UNUM Life Ins. Co. of America, In re, 93-467

• Decision Date: 17 June 1994
• Docket Number: No. 93-467,93-467
• Citation: 647 A.2d 708,162 Vt. 201
• Parties: In re UNUM LIFE INSURANCE COMPANY OF AMERICA.
• Court: Vermont Supreme Court

Page 708

647 A.2d 708

162 Vt. 201

In re UNUM LIFE INSURANCE COMPANY OF AMERICA.

No. 93-467.

Supreme Court of Vermont.

June 17, 1994.

Peter Cullen of Theriault & Joslin, P.C., Montpelier and Andrew J. Bernstein, Portland, ME, for plaintiff-appellant.

Jeffrey L. Amestoy, Atty. Gen. and William Griffin, Chief Asst. Atty. Gen., Montpelier, for defendant-appellee.

Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.

JOHNSON, Justice.

UNUM Life Insurance Company of America (UNUM) appeals the August 1993 decision of the Commissioner of Banking, Insurance and Securities (commissioner), which disapproved UNUM's proposed group life insurance policy. We affirm.

UNUM originally applied to the Vermont Department of Banking, Insurance and Securities (Department) in February 1990 for permission to market a group life insurance policy to the Vermont State Employees Credit Union (Credit Union). The Department disapproved the policy. The Department stated, in part, that a preexisting conditions exclusion (exclusion) ¹ in the policy violated 8 V.S.A. § 3542(2) because it was ambiguous and misleading and deceptively affected the risks to be insured under the policy.

UNUM subsequently requested a hearing before the Department. Then-Commissioner Jeffrey Johnson appointed a hearing officer to preside over the hearing. The hearing officer issued a proposed determination, recommending approval of the policy. ²

Commissioner Johnson rejected the hearing officer's proposed determination, although he adopted the hearing officer's findings of fact. Commissioner Johnson found that UNUM had not met its burden of demonstrating the need for the exclusion. He further found that UNUM's proposal to send a notice to potential insureds explaining the exclusion did not aid in demonstrating a need for the exclusion, "but rather points out the problem with this [exclusion] ...; the [policy] does not meet the consumer's expectations." Commissioner Johnson concluded that "the exclusion[ ] would unreasonably affect the risks purported to be covered by the policy and must be rejected."

UNUM appealed Commissioner Johnson's decision to the Vermont Supreme Court. This Court, in an unpublished decision, reversed and remanded Commissioner Johnson's decision so that "the commissioner may explain his ruling." In re Unum Life Ins. Co. of America, 159 Vt. 643, 623 A.2d 40 (Table) (Jan. 7, 1993). We noted that Commissioner Johnson did not make clear whether the finding that fifteen of twenty-seven insured members who have one of the excluded conditions and die within twenty-four months after the effective date of coverage would be denied benefits was sufficient to disapprove the policy. The Court concluded that Commissioner Johnson did not adequately explain "why this specific exclusion is contrary to public policy, or how consumer expectations would not be met should [the policy] be approved."

Due to a change in commissioners, the case on remand came before Commissioner Elizabeth Costle, who requested memoranda from the parties and heard oral arguments. On August 27, 1993, Commissioner Costle issued a decision concurring with her predecessor's ruling. In her order, Commissioner Costle set out "Supplemental Findings of Fact," which were drawn from the record of the hearing before the hearing officer, to help explain her decision. ³ Commissioner Costle concluded that UNUM's policy "is contrary to public policy" and is in violation of 8 V.S.A. § 3542(2) because the preexisting-conditions exclusion is "ambiguous and misleading" and "deceptively affect[s] the risk that UNUM would purport to assume."

UNUM now appeals Commissioner Costle's order. UNUM argues on appeal that Commissioner Costle's order: (1) exceeds this Court's scope of remand, (2) contradicts and overrules the findings of fact previously adopted by Commissioner Johnson, and (3) is erroneous because the proposed policy complies with all applicable Vermont statutes and regulations.

I.

