Sentry Ins. Payback Program Filing, Matter of
| Decision Date | 07 November 1989 |
| Docket Number | No. C4-89-837,C4-89-837 |
| Citation | 447 N.W.2d 454 |
| Parties | In the Matter of SENTRY INSURANCE PAYBACK PROGRAM FILING. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
Substantial evidence in the record supports the Commerce Commissioner's determination that the Sentry Insurance Payback Endorsement is misleading and violates Carl E. Norberg, St. Paul, for appellant Sentry Ins. Co.
public policy; the Commissioner's disapproval of the endorsement is not arbitrary and capricious.
Hubert H. Humphrey, III, Atty. Gen., Karyn M. (Kim) Greene, Sp. Asst. Atty. Gen., St. Paul, for respondent Minnesota Dept. of Commerce.
Heard, considered and decided by LANSING, P.J., and FOLEY and IRVINE *, JJ.
Sentry Insurance appeals the Commerce Commissioner's order disapproving its Payback endorsement after a hearing under the Administrative Procedure Act, Minn.Stat. Sec. 14.01 et seq. Sentry contends the Commissioner's action is not supported by substantial evidence and is arbitrary and capricious. We conclude that the record as a whole contains substantial evidence that the endorsement is misleading and violates public policy and affirm the Commissioner's order.
Sentry Insurance, a Wisconsin mutual company licensed in Minnesota, applied to the Department of Commerce for permission to offer a Payback endorsement to its standard automobile insurance policy. The endorsement has two independent features which are packaged together. They are not offered separately.
The first feature provides that if Sentry makes no payments on any claims filed by the insured for a period of five years, then at the end of five years, the insured will receive a payback payment equaling one-half of the first year's premium. In the following year, if there are still no claims, one-half of the second year's premium will be refunded. This rebate continues on an annual basis unless the insured files a claim on which Sentry makes any payment. If this occurs, the insured cannot receive a payback payment for five years. In addition, the insured cannot receive a payback payment if Sentry has established a reserve for a claim until the claim is resolved without payment.
The second feature provides that the insured will be excluded from collision coverage, except for lienholder's claims, if the insured's car is involved in an accident and the driver is "legally intoxicated." The exclusion is not limited to accidents in which the named insured is driving.
The Payback endorsement consists of one page and is reproduced below:
Sentry's Payback Program
The Payback Policy is for people who drive carefully and don't drive if they've had too much to drink. We ask you to sign this Endorsement so that we're certain you are aware of the consequences if you have an accident while legally intoxicated.
This Endorsement states that your collision coverage is excluded if the driver of your car is legally intoxicated.
Collision coverage pays for damages to the vehicle and its equipment when it hits or is hit by another car, another object or it rolls over.
Please note the collision coverage is excluded only if the driver is legally intoxicated.
All other coverages remain in effect.
For cars that are financed or leased, the policy will always cover the lending institution's or lessor's interest in the car, even if the driver is intoxicated.
Because you have agreed not to drive while legally intoxicated, Sentry agrees to pay you at the end of each consecutive five-year period during which no claim or losses have been incurred under your Payback Policy one-half of the premium paid for the first year of each such five-year period.
Sentry will renew your policy under this program as long as you continue to:
--Reside in a state in which this program is approved.
--Remain claim and violation free.
Your collision insurance is excluded if the operator of the car we insure is legally intoxicated at the time of a car accident.
This exclusion does not apply to the interests of the lessor or lienholder designated on the declarations page.
The following definition is added to the policy: Legally intoxicated means a blood alcohol content of .10% or more. An operator who refuses to take a test for blood alcohol shall be conclusively presumed to be legally intoxicated.
(Emphasis in original.)
The Payback program is part of the preferred auto insurance market which offers discounts to drivers with clean records. This market typically offers preferred rates 15-20% off a company's standard rate. Sentry proposed to offer a discount of 17% off its standard rate.
After unsuccessfully seeking approval for the Payback endorsement from the Commerce Department, Sentry requested a hearing under the administrative procedure act. At the hearing the department presented evidence of four separate bases for disapproving the endorsement as misleading and violative of public policy under Minn.Stat. Sec. 70A.06, subd. 2 (1988):
(1) The Payback Endorsement when tied to a DWI policy is misleading and violative of public policy in that, among other things, it creates the false impression that good driving and/or sober driving will lead to a rebate equaling one-half of the first year's premium when this is not necessarily the case.
(2) The Payback Endorsement is misleading and violative of public policy in that it may discourage insureds from filing small claims and it creates confusion regarding eligibility for the "payback" in the event of not-at-fault claims, claims due to natural causes, and personal injury claims arising in vehicles owned by someone other than the insured.
(3) The waiver of collision coverage for any "driver of your car" who is involved in an accident while legally intoxicated is misleading and violative of public policy because the term "driver of your car" is not limited to the named insured but includes minor children of the insured and all other individuals who drive the insured's car.
(4) The waiver of collision coverage is violative of public policy because a potential insured's lack of interest in this DWI policy could be used by insurance companies and agents to discriminate against the potential insured with respect to other forms of coverage.
The administrative law judge concluded that the Payback endorsement was not misleading and that the collision exclusion feature did not violate public policy. On the final issue of whether the payback feature violated public policy, the ALJ concluded that Sentry had not met its burden to show that it did not. In an accompanying memorandum the ALJ recommended that the Commissioner approve the endorsement because the opportunity to reduce insurance premiums by safe and sober driving works in favor of the public.
The Department filed exceptions to the ALJ's findings and in the final decision the Commissioner concluded that the form was misleading and violative of public policy. The Commissioner adopted his own findings to support these conclusions and prepared a memorandum explaining his reasons for rejecting various findings and conclusions of the ALJ. Sentry appeals. 1
1. Is the Commissioner's decision that the Payback endorsement is misleading supported by substantial evidence?
2. Is the Commissioner's decision that the Payback endorsement is violative of public policy supported by substantial evidence?
3. Is the Commissioner's decision arbitrary and capricious?
The Commissioner's conclusion that the Payback endorsement form is misleading is based on two central findings:
(1) the endorsement is misleading because it creates the false impression that the insured will be rewarded if he continues to drive safely and soberly when in fact, a safe sober driver may be penalized under the program if he unknowingly lends his car to a drunk driver; and (2) it is inherently misleading to package the collision exclusion and the Payback agreement in one endorsement.
In determining whether these findings are supported by substantial evidence, we rely on the Minnesota interpretation of substantial evidence found in Taylor v. Beltrami Electric Cooperative, Inc., 319 N.W.2d 52, 56 (Minn.1982):
We view that by the "substantial evidence" test is meant (1) such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, (2) more than a scintilla of evidence, (3) more than "some evidence," (4) more than "any evidence," and (5) evidence considered in its entirety.
Id. (quoting Reserve Mining Co. v. Herbst, 256 N.W.2d 808, 825 (Minn.1977)).
Neither this court nor the Minnesota Supreme Court has interpreted the meaning of "misleading" as used in Minn.Stat. Sec. 70A.06, subd. 2 (1988). The dictionary definition adopted by the ALJ is "to lead into a wrong direction or into a mistaken action or belief." Webster's Third New International Dictionary, 1444 (1971). Other jurisdictions have defined "misleading" in a regulatory context. Statements are misleading if they "tend to lead astray or into error, without any specific intent to deceive." People v. Wahl, 39 Cal.App.2d Supp. 771, 773, 100 P.2d 550, 551 (1940) (false advertising statute). The determination of whether a statement is misleading is based on the overall impression created by the statement. See American Home Products Corp. v. Johnson & Johnson, 654 F.Supp. 568, 590 (S.D.N.Y.1987). The total impact may be deceptive or misleading even though the statement is technically not false. U.S. v. One Device, More or Less, Ellis Micro-Dynameter, 224 F.Supp. 265, 268 (E.D.Pa.1963).
To support its contention that the endorsement is misleading, the department presented witnesses who testified that the language of the form was misleading and that the form gives the impression that the Payback endorsement relates to safe, sober driving and not to the claims record. However, it is the claims record that determines whether a payback occurs. An insured who was a safe, sober driver...
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