Employer's Commercial Union Ins. Co. v. Commissioner of Ins.

• Decision Date: 05 June 1972
• Parties: EMPLOYERS' COMMERCIAL UNION INSURANCE COMPANY et al. v. COMMISSIONER OF INSURANCE (and a companion case 1 ).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 849

283 N.E.2d 849

362 Mass. 34

EMPLOYERS' COMMERCIAL UNION INSURANCE COMPANY et al. v. COMMISSIONER OF INSURANCE (and a companion case

¹).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 4, 1972.

Decided June 5, 1972.

Herbert P. Wilkins, Boston (Acheson H. Callaghan, Jr., Boston, and G. Lamar Crittenden, Jr., Dover, with him), for Employers' Commercial Union Ins. Co. and others.

Stephen J. Paris, Boston, for Massachusetts Ass'n of Independent Insurance Agents and Brokers, Inc.

James P. Kiernan, Asst. Atty. Gen., for Commissioner of Insurance.

Sanford A. Kowal, Boston, for intervener, Consumers' Council of Massachusetts.

Before TAURO, C.J., and SPIEGEL, BRAUCHER, and HENNESSEY, JJ.

HENNESSEY, Justice.

These two cases were commenced by the filing in the county court of two bills for review and for declaratory relief. The bills were brought pursuant to G.L. c. 175, § 113B, and G.L. c. 231A to test the validity of St.1971, c. 977, and the action of the Commissioner of Insurance (Commissioner) pursuant thereto. The single justice consolidated the cases and reported them without decision to the full court.

The plaintiffs in one case are insurance companies authorized to issue motor vehicle liability insurance policies in Massachusetts, and the Massachusetts Automobile Rating and Accident Prevention Bureau, a voluntary, unincorporated association of insurance companies which write automobile casualty insurance in Massachusetts. The plaintiff in the second case is the Massachusetts Association of Independent Insurance Agents and Brokers, Inc., an incorporated trade association of 3,500 licensed insurance agents and brokers in Massachusetts. The Consumers' Council of Massachusetts was allowed to intervene in each case. The issues raised by both bills are the same. The case are before us on the bills, the answers, and a statement of agreed facts.

We summarize the facts. By St.1970, c. 670, as amended by St.1970, c. 744, the Legislature in 1970 thereby established the concept of 'no-fault' personal injury protection, effective January 1, 1971. Additionally, c. 670, § 6, mandated that certain automobile insurance rates be reduced by at least fifteen per cent. The insurance companies successfully challenged that reduction with respect to 1971 property damage liability insurance rates. See AETNA CAS. & SUR. CO. V. COMMISSIONER OF INS., MASS., 263 N.E.2D 698.^A Chapter 744, § 3, provided that if any part of the 'no-fault' statute was declared unconstitutional, the policyholders would continue to be protected under the former compulsory system. Subsequently, a bill for declaratory relief was filed challenging the validity of c. 670, as amended by c. 744. This court, on June 29, 1971, rejected that challenge and upheld the validity of those statutes. PINNICK V. CLEARY, MASS., 271 N.E.2D 592^B.

On October 31, 1970, the then Commissioner of Insurance issued a decision and order relating to permium charges for certain 1971 motor vehicle insurance coverages, including compulsory motor vehicle liability insurance, and the premium charges for compulsory insurance set forth in that decision and order were duly filed. These were the compulsory premium charges which were paid in 1971 by policyholders.

Each 1971 compulsory motor vehicle liability insurance policy carried a premium indorsement approved by the then Commissioner. That indorsement is shown in full in a later part of this opinion.

Statute 1971, c. 977, was enacted, and added a new paragraph to G.L. c. 175, § 113B, effective on November 3, 1971. Section 1A of c. 977 requires the Commissioner when establishing rates to determine whether the rates for the current year meet the statutory standards. If such rates do not meet the statutory standards, the Commissioner is to take this factor into account and fix rates for the next year at levels which will meet the statutory standards for the two years taken together.

