Nationwide Mut. Ins. Co. v. Commissioner of Ins.

• Citation: 397 Mass. 416,491 N.E.2d 1061
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY v. COMMISSIONER OF INSURANCE et al. 1
• Decision Date: 28 April 1986
• Court: United States State Supreme Judicial Court of Massachusetts

Page 1061

491 N.E.2d 1061

397 Mass. 416

NATIONWIDE MUTUAL INSURANCE COMPANY v. COMMISSIONER OF INSURANCE et al. ¹

Supreme Judicial Court of Massachusetts Suffolk.

Argued January 10, 1986.

Decided April 28, 1986.

David A. McLaughlin, New Bedford, for Steven E. Barnicoat and others, interveners.

Thomas A. Barnico, Asst. Atty. Gen., for Com'r. of Ins.

Robert W. Mahoney, Boston, for plaintiff.

Before HENNESSEY, C.J., and LIACOS, ABRAMS, LYNCH and O'CONNOR, JJ.

HENNESSEY, Chief Justice.

Nationwide Mutual Insurance Company (Nationwide), a motor vehicle insurance company, commenced an action in the Supreme Judicial Court for Suffolk County against the Commissioner of Insurance (commissioner) challenging the application and constitutionality of two statutes authorizing the commissioner to establish commission rates for motor vehicle insurance agents. Specifically, Nationwide sought a declaration that St.1979, c. 149 and St.1980, c. 398, do not apply to Nationwide; and that, in the alternative, if these statutes do apply to Nationwide they unconstitutionally impair the contract executed in 1977 between Nationwide and its agents.

Twenty-one Nationwide agents intervened in this action as defendants, and counterclaimed for damages in the amount of commissions allegedly due to them under the statutes in question. A single justice of this court transferred the case to the Superior Court for disposition pursuant to G.L. c. 211, § 4A (1984 ed.). All parties filed motions for summary judgment, claiming that there were no facts in dispute. The motion judge thereafter ordered entry of a judgment which provided that (1) the 1980 rates established by the commissioner, pursuant to G.L. c. 175, § 162D, inserted by St.1979, c. 149, do not apply to Nationwide and its agents; and (2) the 1981 rates established by the commissioner, pursuant to G.L. c. 175, § 162D, as amended by St.1980, c. 398, shall not apply to Nationwide and its agents until a hearing has been held by the commissioner regarding Nationwide's expense base.

The commissioner and the agents appealed from the entire judgment. Nationwide appealed only from that portion of the judgment which would subject it, after a hearing, to the commissioner's 1981 rates. We granted the parties' application for direct appellate review. We affirm the judgment of the Superior Court.

The facts are undisputed. Nationwide does business pursuant to an "Exclusive Agency System," under which motor vehicle insurance policies are provided to Commonwealth residents through agents who deal solely in Nationwide insurance. This system is distinguishable from the so-called "American Agency System," under which agents are free to sell insurance products through more than one company. ² In 1977, Nationwide executed a five-year contract with its exclusive agents, which established a commission rate of 10.69% payable to agents writing motor vehicle insurance policies.

In 1979, the Legislature enacted G.L. c. 175, § 162D, which authorized the commissioner to establish commission rates for independent agents issuing motor vehicle insurance policies under the American Agency System. ³ In December, 1979, after extensive hearings and presentation of evidence, the commissioner issued his first decision pursuant to G.L. c. 175, § 162D, establishing for 1980 a 17% commission rate payable to the agents of insurers operating under the American Agency System. Nationwide did not take part in the hearings leading up to this decision.

On July 7, 1980, the Legislature amended G.L. c. 175, § 162D (St.1980, c. 398). The statute, as amended, expanded the commissioner's authority by permitting him to set commissions for agents operating under either the American Agency System, "or any other system, other than that of an employer to employee relationship." This amendment became effective on October 5, 1980. After hearings on the proposed rates, the commissioner in December, 1980, established a 16.2% commission rate for 1981. Nationwide did not participate in these hearings.

In November, 1980, Nationwide submitted a memorandum to the commissioner requesting a ruling regarding the effect of the 1980 amendment to G.L. c. 175, § 162D. Specifically, Nationwide sought a ruling to the effect that the amendment would not effect the 10.69% commission rate payable under Nationwide's 1977 contract with its agents. The commissioner responded in February of 1981, ruling that the 17% and 16.2% commission rates established for 1980 and 1981 applied to Nationwide. ⁴ Nationwide then instituted the present action.

1. 1980 Commission Rates.

