Auto Body Ass'n Of R.I. v. State Of R.I. Dep't Of Bus. Regulation

• Decision Date: 04 June 2010
• Docket Number: No. 2008-224-M.P.,2008-225-M.P.,2008-224-M.P.
• Citation: 996 A.2d 91
• Parties: AUTO BODY ASSOCIATION OF RHODE ISLANDv.STATE of Rhode Island DEPARTMENT OF BUSINESS REGULATION et al.
• Court: Rhode Island Supreme Court

996 A.2d 91

AUTO BODY ASSOCIATION OF RHODE ISLANDv.STATE of Rhode Island DEPARTMENT OF BUSINESS REGULATION et al.

Nos. 2008-224-M.P., 2008-225-M.P.

Supreme Court of Rhode Island.

June 4, 2010.

Jina Petrarca-Karampetsos, Esq., for Auto Body Association of Rhode Island.

Elizabeth Kelleher Dwyer, Esq., for State of Rhode Island Department of Business Regulation.

Linn F. Freedman, Esq., Providence, for Property and Casualty Insurers' Association of America.

Present: SUTTELL, C.J., FLAHERTY, and ROBINSON, JJ.

OPINION

Justice ROBINSON for the Court.

This case arose out of a dispute concerning the determination of the prevailing labor rate according to which property and casualty insurers must pay auto body shops for work performed on vehicles covered by such insurers. The petitioners, the Rhode Island Department of Business Regulation (DBR) and the Property and Casualty Insurers Association of America (PCI), filed separate petitions for the issuance of writs of certiorari, seeking review of a Superior Court order which reversed DBR's interpretation of G.L.1956 § 27-29-4.4. For the reasons set forth in this opinion, we grant the petitions for certiorari and quash the judgment of the Superior Court.¹

IFacts and Travel

The underlying facts that are implicated by this case are largely undisputed. The Auto Body Association of Rhode Island (Auto Body) is an organization with a membership of approximately one hundred independent auto body shops located throughout Rhode Island. Auto Body asserts that, for many years, the prevailing labor rate according to which insurers made payments to auto body shops for work performed on vehicles covered by those insurers was “woefully inadequate.” In 2006, the General Assembly enacted § 27-29-4.4; that statute, in pertinent part, provides that “[e]ach insurer must conduct an auto body labor rate survey, in writing, annually to determine a prevailing auto body labor rate for fully licensed auto body repair facilities.” Section 27-29-4.4(a)(2).

In order to implement the provisions of § 27-29-4.4, in October of 2006, DBR promulgated Insurance Regulation 108. (02-030-108 R.I.Code R. § 2.) Insurance Regulation 108, § 3 provides, in pertinent part, as follows:

“Each insurer that writes more than one percent (1%) of the total premium volume of Motor Vehicle Liability Insurance during the immediately preceding calendar year shall conduct an auto body labor rate survey in accordance with R.I.G.L. §§ 27-29-4.4 and this Regulation.”

In addition, Insurance Regulation 108, § 7(2) requires insurers to file with DBR an annual report regarding the just-referenced labor rate survey. Section 7(3) of Insurance Regulation 108 provides that “[t]he Report of Labor Rate Survey must include [ inter alia ] the following:

“ * * *

“d. Results of the questionnaires considered by the insurer.

“ * * *

“f. A description of the formula or manner in which the insurer has calculated or determined the prevailing labor rate which it pays to auto body repair facilities.

“g. The prevailing labor rate established by the insurer.

“h. If the calculation or formula indicated in subsection f above is not based on the results of the questionnaires identified in subsection d above, a complete explanation as to why it is not so based.”

Pursuant to Insurance Regulation 108, § 7(1), insurers were required to file their first annual report with DBR by June 1, 2007. Auto Body contends that, upon reviewing those initial reports, it “learned that many insurers refused to set a prevailing labor rate, claiming that they ‘negotiate’ with each shop directly (while paying all the same rate), or set a prevailing labor rate basing it upon information such as insurer historical data, subrogation rates, and rates paid in other states.”

On July 23, 2007, acting pursuant to G.L.1956 § 42-35-8, Auto Body filed a petition for a declaratory ruling with DBR. In its petition, Auto Body sought a declaration “that the [labor rate] survey results be used to determine a prevailing labor rate as required by the statute [§ 27-29-4.4], which does not allow for any other mechanism to determine and set such rate.” Auto Body's petition for a declaratory ruling also made reference to the responses of numerous insurers, which (according to Auto Body) stated that “they do not base their prevailing labor rate on the survey, that they do not set a rate and negotiate directly with each shop, or that they are awaiting ruling by the Department.”

