National Federation of Retired Persons v. Insurance Com'r
| Decision Date | 22 October 1992 |
| Docket Number | No. 59188-1,59188-1 |
| Citation | 120 Wn.2d 101,838 P.2d 680 |
| Parties | NATIONAL FEDERATION OF RETIRED PERSONS, Appellant, v. INSURANCE COMMISSIONER, State of Washington, Respondent. |
| Court | Washington Supreme Court |
Ralph R. Smith, Olympia, for appellant.
Kenneth O. Eikenberry, Atty. Gen., Robert V. Jensen, Asst. Atty. Gen., Olympia, for respondent.
This is an appeal from a Thurston County Superior Court decision affirming a ruling of the Washington State Insurance Commissioner that certain mailings by the National Federation of Retired Persons constitute insurance solicitations which are prohibited without a license. The appeal was certified to this court by the Court of Appeals, Division Two, pursuant to RCW 2.06.030. We accepted certification on May 6, 1992. We affirm the decision of the Superior Court.
On April 2, 1987, Appellant National Federation of Retired Persons (NFRP) contacted the office of the Washington State Insurance Commissioner asking for a ruling that its proposed conduct of business in this state would not be subject to the jurisdiction of the Insurance Commissioner. 1 On April 20, 1987, Deputy Commissioner Patricia D. Peterson advised NFRP that it would be violating Washington laws if A formal administrative hearing before the Insurance Commissioner was held February 16, 1989, after which the hearing officer (Deputy Insurance Commissioner Edward H. Southon) concluded (1) that NFRP's mailings were subject to the jurisdiction of the Insurance Commissioner, and (2) that NFRP's activities, particularly the mailing of insurance related materials and the sale of the resulting lead cards, constituted "solicitation" of insurance, a type of "insurance transaction" for which a license is required. 4
without a proper license, it distributed the insurance materials it had submitted to the Commissioner. 2 Appellantthen filed suit in Thurston County Superior Court seeking an answer to the same question (Thurston County cause 88-2-01933-6), only to have the case dismissed on summary judgment by the Honorable Paula Casey for failure to exhaust administrative remedies. 3
After a hearing, the trial court (the Honorable Wm. Thomas McPhee) affirmed the hearing officer's decision by final judgment dated March 20, 1991, despite NFRP's contentions that the Insurance Commissioner lacked jurisdiction over its activities and that imposing a licensing requirement infringed on its constitutional right to free speech. 5 Judge McPhee's "Final Judgment Affirming Insurance Commissioner Order Requiring Licensee [sic ] to Solicit Insurance" states in its entirety:
1. This is an administrative appeal brought pursuant to the Washington Administrative Procedure Act ("APA"). The Petitioner, National Federation of Retired Persons, appeared by its attorney, Ralph R. Smith. The Respondent, the Insurance Commissioner, State of Washington, appeared through Robert V. Jensen, Assistant Attorney General.
2. The single issue in this case is whether the Insurance Commissioner has jurisdiction over the activities of the National Federation of Retired Persons before it contacts residents of this state with a "lead letter."
3. The Insurance Commissioner concluded that such contact constituted the transaction of insurance, in the form of solicitation, under RCW 48.01.060. The Insurance Commissioner further concluded, that in order to engage in such insurance transactions, one must be licensed under the Insurance Code.
4. This matter is reviewable under RCW 34.04.130. These review provisions of the old APA are applicable because this administrative proceeding commenced prior to July 1, 1989. RCW 34.05.902.
5. The court has reviewed the entire record submitted to the court by the Insurance Commissioner. Moreover, it has reviewed the briefs submitted by the parties and heard their oral argument. Based thereon, the court concludes that the Insurance Commissioner properly concluded that the proposed activities of the National Federation of Retired Persons in contacting Washington residents with "lead letters" constituted solicitation. Paulson v. Western Life Ins. Co., 636 P.2d 935, 945 (Or.1981). Thus, it constituted the transaction of insurance under the Insurance Code. RCW 48.01.060.
6. This court also concluded that the Insurance Commissioner has broad authority over the regulation of insurance in the State of Washington. RCW 48.02.060(1); Omega National Ins. Co. v. Marquardt, 115 Wn.2d 416, 427, P.2d (1990); Federated Am. Ins. Co. v. Marquardt, 108 Wn.2d 651, 654, 741 P.2d 18 (1987); Kueckelhan v. Federal Old Line Ins. Co., 69 Wn.2d 392, 405, 418 P.2d 443 (1966). Accordingly, the interpretation of the Insurance Code by the Insurance Commissioner, that one may not solicit insurance without a license from the Commissioner[,] is both reasonable and necessary to ensure effective implementation of the policies of that code. That construction is supported by WAC 284-12-110, which limits all insurance coverage solicited in this state to agents or solicitors, who by statute must be licensed.
