Mid-Century Ins. Co. of Texas v. Ademaj

• Decision Date: 30 November 2007
• Docket Number: No. 05-0016.,05-0016.
• Parties: MID-CENTURY INSURANCE COMPANY OF TEXAS and Texas Farmers Insurance Company, Petitioners, v. Shefciet ADEMAJ, Respondent.
• Court: Texas Supreme Court

243 S.W.3d 618

MID-CENTURY INSURANCE COMPANY OF TEXAS and Texas Farmers Insurance Company, Petitioners, v. Shefciet ADEMAJ, Respondent.

No. 05-0016.

Supreme Court of Texas.

Argued October 17, 2006.

Decided November 30, 2007.

Rehearing Denied February 22, 2008.

Thomas T. Rogers and Mr. William J. Cobb, III, Jackson Walker, L.L.P., Austin, TX, for Petitioner.

Gavin H. McInnis, Michael G. Maloney, Maloney & Maloney, PC, San Antonio, and D.J. Powers, Law Offices of D.J. Powers, Austin, TX, for. Respondent.

Justice GREEN delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice BRISTER, Justice JOHNSON, and Justice WILLETT joined.

This case concerns the convergence of three provisions enacted by the Texas Legislature during the 1991 legislative session: (1) article 4413(37), section 2 of the Revised Civil Statutes, creating the Texas Automobile Theft Prevention Authority (the Authority) as a division of the Texas Department of Transportation; (2) article 21.35B(a) of the Insurance Code, detailing the types of payments insurers generally may solicit or collect;¹ and (3) article 5.101 of the Insurance Code, outlining a flexible rating program and rate-filing process to be used by all automobile insurers in Texas.²

Shefqet Ademaj and others (Ademaj, collectively) brought a class action suit against' Mid-Century Insurance Company of Texas and Texas Farmers Insurance Company (Mid-Century, collectively), and sought a declaratory judgment on the manner in which Mid-Century could lawfully recoup the legislatively imposed Authority fee from insureds. The trial court ruled in Ademaj's favor, and the court of appeals affirmed. We reverse the court of appeals' judgment and render a take-nothing judgment in favor of Mid-Century.

I

Article 4413(37) funds the Authority's automobile theft prevention programs by requiring each automobile insurer to pay a fee of $1 per policy year for every automobile insured. TEX.REV.CIV. STAT. art. 4413(37), § 10(b). The commissioner of the Texas Department of Insurance authorized automobile carriers to recoup the fee from insureds so long as the carriers provided insureds notice that, as part of the policy, they were being charged the fee "in addition to the premium due under this policy." 28 TEX. ADMIN. CODE § 5.205(b)(1), (b)(2) (1992). Article 21.35B applies to all insurers and outlines payments insurers may solicit or collect from policyholders. The statute provides, in pertinent part:

(a) No payment may be solicited or collected by an insurer, its agent, or sponsoring organization in connection with an application for insurance or the issuance of a policy other than:

(1) premiums;

(2) taxes;

(3) finance charges;

(4) policy fees;

(5) agent fees;

(6) service fees, including charges for costs described under Article 21.35A of this code;

(7) inspection fees; or

(8) membership dues in a sponsoring organization,

Art. 21.35B(a). Article 5.101 of the Texas Insurance Code, entitled "Flexible Rating Program for Certain Insurance Lines," applies to automobile insurers and authorizes the commissioner to set a benchmark rate for each line of personal automobile insurance sold in Texas. Article 5.101, §§ 1(a), 3(b). Under Article 5.101, once the commissioner establishes "flexibility bands]"—acceptable rate ranges for each line of insurance—insurers must file detailed information on proposed rates which, if within the flexibility bands, are presumed valid. Id. § 3(e)-(0.

Ademaj alleged in a motion for summary judgment that Mid-Century illegally collected the Authority fee because the fee was not included in Mid-Century's Article 5.101 rate-filing. Mid-Century countered with their own motion for summary judgment, alleging that Article 21.35B(a) authorized them to charge the Authority fee as an expense, and that they were therefore not required to include the fee in their Article 5.101 rate-filing. Mid-Century and Ademaj ultimately filed a joint" motion to sever Ademaj's claims from the remaining plaintiffs' claims or, alternatively, for a written order for interlocutory appeal of the summary declaratory judgment. The parties stipulated the following:

1. Ademaj paid a total of $1 in Authority fees to Mid-Century Insurance Company.

2. Ademaj paid a total of $3 in Authority fees to Texas Farmers Insurance Company.

3. All payments Ademaj made for private passenger automobile insurance coverage, other than the Authority fees, were legally authorized.

4. Neither Mid-Century nor Texas Farmers charged Ademaj the Authority fee as part of the premium for private passenger automobile insurance coverage.

