Dwyer v. Commissioner of Ins.

• Decision Date: 15 May 1978
• Citation: 375 Mass. 227,376 N.E.2d 826
• Parties: Barry J. DWYER et al. 1 v. COMMISSIONER OF INSURANCE et al. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 826

376 N.E.2d 826

375 Mass. 227

Barry J. DWYER et al.¹ v. COMMISSIONER OF INSURANCE et al. ²

Supreme Judicial Court of Massachusetts,Suffolk.

Argued Feb. 15, 1978.

Decided May 15, 1978.

Jerry C. Effren and Richard J. Vita, Dorchester, for plaintiffs.

Mitchell J. Sikora, Jr., Asst. Atty. Gen., for defendants.

Galen S. Gilbert, Boston, for Civil Service Commission, amicus curiae, submitted a brief.

Before HENNESSEY, C. J., and QUIRICO, KAPLAN, WILKINS and ABRAMS, JJ.

KAPLAN, Justice.

Forty-three examiners, employed in the Fraudulent Claims Board (FCB) of the Division of Insurance, were dismissed by the Commissioner of Insurance after hearings. They brought suit in the Superior Court against the Commissioner and others for an order of reinstatement with award of back pay. The suit can be read variously as a civil action in the nature of mandamus (G.L. c. 249, § 5), an appeal under the State Administrative Procedure Act (G.L. c. 30A, § 14), and a claim based on a collective bargaining agreement covering these examiners. A judge of the Superior Court considered the suit in all its phases after a hearing at which he received transcripts of the proceedings before the Commissioner with accompanying exhibits, together with a statement of agreed facts. In a thorough opinion, he held against the examiners' contentions and entered judgment dismissing their complaint. The examiners appealed, and we granted direct appellate review. We affirm.

From the findings of the judge, supplemented by references to the materials before him, we learn the following. FCB was created in 1968 as a board within the Division of Insurance. G.L. c. 26, § 8B, inserted by St.1968, c. 643, § 1. Its purpose was to investigate frauds in motor vehicle accident claims with the object of reducing payments by the insurance companies and thereby lowering insurance premiums charged to the public. ³ Insurance companies filed with FCB reports of all motor vehicle accident claims, indicating on the forms which claims appeared suspicious and warranted investigation for fraud. FCB would then carry out investigations.

FCB had some early success in its work: in 1970, 900 claims referred to it were withdrawn by the claimants. But with the advent of "no fault" automobile insurance, and the consequent near-disappearance of the relatively minor personal injury claims with which FCB had been dealing, the number of referred claims declined greatly (from 2,673 in 1970 to 585 in 1974), and the number of such claims withdrawn fell to seventeen for the twelve months ending March, 1975.

In spring, 1975, the Commissioner directed the first deputy commissioner to conduct a study of FCB. This official proceeded to interview the senior supervisory personnel of FCB and the claims managers of several large insurers; he assembled the FCB statistics and read its periodic reports and other such documentation; and he went into the details of many sample cases. The lengthy report of the deputy commissioner, filed on April 15, 1975, documented the decline in FCB's work. It noted that in the face of this shrinkage FCB had taken upon itself the investigation of motor vehicle arson cases, an activity which the report considered make-work largely duplicating the efforts of local police and fire departments. The report concluded that FCB was producing substantially no savings or other benefits to offset the cost of maintaining it at the then current level of personnel, a cost of about $750,000 annually in appropriated funds and more in expenses of compliance imposed on the insurance companies, all borne ultimately by policyholders. ⁴

After the submission of the report, the Commissioner sent letters to fifty of the fifty-four FCB examiners notifying them that their employment was to terminate on June 15, 1975, ⁵ by reason of lack of work. While stating that he did not consider the employees entitled to hearings regarding their dismissal, the Commissioner offered them the opportunity for hearings as under the civil service and veterans' tenure laws (G.L. c. 30, § 9A; c. 31, §§ 43, 45, 46A).

The two indicated hearings were conducted by the Commissioner in June, 1975, taking together six days. The whole group of examiners including the present plaintiffs were represented. The case presented to justify the dismissal consisted of the testimony and report of the deputy commissioner. This witness was cross-examined at length on the part of the examiners, and several FCB staff members and a State senator were called to testify in their behalf. There was scarcely any challenge to the circumstances of the fall in claim referrals and withdrawals as suggested by the report. Besides a certain amount of anecdotage about incidents of successful fraud investigation before the drop off, the examiners pressed the utility of FCB's arson investigations (a question, however, was raised whether a practice of investigating arson before the filing of a claim was consistent with the FCB statute).⁶ The deputy commissioner reiterated his view that this work should be left elsewhere, and pointed out, incidentally, that no claims had been withdrawn as a result of FCB arson investigations during the preceding year.

