California Auto. Assigned Risk Plan v. Garamendi
Decision Date | 25 July 1991 |
Docket Number | No. B047146,B047146 |
Citation | 232 Cal.App.3d 904,283 Cal.Rptr. 562 |
Court | California Court of Appeals Court of Appeals |
Parties | CALIFORNIA AUTOMOBILE ASSIGNED RISK PLAN et al., Plaintiffs and Respondents, v. John GARAMENDI, as Insurance Commissioner, etc., Defendant and Appellant. |
Rubinstein & Perry, Karl L. Rubinstein, Dana Carli Brooks, Strumwasser & Woocher, Fredric D. Woocher, Michael J. Strumwasser, and Susan L. Goodkin, for defendant and appellant.
Leboeuf, Lamb, Leiby & MacRae, James R. Woods, Sanford Kingsley, Thomas E. McDonald, and Lorraine A. Barrabee, for plaintiffs and respondents.
The Insurance Commissioner of the State of California (hereinafter the commissioner) appeals from a judgment of the superior court declaring that certain provisions of Proposition 103, an initiative measure entitled the Insurance Rate Reduction and Reform Act, apply to automobile insurance policies issued under the California Automobile Assigned Risk Plan (hereinafter CAARP). (Ins.Code, § 11620 et seq.; Cal.Code Regs., tit. 10, § 2400 et seq.) 1 The sole issue on appeal is whether the superior court correctly ruled that the hearing procedures established by Proposition 103 ( ) apply to hearings to set rates for automobile insurance policies issued under the assigned-risk plan. 2 For the reasons that follow, we reverse that portion of the judgment declaring that section 1861.05, subdivisions (b) and (c), and sections 1861.06 through 1861.09, inclusive, apply to hearings to set rates for automobile insurance policies issued under CAARP and affirm the judgment in all other respects.
Proposition 103, passed by the voters on November 8, 1988, added to the Insurance Code an article entitled "Reduction and Control of Insurance Rates." (§§ 1861.01-1861.14.) 3 The following day, plaintiffs California Automobile Assigned Risk Plan 4 and Industrial Indemnity Company filed a complaint in superior court against the commissioner (at that time Roxani Gillespie and currently John Garamendi) and codefendants the State of California and the Attorney General (at that time John K. Van De Kamp and currently Daniel E. Lungren) seeking declaratory and injunctive relief. 5
As subsequently amended, the complaint sought a judicial declaration that Proposition 103 does not apply to CAARP or its participating insurers regarding their assigned-risk business, and that sections 11620-11626.1 and the rules and regulations promulgated thereunder by the commissioner continue to govern CAARP's operations. The complaint further sought a judicial declaration that, to the extent Proposition 103 does apply to CAARP, it is unconstitutional.
A court trial was held on June 21, 1989. Defendants, represented by the Attorney General's Office, took the position the court should examine each provision of Proposition 103 individually to determine whether it is applicable, rather than determine whether Proposition 103, as a whole, applies to CAARP. After hearing lengthy argument, the court made tentative rulings on each issue, directing plaintiffs' attorneys to prepare a proposed judgment and submit it to counsel for defendants.
On July 19, 1989, defendant John Van De Kamp, Attorney General, filed a proposed judgment and stated in accompanying papers that, due to "an apparent conflict of interest," the commissioner henceforth would be represented by separate counsel. In another document filed that day, separate counsel representing the commissioner was substituted in place of the Attorney General's Office.
On December 19, 1989, following delays caused by the filing of motions for reconsideration by the Attorney General and the commissioner, the superior court filed a judgment which stated, in pertinent part:
On December 20, 1989, a notice of appeal was filed by Insurance Commissioner Roxani Gillespie. In her opening and reply briefs, filed July 11, 1990, and October 11, 1990, respectively, Commissioner Gillespie argued that "[n]o provision of Proposition 103 should apply to CAARP" and that the superior court's judgment was improper in that it was the result of stipulations of the parties to issues of law.
Subsequent to the filing of the briefs in this case, John Garamendi was elected Insurance Commissioner and assumed office on January 7, 1991. On February 15, 1991, a substitution of counsel representing the commissioner was filed, and the commissioner requested, and we granted, permission to file supplemental briefs. In those briefs, Commissioner Garamendi challenges only that portion of the judgment declaring that section 1861.05, subdivisions (b) and (c), and sections 1861.06 through 1861.09 apply to requests for revisions of the rates set for automobile liability insurance policies issued under CAARP. 6 Commissioner Garamendi states: "The balance of the decision ... is not being challenged by this appeal."
The passage of Proposition 103 made "numerous fundamental changes in the regulation of automobile and other types of insurance." (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 812, 258 Cal.Rptr. 161, 771 P.2d 1247.) Prior to passage of the initiative, California was "a so-called 'open rate' state, that is, rates [were] set by insurers without prior or subsequent approval by the Insurance Commissioner." (King v. Meese (1987) 43 Cal.3d 1217, 1221, 240 Cal.Rptr. 829, 743 P.2d 889.) The commissioner was empowered to prohibit an insurance rate only if " 'a reasonable degree of competition [did] not exist in the area' " and the rate was found to be " 'excessive, inadequate or unfairly discriminatory.' " (Id., at pp. 1221-1222, 240 Cal.Rptr. 829, 743 P.2d 889.)
Subsequent to passage of Proposition 103, "[e]very insurer which desires to change any rate shall file a complete rate application with the commissioner." (§ 1861.05, subd. (b).) "The commissioner shall notify the public of any [such] application." A hearing may be held if the commissioner, either on his or her own motion or pursuant to the request of a consumer, determines to do so and must be held, upon timely request, if the proposed rate increase exceeds seven percent for "personal lines" or fifteen percent for "commercial lines." (§ 1861.05, subd. (c).) The initiative includes several provisions governing the conduct of such rate hearings. 7 The commissioner shall not approve a rate "which is excessive, inadequate, unfairly discriminatory or otherwise in violation of this chapter." 8 (§ 1861.05, subd. (a).)
The issue before us is whether the procedural provisions applicable to rate applications and hearings pursuant to section 1861.05 apply to hearings to establish rates for automobile insurance policies issued under CAARP. 9 CAARP was created in 1947 and has been described as follows: (King v. Meese, supra, 43 Cal.3d 1217, 1222-1223, 240 Cal.Rptr. 829, 743 P.2d 889; Cal.Code Regs., tit. 10, §§ 2400, 2430.)
(King v. Meese, supra, 43 Cal.3d 1217, 1223, 240 Cal.Rptr. 829, 743 P.2d 889.) The CAARP governing committee 10 annually recommends to the commissioner whether, and to what extent, the rates should be revised. (Cal.Code Regs., tit. 10, § 2421.10.)
In determining whether section 1861.05, subdivisions (b) and (c), and sections 1861.06 through 1861.09 apply...
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