5. Neither Mid-Century nor Texas Farmers has included the Authority fee in their rates or in their rate-filings made with the commissioner under Article 5.101.

The trial court issued a partial summary judgment in favor of Ademaj. The court of appeals affirmed the trial court's ruling, holding insurers are required to include the Authority fee in their Article 5.101 rate-filings with the commissioner. Mid-Century Ins. Co. v. Shefget, 202 S.W.3d 176, 184-85 (Tex.App.-Tyler 2004). Mid-Century timely filed this appeal.

II

We review a trial court's grant of summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.2003). When, as here, both parties moved for summary judgment and the trial court granted one and denied the other, we "determine all questions presented and render the judgment the trial court should have rendered." Argonaut Ins. Co. v. Baker, 87 S.W.3d 526, 529 (Tex.2002). Our objective in construing a statute is to give effect to the Legislature's intent. TEX. GOV'T CODE § 312.005; Am. Home Prods. Corp. v. Clark, 38 S.W.3d 92, 95 (Tex.2000). Our interpretation of these statutes begins with their plain meaning, Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865 (Tex.1999), which we derive "from the entire act and not just from isolated portions." State v. Gonzalez, 82 S.W.3d 322, 327 (Tex.2002). Thus, we "read the statute as a whole and interpret it to give effect to every part." Id. (quoting Jones v. Fowler, 969 S.W.2d 429, 432 (Tex.1998)).

The parties agree that the Insurance Code authorizes insurers to recoup the Authority fee amount from insureds, and disagree only over which specific articles and conditions govern the payments. The principal issue is whether, as Ademaj argues, insurance carriers must include the Authority fee within the rates filed under Article 5.101, or whether, as Mid-Century argues, carriers may recoup the fee independently under Article 21.35B. We must determine whether the rate arising from the Article 5.101 rate-filing process is: (1) merely the premium to which an insurer may add the charges enumerated in Article 21.35B; or (2) the sum of all permissible charges, including any Article 21.35B charges the insurer requires the policyholder to pay. The court of appeals construed Article 5.101 to require the latter. 202 S.W.3d at 184. We disagree.

First, we construe Article 21.35B as an affirmative source of an insurer's authority to solicit and collect payments. Article 21.35B(a) provides that "[n]o payment may be solicited or collected other than" the eight enumerated categories of payments, creating a prohibition with respect to nonenumerated payments and an authorization with respect to the enumerated elements. Article 21.35B(a) (emphasis added). Construing Article 21.35B(a) as a mere outline of the Article 5.101 rate-making considerations renders it meaningless to automobile insurers and ignores the statute's application to other types of insurers.³ Instead, Article 21.35B authorizes the solicitation and collection of premiums, taxes, and the other enumerated payments unless some intervening statute provides otherwise.⁴

Second, we construe the Article 5.101 "rates" to constitute "premiums" as contemplated by Article 21.35B(a). Despite extensive briefing on the issue, we are not convinced that technical etymologies of Article 21.35B's "premium" and Article 5.101's "rate" control our construction.⁵ Because Article 21.35B addresses all insurers, it cannot speak in the exact terms of the various statutes addressing subclasses of insurers, including Article 5.101. Instead, we utilize the plain meanings that produce the most coherent overall scheme. "The foundation of insurance is ... risk distribution, and premiums are a function of calculated risk." In re Tex. Ass'n of Sch. Bds., 169 S.W.3d 653, 658-59 (Tex.2005) ("The payment of the premium by the insured and the assumption of a specified risk by the insurer are the essential elements of the contract of insurance."); accord Rosenstock v. Wheeler, 310 S.W.2d 350, 353 (Tex.Civ.App.-Houston 1958, writ ref'd) ("A premium is the consideration paid by a person for insurance protection or coverage."). In addition to "premiums," Article 21.35B recognizes that insureds incur, as part of insurance policies, various other payment obligations not closely related to risk and cost distributions. Article 21.35B(a). Albeit with different terms, Article 5.101 focuses on the fundamental considerations of risk distribution. Article 5.101 produces "rates" for each "line of insurance" by balancing "risks" against various economic variables, such as "loss experience," "peculiar hazards," "profits," and "expenses of operation," among others. Art. 5.101, § 3(a), (c). Thus, the Article 5.101 rate process produces the premiums that Article 21.3513 authorizes insurers to solicit and collect.

Ademaj argues that Article 5.101 requires the commissioner's inclusion of all costs and expenses of operation, including all taxes, in the Article 5.101 rate. See id. § 3(b)(4), 3(q). Ademaj further asserts that the only expenses that could be excluded from the rate were those listed in section 3(o). Because taxes and fees generally, and the Authority fee specifically, are not listed in section 3(o), Ademaj argues that Article 5.101...