this section shall govern hearings, orders and appeals in matters arising under the provisions of this subtitle (subtitle 16-Rates and Rating Organizations). Sections 35, 36, 37, 38, 39 and 40 (of Art. 48A) shall not apply to rating and rating organizations' (these sections grant de novo appeals on orders under Art. 48A not relating to rates), and (2) the Administrative Procedure Act specifically excludes the Insurance Department from its operation and effect (the exclusion was part of the 1963 revisions of the insurance laws, accomplished by Ch. 305 of the Laws of 1963).

Later, he dismissed State Farm's appeal on the strength of his holdings in the Bureau's case. He declined to rule on State Farm's contention that the Commissioner's decisions that earned premiums must be compared with paid losses and that underwriting income must include income derived from invested unearned premium reserves, were not in accordance with law and required reversal whether or not the Commissioner's order was supported by a preponderance of the evidence.

State Farm appealed to this Court and the Commissioner, although he had been upheld in result, also appealed because he thought the court had erred in its reading and construction of the applicable provisions for judicial review. The appeals were argued together, and both will be disposed of in this opinion.

State Farm contends that the Commissioner's rate making function is not legislative but that if it is appeal provisions do not violate constitutional requirements as to the separation of powers, and that the Commissioner erred as a matter of law on his findings as to loss ratios and underwriting income. The Commissioner and the Bureau concede that the rate making function of the Commissioner is legislative but argue that the judicial review provided by the statute is constitutional and legal. The City of Rockville, which was permitted to intervene in both appeals although its interest in the matter at best would seem to have been minimal, argues that the judicial review provisions are unconstitutional, that the court properly refused to apply a different standard of review, that this Court should not review the legality of the findings of the Commissioner since the lower court did not, and finally that the Commissioner made no errors of law.

We conclude that the review provisions of § 245 of Ar. 48A do not do damage to the constitutional requirement of separation of powers and that since the court of first instance did not pass upon whether or not the Commissioner made errors of law in his determination, it would be inappropriate for us to do so.

In the earlier days of the exercise of governmental powers by administrative bodies, there was widespread fear that the delegating of administrative, legislative and judicial powers or functions to a single agency not only violated the theory of separation of powers but spelled its death knell. Emotional resentment against the rise of administrative power by lawyers and judges rose and resulted in efforts to thwart or destroy this veritable fourth branch of government by invoking the separation of powers theory or using the nondelegation doctrine or requiring a full and complete de novo judicial determination. These efforts had no more success than had the plaintiff in the case of King Canute versus The Sea. Legislatures, national and state, steadily continued to increase administrative agencies and administrative power, 1 Davis, Administrative Law Treatise § 1.01 (1958), and as these agencies have proliferated they have come to legislate more than legislatures and to adjudicate more than courts. 1 Cooper, State Administrative Law, pp. 1-2 (1965), the author says:

'In several states, as many as sixty or seventy independent agencies make rules and adjudicate contested cases affecting in varied ways the lives, health, fortunes, safety, labor, and the business of millions of citizens. At a conservative estimate (as of 1965), more than 2000 state administrative agencies are exercising legislative and judicial functions.'

The early fears of the bar and bench have largely disappeared with experience. It became apparent that the complex problems of modern social, economic and industrial life for ever-increasing numbers of knowledgeable people could be solved or settled more expeditiously, effectively, cheaply and simply by administrative processes than by the traditional executive, legislative and judicial processes, because the blending of powers in one agency, which operates in its particular field or specialty continuously over the years and produces an expertise and a superior ability both correctly to evaluate specialized questions and to supply correct answers to these questions-often due largely to the staff of permanent, expert employees who serve under the successive heads of the...

To continue reading

Request your trial
144 cases
  • Lussier v. Maryland Racing Com'n, 96
    • United States
    • Court of Appeals of Maryland
    • September 1, 1994
    ...... and the Thoroughbred Racing Protective Bureau commenced an investigation with regard to the ... forth or support a general principle that a state administrative agency lacks authority, by ...Byers, 187 Md. 81, 84, 48 A.2d 600, 602 (1946). The "Commission performs an active ... be revoked for any cause which the Commissioner of Motor Vehicles deems sufficient; he cannot ...v. National Labor Relations Board, 313 U.S. 177, 61 S.Ct. ...Nat'l Bureau of Cas. Underwriters, 248 Md. 292, 299-301, 236 A.2d ......
  • Goodwich v. Nolan, 24
    • United States
    • Court of Appeals of Maryland
    • September 1, 1995
    ...Md. 385, 399, 380 A.2d 28, 36-37 (1977); Gould, supra, 273 Md. at 502, 331 A.2d at 65; State Insurance Commissioner v. National Bureau of Casualty Underwriters, 248 Md. 292, 300, 236 A.2d 282, 286 (1967); Heaps v. Cobb, 185 Md. 372, 380, 45 A.2d 73, 76 (1945). Thus, prior to granting a writ......
  • State Dept. of Assessments and Taxation v. Clark, 23
    • United States
    • Court of Appeals of Maryland
    • November 4, 1977
    ...however, this means no more than what Hammond, C. J., said in delivering the majority opinion in Insurance Comm'r v. Nat'l Bureau, 248 Md. 292, 300, 236 A.2d 282 (1967), which was also quoted in Clark, 34 Md.App. at 144-145, 367 A.2d at 75 and in Gould, 273 Md. at 501-502, 331 A.2d The cour......
  • County Council for Montgomery County v. Investors Funding Corp., 282
    • United States
    • Court of Appeals of Maryland
    • December 4, 1973
    ...of administrative law so eloquently articulated by Chief Judge Hammond in State Insurance Commissioner v. National Bureau of Causalty Underwriters, 248 Md. 292, 298-300, 236 A.2d 282, 285-287 (1967): 'In the earlier days of the exercise of governmental powers by administrative bodies, there......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT