Mungo v. Smith

• Decision Date: 23 April 1986
• Docket Number: No. 0771,0771
• Citation: 289 S.C. 560,347 S.E.2d 514
• Court: South Carolina Court of Appeals
• Parties: Walter B. MUNGO, Appellant, v. Rogers T. SMITH, Chief Insurance Commissioner for the State of South Carolina, Respondent. . Heard

Page 514

347 S.E.2d 514

289 S.C. 560

Walter B. MUNGO, Appellant, v. Rogers T. SMITH, Chief Insurance Commissioner for the State of South Carolina, Respondent.

No. 0771.

Court of Appeals of South Carolina.

Heard April 23, 1986.

Decided Aug. 4, 1986.

Charles F. Cooper, II of Ratchford & Cooper, Columbia, for appellant.

L. Kennedy Boggs, Gen. Counsel and Susanne K. Murphy, Staff Counsel, of S.C. Dept. of Ins., Columbia, for respondent.

GARDNER, Judge:

This action was commenced by the Department of Insurance by a petition the object of which was to require the Chief Insurance Commissioner to rescind its previous order designating appellant Walter B. Mungo (Mungo) as a producer for the South Carolina Reinsurance Facility; he was so appointed pursuant to Section 38-37-150, ¹ Code of Laws of South Carolina (1976). The thrust of the petition is that Mungo was designated a producer on February 7, 1977, ² while his agency was located in the Irmo-St. Andrews area of Lexington County, where there was a market need for the designation of a producer for the Reinsurance Facility, and that Mungo moved his agency in November 1983 to North Main Street in the City of Columbia, where there is no market need for a designated agent. Mungo answered the petition and alleged, inter alia, that Section 38-37-150 provides two independent reasons for appointment as a producer, viz., (1) market need or (2) the loss of agency contracts because of the South Carolina Automobile Reparation Reform Act. ³ Mungo alleged and urges that either reason may be the basis of appointment and since he was appointed perforce of reason number two, his moving his agency to Columbia cannot be the basis for the revocation of his producer designation. Mungo further alleged that the Commission had granted designations as producers to other agents without requiring a demonstration of market need or the loss of contracts with insurance companies and specifically alleged several instances of this. Mungo alleges in substance that, because of this last mentioned allegation, to revoke his designation would be an arbitrary decision.

The then Chief Insurance Commissioner Rogers T. Smith appointed John G. Richards V, as the presiding officer for the hearing. We note that Richards is now the Chief Insurance Commissioner for the Insurance Department of South Carolina. Commissioner Richards, after a full hearing, recommended that Mungo's designation as a producer for the Reinsurance Facility should not be revoked. The then Chief Commissioner Smith overruled the recommendation of Commissioner Richards and revoked Mungo's designation. Mungo's appeal to the circuit court resulted in the appealed order affirming Commissioner Smith's revocation of Mungo's designation. We reverse.

Because we are impressed with certain legal conclusions reached by the hearing officer and present Chief Commissioner of the South Carolina Insurance Commission, we report the pertinent provisions of his order.

Having reviewed the record in its entirety, the Presiding Officer concludes that the Respondent, Walter B. Mungo, has not violated any specific provision of Title 38 of the 1976 Code of Laws of South Carolina, as amended, or any specific regulations promulgated by the Department of Insurance that would authorize the Chief Insurance Commissioner to withdraw the Respondent's designation as a Producer for the South Carolina Reinsurance Facility.

In not finding any specific authority for the Chief Insurance Commissioner to withdraw the Respondent's designation as a Producer for the South Carolina Reinsurance Facility, other than for specific violations of the Insurance Code which might be committed by any other licensed insurance agent in the State and which might require the permanent revocation of that agent's license to act as an insurance agent in South Carolina, the Presiding Officer must then look to any authority which might arise by "reasonably necessary" implication.

