Allstate Ins. Co. v. Department of Ins.
| Decision Date | 17 August 1992 |
| Docket Number | Docket No. 121390 |
| Citation | 195 Mich.App. 538,491 N.W.2d 616 |
| Parties | ALLSTATE INSURANCE COMPANY, Petitioner-Appellee, v. DEPARTMENT OF INSURANCE and Commissioner of Insurance, Respondents-Appellants. |
| Court | Court of Appeal of Michigan — District of US |
Dykema Gossett by Donald S. Young and Lori M. Silsbury, Detroit for petitioner-appellee.
Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., and Harry G. Iwasko and E. John Blanchard, Asst. Attys. Gen., for respondents-appellants.
Before BRENNAN, P.J., and SHEPHERD and RICHARD ALLEN GRIFFIN, JJ.
This appeal concerns a revised rating plan for private passenger automobile insurance filed by petitioner, Allstate Insurance Company, with the Michigan Insurance Bureau. Respondents, the Department of Insurance and the Commissioner of Insurance, appeal as of right from the circuit court's September 14, 1989, opinion and order. The circuit court's order affirmed the commissioner's April 21, 1988, final decision and order finding Allstate's October 23, 1984, revised rating plan for private passenger automobile insurance to be in violation of the now-amended subsections 2 and 5 of § 2111 of the Insurance Code, M.C.L. § 500.2111(2) and (5); M.S.A. § 24.12111(2) and (5); see 1980 P.A. 461, § 1(2) and (5). The effect of that portion of the order was to determine that rates charged to certain policyholders were too high in relation to the rates charged other policyholders. The circuit court's order also reversed that part of the commissioner's final decision and order that found Allstate's rating plan to be in violation of M.C.L. § 500.2027; M.S.A. § 24.12027. The effect of the circuit court's holding was to prohibit the respondents from either imposing penalties on the petitioner or requiring that refunds be made to policyholders as a result of the excessive rates. The only remedy would be a prospective change in rates. The latter ruling is now the only matter at issue in this appeal.
In 1979, the Legislature passed the Essential Insurance Act, 1979 P.A. 145. The purpose of the act was described in the analysis of subsequent legislation, Senate Legislative Analysis, S.B. 647, March 3, 1986:
[The Essential Insurance Act] responded to claims that the voluntary insurance market was operating unfairly and that some persons were being denied, or being charged unfairly high rates for, insurance for their homes and cars not because of factors over which they had some control, such as their driving records, but because of other factors over which they had relatively little control, such as where they lived.
In order to address this concern, § 2111(5) of the Insurance Code until February 28, 1986, provided:
Notwithstanding other provisions of this chapter, automobile insurance risks shall be grouped by territory, and territorial base rates for coverages shall be established as follows:
(a) An insurer shall not be limited as to the number of territories employed in its rating plan. However, an insurer shall not employ more than 20 different territorial base rates for an automobile insurance coverage. A territorial base rate may be made applicable in 1 or more territories contained in the rating plan of the insurer.
(b) An insurer shall not employ a territorial base rate for an automobile insurance package policy that is less than 45% of the highest territorial base rate for the same policy, all other rating classifications being the same.
(c) An insurer shall not employ a territorial base rate in a territory for an automobile insurance package policy that is less than 90% of the territorial base rate employed in any adjacent territory for the same policy, all other rating classifications being the same.
The provisions of former § 2111(5)(b) were sometimes referred to as the "high/low constraints." The provisions of former § 2111(5)(c) were sometimes called the "territorial adjacency constraints."
The Insurance Bureau contended that, under Allstate's filing, rates for the $50 deductible varied by twenty-two percent between territories thirteen and fourteen, exceeding by seven percent the maximum differential permitted under a previous order of the commissioner that allowed Allstate's rate differential in adjacent territories to vary by fifteen percent instead of the ten percent ordinarily allowed under former § 2111(5)(c). The rates for the $50 deductible comprehensive in territory eighty-seven, the lowest rated territory, were 41.3 percent of the rates in territory one, the highest rated territory, which was inconsistent with the high/low territorial rate constraint. In other words, the insurance bureau argues that, although the base rates were lawful, the rate differentials that were applied to policies with deductibles as low as $50 were so disparate that the total cost to the consumer, i.e., the premium for any such policy, would be in violation of law. Allstate continues to claim that it never overcharged any policyholder. We need not resolve this dispute, because it is no longer a dispositive issue in this appeal.
The commissioner's final decision and order adopted the hearing officer's proposed decision insofar as it concluded that Allstate violated chapter 21 of the Insurance Code. Specifically, the hearing officer and the commissioner found that the comprehensive deductible factors in the rating plan in effect from October 23, 1984, to July 23, 1986, violated the "high/low" and "territorial adjacency" constraints of § 2111(5)(b) and (c), which remained in effect until February 28, 1986. On that date, 1986 P.A. 10 took effect and suspended the high/low and territorial adjacency constraints. 1986 P.A. 10 also amended § 2111(2)(a)(viii) to provide as follows:
Classifications established pursuant to this section for automobile insurance shall be based only upon 1 or more of the following factors, which shall be applied by an insurer on a uniform basis throughout the state:
(a) With respect to all automobile insurance coverages:
* * * * * *
(viii) Amount of Insurance.
