Massachusetts Auto Body Ass'n, Inc. v. Commissioner of Ins.

• Decision Date: 17 April 1991
• Parties: MASSACHUSETTS AUTO BODY ASSOCIATION, INC. v. COMMISSIONER OF INSURANCE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 147

570 N.E.2d 147

409 Mass. 770

MASSACHUSETTS AUTO BODY ASSOCIATION, INC. v. COMMISSIONER OF INSURANCE.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Jan. 8, 1991.

Decided April 17, 1991.

James A. Castleman, Quincy, for plaintiff.

Ruth A. Bourquin, Asst. Atty. Gen., for Commissioner of Ins.

E. Michael Sloman, Boston, for Automobile Insurers Bureau of Massachusetts.

Acheson H. Callaghan, Jr., Boston, for Kemper Nat. Property & Cas. Companies, was present but did not argue.

Stuart T. Rossman, Boston, for Arbella Mut. Ins. Co., joined in a brief.

Before LIACOS, C.J., and NOLAN, LYNCH, O'CONNOR and GREANEY, JJ.

LYNCH, Justice.

This appeal concerns the validity of regulations promulgated by the Commissioner of Insurance to implement the direct payment and repair shop referral components of St.1988, c. 273, the Automobile Insurance Reform Act of 1988, and of insurers' plans submitted and approved pursuant to those regulations.

The plaintiff, the Massachusetts Auto Body Association, Inc. ¹ (association), sought a declaration in the Superior Court that emergency and final regulations, 211 Code Mass.Regs. § 123.00 (1989), issued by the commissioner exceeded the scope of his statutory authority; that there was insufficient reason for issuance of the emergency regulation; and that direct payment plans submitted by the defendants, Arbella Mutual Insurance Company (Arbella), The Kemper National Property & Casualty Companies ² (Kemper), and the Massachusetts Automobile Rating and Accident Prevention Bureau (bureau), ³ were improperly approved by the commissioner. On a statement of agreed facts, the Superior Court judge ordered judgment for the defendants, and the plaintiff appealed. We transferred the case to this court on our own motion, and we now affirm.

On November 5, 1988, the Legislature enacted, with emergency preamble, St.1988, c. 273, the so-called Automobile Insurance Reform Act (act), the purpose of which was to lower the cost of automobile insurance premiums by restructuring the automobile insurance system in a number of ways. Prior to passage of the act, insurers could pay a claim for repairs only after the insured had certified the repairs had already been completed. Sections 24 and 51 of the act, effective January 1, 1989, allow insurers for the first time to file plans for approval by the commissioner under which they can make direct payment to the insured for certain covered losses, prior to completion of repair work. ⁴ Those sections allow the commissioner to require that any such plan provide that the insured will be given a referral list of repair shops which can do the required repair work for the amount of the payment to the insured, plus any applicable deductible. The sections allow the commissioner to promulgate rules and regulations he deems necessary for implementation of the direct payment system.

In November, 1988, the bureau and Arbella filed direct payment plans with the commissioner for his approval. On December 8, 1988, the commissioner issued on an emergency basis and without public hearing, a regulation governing direct payment plans and referral repair shop programs, 211 Code Mass.Regs. § 123.00. Before issuing the emergency regulation, the commissioner's staff met several times with interested persons, including at least twice with representatives of the plaintiff association. On December 8, the commissioner gave notice that a hearing on approval of the bureau and Arbella plans would be held on December 22, 1988.

On December 15, 1988, Kemper filed a direct payment plan for the first time, and Arbella and the bureau filed revised plans. According to the association, it was notified for the first time on December 20, 1988 that Kemper had filed a plan, that the bureau and Arbella had filed revised plans, and that the hearing on December 22 would be for approval of the newly filed plans.

The December 22 hearing was not conducted as an adjudicatory proceeding. The association participated in the hearing, giving oral and written testimony. Subsequently, the commissioner approved all three plans.

In January, 1989, the commissioner gave notice and held a hearing regarding the approval of 211 Code Mass Regs § 123.00 as a final regulation. The association participated in that hearing. In February, 1989, the commissioner issued 211 Code Mass.Regs. § 123.00 as a final regulation. The challenged portions of the regulation are the same in both emergency and final form.

