Department of Ins. v. Dade County Consumer Advocate's Office

• Citation: 11 Fla. L. Weekly 240,492 So.2d 1032
• Decision Date: 03 June 1986
• Docket Number: No. 66178,66178
• Parties: , 54 USLW 2649, 11 Fla. L. Weekly 240 DEPARTMENT OF INSURANCE, Appellants, v. DADE COUNTY CONSUMER ADVOCATE'S OFFICE, Appellees.
• Court: Florida Supreme Court

Page 1032

492 So.2d 1032

90 A.L.R.4th 193, 54 USLW 2649, 11 Fla. L. Weekly 240

DEPARTMENT OF INSURANCE, Appellants, v. DADE COUNTY CONSUMER ADVOCATE'S OFFICE, Appellees.

No. 66178.

Supreme Court of Florida.

June 3, 1986.

Rehearing Denied Sept. 10, 1986.

Donald A. Dowdell, Gen. Counsel, Dept. of Ins., Curtis A. Billingsley and Jim Smith, Atty. Gen. and Kent A. Zaiser and Louis F. Hubener, Asst. Attys. Gen., Dept. of Legal Affairs, Tallahassee, for appellants.

Mary Charlotte McCall, Tallahassee and William B. Schultz, Public Citizen Litigation Group, Washington, D.C., for appellees.

William O. Birchfield and Dennis E. Hayes of Martin, Ade, Birchfield & Johnson, Jacksonville, for American Counsel of Life Ins., amicus curiae.

Frederick B. Karl, Arthur C. Beal, Jr. and James N. McConnaughhay of Karl, McConnaughhay, Roland & Maida, Tallahassee, for Florida Ass'n of Ins. Agents, amicus curiae.

J. Robert McClure, Jr. and Alan C. Sundberg of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tallahassee, for Florida Ass'n of Life Underwriters, amicus curiae.

Stephen C. O'Connell of Cason & Henderson, Tallahassee, and William N. Albus, Washington, D.C., for Nat. Ass'n of Life Underwriters, amicus curiae.

George E. Owen, Tallahassee and William R. Heerman, Appleton, Wis., for the Nat. Fraternal Congress of America, amicus curiae.

Sandra L. Gilfillan, Kansas City, Mo., for Nat. Ass'n of Ins. Com'rs, amicus curiae.

Carl K. Oshiro and Harry M. Snyder, San Francisco, Cal., for Consumers Union of U.S., Inc., amicus curiae.

OVERTON, Justice.

This appeal from Dade County Consumer Advocate's Office v. Department of Insurance, 457 So.2d 495 (Fla. 1st DCA 1984), concerns the validity of sections 626.611(11) and 626.9541(1)(h)1, Florida Stat utes (1983), ¹ which prohibit insurance agents from accepting from their customers a commission lower than the commission set by the insurer. The First District Court of Appeal declared these "anti-rebate statutes" unconstitutional, finding that they are an invalid exercise of the state's police power. We have jurisdiction. Art. V, § 3(b)(1), Fla. Const. We find these statutes unnecessarily limit the bargaining power of the consuming public and, in accordance with prior consumer decisions of this Court, we affirm the decision of the district court and hold that these statutes are unconstitutional to the extent they prohibit rebates of insurance agents' commissions.

This cause commenced when appellee, the Dade County Consumer Advocate's Office, filed a complaint in circuit court alleging that the anti-rebate statutes prevent "price competition with respect to insurance agents' commissions," thereby depriving Florida consumers of their property without due process of law in violation of article I, section 9, of the Florida Constitution. The trial judge found that the challenged statutes "are a valid exercise of the police power ... and a valid exercise of [the state's] regulatory authority to protect the public from discrimination," and entered summary judgment for the Department of Insurance. The district court reversed, concluding:

We are unable to find any legitimate state interest justifying the continued existence of the anti-rebate statutes.

....

In the absence of any apparent rational relation between the prohibition of rebates and some legitimate state purpose in safeguarding the public welfare, we conclude the anti-rebate statutes ... constitute an unjustified exercise of the police power of this state....

Id. at 497-99. In reaching its decision, the court evaluated and rejected each of the Department's asserted justifications for the statutory ban against rebates, including arguments that the statutes guarantee insurer solvency and prevent discrimination among insureds in the same actuarial class.

