State ex rel. Com'r of Ins. v. North Carolina Auto. Rate Administrative Office

Decision Date22 August 1975
PartiesSTATE of North Carolina ex rel. COMMISSIONER OF INSURANCE v. NORTH CAROLINA AUTOMOBILE RATE ADMINISTRATIVE OFFICE, Nationwide Mutual Insurance Company, State Farm Mutual Automobile Insurance Company, Allstate Insurance Company, the Aetna Casualty and Surety Company, the Travelers Indemnity Company, Hartford Accident and Indemnity Company, Great American Insurance Company, United States Fidelity and Guaranty Company, Lumbermen's Mutual Casualty Company, Liberty Mutual Insurance Company, Iowa National Mutual Insurance Company, St. Paul Fire and Marine Insurance Company, Unigard Mutual Insurance Company, Maryland Casualty Company, the Shelby Mutual Insurance Company, American Motorists Insurance Company, American Mutual Liability Insurance Company, Midwest Mutual Insurance Company, Universal Underwriters Insurance Company and Balboa Insurance Company. In the Matter of RATES AND RATING CLASSIFICATIONS FOR MOTORCYCLE INSURANCE; Order of the Commissioner entered
CourtNorth Carolina Supreme Court

Rufus L. Edmisten, Atty. Gen., by Isham B. Hudson, Jr., Hunter & Wharton by John V. Hunter III, Raleigh, for appellant.

Allen, Steed & Allen, P. A., by Arch T. Allen, Lucius W. Pullen, Thomas W. Steed, Jr., and Arch T. Allen III; Bailey, Dixon, Wooten, McDonald & Fountain, by Wright T. Dixon, Jr.; Broughton, Broughton, McConnell & Boxley, P. A., by J. Melville Broughton, Jr.; Young, Moore, Henderson & Alvis, by Charles H. Young, and R. Michael Strickland, Manning, Fulton & Skinner, by Howard E. Manning, Raleigh, for appellees.

EXUM, Justice.

The most important question raised, and one which is determinative of the appeal, is whether the Commissioner exceeded his statutory authority by abolishing the primary use classifications and safe driver subclassifications for motorcycle liability insurance. The Court of Appeals concluded that he did, and we agree. We therefore vacate the order entered by him.

A full factual statement outlining the proceedings leading to the Commissioner's order is set out accurately in the opinion of the Court of Appeals. We will not repeat it here. Briefly these proceedings were precipitated by the enactment on 18 June 1975 of Chapter 666, 1975 Session Laws, hereinafter referred to as House Bill 28. 1 On 20 June 1975 the Commissioner issued his notice to the North Carolina Automobile Rate Administrative Office (hereinafter "Rate Office") that he would conduct public hearings to "rehear and determine a filing of the North Carolina Rate Administrative Office dated May 7, 1970, for a 'Revised Classification and Rating Procedure Motorcycles' . . . abolish age discrimination in motorcycle insurance classifications pursuant to . . . House Bill 28 . . . review the present weight classification system for motorcycle liability insurance . . . determine whether the rates in general for motorcycle liability insurance are excessive or otherwise not in compliance with law; and to issue such corrective orders as are necessary." Hearings were conducted before the Commissioner on 11 July 1975 when two witnesses were presented by the Insurance Department's staff. After their testimony the Commissioner recessed the hearings until 24 July 1975. Meanwhile on 15 July 1975 the Rate Office filed on behalf of all of its member companies its revised classification and subclassification plan for motorcycle liability insurance which was also designed to comply with the mandates of House Bill 28. Hearings were then held on 24 July 1975, at which time the Rate Office presented its testimony which tended to explain its filing. On 4 August 1975 the hearings continued. Mr. Paul L. Mize, general manager of the Rate Office, explained an amendment to the Rate Office filing, and the principal witness for the Insurance Department's staff, Mr. Robert Holcombe, explained the staff's proposals for revising motorcycle liability rates.

