Michigan Basic Prop. Ins. Ass'n v. Office of Fin. & Ins.
| Decision Date | 08 June 2010 |
| Docket Number | Docket No. 293766. |
| Citation | 808 N.W.2d 456,288 Mich.App. 552 |
| Parties | Michigan BASIC PROPERTY INSURANCE ASSOCIATION v. OFFICE OF FINANCIAL AND INSURANCE REGULATION. |
| Court | Court of Appeal of Michigan — District of US |
OPINION TEXT STARTS HERE
Dykema Gossett PLLC, Lansing (by Lori McAllister), for petitioner.
Michael A. Cox, Attorney General, B. Eric Restuccia, Solicitor General, and Christopher L. Kerr and M. Elizabeth Lippitt, Assistant Attorneys General, for respondents.
Before: BANDSTRA, P.J., and FORT HOOD and DAVIS, JJ.
FORT HOOD, J.
Respondents appeal by leave granted the circuit court's order concluding that the insurance commissioner exceeded his authority by disapproving petitioner's requested rate increase. We reverse.
Petitioner, the Michigan Basic Property Association, is a legislative creation. MCL 500.2920. It provides property insurance to qualified persons who have been unable to obtain insurance in the regular market. MCL 500.2901 et seq. Respondent Commissioner of the Office of Financial and Insurance Regulation (insurance commissioner) must approve petitioner's plan of operation and any changes to that plan. MCL 500.2920(2).
On March 11, 2008, petitioner submitted a rate level adjustment for its home insurance program addressing rate levels for its HO–2 (home), HO–4 (apartment), and HO–6 (condominium) lines of insurance. Specifically, petitioner requested a rate increase of 18.9 percent based on a report prepared by its actuary. The report stated that the rate increase was premised on the actuarial method employed and that the use of a different accepted actuarial method would have resulted in a rate decrease:
The Association respectfully wishes to advise your office that further investigation and research by our actuaries has determined that had the Association followed other actuarially accepted methods for determining its rate levels (like the Form 3 methodology currently in the statute), the change now being requested would have been, in fact, an overall statewide decrease in rates.
An analyst for respondents contacted petitioner's president, noting that the calculation of rates was premised on the weighted base rate average of the top 10 insurer groups, when the appropriate computation would use the “weighted average of actual charged premium [sic] which would include discounts.” Consequently, petitioner was asked to submit actuarial data to determine the rate levels based on the “weighted average of charged, fully discounted premium rates.” Petitioner responded that its rate increase was in accordance with the statutory language for computing the appropriate rate. Petitioner also asserted that the application of discounts was a voluntary method of product marketing, and some insurance companies offered discounts premised on the sale of multiple forms of insurance, but petitioner only dealt in home insurance, not automobile insurance.
The insurance commissioner issued an order disapproving the proposed rate increase. The rejection of the rate increase was premised on multiple considerations. First, the commissioner rejected the assertion that the rate increase was consistent with the weighted-average language of MCL 500.2930a:
In determining the “weighted average,” [petitioner] has traditionally averaged the base rates of the top 10 insurer groups. This is reflected in the rates filed by [petitioner] on March 12, 2008 for HO–2 (traditional home), HO–4 (apartment), and HO–6 (condominium) lines of insurance. However, rates calculated in this manner are no longer appropriate or lawful.
An insurer begins calculating an individual's premium with the base rate and then applies factors that it has determined relate to the frequency or severity of losses, such as age of dwelling, type of construction, and safety devices. Several years ago, final premiums charged were not, on average, greatly disparate from the base rates.
This is no longer true. New rating factors, especially the use of insurance credit scoring, have greatly influenced the calculation of premiums. Base rates have been driven up so that insurers may deeply discount the rates of persons with high insurance credit scores. Base rates, which once had some meaningful correlation with expected losses, have now become just a starting point in a methodology that arrives at expected losses.
Next, the commissioner held that petitioner was required to conform to the requirements of MCL 500.2109(1)(c), which provides that rates may not be unfairly discriminatory in relation to another rate for the same coverage. A rate was not unfairly discriminatory if supported by a reasonable justification for any disparity, a reasonable classification system, sound actuarial principles, and loss and expense statistics. The insurance commissioner held that a reasonable justification had not been established:
With regard to the current rate filing, because of its reliance on base rates, the differential between the rates is not reasonably justified by differences in losses. There is not a reasonable justification because there is not a reasonable classification system or support by actual and credible loss statistics. According to information from [petitioner], actual and credible loss statistics would support a reduction in rates by 6% rather than the proposed increase of 18.9%.
Because the justification was deficient, the insurance commissioner ordered petitioner to bring its rates in conformity with MCL 500.2109(1)(c).
Lastly, the insurance commissioner held that the rates, as computed by petitioner, did not conform to the requirement that the insurance pool adopt a plan of operation that ensured “the fair, reasonable, equitable, and nondiscriminatory manner of administering the pool....” 1 MCL 500.2920(2). Consequently, the insurance commissioner ordered amendment of the plan of operation to provide that home insurance rates in the future would be calculated using the average premium charged by the top 10 insurer groups rather than the base rates of the top 10 insurer groups.
