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

• Decision Date: 06 March 1979
• Docket Number: No. 7810INS238,7810INS238
• Citation: 252 S.E.2d 811,40 N.C.App. 85
• Parties: STATE of North Carolina ex rel. COMMISSIONER OF INSURANCE, Appellee, v. NORTH CAROLINA RATE BUREAU, Aetna Casualty and Surety Company, American Motorists Insurance Company, American Mutual Liability Insurance Company, Continental Insurance Company, Employers Mutual Liability Insurance Company, Fidelity and Guaranty Insurance Underwriters, Great American Insurance Company, Hartford Accident and Indemnity Company, Home Indemnity Company, Home Insurance Company, Iowa National Mutual Insurance Company Liberty Mutual Fire Insurance Company, Liberty Mutual Insurance Company, Lumbermens Mutual Casualty Company, Maryland Casualty Company, Nationwide Mutual Insurance Company, Pennsylvania National Mutual Casualty Insurance Company, St. Paul Fire and Marine Insurance Company, Shelby Mutual Insurance Company, Standard Fire Insurance Company, Travelers Indemnity Company, Travelers Insurance Company, Twin City Fire Insurance Company, United States Fidelity and Guaranty Insurance Company, and United States Fire Insurance Company, Appellants.
• Court: North Carolina Court of Appeals

Page 811

252 S.E.2d 811

40 N.C.App. 85

STATE of North Carolina ex rel. COMMISSIONER OF INSURANCE, Appellee, v. NORTH CAROLINA RATE BUREAU, Aetna Casualty and Surety Company, American Motorists Insurance Company, American Mutual Liability Insurance Company, Continental Insurance Company, Employers Mutual Liability Insurance Company Fidelity and Guaranty Insurance Underwriters, Great American Insurance Company, Hartford Accident and Indemnity Company Home Indemnity Company, Home Insurance Company, Iowa National Mutual Insurance Company Liberty Mutual Fire Insurance Company, Liberty Mutual Insurance Company Lumbermens Mutual Casualty Company, Maryland Casualty Company, Nationwide Mutual Insurance Company, Pennsylvania National Mutual Casualty Insurance Company, St. Paul Fire and Marine Insurance Company, Shelby Mutual Insurance Company, Standard Fire Insurance Company, Travelers Indemnity Company, Travelers Insurance Company, Twin City Fire Insurance Company, United States Fidelity and Guaranty Insurance Company, and United States Fire Insurance Company Appellants.

No. 7810INS238.

Court of Appeals of North Carolina.

March 6, 1979.

Allen, Steed & Allen by Thomas W. Steed, Jr. and Charles D. Case, Young, Moore, Henderson & Alvis by Charles H. Young and George M. Teague, Raleigh, for defendant-appellants.

CLARK, Judge.

The Rate Bureau has appealed under the provisions of G.S. 58-124.22 and G.S. 58-9.4 from the order of the Commissioner of Insurance disapproving the 9 September 1977 Filing of the Rate Bureau in its entirety. This Court has the authority under G.S. 58-9.6(b) to reverse or modify the order of the Commissioner "if the substantial rights of the appellants have been prejudiced because the Commissioner's findings, inferences, conclusions or decisions are: . . . (u)nsupported by material and substantial evidence in view of the entire record as submitted . . . ." The insurers, represented in this case by appellant Rate Bureau, have the right to a premium rate which will assure a fair and reasonable profit and no more. State ex rel. Commissioner of Insurance v. Rating Bureau, 292 N.C. 471, 234 S.E.2d 720 (1977).

The problem of deciding whether the Commissioner has acted responsibly is a delicate one. In this case brevity must yield to the massive record and the need for construction of 1977 rate-making legislation, codified in Article 12B, Chapter 58, General Statutes of North Carolina. Having given some consideration to the record on appeal, the briefs, relevant statutes and opinions, we approach the decision-making with the desire to avoid the tendency to judicialize administrative rate-making procedures.

I. WORKERS' COMPENSATION RATE OF 1973

The last rate adjustment for workers' compensation insurance rates went into effect on 1 December 1973. See State ex rel. Commissioner of Insurance v. Attorney General, 19 N.C.App. 263, 198 S.E.2d 575, Cert. denied 284 N.C. 252, 200 S.E.2d 659 (1973). Under the statutory scheme at that time the Compensation Rating and Inspection Bureau was required to submit its rate proposals to the Commissioner for approval. G.S. 97-100; G.S. 97-102 to -104. The 1973 rate change was based on the 21 September 1972 Filing made by the Bureau. After the 1973 rate became effective, a rate filing was made on 19 March 1974 and was denied by the Commissioner on 14 October 1975. Upon appeal, this Court on 4 August 1976 ordered a remand for appropriate findings. See State ex rel. Commissioner of Insurance v. Rating and Inspection Bureau, 30 N.C.App. 332, 226 S.E.2d 822 (1976). Thereafter the Commissioner held a series of hearings in 1976 and 1977, issued his "Revised Findings of Fact" on 11 February 1977, and again disapproved the Filing. The Bureau again appealed, and this Court in an opinion filed on 18 April 1978 vacated the order of the Commissioner on the ground that his findings of fact were not supported by material and substantial evidence, but the proceeding was not remanded because of the 9 September 1977 Filing which is the subject of this appeal. State ex rel. Commissioner of Insurance v. Rating and Inspection Bureau, 36 N.C.App. 98, 242 S.E.2d 887 (1978).

