Maryland Cas. Co. v. Commissioner of Ins.

• Decision Date: 11 May 1977
• Citation: 372 Mass. 554,363 N.E.2d 1087
• Parties: MARYLAND CASUALTY COMPANY v. COMMISSIONER OF INSURANCE (and a companion case between the same parties). Supreme Judicial Court of Massachusetts, Suffolk
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1087

363 N.E.2d 1087

372 Mass. 554

MARYLAND CASUALTY COMPANY v. COMMISSIONER OF INSURANCE (and a companion case between the

same parties).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 7, 1977.

Decided May 11, 1977.

Gael Mahony, Boston (Boisfeuillet Jones, Jr., Cambride, and Stephen J. Kiely, Boston, with him), for Maryland Casualty Co.

Terence P. O'Malley, Asst. Atty. Gen., for Commissioner of Insurance.

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

HENNESSEY, Chief Justice.

Maryland Casualty Company (Maryland Casualty) appeals from an order of the Commissioner of Insurance (Commissioner) which suspended the license of Maryland Casualty to sell all types of insurance in the Commonwealth. Two cases were consolidated for appeal, one brought originally in the Superior Court pursuant to G.L. c. 30A, and one brought originally in the Supreme Judicial Court for the county of Suffolk pursuant to G.L. c. 175, § 5; both were reported without decision.

We conclude that the decision and order in each case must be vacated and both cases must be remanded to the Commissioner for further findings of fact. See G.L. c. 30A, § 11(8).

Maryland Casualty, a property and casualty insurance company having its principal offices in Maryland, has been licensed to write insurance in the Commonwealth since 1908. In the years prior to 1976, Maryland Casualty wrote a variety of types of insurance in the Commonwealth, including automobile insurance. The total volume of Massachusetts insurance written by Maryland Casualty in 1975 was $15,955,000, of which $9,611,000 (approximately 60%) represented nonautomobile insurance ¹ and $6,344,000 (approximately 40%) represented automobile insurance.

Beginning in late September, 1975, Maryland Casualty took action to withdraw from the Massachusetts automobile insurance market effective January 1, 1976. That action consisted of the following steps: (1) letter and notice dated September 26, 1975, sent to Maryland Casualty's Massachusetts agents informing them of its intent to withdraw from the sale of Massachusetts automobile insurance in 1976 and modifying their agency contracts for 1976 to eliminate authority to write Massachusetts automobile insurance; (2) notice dated November 15, 1975, sent to all Massachusetts agents and policyholders informing them of its intent not to issue or renew Massachusetts automobile insurance policies; (3) letter dated December 1, 1975, sent to the Commissioner requesting amendment of its license to delete automobile insurance; and (4) notice sent on December 3, 1975, to all Massachusetts policyholders informing them that their policies were cancelled effective 12:01 A.M. on January 1, 1976, which was the expiration date of all policies in effect in 1975.

The nonrenewal notices gave the following explanation of Maryland Casualty's action: 'The Company for business and economic purposes must withdraw entirely from Massachusetts Auto Insurance market. The termination of your policy is a result of general reduction in volume of auto insurance and does not reflect on your personal insurability.' Attached to these notices was a letter from Maryland Casualty to its Massachusetts policyholders further explaining its decision to withdraw from the Massachusetts automobile insurance market. It stated that 'the regulatory burdens have reached the point where it is not sound business for us to continue' and contained a list of eleven respects in which it contended that the Massachusetts insurance regulation scheme was unduly burdensome.

Notices were sent to Maryland Casualty by a deputy commissioner of insurance, the first of which was dated December 10, 1975, informing the company that a public hearing would be held to determine whether its license to sell all types of insurance in the Commonwealth should be suspended or revoked because its refusal to issue or renew Massachusetts automobile insurance policies constituted violations of G.L. c. 175, §§ 22E, 22H, 113E, and such violations constituted 'violations of law' for the purposes of G.L. c. 175, § 5. A hearing was held on March 3, 4, and 5, 1976, at which Maryland Casualty was afforded an opportunity to show cause why all of its licenses should not be suspended or revoked.

