Telles v. Commissioner of Ins.

• Decision Date: 03 July 1991
• Citation: 410 Mass. 560,574 N.E.2d 359
• Parties: Deborah S. TELLES, et al. 1 v. COMMISSIONER OF INSURANCE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 359

574 N.E.2d 359

410 Mass. 560

Deborah S. TELLES, et al. ¹ v. COMMISSIONER OF INSURANCE.

Supreme Judicial Court of Massachusetts Berkshire.

Argued March 7, 1991.

Decided July 3, 1991.

Michael B. Keating (Steven W. Phillips with him), for plaintiffs.

William L. Pardee, Asst. Atty. Gen., for Com'r of Ins.

Richard E. Barnsback & Phillip E. Stano, District of Columbia, and Lane McGovern, for American Council of Life Ins., amicus curiae, submitted a brief.

Before LIACOS, C.J., and WILKINS, ABRAMS, NOLAN, LYNCH and GREANEY, JJ.

NOLAN, Justice.

Today we are asked to decide whether the Commissioner of Insurance (commissioner) may lawfully issue regulations which prohibit life insurers from considering gender-based mortality differences in the underwriting of life insurance. ² We hold that the commissioner is not authorized to promulgate the regulations in question, as they are in direct conflict with several statutes which expressly permit the very type of risk classification involved in this case.

Effective September 1, 1988, the commissioner issued regulations prohibiting a life insurer from considering gender-based mortality differences in the underwriting of life insurance. 211 Code Mass.Regs. §§ 35.00 et seq. (1987) ("unisex" regulations). Insurance underwriting is the process by which an insurer determines whether, and on what basis, to accept a risk. The regulations prohibited insurance companies from using any table or other statistical compilation as a basis for any action which classifies residents of the Commonwealth into separate classes based on race, color, religion, sex, marital status, or national origin. 211 Code Mass.Regs. § 35.04(1) (emphasis supplied). The regulations also stated that "[n]o policy ... shall, on the basis of ... sex ... treat any covered person ... differently than it treats or would treat any other covered person ... with respect to the availability, terms, conditions, rates, benefits or requirements...." 211 Code Mass.Regs. § 35.04(2).

Prior to the issuance of the regulations, Massachusetts insurance companies used gender-based mortality tables to classify individuals and to determine insurance rates. The mortality rates for males are generally higher than those for females. In the case of ordinary life insurance, which involves periodic premium payments until the policy matures, a woman would likely make payments for a longer period of time before death. Therefore, prior to these regulations, life insurance premiums were lower for females than they were for males. Pursuant to the unisex regulations, insurance companies must ignore gender in the determination of insurance rates, benefits, conditions, or requirements. The regulations, therefore, have resulted in higher life insurance premiums for women than for men.

The plaintiffs commenced this action on August 12, 1988, and sought a preliminary injunction to enjoin the regulations from taking effect. The motion was denied. The regulations took effect on September 1, 1988. On October 16, 1989, the plaintiffs filed a motion for summary judgment on counts I (lack of statutory authority), II (violation of c. 175 and c. 176D), III (arbitrary and capricious claim), and VI (equal protection claim). The parties had stipulated to the dismissal of count IV (due process claim) and count V (impairment of contracts claim).

The parties agreed that there were no disputed issues of material fact. The judge below determined that the commissioner had the implicit authority, derived from art. 1 of the Massachusetts Declaration of Rights, as appearing in art. 106 of the Amendments, ³ to issue the regulations. The judge also determined that the regulations did not have a discriminatory purpose. Therefore, the judge allowed the commissioner's motion for summary judgment and denied the plaintiffs' cross motion. We granted the plaintiffs' application for direct appellate review. We now vacate the judgment.

The commissioner has conceded that the mortality rates for males are generally higher than those of females. He does not dispute that females as a class have fewer deaths than males as a class at every interval. In September of 1988, when the unisex regulations first barred the use of separate mortality tables based on gender, insureds of different risk classifications (men and women) were required to be grouped together. Given this, the unisex regulations are in direct conflict with several Massachusetts statutes which permit insurers to engage in the very type of risk classification involved in this case. See G.L. c. 175, § 120; c. 176D, § 3(7); c. 175, § 144 (1988 ed.).

