MID-CENTURY INSURANCE COMPANY v. Ademaj

• Decision Date: 24 November 2004
• Docket Number: No. 12,12
• Citation: 202 S.W.3d 176
• Parties: MID-CENTURY INSURANCE COMPANY OF TEXAS AND TEXAS FARMERS INSURANCE COMPANY, Appellants v. SHEFQET ADEMAJ, Appellee.
• Court: Texas Court of Appeals

202 S.W.3d 176

MID-CENTURY INSURANCE COMPANY OF TEXAS AND TEXAS FARMERS INSURANCE COMPANY, Appellants v. SHEFQET ADEMAJ, Appellee.

No. 12-03-00028-CV.

Court of Appeals of Texas, Twelfth District, Tyler.

Opinion delivered November 24, 2004.

Panel consisted of WORTHEN, C.J., GRIFFITH, J., and DeVASTO, J.

OPINION

SAM GRIFFITH, Justice.

In three issues, Appellants Mid-Century Insurance Company of Texas and Texas Farmers Insurance Company (collectively "MCT") challenge the trial court's entry of a partial summary judgment in favor of Appellee Shefqet Ademaj. We affirm.

BACKGROUND

The Automobile Theft Prevention Fee

In 1991, in an effort to combat automobile theft across the state, the Texas Legislature established the Automobile Theft Prevention Authority ("Authority") in the Texas Department of Transportation. TEX. REV. CIV. STAT. ANN. art. 4413(37), § 2 (Vernon Supp. 2004). In order to fund the Authority's programs, the Legislature mandated that each automobile insurer pay to the Authority "a fee equal to $1 multiplied by the total number of motor vehicle years of insurance for insurance policies delivered, issued for delivery, or renewed by the insurer." TEX. REV. CIV. STAT. ANN. art. 4413(37), § 10(b) (Vernon Supp. 2004).¹ The Legislature also added that the $1 fee imposed on the insurers "is in addition to any other fee or tax imposed by law on an insurer." TEX. REV. CIV. STAT. ANN. art. 4413(37), § 10(c) (Vernon Supp. 2004). By rule, the commissioner of insurance ("commissioner") has authorized automobile insurers to recoup this fee from the policyholder. 28 TEX. ADMIN. CODE § 5.205(a) (1992) (Tex. Dept. of Insurance, Automobile Theft Prevention Authority Pass-Through Fee). The rule also mandates that insurers must include a printed notice on policies that the fee is charged "in addition to the premium due." 28 TEX. ADMIN. CODE § 5.205(b)(1), (2) (1992).

The Automobile Insurance Rate-Filing Process

In that same legislative session, the legislature enacted section 5.101 of the Texas Insurance Code, entitled "Flexible Rating Program for Personal Automobile Insurance," which authorized the commissioner of the Texas Department of Insurance to set a "benchmark rate" for each line of personal automobile insurance sold in the state of Texas. TEX. INS. CODE ANN. art. 5.101, §§ 1(a), 3(b) (Vernon Supp. 2004). A "rate" is the "charge for a particular line for each unit of exposure." TEX. INS. CODE ANN. art. 5.101, § 2(5) (Vernon Supp. 2004). The "benchmark rate" is defined as "the rate set annually by the commissioner by line, relative to which the flexibility bands and statutory rates apply." TEX. INS. CODE ANN. art. 5.101, § 2(1) (Vernon Supp. 2004). The purpose of setting the range of benchmark rates on particular lines of automobile insurance is to 1) promote stability in that line and 2) produce rates that are just, reasonable, adequate, and not excessive for the risks to which they apply, and not confiscatory. TEX. INS. CODE ANN. art. 5.101, § 3(b) (Vernon Supp. 2004). In establishing the benchmark rate, the commissioner may give consideration to

1) past and prospective loss experience within the state and outside the state if the state data are not credible;

2) the peculiar hazards and experience of individual risks, past and prospective, within and outside the state;

3) a reasonable margin for profit;

4) expenses of operation of all insurers, excluding only those expenses that are disallowed under Subsection (o) of this section;

5) the extent and nature of competition in that market;

6) the availability or lack of availability in that market;

7) the level and range of rates and rate changes among insurers;

8) investment and underwriting experience of insurers;

9) reinsurance availability;

10) consumer complaints;

11) extent of denials and restrictions of coverage;

12) the volume of cancellations and nonrenewals; and

13) any other factor considered appropriate by the commissioner.

TEX. INS. CODE ANN. art. 5.101, § 3(c) (Vernon Supp. 2004). The "flexibility band" is the range of rates from 30 percent below to 30 percent above, inclusive, the benchmark rates set by the commissioner by line, within which an insurer, during a set period of time, may increase or decrease rate levels without prior approval by the commissioner. TEX. INS. CODE ANN. art. 5.101, § 2(3) (Vernon Supp. 2004). Within 30 days of the effective date of the benchmark rate, each insurer that proposes to write automobile insurance in Texas must file its proposed rate with the commissioner. TEX. INS. CODE ANN. art. 5.101, § 3(e) (Vernon Supp. 2004). Any such filing must produce rates that are just, reasonable, adequate and not excessive for the risks to which they apply, or the commissioner shall disapprove the filing. TEX. INS. CODE ANN. art. 5.101, § 3(g) (Vernon Supp. 2004).