In the light of the hearings, the Commissioner rendered his opinions holding that worthwhile FCB work had diminished steeply (ascribed to the introduction of "no fault"), and the dismissals accordingly were justified. Following the dismissals, FCB has continued to operate with a reduced staff of four.

1. Procedural entitlement. The examiners contended that they were tenured employees who could be properly appointed and removed only by the full FCB of three officials,⁷ and after compliance with the cause and hearing requirements of the civil service law, G.L. c. 31, § 43. They claimed that the military veterans among them achieved this status and the accompanying entitlement by virtue of G.L. c. 30, § 9A (veterans' rights), ⁸ while the others should be seen as similarly protected de facto although their positions had not been classified as permanent under the civil service law (see G.L. c. 31, § 1 et seq.). Alternatively, the examiners asserted a contractual right to continued employment except for just cause, and to a hearing. Such a contractual right, they asserted, would eventuate in a constitutionally cognizable property right and thus to a due process right to a hearing. See Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). They appeared

to argue that, whether the source of the right to a hearing was statutory or contractual, the provisions of the State Administrative Procedure Act (APA) for adjudicatory proceedings represented the relevant procedural standard. See G.L. c. 30A, §§ 1(1), 10, 11; Commonwealth v. Bessette, 345 Mass. 358, 361-362, 187 N.E.2d 810 (1963) (APA standards apply to hearings before appointing authority under civil service law).

The defendants' position has been that the question of the continuation of the examiners' employment was committed by statute to the Commissioner's discretion, and that the collective bargaining agreement neither attempted to affect that statutory power nor could lawfully do so. But they said, further, that if APA standards indeed applied it would be found that the Commissioner's conduct in respect to the dismissals in fact conformed.

We agree with the defendants. The forty-three plaintiff examiners could be dismissed at the Commissioner's discretion. Such discretion is conceded by the plaintiffs as to insurance division examiners generally. General Laws c. 26, § 7, reads in part: "The commissioner of insurance may appoint and remove, with the approval of the governor and council, a first deputy, an actuary, a research analyst, and a chief examiner and such additional deputies, examiners, assistant actuaries and inspectors as the service may require. . . . The commissioner may appoint and remove such clerical and other assistants as the work of the division may require." The freedom of the Commissioner's hand was confirmed in Regan v. Commissioner of Ins., 343 Mass. 202, 205, 178 N.E.2d 81, 83 (1961) ("determination of the sufficiency (of reasons) is in the discretion of the Commissioner"), and that this extends as well to veterans was the holding in Hanley v. Commissioner of Ins., 355 Mass. 784, 243 N.E.2d 917 (1969). ⁹

There is no showing why distinctive treatment should be accorded to FCB examiners. General Laws c. 26, § 8B, FCB's organic statute, states that the board "may appoint and remove a chief of accident claims investigations," but § 8B contains no further grant of power to the board to appoint or remove examiners. It does state that FCB "shall be in the division of insurance" which invites the inference that FCB examiners are appointed and removed like other examiners in the division. FCB examiners have in fact been appointed by the Commissioner and not under the testing and appointment procedures of the civil service law, G.L. c. 31, § 1. This was a continuing practice that aroused no controversy. See Director of Civil Defense Agency & Office of Emergency Preparedness v. Civil Serv. Comm'n, --- Mass. ---, --- ^a , 367 N.E.2d 1168 (1977).

The examiners' claim that they were given civil service protection de facto rests on the circumstance that the job title of some included the word "permanent." But a permanent civil service appointment under G.L. c. 31, § 1, is "an appointment to a permanent position made in accordance with this chapter and the rules made thereunder," a description that does not apply to the plaintiff examiners (their letters of appointment appear in the record). On this matter the reasoning of Director of Civil Defense Agency & Office of Emergency Preparedness v. Civil Serv. Comm'n, supra, is inapposite: there Governors had long denominated the positions in question civil service positions, and the Legislature had implicitly acquiesced, with the evident purpose of...