American Way Service Corp. v. Commissioner of Ins., Michigan Dept. of Commerce, Ins. Bureau

Decision Date06 April 1982
Docket NumberDocket No. 55560
PartiesAMERICAN WAY SERVICE CORPORATION, a Michigan corporation, American Way Life Insurance Company, a Michigan insurance corporation, American Way Life Insurance Company, an Arizona insurance corporation, and Thomas A. Warmus, individually, jointly and severally, Plaintiffs-Appellants, v. The COMMISSIONER OF INSURANCE, MICHIGAN DEPARTMENT OF COMMERCE, INSURANCE BUREAU, and Dealers Financial Services, Inc., Defendants-Appellees.
CourtCourt of Appeal of Michigan — District of US

William Pultusker, Southfield, for plaintiffs-appellants.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Louis J. Porter, Asst. Atty. Gen., Lansing, for the Commissioner of Insurance.

Nine & Maister, Bloomfield Hills, for Dealers Financial Service, Inc.

Before J. H. GILLIS, P. J., and T. M. BURNS and KAUFMAN, JJ.

T. M. BURNS, Judge.

Appellants appeal as of right a lower court judgment upholding a July 7, 1980, order of the Insurance Bureau of the Michigan Department of Commerce finding them in violation of the provisions of M.C.L. § 500.2009; M.S.A. § 24.12009, and M.C.L. § 500.2027; M.S.A. § 24.12027. The Insurance Bureau ordered them to pay a penalty of $15,000 for their violation of § 2009 and a penalty of $25,000 for their violation of § 2027. Further, they were ordered to refrain from issuing any new credit life insurance group contracts and from soliciting any new group credit insurance contracts for a period of six months.

Appellant Thomas M. Warmus is the sole shareholder and president of appellant American Way Service Company (Service), which is the majority shareholder of American Way Life Insurance Company (Life). Warmus is also the president of Life.

Life is in the business of offering credit life insurance to automobile dealers who in turn sell the insurance to their customers. For each policy of credit life insurance sold, the dealer receives a commission of 35 percent of the cost of the policy. The commissions are paid by Life to dealer-related agencies, of which the participating dealers are members, rather than directly to the dealers who are not eligible to receive commissions because they are not licensed insurance agents. Appellant Service, which the bureau found to have an identity so inextricably intertwined with that of Life and Warmus to make its actions attributable to the others, offers a bonus arrangement to dealers that gives them added incentives to sell Life's policies of insurance. Under these "service allowance agreements" between Service and various automobile dealers, the dealers were paid a bonus by Service over and above the 35 percent commission they would otherwise be entitled to pursuant to the terms of the basic contract with appellant Life. However, in order to be entitled to this bonus, the dealers had to agree to limit their sales of credit life insurance policies to persons who were under a certain age. The amount of the bonus varied depending upon the age cap to which the dealer agreed. That is, dealers who agreed not to sell insurance policies to persons over age 55 were entitled to a greater bonus than dealers who agreed not to sell such policies to persons over age 60. In all, 190 such agreements were entered into with various age caps between ages 55 and 64.

Evidence introduced at the hearing below also established that appellants had made statements that were false, maliciously critical and derogatory as to the financial condition of Dealers Financial Service, Inc., a competitor of appellant Life, and that the statements were calculated to injure Dealers Financial.

On June 28, 1979, the Insurance Bureau issued a notice of hearing charging appellants with multiple violations of § 2009 and § 2027 of the Insurance Code of 1956, M.C.L. § 500.100 et seq.; M.S.A. § 24.1100 et seq. The charges were based upon complaints received by the Insurance Bureau from Dealers Financial. Following a hearing that was held on several dates between September 20, 1979, and February 5, 1980, a hearing officer of the Insurance Bureau issued a proposed decision on February 11, 1980, in which he found appellants in violation of § 2009 and § 2027 of the Insurance Code. The hearing officer recommended that the Insurance Bureau issue a cease and desist order for violations of § 2027 and recommended that a penalty of $25,000 be imposed on appellants with $20,000 thereof being suspended if they began offering insurance to persons between the ages of 55 and 64 within 30 days after the order.