On July 10, 2008, petitioner filed its petition for review in the circuit court, alleging that the insurance commissioner's order was contrary to law, exceeded his statutory authority, and was not supported by the record and competent evidence. The circuit court concluded that MCL 500.2930a(1) was ambiguous and, following a review of other statutory provisions including those concerning automobile insurance rates, concluded that the Legislature understood the difference between “premiums” and “base rates.” The circuit court also held that the insurance commissioner was unable to alter a longstanding interpretation premised on changed circumstances in order to avoid “any perceived excessiveness or unfair discrimination.” Therefore, the circuit court reversed the insurance commissioner's disapproval of the 18.9 percent rate increase. We granted respondents' application for leave to appeal.
The Michigan Constitution provides for judicial review of administrative decisions, providing in relevant part:
All final decisions, findings, rulings and orders of any administrative officer or agency existing under the constitution or by law, which are judicial or quasi-judicial and affect private rights or licenses, shall be subject to direct review by the courts as provided by law. This review shall include, as a minimum, the determination whether such final decisions, findings, rulings and orders are authorized by law; and, in cases in which a hearing is required, whether the same are supported by competent, material and substantial evidence on the whole record. Findings of fact in workmen's compensation proceedings shall be conclusive in the absence of fraud unless otherwise provided by law. [Const. 1963, art. 6, § 28.]
However, the application of the standard of review is contingent on the type of challenge at issue and must be in accordance with separation-of-power principles. In re Complaint of Rovas Against SBC Mich., 482 Mich. 90, 97–100, 754 N.W.2d 259 (2008). If a rulemaking function is at issue, the reviewing court must first determine whether the Legislature properly delegated authority to the agency to promulgate the rule at issue. The legality of the delegation is subject to review de novo. If the delegation was proper, the reviewing court must examine whether the agency exceeded the authority granted by the statute. Id. If the examining court is asked to review the agency's fact-finding function in contested cases, the court examines whether the findings were supported by competent, material, and substantial evidence on the entire record. The factual findings, particularly the review of credibility of witnesses and the weight of the evidence, are entitled to deference by the reviewing court. Id.
However, the agency's interpretation of a statute “is not binding on the courts, and it cannot conflict with the Legislature's intent as expressed in the language of the statute at issue.” Id. Rather, a reviewing court must give “respectful consideration” to the agency's construction of the statute and provide “cogent reasons” for overruling an agency's interpretation. Id. However, “when the law is ‘doubtful or obscure,’ the agency's interpretation is an aid in discerning the Legislature's intent.” Id. (citation omitted). Thus, when a reviewing court examines an agency interpretation of a statute, “the primary question presented is whether the interpretation is consistent with or contrary to the plain language of the statute.” Id. Respectful consideration is not equal to deference. Statutory construction is the domain of the judiciary, and therefore, the agency's interpretation is not entitled to more weight. Id. Rather, “the agency's interpretation can be particularly helpful for ‘doubtful or obscure’ provisions.” Id. (citation omitted).
The rules regarding judicial review of statutory language are well...
To continue reading
Request your trial
-
Slis v. State
...well established in our civil jurisprudence. We note this Court's discussion in Mich. Basic Prop. Ins. Ass'n v. Office of Fin. & Ins. Regulation , 288 Mich. App. 552, 560-561; 808 N.W.2d 456 (2010), regarding the nature of administrative agencies:Administrative agencies are created by the L......
-
Menard Inc. v. Dep't of Treasury. Sears Roebuck & Co.
...has seen fit to omit. In re Hurd–Marvin Drain, 331 Mich. 504, 509, 50 N.W.2d 143 (1951); Mich. Basic Prop. Ins. Ass'n v. Office of Fin. & Ins. Regulation, 288 Mich.App. 552, 560, 808 N.W.2d 456 (2010). “When the Legislature fails to address a concern in the statute with a specific provision......
-
Cheboygan Sportsman Club v. Cheboygan Cnty. Prosecuting Attorney
...19 Mich. 39, 46 (1869).17 Johnson v. Recca, 492 Mich. 169, 187, 821 N.W.2d 520 (2012) ; Mich. Basic Prop. Ins. Ass'n v. Office of Fin. & Ins. Regulation, 288 Mich.App. 552, 560, 808 N.W.2d 456 (2010).18 State of Michigan v. McQueen, 293 Mich.App. 644, 671, 811 N.W.2d 513 (2011) ; People v. ......
-
In re Application of Ind. Mich. Power Co. to Increase Rates
...Assessment Roll for Chappel Dam, 282 Mich.App. 142, 148, 762 N.W.2d 192 (2009). In Mich. Basic Prop. Ins. Ass'n v. Office of Fin. & Ins. Regulation, 288 Mich.App. 552, 559–560, 808 N.W.2d 456 (2010), the Court summarized: A statutory provision is ambiguous if it irreconcilably conflicts wit......