State ex rel. Com'r of Ins. v. North Carolina Fire Ins. Rating Bureau

• Decision Date: 04 November 1976
• Docket Number: No. 35,35
• Citation: 291 N.C. 55,229 S.E.2d 268
• Court: North Carolina Supreme Court
• Parties: STATE of North Carolina ex rel. COMMISSIONER OF INSURANCE v. NORTH CAROLINA FIRE INSURANCE RATING BUREAU.

Page 268

229 S.E.2d 268

291 N.C. 55

STATE of North Carolina ex rel. COMMISSIONER OF INSURANCE v. NORTH CAROLINA FIRE INSURANCE RATING BUREAU.

No. 35.

Supreme Court of North Carolina.

Nov. 4, 1976.

Rufus L. Edmisten, Atty. Gen. by Isham B. Hudson, Jr., Asst. Atty. Gen., Raleigh, for Commissioner of Insurance.

Joyner & Howison by William T. Joyner, Henry S. Manning, Jr., and James E. Tucker, Raleigh, for North Carolina Fire Insurance Rating Bureau.

LAKE, Justice.

The North Carolina Fire Insurance Rating Bureau is a statutory agency created by the State 'for the purpose of making rates and rules and regulations which affect or determine the price which policyholders shall pay for insurance.' GS 58--125, 127. 'For rate making purposes, the Bureau is to be regarded as if it were the only insurance company operating in North Carolina and as if it had an earned premium experience, an incurred loss experience and an operating expense experience equivalent to the composite of those of the companies actually in operation.' In Re Filing by Fire Insurance Rating Bureau, 275 N.C. 15, 32, 165 S.E.2d 207, 219 (1968). Every company engaged in the writing of fire insurance policies, including extended coverage endorsements attached thereto, is required to be a member of the Bureau. GS 58--127.

There are two methods by which changes in premium rates for extended coverage insurance may be put into effect. First, the Bureau may file with the Commissioner of Insurance, for approval by him, a proposal for such change, either an increase or a decrease. GS 58--131.1. Second, the Commissioner, on his own initiative, may, after investigation, order a reduction or an increase in the premium rate when necessary to enable the operating companies (considered for this purpose as if they were a single company) to earn upon policies written in North Carolina a fair and reasonable profit. GS 58--131.2. The two methods overlap in the sense that in passing upon a proposal submitted by the Bureau the Commissioner need not approve or disapprove such proposal in its entirety but 'upon proper findings of fact supported by substantial evidence, may fix premium rates at a level such as to allow part but not all of the increase (or decrease) proposed by the Bureau.' In Re Filing by Fire Insurance Rating Bureau, supra, at p. 40, 165 S.E.2d at p. 224. The two methods for changing premium rates are, however, separate and independent and the procedures prescribed by the statute in pursuing the one or the other method must be followed.

In the present instance, the Bureau filed a proposal that the premium rates for extended coverage insurance be reduced by 19% For the reason that premium rates then in effect were producing excessive profits and, with such reduction in effect, the profits of the companies (considered as if they were one company) would be fair and reasonable. The proposal, known to the Insurance Department and to the insurance industry as the 'filing,' carried attachments containing statistical data in support of the proposal. Nothing in the record before us indicates that these data were not sufficient to show, Prima facie, that the proposed reduction in premium rates was proper and that, with such proposed rates in effect, the insurance companies would earn upon their North Carolina extended coverage business a fair and reasonable profit. The actuary and statistician for the Bureau, testifying at the hearing before the Commissioner on the motion of the Bureau to vacate the Commissioner's 'letter order' testified that data available to the Bureau at the time of the filing so indicated.

Before the Commissioner took any action upon this filing and before the filing could go into effect pursuant to the 'deemer' provision of GS 58--131.1, the Bureau notified the Commissioner that it was withdrawing the filing. We have heretofore said that when the Bureau makes a filing in which it proposes an increase in the premium rates, 'unquestionably, the Bureau may amend its filing so as to propose a smaller increase in premium rates then that proposed in the original filing.' In Re Filing by Fire Insurance Rating Bureau, supra, at p. 40, 165 S.E.2d at p. 224. We find no merit in the contention of the Commissioner that once a filing is made the Bureau cannot withdraw it, but it remains before the Commissioner for his approval, disapproval or modification.