On July 7, 1980, the Insurance Bureau issued a final order. The bureau affirmed the findings of the hearing officer. Further, the bureau imposed a penalty of $15,000 on appellants for their violation of § 2009 and a penalty of $25,000 for their violation of § 2027. The Insurance Bureau ordered American Way to cease and desist from making false, maliciously critical or derogatory statements regarding the financial condition of Dealers Financial and to cease and desist from discriminating against individuals between the ages of 55 and 64 in offering credit life insurance. Finally, the bureau enjoined appellants from issuing any credit insurance group contracts and from directly or indirectly soliciting any new group credit insurance contracts for a period of six months. On October 27, 1980, the circuit court entered an order affirming the decision of the Insurance Bureau. Appellants now appeal and we affirm.

Appellants raise a number of issues in this appeal, however, all but two of them have been waived on account of their failure to raise them below in the circuit court. This Court will not review issues that were not raised and decided by the trial court. The Felters Co. v. Local 318, Amalgamated Clothing & Textile Workers Union, AFL-CIO, 108 Mich.App. 333, 310 N.W.2d 233 (1981); Scanlon v. Western Fire Ins. Co., 4 Mich.App. 234, 144 N.W.2d 677 (1966); Detroit v. Burke Rental Service, Inc., 3 Mich.App. 353, 142 N.W.2d 473 (1966).

Although appellants have waived the following issues, we have examined them in order to insure that a miscarriage of justice will not occur by our failure to pass upon them.

The first issue waived by appellants concerned whether the findings of the Insurance Bureau hearing officer regarding appellants' violation of § 2027 are supported by competent, material and substantial evidence on the whole record.

Section 2027 of the Insurance Code took effect on April 1, 1977. In pertinent part, it provides:

"Unfair methods of competition and unfair or deceptive acts or practices in the business of insurance include:

"(a) Refusing to insure, or refusing to continue to insure, or limiting the amount of coverage available to an individual or risk because of any of the following:

* * *

* * *

"(ii) The residence, age, handicap, or lawful occupation of the individual or the location of the risk, unless there is a reasonable relationship between the residence, age, handicap, or lawful occupation of the individual or the location of the risk and the extent of the risk or the coverage issued or to be issued, but subject to subparagraph (iii). This section shall not prohibit an insurer from specializing in or limiting its transactions of insurance to certain occupational groups, types, or risks as approved by the commissioner of insurance. The commissioner shall approve the specialization for an insurer licensed to do business in this state and whose articles of incorporation contained a provision on July 1, 1976, requiring that specialization."

In St. Joseph Twp. v. State Boundary Comm., 101 Mich.App. 407, 411, 300 N.W.2d 578 (1980), this Court found that the term "substantial evidence" has been construed by the Supreme Court to be:

"[A] thorough judicial review of administrative decision, a review which considers the whole record--that is, both sides of the record--not just those portions of the record supporting the findings of the administrative agency. Although such a review does not attain the status of de novo review, it necessarily entails a degree of qualitative and quantitative evaluation of evidence considered by an agency. Such review must be undertaken with considerable sensitivity in order that the courts accord due deference to administrative expertise and not invade the province of exclusive administrative fact-finding by displacing an agency's choice between two reasonably differing views. Cognizant of these concerns, the courts must walk the tightrope of duty which requires judges to provide the prescribed meaningful review." (Quoting Michigan Employment Relations Comm. v. Detroit Symphony Orchestra, Inc., 393 Mich. 116, 124, 223 N.W.2d 283 [1974]).

Appellants contend that in order to prove a violation of § 2027, appellants were obligated to present direct evidence establishing that individuals between the ages of 55 and 64 who purchased automobiles were refused insurance coverage. With respect to this argument, the Insurance Bureau found:

"Where American Way has entered into 190 of these agreements to pay automobile dealers more if they agree not to sell to persons over a specified age, it is a fair inference that most, if not all, of the automobile dealers basically adhere to the agreement. While the precise number of debtors who have been refused insurance pursuant to any particular agreement has not, and possibly could not, be ascertained, it may be fairly inferred that, during any six months period in which such an agreement is in effect, several individuals would not be offered the insurance or would be denied the insurance if they asked to purchase it."

This inference of the Insurance Bureau is a reasonable one fully supported by evidence consisting in part of the minutes of a sales meeting conducted by appellant Service in 1972, by a tape recording of a sales meeting in the fall of 1976 that contained instructions given to a...

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