Skating Vanities Co. v. State of New York

• Decision Date: 14 February 1953
• Parties: Skating Vanities Co., Claimant,<BR>v.<BR>State of New York, Defendant. (Claim No. 31012.)
• Court: New York Court of Claims

203 Misc. 779

Skating Vanities Co., Claimant,

v.State of New York, Defendant. (Claim No. 31012.)

February 14, 1953.

Harry H. Shayon and Isidore Miller for claimant.

Nathaniel L. Goldstein, Attorney-General (Douglas L. Manley of counsel), for defendant.

SYLVESTER, J.

This claim, submitted on a stipulated statement of facts, seeks recovery from the State Insurance Fund of premiums amounting to $2,177.41, claimed to have been improperly exacted by the fund in respect of a policy of workmen's compensation insurance issued to claimant covering the period from May 6, 1949, to May 6, 1950. The claim arises under the following circumstances:

On May 6, 1944, the State Insurance Fund issued a policy of compensation insurance to Roller Follies, Inc., claimant's predecessor, which was thereafter renewed from year to year and assigned to claimant in 1947. It provided, among other things: "This policy is accepted by the employer subject to the manual rules, classifications, rating plans and rates adopted by The State Insurance Fund and also subject to annual revision in accordance with such rules, classifications, rating plans and rates, with the agreement that the classifications, rates and premiums are subject to either change, correction or modification, in accordance with such manual rules, classifications, rating plans and rates. Such revision, change, correction or modification, if any, shall be expressed by endorsement indicating the effective date thereon."

On March 28, 1949, the fund wrote claimant regarding renewal of the policy for the year beginning May 6, 1949, stating that since claimant's accident record during its latest insurance period was "clearly sub-standard", the policy would "be renewed on the basis of unconditional 200% over Board Rates." These board rates are promulgated by the Compensation Insurance Rating Board, organized under article 8 of the Insurance Law and govern premiums chargeable by private carriers but are not made applicable to the State Fund, which is expressly exempted therefrom by subdivision 3 of section 44 of the Insurance Law.

After an exchange of correspondence between the claimant and the fund regarding coverage for the extraterritorial activities of claimant, the policy was renewed on the basis of the rates referred to on May 6, 1949. The renewal indorsement specifically described the rates payable as "uncond. 200% B.R.". Since the premium at board rates was $3,747.67, the rate payable was $11,243.01, which sum was actually paid to the fund by claimant.

The policy, however, was expressly made subject to a retrospective rating plan, which provided for periodic adjustments of the premiums paid, based on the insured's actual loss experience during the insurance period. In accordance with this procedure, a credit of $5,317.95 was subsequently allowed claimant on November 30, 1950. Claimant was advised of this credit by letter dated January 3, 1951, which enclosed an accounting for the period from May 6, 1949, to May 6, 1950, and which stated that the accounting "shows a very favorable loss ratio".

It should be noted that prior to the receipt of this accounting, claimant, on April 6, 1950, had agreed to a renewal of the policy for the period beginning May 6, 1950. In arranging this renewal, the fund advised claimant that the renewal policy "would be on the same State Fund rate basis as we applied last year, namely, on the basis of unconditional 200% over board rates with our retrospective rating plan endorsement." Claimant acknowledged receipt of this communication by its letter, dated April 6, 1950, stating that "(we) instruct you to renew our policy starting May 6th, 1950. Thank you very much."

It is stipulated that the claim submitted is "intended to challenge only the fund's power to depart from Rating Board rates" and is "not intended to question whether the premium charged was otherwise excessive, arbitrary or unreasonable."

The authority of the State Fund to fix premium rates derives from sections 83 and 89 of the Workmen's Compensation Law. Section 83 empowers the commissioners of the fund to adopt rules providing for the conduct of its business, including "the fixing of premium rates". Section 89, the validity of which is here challenged, provides as follows: "Rates. Employments and employees in the state fund shall be divided into such groups and classes as shall be equitably based upon differences of industry or hazard for the purpose of establishing premium rates, and for such purpose a system of merit rating may be employed which shall take account of the peculiar hazard of each individual risk. Premiums in the state fund shall be fixed at the lowest possible rates consistent with the maintenance of a solvent fund and of reasonable reserves and surplus." (Formerly § 95, as amd. by L. 1926, ch. 533; as renum. § 89, by L. 1938, ch. 585, § 6, eff. July 1, 1938.)

