Automobile Trade Ass'n of Maryland, Inc. v. Insurance Com'r

• Decision Date: 25 November 1981
• Docket Number: No. 56,56
• Citation: 437 A.2d 199,292 Md. 15
• Parties: AUTOMOBILE TRADE ASSOCIATION OF MARYLAND, INC. et al. v. INSURANCE COMMISSIONER of the State of Maryland et al.
• Court: Maryland Court of Appeals

Page 15

292 Md. 15

437 A.2d 199

AUTOMOBILE TRADE ASSOCIATION OF MARYLAND, INC. et al. v. INSURANCE COMMISSIONER of the State of Maryland et al.

No. 56.

Court of Appeals of Maryland.

Nov. 25, 1981.

Henry R. Lord, Baltimore (Cynthia J. Morris, Baltimore, on the brief), for appellant, William H. Schaefer, Jr.

Stephen C. Winter, Towson (Robert J. Aumiller, Towson, on the brief), for other appellants.

Michael L. Cohen, Asst. Atty. Gen., Baltimore (Stephen H. Sachs, Atty. Gen., and Thomas P. Barbera, Asst. Atty. Gen., Baltimore, on brief), for appellees.

Argued before MURPHY, C. J., and SMITH, DIGGES, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.

SMITH, Judge.

We shall here reject the invitation of appellants and cross-appellees, Automobile Trade Association of Maryland, Inc., et al. (the Dealers), to declare invalid certain parts of the regulations adopted by Maryland's Insurance Commissioner relative to credit life insurance. Because of our determination of those issues, we shall not be obliged to address the contentions of the Insurance Commissioner, appellee and cross-appellant. Thus, we shall affirm the judgment of the Circuit Court for Baltimore County entered after the filing of the carefully prepared, comprehensive opinion of Judge Alpert in that court.

i The case

In 1970, the General Assembly adopted Ch. 416 of the Acts of that year. It created a new subtitle of Maryland Code (1957) Art. 48A entitled "Credit Life and Health Insurance," codified as §§ 436C-436-O. Code (1957, 1979 Repl. Vol.) Art. 48A, §§ 26 and 436M empower the Insurance Commissioner to adopt rules and regulations. ¹ This litigation stems from the adoption of Ch. 464 of the Acts of 1979, effective January 1, 1980, amending § 436H by the addition of a new subsection (g). It authorized the Commissioner, among other things, to establish maximum rates of commission. ²

Regulations adopted by the Commissioner are the root of this controversy. The Dealers object to Regulation 436M-1.4.6.14, treating profits derived from reinsurance as a part of commissions; Regulation 436M-1.20, setting up maximum commissions; and Regulation 436M-1.21, providing that reinsurance agreements must be approved by the Commissioner. ³ The Automobile Trade Association of Maryland, Inc., together with certain dealers, and a number of individuals who are stockholders and officers of automobile dealerships, licensed agents for insurance companies and otherwise involved insofar as credit life insurance and in some instances reinsurance, filed a bill of complaint in the Circuit Court for Baltimore County seeking a declaratory judgment and injunctive relief. They challenged the regulations to which we have previously made reference. That association was described in the amended bill of complaint as "a non-profit trade association composed of automobile dealers, ... (its) member(ship) consist(ing) of approximately ... 400 licensed automobile dealers operating businesses in the State of Maryland (,) ... (many of whose members) have employees licensed as agents with various insurance companies who, pursuant to contractual arrangements with insurance companies, receive commissions as agents on the sale of credit life and credit health insurance to customers of the dealers."

The matter ultimately came on for hearing. The parties agreed to a statement of facts. The trial judge found the regulations valid. He also rejected certain contentions of the Commissioner. Both parties appealed. We acceded to the request of appellants and cross-appellants that we grant the writ of certiorari prior to hearing of the case by the Court of Special Appeals and that we advance the case for argument.

The Dealers contend: (1) Regulation 436M-1 and its enabling act violate the Contract Clause of the United States Constitution (U.S.Const. art. I, § 10); (2) the Insurance Commissioner lacks authority: (a) to create a distinction in the amount of commission that may be received by affiliated and non-affiliated agents, (b) to "grant unto himself" the right to approve reinsurance treaties entered into by out-of-state reinsurance companies, and (c) to define broadly "commission" so as to include reinsurance profits and dividends; and (3) the administrative record is insufficient to support the regulation. Since we took the case to decide the issue of the validity of the statutes and regulations, we address that issue. Inasmuch as our determination is favorable to the Commissioner, we have no need in this instance to determine the validity of his contention.

