State Farm Mut. Auto. Ins. Co. v. Hale

• Decision Date: 22 September 1972
• Citation: State Farm Mut. Auto. Ins. Co. v. Hale, 297 A.2d 416 (Del. Ch. 1972)
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation of the State of Illinois, Plaintiff, v. H. Jackson HALE et al., Defendants.
• Court: Court of Chancery of Delaware

Page 416

297 A.2d 416

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation of the State of Illinois, Plaintiff, v.H. Jackson HALE et al., Defendants.

Court of Chancery of Delaware, New Castle County.

Sept. 22, 1972.

William Prickett, of Prickett, Ward, Burt & Sanders, Wilmington, for plaintiff.

Robert W. Ball, Deputy Atty. Gen., Wilmington, for defendants.

SHORT, Vice Chancellor:

This is a statutory appeal under 18 Del.C. § 333 by State Farm Mutual Automobile Insurance Company('State Farm') from the findings and order of Robert A. Short, Insurance Commissioner ('Commissioner') dated April 10, 1970.State Farm has moved for summary judgment and the Attorney General has filed a cross motion to remand the case to the Commissioner for the purpose of completing the record under 18 Del.C. § 333(h).

The case arose out of a dispute between H. Jackson Hale and State Farm over the amount of a claim submitted by Hale for loss of use of an automobile.Hale's car had been damaged on July 18, 1969 by State Farm's insured, who was concededly responsible for the accident.When State Farm offered Hale considerably less than his actual expenses for car rental while his own car was being repaired Hale engaged an attorney and filed suit against State Farm's insured in Magistrate's Court.State Farm then offered to settle for the original amount of Hale's claim but refused to pay his attorney's fees.Hale telephoned the Insurance Commissioner and made an oral complaint alleging that State Farm had refused to pay a valid claim and had forced him to incur unnecessary legal fees.

The Commissioner investigated this complaint and on February 19, 1970, issued an order to show cause, as amended on February 26, 1970, alleging that State Farm had violated § 520(b)(1), (2) of the Delaware Insurance Code by failing to settle a claim 'without apparent justification,' and ordering a hearing pursuant to 18 Del.C. § 327(a).At the hearing, held on March 11, 1970, the hearing examiner, Lewis Darlin, broadened the inquiry to include State Farm's general policy regarding claims for loss of use.Testimony was taken both on State Farm's handling of Hale's claim and on its general policy regarding these claims.At this time, the case before the Magistrate's Court was still pending.The hearing officer, through an inquiry made subsequent to the hearing, determined that the suit was settled for approximately the original sum claimed by Hale.

In his findings and order the Commissioner made no express finding that State Farm had violated § 520(b)(1)(2).He did, however, find that State Farm

'15. . . . admits to no basic policy whatever regarding reimbursement for loss of use of an automobile.It is required that an insurer in this State shall handle claims in such a manner as to evidence good faith in relation to its contractual obligations and not ignore the legal rights of a claimant.Here, Respondent conveniently imposed upon itself the problem of treating an automobile as a special sort of chattel to which ordinary rules do not apply.No justification can be found for this special status.It is well-settled law in this State that the tort-feasor shall make the injured party whole.'

He further found that

'16.When a duly authorized insurer files its rating plan with the Commissioner, it must indicate, among other things, the character and extent of coverage contemplated.Notice is taken that the filings and forms of Respondent pertaining to this matter are not interpreted to contain any exceptions to the general law of this State.Therefore, there is no basis for Respondent to take the position and effect the policy it has generally admitted to.'

The Commissioner concluded that State failure to confirm its practices concerning loss of use claims to its filings, required to be submitted to the Insurance Commissioner under 18 Del.C. § 2504(a), constituted a violation of that section.His order imposed a penalty of $250, citing both § 520(b)(1)(2)and§ 2530(a)(the penalty provision for § 2504(a)), and also ordered State Farm to adjust its claims-handling methods and establish policy to comply with its filings.

Section 520(a) provides for a maximum of a $5,000 fine for violation of those sections of the Code where revocation of an insurer's certificate of authority is not mandatory.Section 2530(a) provides for a maximum fine of $200 for failure by an insurer to conform to its filings, or $500 if the violation is found to be wilful.

The Insurance Commissioner is charged with enforcing the provisions of the Insurance Code and he has the powers expressly vested in him by, or reasonably implied from, the provisions of the Code. 18 Del.C. § 313(1968).State Farm, in support of its motion for summary judgment, raises important questions about the scope of those powers, and the procedural and evidentiary rules under which they must be exercised.Specifically, it challenges the statutory and constitutional authority of the Commissioner, in the context of a quasi-judicial hearing for a violation of the Code, to collaterally make a determination of tortious liability and extent of liability when that issue is pending before a court of law.State Farm also challenges, on due process grounds, the adequacy of the notice given to charges pending against it and the consideration by the hearing examiner of information outside the record.On purely legal grounds, it challenges the hearing examiner's consideration of evidence inadmissible under formal rules of evidence.

The present Insurance Code was enacted in 1968, 56 Del.L.Ch. 380, and the Commissioner's experience in enforcing the provisions in question has been minimal.Few hearings have been held under the procedures of §§ 327--332.There have been no reported decisions either defining the basic procedural requirements or interpreting the penalty provisions upon which the Commissioner here relies.Thus, the scope of the Commissioner's power to protect the public interest, and the procedures under which he must operate, will be substantially defined by the resolution of the issues State Farm poses.To decide such important issues the court should have the benefit of a clear, complete and unambiguous record.The record here does not meet these standards.I find that the case should be remanded before a decision on the merits to give the Commissioner an opportunity to complete and clarify the record.

Granting the Attorney General's motion to remand to complete the record at this juncture is clearly within the court's discretion.It is familiar appellate practice to remand causes for further proceedings without deciding the merits, where justice demands that course in order that some defect in the record may be supplied.Ford Motor Co. v. N.L.R.B., 305 U.S. 364, 373, 59 S.Ct. 301, 83 L.Ed. 221(1939).The procedure requested here is remarkably similar to that approved by the Supreme Court in Ford.There the Board had moved to have the case remanded in order to cure procedural defects and to make new...