Since the 21 September 1972 Filing, the basis for the 1973 rate, there have been six legislative changes and three Industrial Commission changes which have increased benefit levels and costs for workers' compensation. These changes constitute substantially the basis for this 9 September 1977 Filing, an overall increase of 28.4% Over the 1973 rate. Assuming that the 1973 rate was fair, in view of the nine changes resulting in increased benefit levels and costs, it is reasonable to conclude some increase in the rate is necessary to assure the insurer a fair and reasonable profit.

II. 1977 LEGISLATION

In 1977 the General Assembly modified G.S. 97-100 and repealed G.S. 97-102 to -104 and other statutes making up a patchwork system of rate-making procedures and enacted new and comprehensive legislation for the purpose of regulating workers' compensation and other types of insurance rate-making. Article 12B, Chapter 58, General Statutes of North Carolina.

The old "prior approval" method of setting workers' compensation insurance rates was replaced by a new "file and use" procedure which in substance authorized the Rate Bureau to make a rate filing and provided that "(e)ach filing shall become effective immediately on the date specified therein but not earlier than 90 days from the date such filing is received by the Commissioner." G.S. 58-124.20(a).

If the Commissioner contends that the Filing fails to comply with the law he must, within 30 days after the date of the filing, give written notice to the Bureau "specifying in what respect . . . he contends such filing fails to comply . . ." and fix a date for hearing. G.S. 58-124.21(a).

At such hearing the Commissioner shall consider the factors specified in G.S. 58-124.19 as follows:

"Method of rate making; factors considered.--The following standards shall apply to the making and use of rates:

(1) Rates shall not be excessive, inadequate or unfairly discriminatory.

(2) Due consideration shall be given to past and prospective loss experience, within this State, to the hazards of conflagration and catastrophe, to a reasonable margin for underwriting profit and to contingencies, to dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers, to past and prospective expenses specially applicable to this State, and to all other relevant factors including judgment factors, deemed relevant, within this State; provided, however, that countrywide expense and loss experience and other countrywide data shall be considered where credible North Carolina experience or data is not available."

After hearing, if the Commissioner disapproves the filing, wholly or in part, G.S. 58-124.21(a) requires that he include in his order "wherein and to what extent such filing is deemed to be improper . . . ." And to insure proper appellate review upon appeal under G.S. 58-9.4 by the Rate Bureau from all or any part of the order, the Commissioner must make findings of fact which specifically point out the absence of, or deficiencies in, the evidence produced in support of the filing. These findings must be supported by material and substantial evidence in view of the entire record as submitted. G.S. 58-9.6(b)(5); State ex rel. Commissioner of Insurance v. Rating Bureau, 292 N.C. 70, 231 S.E.2d 882 (1977).

Pending judicial review of the Commissioner's order of disapproval, the Rate Bureau has the option to continue to use the filing rate, provided that each insurer member of the Bureau shall place in escrow account "the purportedly unfairly discriminatory or excessive portion of the premium collected during such interim period and the court, upon a final determination, shall order the escrowed funds to be distributed appropriately, except that refunds are de minimus shall not be required." G.S. 58-124.22(b).

This completes our attempt to present the new statutory scheme for workers' compensation insurance rate-making. Verbatim quotations from the various relevant statutes have been limited and many statutes have been summarized, hopefully avoiding accusations of voluminosity without sacrificing clarity. The purpose is not to present a detailed account of the new statutory scheme of rate-making but to present those parts of the scheme which are relevant and significant in understanding and interpreting the statutory scheme.

III. CONSTRUCTION OF 1977 LEGISLATION

In construing the new statutory procedures for workers' compensation rate-making our primary function is to insure that legislative purpose is accomplished. In addition to statutory language the court may also consider the circumstances surrounding the adoption which throws light upon the evil sought to be remedied, which involves a consideration of the terms and construction given to repealed statutes. State ex rel. Commissioner of Insurance v. Rate Office, 294 N.C. 60, 241 S.E.2d 324 (1978); State ex rel. Commissioner of Insurance v. Rate Office, 293 N.C. 365, 239 S.W.2d 48 (1977).

Clearly, it was the legislative intent to eliminate unfair and unnecessary delay in the rate-making process. Such delay is clearly illustrated by the Filing, referred to heretofore, made under the old statutory scheme by the Compensation Bureau on 19 March 1974, which was disapproved by the Commissioner and on appeal vacated and remanded, again disapproved by the Commissioner, and finally determined by this Court on 18 April 1978, more than four years after the Filing. Further, this Court could not have made a final determination at that time if the 19 March 1974 Filing had not in effect been superseded by the Filing which is the subject matter of this proceeding, because the Court could only vacate the Commissioner's order of disapproval and remand again to him. It is apparent...