The statutory pattern which deals with insurance regulation authorizes insurers to "discriminate fairly." Life Ins. Ass'n of Mass. v. Commissioner of Ins., 403 Mass. 410, 416, 530 N.E.2d 168 (1988). We stated in Life Ins. Ass'n that "[t]he basic principle underlying statutes governing underwriting practices is that insurers have the right to classify risks and to elect not to insure risks if the discrimination is fair." Id. at 415, 530 N.E.2d 168. We went on to acknowledge that "[t]he intended result of the [information gathering] process is that persons of substantially the same risk will be grouped together, paying the same premiums, and will not be subsidizing insureds who present a significantly greater hazard." Id. at 416, 530 N.E.2d 168.

Chapter 175, § 120, and G.L. c. 176D, § 3(7), illustrate the principle that insureds must be treated in accordance with their risk classification. Chapter 175, § 120, states that "[n]o life company and no officer or agent thereof shall make or permit any distinction or discrimination in favor of individuals between insurants of the same class and equal expectation of life in the amount or payment of premiums or rates charged for policies of life or endowment insurance, or annuity or pure endowment contracts, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes" (emphasis supplied). Chapter 176D, § 3(7), also has a provision that defines "[u]nfair discrimination" as that which treats individuals of the same class and equal expectation of life differently. ⁴

This statutory scheme requires the commissioner to treat equally insureds who are of the same risk classification. This may result in "fair discrimination." It is conceded that women are of a different risk classification than men, given their differences in life expectancy. Regulations which make it mandatory to place women in the same risk category as men, such as the unisex regulations, are in direct conflict with c. 175, § 120 and c. 176D, § 3(7).

Likewise, c. 175, § 144(6A)(h ), provides that "[a]ll adjusted premiums and present values referred to in this section shall for all policies of ordinary insurance be calculated on the basis of (i ) the Commissioner[s'] 1980 Standard Ordinary Mortality Table...." This table (CSO Table), published in 1980, and based on experience data from 1970 through 1975, treated males and females as distinct classes, with separate mortality tables. In 1982, the Legislature had amended G.L. c. 175, § 144, to authorize directly the use of the CSO table. St. 1982, c. 334, § 2. The unisex regulations expressly bar the use of separate mortality tables based on an insured's sex, in direct conflict with c. 175, § 144.

It is settled that a "an administrative board or officer has no authority to promulgate rules and regulations which are in conflict with the statutes or exceed the authority conferred by the statutes by which such board or office was created." Bureau of Old Age Assistance of Natick v. Commissioner of Pub. Welfare, 326 Mass. 121, 124, 93 N.E.2d 267 (1950). The unisex regulations are in direct conflict with several statutes regulating insurance practices. These statutes have not been amended, and there is no judicial decision which states that the statutes are unconstitutional. The commissioner may not issue a regulation which is in conflict with statutes which control his authority. Accordingly, the commissioner was without power to issue the regulations in question.

The commissioner contends that, even in light of the statutory scheme, art. 1 bestows authority on him to promulgate the regulations. We disagree. The commissioner's authority to issue regulations is delegated by the Legislature and does not derive from the State Constitution. The Legislature has explicitly denied the commissioner the authority to issue the challenged regulation. It is the legislative, not the executive, branch which is given the power to make laws. Whatever the merits of the regulations may be, the doctrine of separation of powers embodied in art. 30 of the Massachusetts Declaration of Rights requires that an administrative agency receive a proper delegation of authority before promulgating rules of general application. An administrative body does not have any inherent authority to issue regulations. ⁵

The judge properly concluded that the commissioner lacked any statutory authority to issue the regulations in light of our decision in Life Ins. Ass'n, supra. The judge erred, however, when he determined that the Massachusetts Constitution provides the commissioner with implicit authority to regulate underwriting practices as they regard gender.

The commissioner lacked either express or implied authority to promulgate the regulations. He did not derive any authority from the Massachusetts Constitution. Furthermore, the regulations at issue directly conflict with several of the statutes which regulate insurance practices. The commissioner may not issue regulations which conflict directly with these statutes. Therefore, the judgment for the defendant is vacated and the case is remanded for entry of a judgment declaring that 211 Code Mass.Regs. §§ 35.00 (1987) are void because the commissioner lacked authority to issue the regulations.

So ordered.

ABRAMS, Justice ...