North Carolina Auto. Rate Administrative Office, In re

• Decision Date: 14 April 1971
• Docket Number: No. 39,39
• Citation: 278 N.C. 302,180 S.E.2d 155
• Parties: In the Matter of a Filing by the NORTH CAROLINA AUTOMOBILE RATE ADMINISTRATIVE OFFICE for a Revision of Liability Rates on Private Passenger Vehicles.
• Court: North Carolina Supreme Court

Page 155

180 S.E.2d 155

278 N.C. 302

In the Matter of a Filing by the NORTH CAROLINA AUTOMOBILE RATE ADMINISTRATIVE OFFICE for a Revision of Liability Rates on Private Passenger Vehicles.

No. 39.

Supreme Court of North Carolina.

April 14, 1971.

Atty. Gen. Robert Morgan, Deputy Atty. Gen. Jean A. Benoy and Asst. Attys. Gen. Henry T. Rosser and Isham B. Hudson, Jr., appellant intervenor.

Allen, Steed & Pullen, by Arch T. Allen, Raleigh, for North Carolina Automobile Rate Administrative Office.

William T. Joyner, Raleigh, for North Carolina Fire Insurance Rating Bureau, amicus curiae.

BOBBITT, Chief Justice.

STATUTORY FRAMEWORK

General Statutes of North Carolina, Chapter 58, known as 'the 'Insurance Law,' G.S. § 58--1, is composed of seven subchapters and is set forth on pages 346--592, both inclusive, of Vol. 2B, Replacement 1965.

In Subchapter I, the Insurance Department is established 'as a separate and distinct department,' G.S. § 58--4, and the 'Commissioner of Insurance' is designated the chief officer thereof, G.S. § 58--5. Subchapter I contains provisions which set forth powers and duties of the Commissioner. G.S. § 58--9(1) confers upon the Commissioner 'power and authority to make rules and regulations, not inconsistent with law, to enforce, carry out and make effective the provisions of this chapter * * *.' G.S. § 58--9.2 relates to examinations, investigations and hearings conducted by the Commissioner. G.S. § 58--9.3, which relates to court review of the Commissioner's orders and decisions, contains the following provision: 'The order or decision of the Commissioner if supported by substantial evidence shall be presumed to be correct and proper.'

It is provided that the Commissioner 'shall appoint' a chief deputy commissioner, a chief actuary and 'such other deputies, actuaries, examiners, clerks and other employees as may be found necessary for the proper execution of the work of the Insurance Department, at such compensation as shall be fixed and provided by the Budget Bureau.' G.S. § 58--7.1; G.S. § 58--7.2; G.S. § 58--7.3. On or before March 1st of each year, every insurance company is required to file in the office of the Commissioner a statement, sworn to by its chief managing agent or officer, showing its 'business standing and financial condition' on the preceding 31st day of December. G.S. § 58--21.

G.S. 58, Subchapter 5, Article 25, consisting of G.S. § 58--246 through G.S. § 58--248.8, relates specifically to automobile liability insurance. These provisions are codifications of Chapter 394 of the Public Laws of 1939 and amendments thereto.

The 1939 Act created and established the Rate Office. G.S. § 58--246; G.S. § 58--248. The Commissioner has authority to grant permission to write liability insurance for bodily injury and for property damage on private passenger automobiles only to those insurance companies or organizations which subscribe to and become members of the Rate Office. G.S. § 58--247(a). Each member is entitled to one represenmtative and to one vote in the administration of its affairs. The members elect the Governing Committee. G.S. § 58--247(b). The expenses are prorated among the members in proportion to their respective gross premium receipts. G.S. § 58--247(c).

G.S. § 58--247(d) provides that the Commissioner, or such deputy as he may appoint, shall be Ex officio chairman of the Rate Office; that he shall preside over all of its meetings, including those of its Governing Committee; and that he shall 'determine any controversy that may arise by reason of a tie vote between the members of the governing committee.' G.S. § 58--248.6 authorizes any member to appeal to the Commissioner from any decision of the Rate Office.

One of the stated objects and functions of the Rate Office is '(t)o maintain rules and regulations and fix rates for automobile bodily injury and property damage insurance and equitably adjust the same as far as practicable in accordance with the hazard of the different classes of risks as established by said bureau.'

G.S. § 58--248 authorizes the Commissioner 'to compel the production of all books, data, papers and records and any other data necessary to compile statistics for the purpose of determining the pure cost and expense loading of automobile bodily injury and property damage insurance in North Carolina and this information shall be available and for the use of the North Carolina Automobile Rate Administrative Office for the capitulation (sic) and promulgation of rates on automobile bodily injury and property damage insurance.' G.S. § 58--248 also provides that the rate 'compiled and promulgated by such bureau shall be submitted to the Commissioner of Insurance for approval and no such rates shall be put into effect in this State until approved by the Commissioner of Insurance and not subsequently disapproved.'