A deputy commissioner issued his findings and order on August 24, 1976, in which he made the following conclusions of law: (1) Maryland Casualty violated G.L. c. 175, § 22H, by refusing to write automobile insurance business, ² thereby disrupting the market for such insurance in the Commonwealth, without such refusals being justifiably required to protect the solvency of the company; (2) Maryland Casualty violated G.L. c. 175, § 22E, by refusing to renew insurance policies at the option of the policyholder for reasons other than those specified as permissible under that section; (3) Maryland Casualty violated G.L. c. 175, § 113E, by refusing to issue automobile insurance policies for reasons other than those provided by that section; and (4) Maryland Casualty was subject to the penalties established by G.L. c. 175, § 5, for violations of G.L. c. 175, §§ 22E, 22H, and 113E. He therefore imposed a thirty-day suspension of Maryland Casualty's licenses to issue or sell any form of insurance in the Commonwealth and a subsequent indefinite suspension to continue until Maryland Casualty demonstrated its willingness to resume the issuance and renewal of Massachusetts automobile insurance policies in compliance with the State insurance statutes and the rules and regulations of the Commissioner. The Commissioner affirmed the findings and order, modifying only the effective date of the order and of the two suspensions. A single justice of this court stayed the suspension order pending decision by the full court.

1. General Laws c. 175, § 22H, as amended through St.1975, c. 750, § 1, effective December 15, 1975 ³ (hereinafter called December amendment), provides in part: 'If any company refuses to issue motor vehicle liability policies or bonds . . . without a written determination by the commissioner that such refusal, which may be a refusal in whole or in part, is justifiably required to protect the solvency of the refusing company, the commissioner shall hold a public hearing at which the company may appeal the commissioner's initial determination concerning solvency and at which shall be considered whether the company's refusal to write motor vehicle liability policies or bonds is contrary to the public interest by disrupting the market for said insurance in the commonwealth. If the commissioner finds, on the basis of said public hearing, that the company's refusal is not justified by the protection of solvency and is contrary to the public interest, he shall suspend such company's licenses to issue of sell any other form of insurance within the commonwealth until such company resumes the issuance or renewal of motor vehicle liability policies or bonds in compliance with the laws and rules and regulations prescribed by the commissioner. . . .'

Maryland Casualty contends that this amended version of § 22H was not applicable to these proceedings because all the steps taken by the company to withdraw from the automobile insurance market were completed prior to the effective date of the amendment. The Commissioner concluded that the December amendment was applicable, on the basis that the nonrenewals were not effective until January 1, 1976. Review of the deputy commissioner's findings and order is under G.L. c. 30A, § 14, and questions of law involved in his determination are subject to de novo judicial review. See, e.g., Raytheon Co. v. Director of the Div. of Employment Security, 364 Mass. 593, 307 N.E.2d 330 (1974).

We agree with the Commissioner's determination as to the applicability of the December amendment to the proceedings in this case. While the nonrenewal notices mailed on December 3, 1975, to Maryland Casualty policyholders are, under the terms of § 22H, sufficient evidence to show a refusal to issue, ⁴ the evidentiary standard thus provided does not purport to define the entirety of the violation which will give rise to proceedings under this section. A violation of § 22H occurs when the notices of nonrenewal or cancellation are sent to policyholders, and a single such notice is a sufficient basis on which the Commissioner may hold a public hearing as provided by this section.

The statute provides merely the minimum basis for action by the Commissioner, indicating the Legislature's intent that the Commissioner be empowered to take action prior to the actual effective date of nonrenewal or cancellation in the interest of protecting the stability of the market and the interests of Massachusetts insurance consumers. Section 22H in no way confines violation of its provisions to the happening of one particular event at one discrete point in time; refusal to issue without the required written determination by the Commissioner that such refusal is justifiably required to protect the solvency of the company is a continuing violation which begins when the cancellation or nonrenewal notices are sent to policyholders and which extends to the actual effective date of the cancellation or nonrenewal.

In the case now before us, Maryland Casualty sent its nonrenewal notices on December 3, 1975, the effective date of such nonrenewal being January 1, 1976. When the policies in question were not renewed as of that date, without the above described written determination by the Commissioner, the actions of Maryland Casualty came within the purview of § 22H. As of January 1, 1976, Maryland Casualty was subject to the provisions of § 22H, by reason of its failure to request the required determination by the Commissioner in the interval between December 15, 1975, the effective date of § 22H, as amended, and January 1 1976. ⁵ We find no constitutional prohibitions to such a conclusion.

In addition,...