Alias Smith & Jones, Inc. v. Barnes, 83CA1122

• Decision Date: 20 December 1984
• Docket Number: No. 83CA1122,83CA1122
• Citation: 695 P.2d 302
• Court: Colorado Court of Appeals
• Parties: ALIAS SMITH & JONES, INC., d/b/a Pumpkin's Finger, and Hannibal Hayes and Kid Curry, Inc., Plaintiffs-Appellants, v. J. Richard BARNES, Individually and as Commissioner of Insurance of the State of Colorado, Defendant-Appellee. . I

Page 302

695 P.2d 302

ALIAS SMITH & JONES, INC., d/b/a Pumpkin's Finger, and Hannibal Hayes and Kid Curry, Inc., Plaintiffs-Appellants, v. J. Richard BARNES, Individually and as Commissioner of Insurance of the State of Colorado, Defendant-Appellee.

No. 83CA1122.

Colorado Court of Appeals Div. I.

Dec. 20, 1984.

Tague & Beem, P.C., Clifford L. Beem, Denver, for plaintiffs-appellants.

Hall & Evans, John R. Trigg, Denver, for defendant-appellee.

TURSI, Judge.

In this action challenging certain actions taken by defendant commissioner of insurance, J. Richard Barnes, the trial court entered summary judgment for defendant, and plaintiffs appeal. We affirm.

The plaintiff, Alias Smith & Jones, Inc., operated a restaurant called Pumpkin's Finger in Pueblo, Colorado, on property leased from plaintiff Hannibal Hayes & Kid Curry, Inc. The restaurant was insured by Manufacturers and Wholesalers Indemnity Exchange (M & W), an interinsurance exchange. See § 10-13-101, et seq., C.R.S.1973.

On November 11, 1974, the commissioner ordered the division of insurance to conduct an examination of M & W because of concerns he had regarding the company's financial condition. Plaintiffs obtained a fire and personal property insurance policy from M & W on December 16, 1974. On January 14, 1975, the commissioner entered a determination of delinquency order and imposed a conservatorship upon M & W for the purpose of rehabilitating the company. M & W was allowed to continue in business but was ordered to discontinue issuing new policies to avoid future losses. On April 1, 1975, the commissioner renewed M & W's certificate of authority.

On May 25, 1975, the restaurant was destroyed by fire. M & W was unable to pay the insurance claim on the destroyed restaurant because it was insolvent. On December 1, 1975, the commissioner placed M & W into receivership because the rehabilitation efforts were unsuccessful.

Thereafter, plaintiffs initiated this action claiming that on April 1, 1975, when the commissioner renewed M & W's certificate of authority to transact business in Colorado, he knew that M & W was insolvent and that it had not met the statutory requirements necessary for the issuance of the certificate. Plaintiffs argue that the commissioner did not have the discretion to renew the certificate of authority, and in an absence of such discretion, the commissioner was not protected by official immunity.

In granting summary judgment, the trial court found that the commissioner was acting within the scope of his official duties in attempting the rehabilitation of M & W. The court concluded that the decision whether to rehabilitate or liquidate M & W was discretionary as a matter of law and, thus, the commissioner was protected by official immunity. We agree with the trial court.

Plaintiffs admit that the commissioner acted within his lawful discretion in attempting to rehabilitate M & W pursuant to § 10-3-401, et seq., C.R.S., instead of revoking and suspending the company as authorized by § 10-13-111, C.R.S. Plaintiffs' sole contention on appeal is that the commissioner of insurance has no discretion under § 10-13-106(1) to issue a new annual certificate of authority to an interinsurance exchange which no longer meets the unencumbered surplus requirement for original certification set out in § 10-13-106(2), C.R.S. Plaintiffs argue since the statutes regulating interinsurance exchanges are more restrictive than the statutes regulating other insurance companies, the commissioner of insurance has less discretion in determining if an interinsurance exchange qualifies for renewal of its certification.

Interinsurance exchanges are governed by § 10-13-101, et seq., C.R.S. This article sets forth requirements for the issuance of a certificate of authority (§ 10-13-106, C.R.S.), including required reserves (§ 10-13-107, C.R.S.) annual certification and revocation (§ 10-13-111, C.R.S.), and provisions for filing fees (§ 10-13-112, C.R.S.). Section 10-13-114, C.R.S., states:

"Except as they may be inconsistent with the provisions of this article, all other provisions of this title shall apply to interinsurance and reciprocal exchanges."

The authority for the commissioner of insurance to take remedial action against any insurance company on account of delinquencies is found in § 10-3-401, C.R.S. which reads:

"(1) The purpose of this part 4 is to make available to the commissioner supplemental remedial authority in instances of insurance company delinquencies of various kinds and degrees which demand regulation and control by the commissioner in order to effectuate his responsibility that the business of insurance in this state is conducted according to law and his responsibility to protect the policyholders and public of this state. Most delinquencies are of such a kind or degree as to not justify the imposing of the remedy or sanction of loss of certificate or of receivership by court order. Either of the remedies of loss of certificate or of receivership by court order would in many instances defeat any realistic opportunity to rehabilitate the delinquent company....

(2) ... The remedial steps provided by this part 4 are provided with the purpose in mind that insurance companies committing or suffering a delinquency be rehabilitated where and whenever possible with no loss of public confidence in the companies, and thus avoid...