After having provided interested parties with notice and an opportunity to respond to Auto Body's petition for a declaratory ruling, DBR issued a written decision on November 21, 2007. In that decision, DBR stated that § 27-29-4.4 does not clearly require that insurers must set their labor rate solely on the basis of the labor rate survey.² It was further DBR's position that “the information received from the survey must be taken into consideration by the insurer as one element in its decision making process.” (Emphasis added.)

In its decision, DBR stated that it had determined that the statute was ambiguous and that, therefore, it had conducted an analysis of the legislative intent behind the statute in order to determine its meaning. DBR stated that “the clear legislative intent” underlying § 27-29-4.4 was that insurers be required “to consider information submitted by auto body shops on labor rates and to provide public information on how the labor rates are set.” In its decision, DBR indicated (1) that the statute merely sought “to provide additional transparency” with respect to the process of setting labor rates; and (2) that the labor rate survey was intended to be just one factor to be taken into account in the setting of labor rates. Accordingly, DBR denied Auto Body's request “that the Department find that * * * § 27-29-4.4 requires that the result of the labor rate survey be the only mechanism which an insurer can use to determine and set such labor rates for fully licensed auto body shops * * *.” (Emphasis added.)

On December 5, 2007, Auto Body, relying upon the Administrative Procedures Act,³ appealed DBR's decision to the Superior Court. Thereafter, PCI was permitted to intervene, and the legal issues were briefed by all parties. On August 13, 2008, a justice in the Providence County Superior Court issued a written decision, which reversed DBR's declaratory ruling. In her written decision, the hearing justice concluded that § 27-29-4.4 is not ambiguous. In so concluding, she held that “every insurer governed by § 27-29-4.4 must conduct a labor rate survey as provided in the statute and use that survey as the sole determinant of the prevailing auto body labor rate.” (Emphasis added.)

Although neither Auto Body nor DBR had raised the issue in the context of Auto Body's administrative appeal to the Superior Court, the hearing justice nevertheless chose to make a further ruling to the effect that “ § 27-29-4.4 applies to every insurance carrier authorized to sell motor vehicle liability insurance in Rhode Island.” (Emphasis added.) The latter ruling effectively overruled the provision within Insurance Regulation 108 whereby the requirements of § 27-29-4.4 are deemed to apply only to insurers writing more than one percent of private passenger automobile lines of insurance.

PCI filed a motion for clarification of the Superior Court's decision, and the hearing justice heard oral argument on that motion on August 28 and 29, 2008. The hearing justice denied the motion to clarify. DBR and PCI then filed separate motions to stay the effect of the hearing justice's decision. After a hearing was held on September 15, 2008 with respect to the motions to stay, the hearing justice denied PCI's motion to stay and partially granted DBR's motion. ⁴

DBR and PCI each filed petitions for a writ of certiorari, pursuant to G.L.1956 § 42-35-16. On October 9, 2008, we entered an order issuing the writs, consolidating the proceedings, and staying the Superior Court decision pending our consideration of the issues.

IIStandard of Review

This Court has frequently stated that, when dealing with an administrative appeal, “the scope of our review, like that of the Superior Court, is an extension of the administrative process.” Rhode Island Public Telecommunications Authority v. Rhode Island State Labor Relations Board, 650 A.2d 479, 484 (R.I.1994); see also Environmental Scientific Corp. v. Durfee, 621 A.2d 200, 208 (R.I.1993).

The Superior Court's review of an administrative appeal is governed by the Rhode Island Administrative Procedures Act. That act provides, in pertinent part, as follows:

“The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings, or it may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

“(1) In violation of constitutional or statutory provisions;

“(2) In excess of the statutory authority of the agency;

“(3) Made upon unlawful procedure;

“(4) Affected by other error or law;

“(5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or

“(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.”

Section 42-35-15(g).

In essence, if “competent evidence exists in the record, the Superior Court is required to uphold the agency's conclusions.” Rhode Island Public Telecommunications Authority, 650 A.2d at 485; see also § 42-35-15.

The act also guides this Court's review of the Superior Court's judgment in administrative proceedings. Section 42-35-16. In conducting our review, “we are restricted to questions of law, which we review de novo.” Champlin's Realty Associates v. Tikoian, 989 A.2d 427, 437 (R.I.2010); Rossi v. Employees' Retirement System, 895 A.2d 106, 110 (R.I.200...