Farm Bureau Town and Country Ins. Co. of Missouri v. Angoff

• Decision Date: 24 October 1995
• Docket Number: No. 77607,77607
• Citation: 909 S.W.2d 348
• Parties: FARM BUREAU TOWN AND COUNTRY INSURANCE COMPANY OF MISSOURI, Appellant, v. Jay ANGOFF, Director, Department of Insurance, Respondent, and Jeremiah W. Nixon, Attorney General, Intervenor-Respondent.
• Court: Missouri Supreme Court

Page 348

909 S.W.2d 348

FARM BUREAU TOWN AND COUNTRY INSURANCE COMPANY OF MISSOURI, Appellant, v. Jay ANGOFF, Director, Department of Insurance, Respondent, and Jeremiah W. Nixon, Attorney General, Intervenor-Respondent.

No. 77607.

Supreme Court of Missouri,

En Banc.

Oct. 24, 1995.

Rehearing Denied Nov. 21, 1995.

Kent L. Brown, Ronald R. McMillin, Jefferson City, for appellant.

Jeremiah W. (Jay) Nixon, Atty. Gen., John R. Munich, Norbert Glassl, Asst. Attys. Gen., Jefferson City, for intervenor-respondent.

Mark W. Stahlhuth, Mo. Dept. of Insurance, Jefferson City, for respondent.

Patrick Watts, Kansas City, for amicus curiae National Association of Insurance Commissioners.

HOLSTEIN, Chief Justice.

Farm Bureau Town and Country Insurance Company (T & C) appeals from the dismissal of its four-count petition against the Director of the Department of Insurance. Among other related claims, each count presents a variation on the theme that §§ 375.007, 375.934, and portions of § 375.936(11), are unconstitutional. ¹ Because of the constitutional claims, the attorney general intervened. The claimed constitutional invalidity of the statutes gives this Court jurisdiction. Mo. Const. art. V, § 3. The judgment is affirmed in part and reversed in part.

I.

Section 375.007 provides in part:

No insurer shall cancel or refuse to write ... a policy solely because of the ... place of residence ... of anyone who is or seeks to become insured....

Section 375.934 provides:

It is an unfair trade practice for any insurer to commit any practice defined in section 375.936 if:

(1) It is committed in conscious disregard of sections 375.930 to 375.948 or of any rules promulgated under sections 375.930 to 375.948; or

(2) It has been committed with such frequency to indicate a general business practice to engage in that type of conduct.

The relevant portions of § 375.936 provide:

Any of the following practices ... are hereby defined as unfair trade practices in the business of insurance:

....

(11) "Unfair discrimination":

....

(c) Making or permitting any unfair discrimination between individuals or risks of the same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling or limiting the amount of ....

insurance coverage on property or casualty risk because of the geographic location of the risk;

(i) The provisions of paragraph[ ] (c), ... of this subdivision shall not apply if:

a. The refusal, cancellation, limitation, termination or modification is for a business purpose which is not a mere pretext for unfair discrimination....

There are apparently no criminal sanctions imposed for engaging in "unfair discrimination" by an insurer. Rather, the above provisions are enforced by an administrative disciplinary proceeding. The administrative process begins with an investigation by the director. § 375.938. If the director has reason to believe that the insurer has been engaged in any unfair practice, a statement of charges is issued to the insurer setting a hearing to show cause why the insurer should not cease and desist from the acts alleged. § 375.940. Following the administrative hearing, if it is determined that the person charged has engaged in any unfair practice, the director must issue an order requiring the insurer to cease and desist from the activity and, in addition, the director may order the payment of a monetary penalty or the suspension or revocation of the insurer's license. § 375.942. That determination is then subject to judicial review. § 375.944.

II.

On November 12, 1993, T & C was notified that the director intended to begin an administrative disciplinary action based on T & C's alleged refusal to write policies within certain geographical areas of the state. T & C filed its petition for declaratory judgment against the director on December 9, 1993. The director responded by filing a motion to dismiss on January 12, 1994. On that same date, the director issued a statement of charges in the administrative process pursuant to § 375.940. The statement alleges three specific instances in which T & C unfairly discriminated in violation of the Missouri Unfair Trade Practice Act, §§ 375.930-948. Preliminary injunctive relief was granted by the circuit court prohibiting the director from proceeding with the administrative action.