The commissioner and the hearing officer also concluded that Allstate's comprehensive deductible factors violated § 2111(2)(a)(viii).
The commissioner did not follow the hearing officer's proposed decision as it related to the assertions by the Insurance Bureau's staff that Allstate's rating practices violated the Uniform Trade Practices Act, chapter 20 of the Insurance Code, M.C.L. § 500.2001 et seq.; M.S.A. § 24.12001 et seq. The hearing officer rejected the Insurance Bureau's contention that § 2027 was also violated. However, the commissioner disagreed with this part of the proposed decision and found that because Allstate had violated chapter 21, it had also violated § 2027(c), which prohibits charging a different rate for the same coverage on the basis of residence or location of the risk "unless the rate differential is based on sound actuarial principles, a reasonable classification system, and is related to the actual and credible loss statistics or reasonably anticipated experience in the case of new coverages." The commissioner reasoned, in part, as follows:
It would be manifestly unsound and unreasonable to establish rates in defiance of legal requirements. It is, therefore, entirely appropriate and necessary to conclude that Allstate, in using deductible factors that are in violation of Sections 2111(2) and 2111(5), has not utilized sound actuarial principles and has established an unreasonable classification system.
On appeal, the circuit court affirmed the commissioner's findings that Allstate violated chapter 21. However, the court reversed the commissioner's finding that Allstate violated § 2027. In addition, the court concluded that imposition of the refund sanction of chapter 20, M.C.L. § 500.2038; M.S.A. § 24.12038, was "precluded by the terms of the enforcement section of chapter 21," M.C.L. § 500.2114; M.S.A. § 24.12114.
The commissioner appealed to this Court, arguing that the circuit court erred in reversing his order finding that Allstate violated § 2027 and ordering Allstate to "refund all overcharges to its Detroit area policyholders carrying comprehensive insurance with a deductible." Allstate cross appealed, arguing that the trial court erred in affirming the commissioner's finding that Allstate violated chapter 21. Pursuant to a stipulation of the parties, we entered an order on January 3, 1992, dismissing Allstate's cross appeal. This means that the finding that Allstate's rates were in violation of law remains in effect and that the only issue remaining in this appeal is whether the violation of chapter 21 also constitutes a violation of chapter 20, which has the penalty and refund provisions.
Allstate no longer uses the rating plan at issue. By dismissing its cross appeal, Allstate concedes, at least for purposes of the argument herein, that the plan violated § 2111. Thus, the dispositive issue presented in this appeal is not whether Allstate violated § 2027, but whether the refund remedy is appropriate. We hold that it is not, and we affirm the circuit court's conclusion that the commissioner's imposition of the refund sanction contravened the provisions of chapter 21 and constituted a substantial and material error of law. M.C.L. § 24.306(1)(a) and (f); M.S.A. § 3.560(206)(1)(a) and (f).
It is undisputed that the claimed violation of § 2027 is based solely on Allstate's violation of § 2111. In other words, the reason the commissioner found that Allstate's rates were not based on "sound actuarial principles" or "a reasonable classification system," as required by § 2027, is because the rates violated the law, specifically, § 2111. The commissioner argues that this case presents no conflict between the provisions of chapter 20 and chapter 21. We disagree.
Upon finding that a regulated person has committed practices prohibited by chapter 20,...
To continue reading
Request your trial
-
McLiechey v. Bristol West Ins. Co.
...refund for violations of Chapter 21. Plaintiffs contend this issue was decided in the negative in Allstate Ins. Co. v. Mich. Dep't of Ins., 195 Mich.App. 538, 491 N.W.2d 616 (1992). In Allstate the Commissioner ordered Allstate to refund overcharges to its policyholders based on Allstate's ......
-
Ramsey v. Kohl
...the law must be applied as written. Jennings v. Southwood, 446 Mich. 125, 142, 521 N.W.2d 230 (1994); Allstate Ins. Co. v. Dep't of Ins., 195 Mich.App. 538, 547, 491 N.W.2d 616 (1992). Because M.C.L. § 418.827; MSA 17.237(827) does not provide for the imposition of a worker's compensation l......
-
Ludington Service Corp. v. Acting Com'r of Ins.
...Buttleman v. State Employees' Retirement System, 178 Mich.App. 688, 690, 444 N.W.2d 538 (1989), and Allstate Ins. Co. v. Dep't of Ins., 195 Mich.App. 538, 545, 491 N.W.2d 616 (1992). We conclude that the plain meaning of § 1242(3) clearly limits the commissioner's powers to the granting or ......
-
Heinz v. Chicago Road Inv. Co.
...legislation to rectify a perceived inequity; our task is simply to apply the law as written. 1 See Allstate Ins. Co. v. Dep't of Ins., 195 Mich.App. 538, 547, 491 N.W.2d 616 (1992). I would * John J. McDonald, 6th, Judicial Circuit Judge, sitting on Court of Appeals by assignment pursuant t......