The Rate Office contended that while House Bill 28 mandated the elimination of any classifications on the basis of age or sex, it did not abolish and, rather, required that motorcycles be classified according to uses and their operators be subclassified the same as automobiles and automobile operators pursuant to the provisions of General Statute 58-30.4. 2 The Rate Office also proposed that motorcycles with an engine size of 324 cubic centimeters or less be rated at 50 percent of the applicable private passenger car rate and motorcycles with an engine size of 325 cubic centimeters or more be rated at the applicable private passenger automobile rate. 3

The Department Staff, on the other hand, took the position that House Bill 28 actually abolished the primary use classification and safe driver subclassification plan for motorcycles. It proposed, consequently, only two premiums for motorcycle liability insurance: one premium for motorcycles with an engine size of not more than 324 cubic centimeters and another for motorcycles with an engine size in excess of 324 cubic centimeters. The Department Staff also offered evidence tending to show that the premiums proposed by the Rate Office for motorcycle liability insurance and the premiums which had been charged in the past for such insurance resulted in grossly low loss ratios for the companies writing this business. 4

The Commissioner in his final order concluded in part that, "Motorcycle insurance is not subject to that part of Chapter 666 of the 1975 Session Laws . . . identified as G.S. 58-30.4." In the decretal portions of his order he in effect abolished all primary classifications on the basis of use and all safe driver type subclassifications, both prescribed in G.S. 58-30.4, and established only two premiums for basic limits motorcycle liability insurance: one premium for small motorcycles and another for large motorcycles.

Thus the principal and dispositive legal question on this appeal is whether, indeed, House Bill 28 authorized this action on the part of the Commissioner. Applying well-established canons of statutory construction, we think it clear that it did not. As we said in Commissioner of Insurance v. Automobile Rate Office, 293 N.C. 365, 392, 239 S.E.2d 48, 65 (1977):

"The primary function of a court in construing legislation is to insure that the purpose of the legislature in enacting it, sometimes referred to as legislative intent, is accomplished. In re Filing by Fire Insurance Rating Bureau, supra, 275 N.C. 15, 34, 165 S.E.2d 207, 220 (1969). The best indicia of that legislative purpose are 'the language of the statute, the spirit of the act, and what the act seeks to accomplish.' Stevenson v. City of Durham, 281 N.C. 300, 303, 188 S.E.2d 281, 283 (1972). A court may also consider 'the circumstances surrounding (the statute's) adoption which throw light upon the evil sought to be remedied.' Milk Commission v. Food Stores, 270 N.C. 323, 332, 154 S.E.2d 548, 555 (1967)."

The primary purpose of House Bill 28 was obviously to abolish age and sex as criteria for classifying motor vehicle both automobile and motorcycle insurance.

The Commissioner's position that the legislature by enacting House Bill 28 also intended to abolish all primary classification and subclassification plans with regard to motorcycle liability insurance is based on his assertion that when House Bill 28 was initially introduced the word "motorcycles" appeared in that portion of the bill codified as G. S. 58-30.4. When the bill was ultimately enacted, however, the word "motorcycles" was deleted from that portion of the bill. 5

There were essentially three substantive changes made in that part of House Bill 28 codified as G.S. 58-30.4 before it was ratified. 6 This first was to give to the Rate Office rather than the Commissioner the responsibility of initiating and filing with the Commissioner a revised classification plan which would eliminate age and sex as classification criteria. The second was to establish specified basic classifications and subclassifications which would supersede the old basic classification and subclassification plans. The third was to change the fraction of total premiums to be derived from subclassification surcharges from not less than one-third to not less than one-fourth. In making this last change House Bill 28 as finally enacted provided, "Said subclassification plan shall be designed to provide not less than one fourth of the total premium income of insurers in writing and servicing the aforesaid coverages in this State." (Emphases supplied.) The provision in the bill as originally introduced comparable to this sentence read, "to the end that surcharges assessed against insured operators having bad driving records will provide not less than one-third of the total amount of the premium income needed by insurers in writing and servicing coverages on private passenger automobiles and motorcycles in this state." (Emphases supplied.)

We are satisfied that the purpose of the legislature in amending this clause in House Bill 28 was to change the fraction of total premiums produced by the subclassification surcharges and not to change the coverages to which the surcharges applied. We see no substantive difference in the use of the words "in writing and servicing coverages on private passenger automobiles and motorcycles in this state" and the words "in writing and servicing the aforesaid coverages in this state." The reference to "coverages on private passenger automobiles and motorcycles" in G.S. 58-30.4 as originally introduced obviously echoes the reference to "private passenger automobiles or motorcycles" in G.S. 58-30.3 as originally introduced. Likewise it seems abundantly clear that the words "the aforesaid coverages" in the amendment refers to the first use of the word "coverages" in G.S. 58-30.4 as ratified, where the section speaks of "coverages on private passenger (nonfleet) automobiles . . . affected by the provisions of G.S. 58-30.3." (...

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