Claimant urges that section 89 above quoted constitutes an unconstitutional delegation of legislative power in that it contains no proper standards to be followed by the fund in the fixing of premium rates. Claimant also contends that the fund had no authority "to adopt a second rating system in fixing claimant's rates." This latter contention relates to the practice of the fund in adopting board rates in the underwriting of its ordinary risks. It is urged that the language of section 89 authorizes the fund to employ "a system of merit rating" and that the fund, having become a member of the rating board and having adopted its rates, was without power to depart therefrom in the writing of its insurance.

Turning first to the constitutional question presented, it is concluded that this case does not involve a delegation of legislative function. The fund is not empowered to fix the rates chargeable by private carriers. It is authorized merely to fix rates upon policies of insurance issued by it. Actually, the State Fund is an insurance carrier operated under the auspices of the State which insures employers against claims of employees for injuries. "As to workmen's compensation it [the State Fund] is merely a managed fund competing on the same basis with other private insurance companies" (Matter of Torpedo Dress Corp., 176 Misc. 60, 63, affd. 259 App. Div. 994, affd. 285 N.Y. 626; Commissioners of State Ins. Fund v. Dinowitz, 179 Misc. 278, 279).

But even if it be regarded that lawmaking authority had been delegated to the State Fund, it is clear that the standards of rate-making set forth in section 89 of the Workmen's Compensation Law are sufficiently definite to comply with the requirement that adequate legislative criteria be promulgated for the guidance of the administrative agency. It is provided that employments and employees are to be divided into such groups and classes as shall be equitably based upon differences of industry or hazard and that a system of merit-rating may be employed which shall take account of the peculiar hazard of each individual risk. It is also provided that premiums shall be fixed at the lowest possible rates consistent with the maintenance of a solvent fund and of reasonable reserves and surplus. Certainly, it may not be reasonably maintained that the Legislature is required to fix the individual rates applicable to the thousands of employers engaged in multifarious industries or to prescribe the numerous and varying factors which must necessarily be considered. The administrative agency is, however, instructed to take into account all of the factors which affect the hazard of each risk and is further required to fix rates consistent with the maintenance of a solvent fund and of a reasonable reserve and surplus.

The delegation of rate-making authority to administrative agencies has long been accepted governmental practice. (People ex rel. Central Park, North & East Riv. R. R. Co. v. Willcox, 194 N.Y. 383; Matter of Village of Saratoga Springs v. Saratoga Gas, Elec. Light & Power Co., 191 N.Y. 123; City of New York v. Maltbie, 274 N.Y. 90; Noyes v. Erie & Wyoming Farmers Co-op. Corp., 281 N.Y. 187, 194.) In the cases cited, the standards fixed by the legislation for the guidance of the administrative rate-making agency were comparable to those included in section 89. In Matter of Village of Saratoga Springs v. Saratoga Gas, Elec. Light & Power Co. (supra), the legislative requirement was that "reasonable" rates be fixed. Dealing with the definiteness of this standard, the court said, per CULLEN, Ch. J., at page 147: "But it is said that granting this, `reasonable' is really no standard but a mere generality. Again, we are of a different opinion. Indeed, if the statute assumed to fix any other standard for rates than that they should be reasonable, we think it would be much more open to attack than in its present form. A lawmaker might exhaust reflection and ingenuity in the attempt to state all the elements which affect the reasonableness of a rate only to find that in a particular case he had omitted the factor which controlled the disposition of that case." Similarly, in Noyes v. Erie & Wyoming Farmers Co-op. Corp. (supra), the Commissioner of Agriculture and Markets was empowered to effect an equalization of milk prices so that all producers should receive the same price for milk delivered "subject to reasonable differentials for quality and location and for services".

Thus, even upon the assumption that there is a delegation of rate-making authority, it appears, nevertheless, that a sufficiently definite standard is embraced in the legislation.

Claimant urges further that the fund, having adopted the rates fixed by the rating board, has no power to adopt another and different rating system in the application of "over Board" rates, adjusted by the retrospective rating plan. But the power of the State Fund to depart from...