1. Substantive challenges to the regulation. The association challenges three provisions of the regulation: (1) the allowance of a transition period and a waiver concerning the number of repair shops on an insurer's referral list, 211 Code Mass.Regs. § 123.06(2)(a); (2) the allowance of supplemental payments for unexpected damage, 211 Code Mass.Regs. § 123.06(3)(a)(ii); and (3) a provision permitting repair shops to offer discounts on parts, glass, labor rate or other item or customer service, 211 Code Mass.Regs. § 123.06(8)(b). The association contends these provisions violate the following statutory language, referring to direct payment plans:

"The commissioner may require any plan filed pursuant to the preceding paragraph to provide (a) that the insured will be given a list of at least five registered repair shops, geographically convenient for the insured, from which the insured may at his or her option select a shop, which will without undue delay complete the repair work for the amount of the payment to the insured, plus any applicable deductible....

. . . . .

"(e) ... No repair shop, or employee, owner or agent thereof, shall give or pay, or offer to give or pay, any thing of value to any person in exchange for being included, or as an inducement to be included, on such a list of repair shops ..." (emphasis added).

St.1988, c. 273, § 24, 4th par.; § 51, 3d par.

a. Transition period and waiver. The regulation promulgated by the commissioner does require all plans to provide that insurers give insureds a list of at least five repair shops, with two exceptions. First, it allowed a one-year transition period in 1989, during which insurers were permitted to have fewer than five shops on their referral lists while they built up the lists to reach the five-shop minimum. 211 Code Mass.Regs. § 123.06(2)(a). Second, it provides that, even after the transition period, insurers may petition for a waiver of the five-shop minimum based on "specific facts regarding market share, geographic location, availability of repair shops, or other circumstances." 211 Code Mass.Regs. § 123.06(2)(c). The association contends that both the transition period and the waiver provision go beyond the commissioner's statutory authority.

The transition period expired at the end of 1989, making the question of its validity moot. See Lockhart v. Attorney Gen., 390 Mass. 780, 782, 459 N.E.2d 813 (1984); Wolf v. Commissioner of Pub. Welfare, 367 Mass. 293, 298, 327 N.E.2d 885 (1975). Because it is not capable of repetition, we need not address the issue further. Lockhart, supra 390 Mass. at 783-785, 459 N.E.2d 813. Stokes v. Superintendent, Mass. Correctional Inst., Walpole, 389 Mass. 883, 887, 452 N.E.2d 1123 (1983).

With respect to the waiver provision, the association argues that the word "may" in the relevant statutory language gives the commissioner discretion only so far as the choice whether to implement a referral list program. Once he chooses to implement such a program, it is argued, the commissioner has no discretion to permit any list to name fewer than "at least five" shops under any circumstances. ⁵

"[W]e must apply all rational presumptions in favor of the validity of the administrative action and not declare it void unless its provisions cannot by any reasonable construction be interpreted in harmony with the legislative mandate." Consolidated Cigar Corp. v. Department of Pub. Health, 372 Mass. 844, 855, 364 N.E.2d 1202 (1977). Furthermore, when an agency is given "a broad grant of authority to implement a program of reform or social welfare, the administrative agency generally has a wide range of discretion in establishing the parameters of its authority pursuant to the enabling legislation." Levy v. Board of Registration & Discipline in Medicine, 378 Mass. 519, 525, 392 N.E.2d 1036 (1979). See School Comm. of Wellesley v. Labor Relations Comm'n, 376 Mass. 112, 116, 379 N.E.2d 1077 (1978).

The commissioner interprets the statutory language, stating what he "may" require any plan to provide, as giving him discretion to decide what the direct payment plans should include. The contrasting mandatory language in a preceding paragraph supports this interpretation. There, the statute requires that a direct payment plan

"shall not be approved unless it: (a) provides for a procedure acceptable to the commissioner to resolve any dispute between the insured and the insurer as to the adequacy of the payment; (b) provides for adequate disclosure to the insured of his or her rights hereunder; and (c) contains such other terms and conditions as the commissioner shall prescribe" (emphasis added).

St.1988, c. 273, § 24, 2d par.; § 51, 2d par.

In addition to giving the commissioner discretion to decide whether to implement a referral list system at all, and authority to prescribe what terms and conditions direct payment plans shall contain, the statute also expressly grants the commissioner "authority to promulgate such rules and regulations as he deems necessary for the implementation" of a direct payment system. St.1988, c. 273, § 24, 3d par.; § 51, 2d par. The commissioner concluded that a waiver provision was necessary for the referral list program to be implemented at all in geographical areas with a small number of registered repair shops. The commissioner could reasonably interpret the broad authority granted him to implement the statute as permitting him to make an adjustment such as the waiver...