The 1979 statute, G.L. c. 175, § 162D, inserted by St.1979, c. 149, authorized the commissioner to establish commission rates for motor vehicle insurance companies operating under the "American Agency System." By its express terms, the statute does not apply to insurers such as Nationwide, which operate through exclusive agents. The Legislature clearly and unambiguously limited the application of the statute to American Agency System insurers. Where the statutory language is clear, it must be given its plain and ordinary meaning. See State Bd. of Retirement v. Boston Retirement Bd., 391 Mass. 92, 94, 460 N.E.2d 194 (1984); Bronstein v. Prudential Ins. Co. of America, 390 Mass. 701, 704 (1984). The judge properly ruled that the 1979 statute does not apply to Nationwide, and that Nationwide therefore is not subject to the 1980 commission rates adopted by the commissioner in December, 1979.

The commissioner and Nationwide's agents argue that the 1980 amendment merely "clarified" G.L. c. 175, § 162D, and therefore that Nationwide's inclusion in the statutory scheme should be given retroactive effect to the date of the original enactment. ⁵ In 1980 the Legislature amended the statute to apply to "any other system, other than that of an employer to employee relationship." G.L. c. 175, § 162D, as amended by St.1980, c. 398. The commissioner and agents argue that this change in the statute's language evidences the Legislature's intent from the outset to include companies who operate under the Exclusive Agency System. This argument is unpersuasive. The language "American Agency System" in the first statute is clear, and the parties agree that Nationwide does not operate under that form of agency system. The 1980 amendment applying the commissioner's rate to "any other system ..." must thus be considered an extension, rather than a clarification, of the original statute. Nationwide therefore is not subject to the 1979 statute and the 1980 commission rates promulgated thereunder.

2. 1981 Commission Rates.

The 1980 amendment to G.L. c. 175, § 162D, authorizes the commissioner to establish commission rates for motor vehicle insurers which do business through an independent insurance agency system, "other than that of an employer to employee relationship." Nationwide does not argue that its Exclusive Agency System constitutes an employer-employee relationship. Nationwide thus clearly falls within the language of the July, 1980, amendment, and is subject to the commission rates promulgated by the commissioner after that date.

Nationwide argues that, absent express legislative intent, the 1980 amendment to G.L. c. 175, § 162D, may not be interpreted to disturb preexisting contract rights between Nationwide and its agents. To the extent that the 1980 amendment would replace the contractual 10.69% commission rate agreed on between Nationwide and its agents with a commission to be determined by the commissioner, then it must be considered "retroactive" in nature. ^{6 6} As a general rule, however, a statute will be construed to operate retroactively only where the Legislature evidences a clear intent to alter existing contract rights. Nantucket Conservation Found., Inc. v. Russell Management, Inc., 380 Mass. 212, 214, 402 N.E.2d 501 (1980). Liberty Mut. Ins. Co. v. Wolfe, 7 Mass.App.Ct. 263, 266, 386 Mass.App. 263 (1979). Nationwide argues that, because the 1980 amendment does not expressly provide that existing contract rights will be displaced, Nationwide is not subject to the statute until its 1977 contract has expired. We disagree.

The language of the amendment indicates that its provisions are to take effect immediately, irrespective of existing contracts. The amendment provides that companies within its scope "shall pay" to their agents the commissions established by the commissioner. The word "shall" indicates immediate payment, and an intention to enforce the statute despite existing rights. See Nantucket, supra. In addition, the emergency preamble to the 1979 act provides that "[t]he deferred operation of this act would tend to defeat its purpose, which is to immediately require certain insurers to pay the premium commission earned by certain insurance agents" (emphasis added). G.L. c. 175, § 162D, inserted by St.1979, c. 149. This preamble, although not included in the 1980 amendment "further defining" the agents to whom such commissions must be paid, evidences the intent of the Legislature to abrogate existing contract rights.

In light of these provisions, we conclude that the words used by the Legislature evidence an intent to make the 1980 amendment to G.L. c. 175, § 162D, retroactive. Therefore, the statute and the commissioner's 1981 rate decision promulgated thereunder apply to Nationwide, despite the outstanding contract between the company and its agents. The remaining issue is whether the retroactive application of this statute exceeds constitutional limitations. Nationwide argues that application of the commissioner's 1981 rates to Nationwide would unconstitutionally impair its 1977 contract, and would deprive Nationwide of its property without due process of law. ⁷

A statute is not per se unconstitutional merely because it has the effect of restricting, or barring altogether, the performance of contracts entered into prior to its amendment. Exxon Corp. v. Eagerton, 462...