7. The National Federation of Retired Persons also contends that the Commissioner's requirement that the Federation be licensed, before proceeding with its solicitations, is unconstitutional. This court rejects that contention. The requirement of licensing is consistent with the test of Central Hudson Ins. Corp. v. Public Service Comm'n., 447 U.S. 557, 65 L.Ed.2d 341, 100 S.Ct. 2343 (1980). I conclude that the second, third and fourth prongs of that test are applicable; namely, that the government interest here is substantial, that licensing requirement directly advances that government interest; and the licensing requirement is not more restrictive than necessary to serve that interest.
NOW THEREFORE, it is hereby ordered, judged, [sic ] and decreed that the order of the Insurance Commissioner requiring a license prior to solicitation is hereby affirmed.
DONE IN OPEN COURT this 20th day of March, 1991.
/s/ Judge Wm. Thomas McPhee
Appellant appealed to the Court of Appeals, Division Two, which certified the case to this Court pursuant to RCW 2.06.030.
Appellant National Federation of Retired Persons is a nonprofit corporation licensed in Texas in 1979. 6 NFRP describes itself as a "philanthropic association for the benefit of retirees and matured persons." 7 It is not tax exempt under the Internal Revenue Code, nor has it applied for such status. 8 Among its activities, NFRP periodically distributes printed information to members and nonmembers relating to its health education and consumer aid programs. 9 The four pamphlets submitted to the Insurance Commissioner for review noted that they were reprinted by NFRP from a brochure of the United States Department of Health and Human Services. 10 Mailing this reprinted information "appears to constitute the Health Education Program of NFRP." 11
As part of its "consumer aid" program, NFRP regularly sends members printed information concerning Medicare Supplement insurance. 12 Similar information is sent to nonmembers After receiving completed business reply cards (lead cards) from persons showing an interest in Medicare Supplement Insurance, NFRP offers the cards for sale to insurance companies or to individual insurance agents using lists it purchases from state insurance departments. 16 Most of the lead cards are sold at a flat rate ranging from $12 to $20 per card, and NFRP's compensation is not contingent upon the purchasing agent making a successful sale to the person completing the "lead card". 17 In testimony before the Insurance Commissioner, NFRP Executive Director Elmer B. Gibson stated that receipts from the sale of lead cards "might well possibly be" the biggest source of income to the NFRP. 18
using mailing lists purchased from commercial providers. 13 Copies of those documents are not part of the record before this court. However, in referring to the documents in his ruling, Deputy Insurance Commissioner Edward H. Southon indicated that the mailed materials advise recipients that NFRP has reviewed several Medicare Supplement insurance programs and include postage-paid business reply cards for recipients interested in obtaining additional insurance information. 14 According to Deputy Insurance Commissioner Southon, NFRP's printed materials "[g]ive opinions on the plans such as 'these programs offer outstanding benefits and have reasonable rates.' They include statements such as 'If you act now there will be no health questions and will cover pre-existing conditions [sic]'... ". 15
Besides finding that there were financial benefits to NFRP from insurance related mailings, the hearing officer Appellant NFRP does not limit the sale of completed lead cards to companies whose policies have been reviewed by NFRP, nor does it limit sales to individual agents representing companies whose policies have been reviewed by NFRP. 21 Accordingly, if a person completes an NFRP lead card, there is no guaranty that that person will be contacted by an insurer whose Medicare Supplement product has been reviewed by NFRP. 22
(Deputy Insurance Commissioner Edward H. Southon) also found that one or more of NFRP's officers personally benefited financially from its mailing operations. 19 The hearing officer reached this conclusion because of the "overwhelming identity between the directors and incorporators of the NFRP and Mailing Surveys, Inc., ... of San Antonio, Texas ... the company which performs the mailing services for the NFRP." 20
This case presents two principal questions: (1) whether the Washington State Insurance Commissioner has authority under RCW Title 48 to restrict distribution of printed materials by the National Federation of Retired Persons by requiring it to secure a license before engaging in such distribution in this state when the materials being distributed advise recipients concerning available Medicare Supplement insurance and...
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