The only provision within Title 38 of the 1976 Code of Laws, as amended, which mentions "Designated Producers" is Section 38-37-150, as amended by Act No. 412 of 1980. That provision speaks only to the "designation" of such Producers and is silent as to the withdrawal of such designation, for any cause. It might be implied that because the Chief Insurance Commissioner has the expressed authority to designate, he then has the implied authority to withdraw such designation. In that case, it would follow that if a Designated Agent received an appointment, or entered into a contract to write automobile business for another insurer, other than one appointed by the Chief Insurance Commissioner pursuant to that same Section, then the Producer's (or Agent's) designation could, and should, be withdrawn. However, the Presiding Officer cannot stretch this implied authority to withdraw designation to the circumstances surrounding the case at hand. The Respondent was designated in 1977 because he met the requirements contained in Section 38-37-150, as amended, and has merely changed the location of his office, a matter of a few miles, in the same metropolitan area. This does not appear to be a circumstance whereby it would be "reasonably necessary" for the Commissioner to exercise the implied authority to withdraw designation, and as such, leaves a "reasonable doubt" as to whether the power should be "exercised" at all. In fact, when such a "reasonable doubt" exists, we are guided by the following language as contained in Calhoun Life Insurance Company, et al., v. Gambrell, 245 S.C. 406, 140 S.E.2d 774, 776 (1965):

It is elementary law that "administrative agencies are creatures of statute and their power is dependent upon statute, so that they must find within the statute warrant for the exercise of any authority which they claim." 1 Am.Jur.2d, Administrative Law Section 70, Page 88G.

As the South Carolina Supreme Court said in Piedmont & Northern Ry. Co. v. Scott, 202 S.C. 207, 24 S.E.2d 353, 360:

Such (administrative) bodies, being unknown to the common law, and deriving their authority wholly from constitutional and statutory provisions, will be held to possess only such powers as are conferred, expressly or by reasonably necessary implication, or such as are merely incidental to the powers expressly granted. See 51 C.J. 36, 37, where among other things it is said: "Any reasonable doubt of the existence in the commission of any particular power should ordinarily be resolved against its exercise of the power." And purely administrative functions are readily distinguishable from the making of regulations affecting substantial rights, which being in derogation of the common law must be directly derived from constitutional or statutory provisions.

That this principle is applicable to the Insurance Department is indicated by the case of Independence Ins. Co. v. Independent Life & Acc. Ins. Co., 218 S.C. 22, 61 S.E.2d 399, 402, where the Court said, "Authority need not be cited for the observation that the power of the (insurance) commissioner is derived solely from the statutes. To them alone we look for his authority and jurisdiction."

RECOMMENDATION AND PROPOSAL FOR DECISION

The Presiding Officer finds that the Respondent, Walter B. Mungo, did not in the instance at hand violate any provision of Title 38 of the 1976 Code of Laws of South Carolina, or any regulation promulgated by the Department of Insurance that would authorize the Chief Insurance Commissioner to withdraw the Respondent's designation as a Producer for the South Carolina Reinsurance Facility. The Presiding Officer, after reviewing the record in its entirety, can find no specific statutory prohibition expressed or implied or specific regulatory prohibition or specific case law prohibition against a Designated Producer for the Reinsurance Facility, moving his or her place of business from one location to another. There does appear to be a striking absence of any standards of operation for Designated Producers, other than a letter to all Designated Producers dated August 8, 1975, from former Chief Insurance Commissioner John W. Lindsay, which included a "Notice to Designated Producers." (SEE: SCID Exhibit Number 3). Contained within that "Notice to Designated Producers," there is no specific prohibition against changing locations. There is language, Item eight, Page three of that Notice, which states:

Selling, negotiating sale, of an agency without informing the purchaser or prospective purchaser, that automobile insurance of an agent is marketed through the designated producer system. (The designated producer status is nontransferable, and is withdrawn when the individual so designated ceases to participate in the insurance operation.)

However, the language quoted above, specifically the word "nontransferable," obviously addresses the Designated Producer's status itself, not the relocation of the Designated Producer's office, especially when read in conjunction with Section 38-37-150 of the 1976 Code of Laws of South Carolina, as amended by Act No. 412 of 1980.

The Presiding Officer takes official notice of a matter of common knowledge that on August 18, 1983, at a meeting of the Board of Governors of the South Carolina Reinsurance Facility, that body officially approved a Designated Agent (Producer) Contract which contained therein, for the first time, a specific prohibition against a Designated Agent (Producer) changing the location of his or her agency from one location to another without the prior approval of the Chief Insurance Commissioner. It is admitted that the Respondent operated as a Designated Producer at 6356 St. Andrews Road, Lexington County, South Carolina, "until November, 1983, at which time Respondent moved his agency to a building located at 2800 North Main Street, in the City of Columbia, Richland County, South Carolina." There is no evidence or testimony to prove that the Respondent entered into the Designated Agent Contract,...