It is elementary that appellate courts do not decide issues of constitutionality except as a last resort. Moreover, there would be no need to decide that issue if we were to find for the Dealers on their contentions relative to the adoption of the regulations. Hence, we shall consider the constitutional issue last.

ii Power of the Commissioner

The Dealers at the outset allude to the doctrine of separation of powers as reflected in Maryland Declaration of Rights, Art. 8. The Dealers assert that because administrative officials have no inherent powers and may exercise only those powers which have been expressly granted to them by the General Assembly or which are necessarily or reasonably implied from those powers so granted, the Commissioner is without power here. They cite such cases as Governor v. Exxon Corp., 279 Md. 410, 440-41, 370 A.2d 1102 (1977), aff'd on other grounds, 437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978), and Pressman v. Barnes, 209 Md. 544, 555, 121 A.2d 816 (1956). Accordingly, it may be worthwhile to examine what was said in those cases.

In response to a contention the certain portions of an act constituted an unlawful delegation of legislative authority in violation of Declaration of Rights, Art. 8, Judge Eldridge said for the Court in Exxon:

"Ordinarily when legislative authority is delegated to administrative officials, there must be sufficient standards for the guidance of the administrative officials. However, it has been recognized that the complexity of modern economic conditions may make it impossible to tailor specific guidelines for every conceivable situation and that latitude in granting discretion is necessary. As stated in Pressman v. Barnes, 209 Md. 544, 555, 121 A.2d 816 (1956):

'It is recognized that it would not always be possible for Legislature or City Council to deal directly with the multitude of details in the complex situations upon which it operates.... The modern tendency of the courts is toward greater liberality in permitting grants of discretion to administrative officials in order to facilitate the administration of the laws as the complexity of governmental and economic conditions increases.'

See also Montgomery County v. Walsh, 274 Md. 502, 523-524, 336 A.2d 97 (1975), appeal dismissed, 424 U.S. 901, 96 S.Ct. 1091, 47 L.Ed.2d 306 (1976). It would obviously be impractical for the Legislature to set specific guidelines to govern all situations where exceptions to the divestiture dates would be reasonable or where it would be necessary for a producer or refiner to operate a service station on a temporary basis." Id. at 440-41, 370 A.2d 1102.

We have heretofore set forth the statutory bases for the authority of the Commissioner. The argument here runs that the grant of power in § 26 (1) to the Commissioner is to make only such rules as are reasonable and necessary to effectuate the provisions of the article, that the authorization in § 436M is to adopt rules and regulations deemed "appropriate and necessary for the supervision of (the) subtitle," and that the bases of authority set forth in § 436H (g) are to assure that the credit health and credit life insurance operations do not result in rates which are excessive in relation to benefits, do not endanger the solvency of the insurer, and do not adversely affect other classes of business of the insurer. Thus, it is argued that "the General Assembly (has) carefully circumscribed the Commissioner's rulemaking authority" and hence he is without power to do that which he has done. It is elementary that in examining the power of the Commissioner to issue regulations to implement the provisions of the Credit Life and Health Insurance subtitle of the Insurance Code, we should examine the provisions of that subtitle. This is so because the regulations must be read in the context of that enactment. The purpose of the subtitle is defined in § 436C (a) as "to promote the public welfare by regulating credit life insurance and credit health insurance." The terms used are defined. A limitation is placed upon the forms of credit life and credit health insurance to be issued. The amounts of payments are regulated. The term of such insurance under § 436F is to "commence on the date the debtor becomes obligated to the creditor, except that, if a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to the indebtedness shall commence on the effective date of the policy." Individual policies issued are required to be delivered to the debtors, except that in the case of group insurance a certificate of insurance shall be issued to the debtor. Section 436G (b) specifies the contents of each individual policy or group certificate. The Commissioner by § 436H is vested with the power and authority to approve all forms to be used in connection with such insurance as well as the rates to be charged. The statute contains requirements as to refunds. All policies of credit life insurance and credit health insurance delivered or issued for delivery in this State are required by § 436J to be "only by an insurer authorized to do an insurance business (in this State) and shall be issued only through holders of licenses or authorizations issued by the Commissioner." There are statutory provisions relative to claims and to the option of a debtor "of furnishing the required amount of insurance through existing...