"Permissible Payments"

Section 21.35B of the insurance code was also enacted in 1991, and it describes the types of payments that may be solicited or collected by an insurer. It is entitled "Permissible Payments," and it mandates that no payment may be solicited or collected by an insurer or agent in connection with an application for insurance or the issuance of a policy except payments for

1) premiums;

2) taxes;

3) finance charges;

4) policy fees;

5) agent fees;

6) service fees, including charges for [local agent service and reimbursement fees];

7) inspection fees; or

8) membership dues in a sponsoring organization.

TEX. INS. CODE ANN. art. 21.35B(a) (Vernon Supp. 2004).

The Underlying Litigation

This appeal stems from a class action brought by Ademaj and others in which they sought to obtain, inter alia, summary judgment on the question of whether MCT could lawfully collect the Texas Automobile Theft Prevention ("ATP") fee from its insureds, in addition to the premium collected from them. In his motion for summary judgment, Ademaj argued that the rate he was charged for auto insurance was in excess of the legal rate because that fee was not included in the filed rate under article 5.101 of the Texas Insurance Code. In its motion for summary judgment, MCT contended that section 21.35B of the insurance code authorized them to charge the ATP fee as an expense and that they were not required to include the fee as part of their rate-filing with the commissioner of insurance.

On November 14, 2002, the parties jointly filed a motion to sever Ademaj's claims from the remaining plaintiffs or, alternatively, to issue a written order for interlocutory appeal of the summary declaratory judgment. In the motion, Ademaj and MCT stipulated to the following facts:

1. Ademaj has paid a total of $1.00 to MCT in Auto Theft Prevention Authority fees.

2. Ademaj has paid a total of $3.00 to [Texas Farmers Insurance Company] in Auto Theft Authority Prevention Fees.

3. All payments, other than the Auto Theft Prevention Authority fees, that were paid by Ademaj to MCT and TFIC for private passenger automobile insurance coverage were legally authorized.

4. The Auto Theft Prevention fee was not charged to Ademaj by MCT or TFIC as part of the premium for private passenger automobile insurance coverage.

5. MCT and TFIC have not included the Auto Theft Prevention fee in their rates, or in their rate filings made with the Commissioner of Insurance under TEX. INS. CODE art. 5.101 for private passenger auto insurance.

The joint motion was granted on November 18, and on December 30, the trial court ruled in favor of Ademaj on his motion for partial summary judgment. Specifically, the trial court ruled that 1) in order to assess the ATP fee to Ademaj, MCT is required to include the ATP fee in the rate established under article 5.101 of the Texas Insurance Code, and 2) article 21.35B of the Texas Insurance Code does not authorize MCT to charge the ATP fee to Ademaj outside the rate established under article 5.101.

MCT now appeals from the trial court's grant of declaratory relief, raising three issues on appeal: 1) the ATP fee is a "tax" or "policy fee" and can be recouped under article 21.35B, 2) article 21.35B does not conflict with, and is not preempted by, article 5.101, and 3) article 5.101 does not provide the sole method for a rate-regulated insurer to collect money in the sale of auto insurance.

"PERMISSIBLE PAYMENTS" VERSUS REGULATED INSURANCE RATES

In their first issue, MCT contends that the trial court's final order was erroneous because the ATP fee is a "tax" or "policy fee" within the purview of article 21.35B. Ademaj argues that the ATP fee is part of the total amount that MCT must file with the commissioner of insurance in order to comply with article 5.101.

Standard of Review

We review a summary judgment de novo. Vardeman v. Mustang Pipeline Co., 51 S.W.3d 308, 311 (Tex. App.—Tyler 2001, pet. denied). Accordingly, when cross-motions for summary judgment are filed, we consider the evidence supporting both motions. Cedillo v. Gaitan, 981 S.W.2d 388, 390 (Tex. App.—San Antonio 1998, no pet.). We uphold a traditional summary judgment only if the summary judgment record establishes there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law on a ground set forth in the motion. TEX. R. CIV. P. 166a(c); e.g., Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). In deciding whether the summary judgment record establishes the absence of a genuine issue of material fact, we view as true all evidence favorable to the nonmovant and indulge every reasonable inference, resolving all doubts in the nonmovant's favor. Id. Since both parties moved for summary judgment, this Court has the authority to (1) affirm the judgment, (2) reverse the judgment and render the judgment that the trial court should have rendered, or (3) reverse the judgment and remand the case to the trial court for further proceedings. Members Mut. Ins. Co. v. Hermann Hosp., 664 S.W.2d 325, 328 (Tex. 1984).

Since we must harmonize the permissible payments...