Before this Court, the Department of Insurance first argues that the district court applied a too-rigorous standard of review in stating that the statutes must "reasonably and substantially promote the public health, safety or welfare." Id. at 497 (emphasis added). The Department and the various organizations appearing as amici curiae next assert that these anti-rebate statutes should be upheld on the ground that they reasonably advance the economic protection of Florida consumers by establishing uniform rates among members of the same actuarial class; that, in the absence of these laws, similarly classified policyholders of the same insurer will pay different prices for the same policy; that consumers' efforts to compare costs of similar policies will be thwarted; that consumers will be more likely to focus on the size of the rebate than on the quality of the insurance; that premiums will increase as a result of pressure by agents for larger commissions to enable them to offer larger rebates; and that many policies will lapse because consumers will replace their policies each year with new policies sold by different agents who can offer larger rebates as a result of the prevailing first-year commission structures, resulting in higher administrative costs.

We are concerned with the narrow issue of whether a statute that prohibits an insurance agent from reducing the amount of the commission he or she will earn from selling the insurance is valid. Historically, this Court has carefully reviewed laws that curtail the economic bargaining power of the public. In fact, this Court was one of the first to hold unconstitutional a "fair trade act" that allowed a manufacturer to establish a minimum retail price for which the retailer could sell a product to the consumer. See Liquor Store v. Continental Distilling Corp., 40 So.2d 371 (Fla.1949). We found that such legislation is not within the scope of the state's police power and noted that "[c]onstitutional law never sanctions the granting of sovereign power to one group of citizens to be exercised against another unless the general welfare is served." Id. at 374 (emphasis in original). We concluded that the act was arbitrary, unreasonable, and violated the right to own and enjoy property. In Larson v. Lesser, 106 So.2d 188 (Fla.1958), we struck down as unconstitutional a statute that prohibited a public adjuster who represents insureds from soliciting business on the ground that the restraint imposed was not rationally related to the public's welfare. In Stadnik v. Shell's City, Inc., 140 So.2d 871 (Fla.1962), this Court held invalid a pharmacy board rule that prohibited the advertisement of the name or price of prescription drugs on the basis that it was an attempt to prohibit price competition which had no reasonable relation to public safety, health, morals or general welfare. In Florida Board of Pharmacy v. Webb's City, Inc., 219 So.2d 681 (Fla.1969), we held invalid a statute which prohibited retail drug establishments from using the media to promote the use or sale of prescription drugs.

In recent years, the United States Supreme Court also has struck down governmental statutes or regulations that restrict the competitive pricing of consumer services. While recognizing that states have broad power to establish standards for licensing practitioners and regulating the practice of professions within their boundaries, the Court, in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), determined that a minimum fee schedule for attorneys enforced through the prospect of professional discipline by the state bar association and the state supreme court violated the Sherman Anti-Trust Act. In Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976), the Court held unconstitutional, on first and fourteenth amendment grounds, that part of a statute declaring it unprofessional for a pharmacist to advertise prices for prescription drugs. In Bates v. State Bar of Arizona, 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977), the Court held that a disciplinary rule prohibiting attorneys from advertising the cost of their services violated the first amendment.

In considering the validity of a legislative enactment, this Court may overturn an act on due process grounds only when it is clear that it is not in any way designed to promote the people's health, safety or welfare, or that the statute has no reasonable relationship to the statute's avowed purpose. Palm Beach Mobile Homes, Inc. v. Strong, 300 So.2d 881 (Fla.1974) (citing Atlantic Coastline Railroad Co. v. City of Goldsboro, 232 U.S. 548, 34 S.Ct. 364, 58 L.Ed. 721 (1914)). Although the district court recited an incorrect standard of review in part of its opinion, we conclude that the error did not affect the result reached in this case. We find the district court properly found no relationship between the enactments and any legitimate state interest and, therefore, it was not called upon to determine the degree to which the anti-rebate statutes advance a state interest.

From our review of the record, we find no identifiable relationship between the anti-rebate statutes and a legitimate state purpose in safeguarding the public health, safety or general welfare. Insurance agents' commissions do not affect the net insurance premium and are unrelated to the actuarial soundness of insurance policies. The other arguments presented by the Department of Insurance in support of the statutes' constitutionality have been properly responded to by the district court in its opinion. Many of these arguments have been previously unsuccessfully made to uphold statutes or regulations limiting consumers' bargaining power for other services.

For the reasons expressed, we find sections 626.611(11) and 626.9541(1)(h)1, Florida Statutes (1983), are unconstitutional under article I, section 9, of the Florida Constitution to the extent they prohibit insurance agents from rebating any portion of their commissions to their customers.

It is so ordered.

McDONALD, EHRLICH and BARKETT, JJ., concur.

BOYD...