Maine AFL-CIO v. Superintendent of Ins.

• Decision Date: 26 July 1991
• Docket Number: AFL-CIO
• Parties: MAINEv. SUPERINTENDENT OF INSURANCE, et al.
• Court: Maine Supreme Court

Page 424

595 A.2d 424

MAINE AFL-CIO v. SUPERINTENDENT OF INSURANCE, et al.

Supreme Judicial Court of Maine.

Argued May 22, 1991.

Decided July 26, 1991.

Patrick N. McTeague (orally), McTeague, Higbee, Libner, MacAdam, Case & Watson, Topsham, for plaintiff.

Harold C. Pachios (orally), Preti, Flaherty, Beliveau & Pachios, Portland, and Linda M. Pistner (orally), Asst. Atty. Gen., Augusta, for defendants N.C.C.I. and Superintendent.

Before McKUSICK, C.J., and ROBERTS, WATHEN, GLASSMAN, CLIFFORD, COLLINS and BRODY, JJ.

BRODY, Justice.

The Maine AFL-CIO appeals from an order by the Superior Court (Kennebec County, Alexander, J.) affirming a workers' compensation insurance ratesetting decision and order entered by the Superintendent of Insurance. On appeal, the AFL-CIO contends that the Superintendent's findings are inadequate to enable effective judicial review. The AFL-CIO further contends that the rates, surcharges and fees set by the Superintendent lack the support of competent evidence and that the Superintendent failed to comply with statutory standards in setting them. Finding no error, we affirm the Superintendent's decision and order.

In Maine, workers' compensation insurance is divided into two markets, the voluntary market and the residual market. The residual market is an assigned risk pool designed to protect insurance carriers from risks that make it economically unattractive to underwrite specific employers voluntarily, thereby providing coverage for employers otherwise unable to find insurers willing to insure them. The residual market is subdivided into an accident prevention account that services employers with demonstrated accident frequency problems and a safety pool that services employers that have good safety records but, nonetheless, have trouble procuring insurance in the voluntary market. All insurance companies authorized to write workers' compensation insurance in Maine must participate, either directly or indirectly, in the assigned risk pool. 24-A M.R.S.A. § 2366(1) (1990). Insurance companies that participate directly are called "servicing carriers." These companies handle billing, process claims and provide other services to residual market policy holders. Me. Bureau Ins. Rules, ch. 440, subch. II § 10(D) (March 20, 1988). Insurance companies that do not service residual market policies directly are required to pay a fee to compensate the servicing carriers for their expenses in servicing the residual market. Me. Bureau Ins. Rules, ch. 440, subch. II § IO(C)(1). As a quid pro quo for required participation in the residual market, insurance carriers receive a "fresh start surcharge" to compensate for any loss in revenue in the residual market that would cause them to earn less than a reasonable rate of return on the policies issued in the State of Maine. 24-A M.R.S.A. § 2367 (Supp.1990). The fresh start surcharge is designed to address concerns that mandatory participation in the assigned risk pool may be confiscatory and to stem the flight of workers' compensation insurance carriers from the State. See National Council on Compensation Ins. v. Superintendent of Ins., 538 A.2d 759, 760-61 (Me.1988).

Under the current statutory scheme, the Superintendent of Insurance must approve voluntary and residual market workers' compensation insurance rates in an annual ratemaking proceeding. 24-A M.R.S.A. § 2362 (1990). The proceeding is adjudicatory in nature and is conducted in accordance with 5 M.R.S.A. §§ 9051-9064 (1989 & Supp.1990); 24-A M.R.S.A. §§ 229-235 (1990); and Me. Bureau of Ins. Rules, ch. 350 (Nov. 5, 1984). In approving workers' compensation insurance rates that are just and reasonable, the Superintendent must adhere to standards set forth by statute. 24-A M.R.S.A. § 2363(7) (1990). Once system-wide rates are approved by the Superintendent, individual rate schedules based upon those rates are prepared for each industry depending upon its loss experience and risk classification.

In addition to approving overall rate increases, the Superintendent must annually review the reasonableness of the fee paid to insurers servicing the residual market, 24-A M.R.S.A. § 2363(7-A) (1990); Me. Bureau Ins. Reg., ch. 440, subch. II § 10(C)(1), and, if necessary, establish a fresh start surcharge. 24-A M.R.S.A. § 2367. In setting the servicing carrier fee and the fresh start surcharge, the Superintendent must comply with the general statutory standards for ratesetting set forth in 24-A M.R.S.A. § 2363(7) as well as the specific statutory requirements provided in 24-A M.R.S.A. §§ 2363(7-A) and 2367 and the corresponding Bureau of Insurance Rules and Regulations.