The statutory provisions referred to above are codifications of the provisions of the 1939 Act. They authorized the Rate Office to 'fix rates for automobile bodily injury and property damage insurance.' However, approval of the Commissioner was required before the rates could be put into effect.

In United States v. South-Eastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944), the Supreme Court of the United States considered an appeal by the United States from a decision of the United States District Court for the Northern District of Georgia dismissing an indictment which charged the appellees, an association of nearly two hundred private stock fire insurance companies, and twenty-seven individuals, with violations of the Sherman Anti-Trust Act (15 U.S.C.A. §§ 1 and 2). The indictment charged two conspiracies, namely, (1) a conspirary 'to restrain interstate trade and commerce by fixing and maintaining arbitrary and non-competitive premium rates on fire and specified 'allied lines' of insurance in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia'; and (2) a conspiracy 'to monopolize trade and commerce in the same lines of insurance in and among the same states.' The Supreme Court reversed, basing its decision upon the holding that insurance transactions which stretch across State lines constitute interstate commerce so as to make them Subject to regulation by Congress under the Commerce Clause. (Note: Apparently, less than five of the two hundred and forty-eight companies represented in the July 1, 1969 Filing are North Carolina corporations.)

Soon after the decision in United States v. South-Eastern Underwriters Association, supra, the Congress of the United States enacted legislation (Act of March 9, 1945, 59 Stat. 33, codified as 15 U.S.C.A. §§ 1011--1015), which provided, Inter alia, that after January 1, 1948 (by amendment, June 30, 1948), the Sherman Act, the Clayton Act, and the Federal Trade Commission Act, 'shall be applicable to the business of insurance To the extent that such business is not regulated by State law.' (Our italics.)

Seemingly in response to the decision in United States v. South-Eastern Underwriters Association, supra, and in anticipation of the enactment of federal legislation such as that embodied in the Act of March 9, 1945, known as the McCarran-Ferguson Act, the General Assembly enacted Chapter 381 of the Session Laws of 1945, codified as G.S. § 58--248.1, which provides, Inter alia: 'Whenever the Commissioner, upon his own motion or upon petition of any aggrieved party, shall determine, after notice and a hearing, that the rates charged or filed on any class of risks are excessive, inadequate, unreasonable, unfairly discriminatory, or otherwise not in the public interest, or that a classification or classification assignment is unwarranted, unreasonable, improper or unfairly discriminatory he shall issue an order to the bureau directing that such rates, classifications or classification assignments be altered or revised in the manner and to the extent stated in such order to produce rates, classifications or classification assignments which are reasonable, adequate, not unfairly discriminatory, and in the public interest.' Another new section added by the 1945 Act, to wit, G.S. § 58--248.5, provided that a review of any order made by the Commissioner in accordance with the provisions of G.S. 58, Article 25, which is comprised of G.S. § 58--246 through G.S. § 58--248.8, was by appeal to the Superior Court of Wake County in accordance with G.S. § 58--9.3.

In Allstate Insurance Company v. Lanier, a declaratory judgment involving our statutes, G.S. § 58--246 through G.S. § 58--248.8 (1965), was entered in the United States District Court for the Eastern District of North Carolina, 242 F.Supp. 73 (1965), and affirmed by the Court of Appeals, 361 F.,2d 870 (4th Cir. 1966). The plaintiffs, 'five large insurance companies doing 29% Of the total business in North Carolina,' filed the suit to obtain a judgment declaring the North Carolina statutory provisions invalid 'insofar as it restricts competition by prohibiting the offering of lower premium rates.' 361 F.2d at 871. A summary judgment dissolving the complaint was affirmed on the ground that, since the Rate Office 'was established and administered under the active supervision of the State, it was not subject to attack under the federal antitrust laws, which condemn only Private noncompetitive activities,' and that the North Carolina statutory provisions had not been preempted either by the Sherman Act or by the McCarran-Ferguson Act. The opinion of Circuit Judge Sobeloff concludes with this observation: 'Whether the statutory plan embodies the wisest and most effective type of regulation is, of course, not a judicial question.'

Prior to the enactment of Chapter 943 of the Session Laws of 1965, no statute provided for periodic filings by the Rate Office with the Commissioner of the data referred to in G.S. § 58--248, to wit, 'data necessary to compile statistics for the purpose of...