Section 2 of c. 977 requires the Commissioner to determine, after hearing, whether the earnings of the companies from compulsory insurance in 1971 resulted in an unfair profit and to direct the companies to establish a special reserve if there is an unfair profit. If the Commissioner can determine the extent of the unfair profit by December 1, 1971, he is to direct the companies to return such unfair profit to the policyholders either by direct payment or by a credit on the 1972 policies. If he cannot make such a determination until after December 1, 1971, he is to fix and establish rates for 1972 under c. 175, § 113B, as amended by § 1A of c. 977 of St.1971, but such rates shall be provisional. At a further hearing in 1972 he is to determine finally the extent of any such unfair profit and to determine finally the rate for 1972. He is to then direct the companies to return such unfair profit to the policyholders or to adjust the rates for 1972 and finalize them.

Following the passage of c. 977 the Commissioner, after a six-day public hearing in which the plaintiffs and the intervener herein participated, issued a decision on December 13, 1971. The decision was divided into two parts. In Part I the Commissioner fixed and established the rates to be in effect for 1972 independent of the provisions of c. 977. These rates established a 27.6 per cent reduction in 1972 private passenger premium charges, and comparable reductions for other classifications. In Part II the Commissioner set rates for 1972 pursuant to § 1A and § 2 of c. 977, and he also ordered the insurance companies to set aside a special reserve of thirty-five per cent of the premiums earned on compulsory insurance in 1971 to assure the availability of funds to provide for a fair and reasonable sharing of such profits by the policyholders.

1. The intervener argues that these proceedings are premature in that no final determination of the 1972 rates has been made by the decision of the Commissioner dated December 13, 1971, which gave rise to these proceedings. The intervener correctly states that final determination of the rates may give rise to another proceeding later. We observe that no demurrer or motion to dismiss has been filed. In any event, we conclude that these bills were not prematurely filed. The plaintiffs challenge the constitutionality of St.1971, c. 977, upon which Part II of the Commissioner's decision, anticipating further reduction of 1972 rates, is based. The insurance companies do not have to await final determination of the 1972 rates before seeking review of that part of the decision which provides for further reduction of 1972 rates. Similarly, that part of the Commissioner's decision which ordered the companies to set aside a special reserve of thirty-five per cent, and which the companies contend is itself unconstitutional, may appropriately be reviewed at this time. The bills allege the existence of an actual controversy of a justiciable nature, and the plaintiffs are entitled to a declaration of the rights and obligations in the controversy stated. Franklin Fair Ass'n, Inc. v. Secretary of Commonwealth, 347 Mass. 110, 113, 196 N.E.2d 622; TRAVELERS INS. CO. V. GRAYE, MASS., 263 N.E.2D 442^C.

2. The plaintiffs do not challenge the 27.6 per cent reduction in 1972 private passenger premium charges, and other comparable reductions for other classifications, as established in Part I of the Commissioner's decision. ¹ However, they contend that St.1971, c. 977, is unconstitutional and that any order under c. 977 (as contemplated by Part II of the Commissioner's decision) to refund excessive portions of 1971 premiums would be an unconstitutional taking of property and an unconstitutional impairment of the obligations of contract. They assert that the 1971 premiums have been earned and are the property of the insurance companies.

In support of their position, the plaintiffs cite the Opinion of Justices, 334 Mass. 711, 134 N.E.2d 923, given to the House of Representatives in May of 1956. The Justices there considered proposed legislation to require the refunding of that portion of 1956 compulsory premium charges which was attributable to surcharges imposed because of the assessment of demerit points under the Highway Safety Act (G.L. c. 90A, inserted by St.1953, c. 570, § 1). The Justices concluded that the proposed legislation would be unconstitutional. They stated: 'When the surcharges were paid to the insurance and bonding companies the money became the property of the companies and part of their assets. . . . (T)o create a right to a refund now, as proposed, would be to take away property of the companies and bestow it upon private persons without compensation and for a purpose not...