As a preliminary matter, we hold that Commissioner Costle did not exceed the scope of remand of our January 1993 order. UNUM argues first that Commissioner Costle was limited by our remand to writing an order that explained why the policy should be disapproved based only on the findings of fact adopted by Commissioner Johnson. While we stated in our order that the purpose of remand was to permit Commissioner Johnson to "explain his ruling," we did not bar him from making more findings of fact on remand. Actually, we implied that more findings of fact would be necessary to explain his ruling, because the hearing officer's findings of fact were already before this Court during the prior appeal. Cf. Isabelle v. Proctor Hosp., Inc., 132 Vt. 243, 245-46, 315 A.2d 241, 243 (1974) (where Supreme Court struck down findings, on remand trial court could base its conclusion only on findings made during rehearing). Commissioner Costle requested that the parties submit memoranda and attend oral argument to orient herself to the dispute. As Commissioner Costle stated: "I am ... presented with the task of explaining a determination in which I did not participate." Commissioner Costle then issued a decision, supplementing the findings of fact adopted by Commissioner Johnson with findings drawn exclusively from the record of the initial hearing before the hearing officer, to provide the explanation that was lacking in the prior ruling. This was not beyond the scope of our remand.

UNUM further contends that, because there are no statutes or regulations directing how the commissioner may act on remand from the Supreme Court, Commissioner Costle did not have the authority to conduct further proceedings. We disagree. "The powers of an administrative agency must be construed to include such incidental, implied power as may be needed for the agency to achieve the task assigned to it." In re DeCato Bros., Inc., 149 Vt. 493, 495, 546 A.2d 1354, 1356 (1988); see also New Hampshire-Vermont Physician Serv. v. Commissioner, 132 Vt. 592, 596, 326 A.2d 163, 166 (1974) (administrative agency possesses implied powers necessary for full exercise of those expressly granted). The commissioner is charged with reviewing insurance policies to ensure compliance with the law. See, e.g., 8 V.S.A. § 3542. To fulfill this duty, the commissioner may hold hearings and issue findings of fact pursuant to regulation. ⁴ Vt. Dep't of Banking & Ins. Reg. 82-1, § 4 (rev. 1987). See also 8 V.S.A. § 72(a) (commissioner has authority to "issue subpoenas, examine persons, administer oaths and require production of papers and records"). Commissioner Costle concluded that she had the authority to hear the parties' arguments and issue supplemental findings of fact based on the earlier record. "[A]bsent compelling indication of error, interpretations of statutory provisions by the administrative body responsible for their execution will be sustained on appeal." In re Vt Health Serv. Corp., 144 Vt. 617, 622-23, 482 A.2d 294, 297 (1984). We hold that, as Commissioner Johnson had the express authority to hold a hearing and issue findings of fact, Commissioner Costle had the implied authority to hold a rehearing and issue supplemental findings on remand from the Supreme Court. ⁵

II.

UNUM also urges this Court to find that Commissioner Costle's decision to disapprove its policy was erroneous because the policy complied with the applicable state statutes and regulations.

Our standard of review is limited in this case. " 'Absent a clear and convincing showing to the contrary, decisions made within the expertise of [administrative] agencies are presumed [to be] correct, valid and reasonable.' " Consumer Credit Ins. Ass'n v. State, 149 Vt. 305, 308, 544 A.2d 1159, 1161 (1988) (quoting In re Johnston, 145 Vt. 318, 322, 488 A.2d 750, 752 (1985)); accord In re Green Mtn. Power Corp., 138 Vt. 213, 215, 414 A.2d 1159, 1160 (1980) ("A decision of an administrative board is entitled to great weight with respect to matters within its particular area of expertise.").

The grounds for disapproval of an insurance policy by the commissioner are set out in 8 V.S.A. § 3542:

The commissioner shall disapprove any [policy] filed under this subchapter or withdraw any previous approval thereof, only on one or more of the following grounds: ... (2) If it contains or incorporates by reference ... any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract.

Commissioner Costle explained her grounds for disapproving UNUM's policy. She found that the exclusion was both "misleading" and "ambiguous," in violation of 8 V.S.A. § 3542(2), as demonstrated by the confusing testimony of UNUM's employees regarding the application of the exclusion to specific cases. She further found that the exclusion would violate public policy and would "deceptively affect the risk that UNUM would purport to assume" in violation of 8 V.S.A. § 3542(2), stating that policies containing such exclusions "are not sufficiently conclusive in their terms, and do not provide a sufficient commitment on the part of the insurer to pay benefits."

We do not agree that the exclusion is ambiguous. Although UNUM's witnesses may have differed as to the exclusion's specific application, this fact alone does not demonstrate ambiguity. The language of the policy excludes "cancer," "cardiovascular disease," and "AIDS/ARC," diseases that have well accepted and understood medical definitions, meanings and usages. ⁶ The language is sufficiently clear to put an insured on notice of the potential exclusions.

We agree with the commissioner, however, that the exclusion deceptively affected the risk to consumers. Commissioner Costle found that consumers of life insurance policies expect to be covered as long as they do not commit suicide. Despite its plan to publish the explanatory brochure for consumers,...