In December, 1989, the National Council on Compensation Insurance ("NCCI"), an advisory organization that represents workers' compensation insurance carriers in ratemaking matters, filed with the Superintendent proposed workers' compensation insurance rate increases for 1990. Among other things, NCCI sought a 26 percent average increase in the voluntary market and safety pool premium rates and a 32.3 percent average increase in the accident prevention account premium rates. NCCI also requested an increase in the servicing carrier fee and a fresh start surcharge sufficient to compensate insurance carriers for a claimed loss of revenue in the residual market of approximately $40 million.

The Superintendent consolidated the ratemaking, servicing fee and fresh start surcharge requests into one public proceeding. Initially, only NCCI and the Public Advocate, 24-A M.R.S.A. § 2363(9) (1990), were designated as parties. The Superintendent subsequently granted intervenor status to the Maine Chamber of Commerce and Industry and the AFL-CIO and limited intervenor status to a number of Maine business associations and corporations pursuant to 5 M.R.S.A. § 9054(1) & (2) (1989).

Public hearings commenced on February 12, 1990 and closed on April 6, 1990. At the hearings, testimony was taken from witnesses for the parties and intervenors regarding the reasonableness of the rate increases, fresh start surcharge and servicing fee requests submitted by NCCI. NCCI had the burden of establishing that the increases it requested were just and reasonable. 24-A M.R.S.A. § 2363(7)(D).

On April 17, 1990, the Superintendent issued a decision and order finding the increases requested by NCCI excessive. The Superintendent concluded, based on his experience and the evidence before him, that the following rate increases were just and reasonable: a 4 percent average rate increase for the voluntary market and safety pool part of the residual market; a 9.2 percent average rate increase for the accident prevention account of the residual market; a fresh start surcharge of 3 percent to recoup approximately $10 million of a $14 million deficit in the residual market; and a servicing carrier fee of 25.6 percent, a continuation of the fee set in 1989. ¹ The Superintendent further found that insurance carrier mismanagement is a significant problem in Maine and imposed a 1.5 percent penalty to be deducted from the approved rate increases.

On May 16, 1990, the AFL-CIO filed a timely petition pursuant to M.R.Civ.P. 80C seeking judicial review of the Superintendent's decision. None of the other parties or intervenors appealed. Before the Superior Court, the AFL-CIO contended that the Superintendent's findings are inadequate to enable effective judicial review, the Superintendent's approval of the modified rate increases, fresh start surcharge and continuation of the 1989 servicing carrier fee lack the support of substantial evidence in the record and that the Superintendent failed to comply with statutory rate approval standards.

On October 17, 1990, the Superior Court affirmed the Superintendent's decision and the AFL-CIO appealed, reasserting the same contentions presented to the Superior Court. Because the Superior Court acted as an intermediate appellate court, this court reviews the Superintendent's decision directly. Huard v. M.S.R.S. Bd. of Trustees, 562 A.2d 694, 695 (Me.1989); York Mutual Ins. Co. v. Superintendent of Ins., 485 A.2d 239, 241 (Me.1984).

I

The AFL-CIO contends that the Superintendent's decision and order fails to meet the requirements of the Administrative Procedure Act, 5 M.R.S.A. §§ 8001-11008 (1989 & Supp.1990), because it is conclusory and lacks findings of basic facts necessary for effective judicial review. We disagree.

The Administrative Procedure Act requires that "agency decisions made at the conclusion of an adjudicatory proceeding shall be in writing or stated in the record, and shall include findings of fact sufficient to apprise the parties and any interested member of the public of the basis for the decision." 5 M.R.S.A. § 9061. A workers' compensation insurance ratemaking proceeding is an adjudicatory proceeding and thus section 9061 applies. See 24-A M.R.S.A. §§ 229-235 and 2363(11). The reasons for requiring administrative findings of fact are to facilitate judicial review, avoid judicial usurpation of administrative functions, assure more careful administrative considerations, help parties plan cases for rehearing or judicial review and to keep agencies within their jurisdiction. See Gashgai v. Board of Registration in Medicine, 390 A.2d 1080, 1085 (Me.1978). Section 9061 does not require detailed incident-by-incident fact finding but rather requires only that the agency include findings of fact sufficient to apprise the parties and interested members of the public of the basis for the decision. Merrow v. Maine Unemployment Ins. Comm'n, 495 A.2d 1197, 1201-02 (Me.1985); Bean v. Maine Unemployment Ins. Comm'n, 485 A.2d 630, 634 (Me.1984); Cotton v. Maine Employment Sec. Comm'n, 431 A.2d 637, 639 (Me.1981).

The AFL-CIO argues that the Superintendent failed to render specific findings of fact on incurred losses and expenses in the residual market, the actual expenses of carriers servicing the residual market and the...