The director and attorney general moved to dismiss T & C's petition because T & C had failed to exhaust its administrative remedies and because the petition failed to state any claim upon which relief could be granted. On December 8, 1994, the trial court granted the motions to dismiss. The order also found that §§ 375.007, 375.934, and 375.936(11)(c) and (i) are not facially unconstitutional.

III.

When reviewing the dismissal of a petition, the pleading is granted its broadest intendment, all facts alleged are treated as true, and it is construed favorably to the plaintiff to determine whether the averments invoke substantive principles of law which entitle the plaintiff to relief. Hagely v. Board of Educ. of the Webster Groves Sch. Dist., 841 S.W.2d 663, 665 (Mo. banc 1992). If the motion to dismiss should have been sustained on any meritorious ground alleged in the motion, the ruling of the trial court will be affirmed. Spearman v. University City Pub. Sch. Dist., 617 S.W.2d 68, 72 (Mo. banc 1981).

T & C's petition alleges that its bylaws mandate membership in a county farm bureau as a condition precedent to be eligible for insurance, and that no county farm bureau exists in the City of St. Louis. County farm bureaus "were formed over the years by persons within a county interested in agriculture." ²

T & C asserts that the director of insurance was, when this action was filed, about to commence proceedings against it and thereafter actually did commence administrative Without specifically admitting in any count that it has refused to insure any risk or person because of geographic location, T & C seeks a declaratory judgment that it not be required to provide insurance coverage to persons residing in those areas of the state which it has decided not to serve and that the director does not have jurisdiction to compel T & C to write policies in such geographical areas. The petition further seeks injunctive relief against the director from attempting to compel T & C to "offer insurance to residents of geographical areas which it has determined not to serve." The petition also seeks a writ of prohibition against the administrative proceeding.

                proceedings against it to require it to "actively offer" insurance in major metropolitan areas in violation of its "chosen market and marketing philosophy."   It asserts that the director's action is improper because T & C has a legitimate business purpose for its practices, as permitted under the statute.  T & C further asserts that the director's action is improper because it denies T & C equal protection and due process of law in that the director is selectively enforcing §§ 375.007, 375.934, and 375.936(11)(c) and (i) by proceeding against it but not against insurers that market primarily in metropolitan areas.  T & C claims the statutes violate due process because of vagueness, in that persons of ordinary intelligence must speculate as to the meaning of those statutes.  T & C finally asserts that the statutes are unconstitutional because they appropriate the property of T & C for public use without due process of law or compensation, as required by the Fourteenth Amendment of the United States Constitution and article I, § 10 of the Missouri Constitution.  T & C alleges that it has no adequate remedy to protect its rights
                

The trial court entered an order finding that §§ 375.007, 375.934 and 375.936(11)(c) and (i) are constitutional on their face and that all other claims were premature. The motion to dismiss was sustained. This appeal followed.

IV.

The exhaustion of administrative remedies doctrine is rooted in sound policy, as well as in both the state constitution and statutes. Only "final decisions, findings, rules and orders" of an administrative agency are subject to review as provided by law. Mo. Const. art. V, § 18. The relevant statute, § 536.100, provides for judicial review only by a "person who has exhausted all administrative remedies provided by law and who is aggrieved by a final decision in a contested case."

The policy reasons for the exhaustion doctrine are clear.

Exhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.

Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 2467, 45 L.Ed.2d 522 (1975).

Exhaustion of administrative remedies is often said to be a jurisdictional prerequisite to a declaratory judgment action. State ex rel. Missouri State Board of Registration for the Healing Arts v. Hartenbach, 768 S.W.2d 657, 659 (Mo.App.1989); State ex rel. J.S. Alberici, Inc. v. City of Fenton, 576 S.W.2d 574, 577 (Mo.App.1979); see also Green v. City of St. Louis, 870 S.W.2d 794, 796 (Mo. banc 1994) ("The rule requiring exhaustion of administrative remedies is one of subject matter jurisdiction.") All of these statements of the rule presuppose an adequate administrative remedy.

T & C is correct in its assertion that the circuit court of Cole County has jurisdiction to grant declaratory judgment on the constitutionality of the statutes in question. § 527.010. However, a declaratory judgment is not available to adjudicate hypothetical or speculative situations which may never come to pass. To be ripe for declaratory judgment, a justiciable controversy must exist. Tintera v. Planned Indus. Expansion Auth., 459 S.W.2d 356, 358 (Mo.1970); Commonwealth Ins. Agency, Inc. v. Arnold,...