Calhoun Life Ins. Co. v. Gambrell

• Decision Date: 05 March 1965
• Docket Number: No. 18316,18316
• Court: South Carolina Supreme Court
• Parties: CALHOUN LIFE INSURANCE COMPANY and Calhoun Fire and Casualty Insurance Co., Respondents, and Woodrow Easler, as Agent for Better Loans, Inc., C. V. Bennett, as Agent for Lewis-Bennett Finance Company, Inc., C. A. Byce, as Agent for Guarantee Loan Company, Inc., and M. E. Byce, as Agent for Lane Finance Company, Inc., Intervening Respondents, v. Charles W. GAMBRELL, as Chief Insurance Commissioner, and the Insurance Commission of South Carolina, Appellants.

Page 774

140 S.E.2d 774

245 S.C. 406

CALHOUN LIFE INSURANCE COMPANY and Calhoun Fire and Casualty Insurance Co., Respondents and Woodrow Easler, as Agent for Better Loans, Inc., C. V Bennett, as Agent for Lewis-Bennett Finance Company, Inc. C. A. Byce, as Agent for Guarantee Loan Company, Inc., and M. E. Byce, as Agent for Lane Finance Company, Inc. Intervening Respondents, v. Charles W. GAMBRELL, as Chief Insurance Commissioner, and the Insurance Commission of South Carolina, Appellants.

No. 18316.

Supreme Court of South Carolina.

March 5, 1965.

Daniel R. McLeod, Atty. Gen., William L. Pope, Asst. Atty. Gen., Glen E. Craig, Columbia, for appellant.

Marchant & Bristow, Edwin H. Cooper, Columbia, for respondents.

Moore & Stoddard, Spartanburg, intervening respondents. BUSSEY, Justice.

The basic question involved in this appeal is whether or not the Insurance Commission of South Carolina has any statutory authority to regulate both the rates and the commissions paid in connection therewith on credit life and credit health and accident insurance.

By way of historical background, it appears that subsequent to the enactment, in 1956 and 1957, of what is now Chapter 9, Title 8, of the 1962 Code of Laws, regulating small loan companies in this State, the then Insurance Commissioner filed in the office of the Secretary of State, on July 29, 1957, a regulation which, among other things, purported to regulate the premium rates which could be charged for credit life insurance and credit accident and health insurance issued in connection with loans made by licensees under the aforesaid Small Loan Act. See 1957 Acts of the General Assembly, page 1520.

On March 9, 1962, a concurrent resolution was passed by the General Assembly in which the Chief Insurance Commissioner was requested to re-examine the actuarial rates for accident and health insurance used in consumer finance in South Carolina since 1957, with a view to their revision downward. In response thereto, the Chief Insurance Commissioner made a rather full and comprehensive report wherein he pointed out, among other things, that he had endeavored to place, through his discretionary powers, a more realistic ceiling on commissions payable in connection with credit insurance, but had concluded that the Insurance Department was without authority to regulate commissions and had abandoned any such effort. He further stated,

'Our studies also indicate a serious doubt as to whether the Insurance Department possesses any authority, express or implied, to control credit life and credit accident and health insurance rates.'

While repeatedly expressing serious doubt as to his authority, the Insurance Commissioner, nevertheless, in a stated attempt to comply with the wishes of the General Assembly as expressed in the concurrent resolution, promulgated another regulation, filed in the office of the Secretary of State on December 4, 1962, (see 1963 Acts of the General Assembly, page 1681), which, among other things, reduced the premium rates on accident and health insurance, written in connection with loans by licensees under the Small Loan Act, below the rates prescribed by the 1957 regulation.

With respect to credit life insurance, the report of the Commissioner states,

'* * * no action can be taken by the Insurance Department since there is no law which permits the Department to control life or credit life insurance rates. * * * Any action along these lines by the Department, of course, must be determined by whatever enabling legislation the General Assembly enacts.'

Prior to the aforesaid report of the Commissioner, the Attorney General of South Carolina had advised the Commissioner that the Insurance Department did not have the authority to regulate premium rates for accident and health insurance. Opinion No. 672, April 27, 1960. Said opinion did not specifically refer to 'credit' accident and health insurance, but it is comprehensive and referred to accident and health insurance, without making any exception as to 'credit' insurance. Attention was therein called to Code Section 37-653, which specifically exempts accident and health insurance from the provisions of Chapter 7, Title 37 of the Code, which provides for the regulation of rates with respect to 'Fire, Marine and Inland Marine and Casualty and Surety Rates', that chapter being the only statutory provision which expressly accords to the Insurance Commission any power to regulate rates.

Even though all of the foregoing was thus brought to the attention of the General Assembly, it has not so far seen fit to enact any legislation which would expressly authorize the Insurance Commission to regulate premiums on credit life insurance, credit health and accident insurance, or commissions payable in connection therewith.

The legislature not having acted, the Commission, nevertheless, on February 3, 1964, filed in the office of the Secretary of State a very full and comprehensive regulation applicable to credit insurance issued in connection with loans made by both licensed lenders under the Small Loan Act, and by unlicensed lenders, which, inter alia, regulated the premium rates on credit life insurance, rates on credit accident and health insurance, and the commissions payable in connection with all credit insurance. 1964 Acts of the General Assembly, page 3418.

The plaintiffs being engaged, among other things, in writing credit insurance, commenced this action seeking to enjoin the defendants-appellants from enforcing the last mentioned regulation insofar as it regulates either the rates or commissions in connection with credit insurance, on the ground that the appellants are without statutory authority to so do. The intervening plaintiffs are agents for lending agencies doing business in South Carolina, and were made parties plaintiff by order of court, their complaints being substantially the same as the complaint of the plaintiffs.

The matter was heard before Honorable John Grimball, Resident Judge of the Fifth Judicial Circuit, who, after hearing a considerable volume of testimony, filed an order from which this appeal comes.

The order of the circuit judge, while not invalidating the entire regulation, enjoined the appellants from enforcing the regulation insofar as it regulated the commissions to be paid in connection with, and the rates to be charged for, credit life insurance and credit accident and health insurance, on the ground that the appellants had no statutory authority to regulate these matters. His decision that no such authority existed made unnecessary the consideration of incidental questions raised by the pleadings. The fundamental propositions of law governing the issue decided by the circuit judge were aptly stated by him in the following language:

'The Constitution of the State of South Carolina (1895) in Article 1, Section 14 and in Article 3, Section 1, places all legislative power of this State in the General Assembly. South Carolina State Highway Department v. Harbin, 226 S.C. 585, 86 S.E. (2d) 466.

'It is elementary law that 'administrative agencies are creatures of statute and their power is dependent upon statute, so that they must find within the statute warrant for the exercise of any authority which they claim.' 1 Am.Jur. (2d), Administrative Law Section 70, Page 886.

'As the South Carolina Supreme Court said in Piedmont & Northern Ry. Co. v. Scott, 202 S.C. 207, 24 S.E. (2d) 353, 360:

"Such (administrative) bodies, being unknown to the common law, and deriving their authority wholly from constitutional and statutory provisions, will be held to possess only such powers as are conferred, expressly or by reasonably necessary implication, or such as are merely incidental to the powers expressly granted. See 51 C.J. 36, 37, where among other things it is said: 'Any reasonable doubt of the existence in the commission of any particular power should ordinarily be resolved against its exercise of the power.' And purely administrative functions...