If a filing, once made, could never be withdrawn, it would follow that if the Bureau made a filing proposing a substantial increase in the premium rates which the Commissioner, with or without justification, failed to disapprove within 60 days after its submission, such increase would go into effect, at least temporarily, pursuant to the 'deemer' provision of GS 58--131.1, even though the Bureau were to find that its calculations were in error and no increase was justified and were to advise the Commissioner of such error and of its desire to withdraw the proposal. It can hardly be supposed that the Legislature, by the enactment of Article 13 of Chapter 58 of the General Statutes, creating the Bureau, so intended. Nothing in the statute relating to filings by the Bureau supports the contention that a filing, once made, cannot be withdrawn for any reason satisfactory to the Bureau. In this respectThere is no basis for making a distinction between a filing which proposes an increase in the premium rate and a filing which proposes a decrease in such rate. We, therefore, hold that the Court of Appeals was correct in its determination that the Bureau was acting within its rights in withdrawing this filing. It is not necessary for us to determine, and we do not pass upon, the question of whether a filing may be withdrawn by the Bureau after the 'deemer' provision puts it into effect or the Commissioner sets it for a public hearing. The filing in question was never set for hearing and was withdrawn within 60 days from its submission.

The Bureau having withdrawn its filing, that matter was at an end and there was, thereafter, no proposal before the Commissioner for a change in the premium rate for extended coverage insurance. The matter was then as if no filing had ever been made, so far as the Commissioner's authority to order a change in the premium rate was concerned. The second method for bringing about a change in the premium rate, namely an independent investigation and action by the Commissioner pursuant to GS 58--131.2, was available to the Commissioner, just as it would have been had the Bureau made no filing at all. However, to pursue that method, the Commissioner must follow the procedure prescribed therefor. 'Obviously, the Commissioner of Insurance has no authority to prescribe or regulate premium rates, except insofar as that authority has been conferred upon him by the above mentioned statutes. In exercising that authority he must comply with the statutory procedures and standards.' In Re Filing by Fire Insurance Rating Bureau, supra, at p. 33, 165 S.E.2d at p. 220.

This is not to say that the withdrawn filing is, by the withdrawal, obliterated from the records of the Insurance Department or that, in a proceeding initiated by the Commissioner, it cannot be considered by him. Such filing, together with the statistical data attached thereto, would be competent in evidence at a properly convened hearing before the Commissioner, pursuant to GS 58--131.2, as an admission by the Bureau that, as of the date of the filing, the therein proposed rates would be sufficient to yield to the companies (considered as one) a fair and reasonable profit upon their North Carolina extended coverage business. However, at such hearing, like any other extra-judicial admission, it would be subject to correction, clarification or modification by evidence of inconsistent or more recent information. Stansbury, North Carolina Evidence (Brandis Rev.), § 166, at p. 4 of Vol. 2, § 167.

The Commissioner, having no filing before him, issued his 'letter order' directing a reduction in the premium rate for extended coverage insurance without notice to the Bureau or to the public, without conducting a hearing and without receiving any evidence or making any finding of fact. The subsequent orders of the Commissioner (one oral, the other a formal, written order) followed a hearing upon the motion by the Bureau to set aside the earlier 'letter order.' This hearing was necessarily limited to the determination of the Bureau's motion to vacate the earlier order. No notice thereof was given to the public and the notice thereof the Bureau contained no information that the purpose of the hearing was to receive evidence, make findings of fact and determine the premium level which would yield to the companies (considered as one) a fair and reasonable profit on their extended coverage business in North Carolina. Thus, the two orders, oral and written, made by the Commissioner following the hearing on the motion to vacate, must be deemed made without any notice or hearing as to the merits; i.e., the reasonableness of the then existing premium rates.

GS 58--131.5 provides:

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