ALLSTATE INSURANCE COMPANY and Allstate Indemnity Company, Plaintiffs and Appellees, v. Byron KNUTSON, as North Dakota Insurance Commissioner, Defendant and Appellant.
Civ. No. 9564
Supreme Court of North Dakota.
April 16, 1979.
278 N.W.2d 383
State Auto‘s third issue is that the trial court erred in allowing interest on the $6,500 judgment awarded Dolajak because the insurer never was notified that Dolajak had made any commitment to insure materials owned by the Bos brothers. The trial court determined that no written proof of loss was ever submitted to State Auto but none was required because State Auto denied the claim by letter. State Auto contends, however, that under the evidence and the findings of the trial court, an insurer would not know the amount of the claim nor that the claim was in fact valid because Dolajak had demanded the full amount of the coverage, i. e., $20,000. State Auto argues that while furnishing proof of loss may dispense with the formal notice of loss, the giving of notice of loss does not dispense with the necessity of a formal proof of loss. State Auto‘s position is not persuasive. The letter of denial of July 20, 1972,5 from State Auto to Mike Dolajak indicates several reasons for denying the claim, only one of which concerned the issue of an insurable interest. The other reasons given in the letter for denial of the claim were that it was due to an act of God and a breach of the standard care, custody, and control exclusion in the policy. Given those reasons for denial of the claim, it is apparent that State Auto would have denied the claim even if Dolajak had submitted written proof of loss indicating his interest in the silo that was insured under the policy. We conclude that the trial court, under this set of circumstances, did not err in determining that Dolajak was entitled to interest from and after July 24, 1972, the date that the trial court found the claim was denied in total by State Auto. See
The judgment of the trial court is affirmed.
ERICKSTAD, C. J., and SAND, PAULSON and PEDERSON, JJ., concur.
In the Matter of the FILINGS OF REVISED RULES AND RATES FOR PRIVATE PASSENGER AND UTILITY AUTOMOBILES BY ALLSTATE INSURANCE COMPANY and the filing of Revised Rules and Rates for Private Passenger Cars by Allstate Indemnity Company.
Thomas O. Smith, Bismarck, for plaintiffs and appellees.
ERICKSTAD, Chief Justice.
In this case, the Insurance Commissioner for the State of North Dakota appeals to this court from an order for judgment of the District Court of the Fourth Judicial District, entered on the 29th day of September, 1978. Although we have often said that an order for judgment is not appealable,1 we shall in this case, because it appears that both parties are anxious to have this court reach the merits, and because a denial of the appeal on that ground would in this case only result in a temporary remand for the purpose of permitting the Commissioner to appeal from the judgment, consider this as an appeal from the judgment of the district court which was entered on the 4th day of October, 1978.
The judgment reversed the decision of the Insurance Commissioner dated May 19, 1978, which denied the filing for a rate increase of Allstate Insurance Company and Allstate Indemnity Company, whom we shall hereinafter refer to as Allstate. The judgment remanded the case to the Insurance Commissioner for the purpose of allowing him to enter an order approving the rate filings, and further provided that if the Commissioner did not enter an order approving the rate filings within 10 days of the date the record was returned to the Commissioner, the rate filings were to be deemed approved. We affirm the judgment of the district court.
Chapter 26-28,
“In summary,
“(1) The initial presentation made by Allstate results in a prima facie showing of a need for an increase in rates.
“(2) There is no evidence of record, by way of opinion or otherwise, that would justify some other conclusion.
“(3) The opinions reexpressed by Dr. Ceyhun and Mr. Hoag regarding the adequacy of Allstate‘s presentation were based on the erroneous assumption that Allstate had not explained or supported its projections and estimates.
“(4) No actual deficiency in Allstate‘s presentation has been demonstrated.
“(5) The alternate techniques employed by Messrs. Ceyhun and Hoag produce results similar to those obtained by Allstate.
“(6) The Commissioner‘s conclusion that he is unable to evaluate Allstate‘s presentation is contrary to the evidence.
“(7) The Commissioner‘s decision that the application should be denied is contrary to law and should be reversed.
“It is so ordered.”
Notwithstanding that it is important to know what conclusions the trial court reached and upon what facts the court reached its conclusions, as our review under the Administrative Agencies Practice Act, Ch.
Since our decision in Geo. E. Haggart, Inc. v. North Dakota Workmen‘s Comp. Bur., 171 N.W.2d 104 (N.D.1969), in which we applied the substantial evidence rule, both Sections
Most recently, our court speaking through Justice Sand, considered the significance of the amendment to Section
“Section
28-32-19, NDCC , as amended, sets forth the standard for review of the agency‘s decision in the district court. The only rational legal conclusion that can be reached from the amendment and the Haggart case is that on appeal the Supreme Court reviews the administrative agency‘s decision and not the district court‘s decision except as to limited permissible action taken by the district court in such matters as attorney‘s fees on appeal and the taking of additional testimony as provided for in§ 65-10-03, NDCC , as amended,§ 65-10-01 , as amended, and§ 28-32-18 . Furthermore, the standard of review in the Supreme Court is the same as the standard under which the district court reviews the decision. (§§ 28-32-21 ,28-32-19, NDCC ).“Accordingly, we review the decision of the Bureau and consider these issues raised which need to be resolved.
“In considering the issues raised by the claimant whether or not the Bureau‘s findings are supported by the preponderance of the evidence, we note that
§ 28-32-19, NDCC , as amended in 1977, requires the Bureau‘s findings of fact to be supported by a preponderance of the evidence. The immediate previous standard based on the provisions of§ 28-32-19 , prior to the 1977 amendment and case law, Bank of Rhame [Application of Bank of Rhame, N.D., 231 N.W.2d 801] infra and predecessors, was substantial evidence.“Our court, in Benzmiller v. Swanson, 117 N.W.2d 281 (N.D.1962), relying upon Barkow v. Donovan Wire & Iron Co., 190 Mich. 563, 157 N.W. 55 (1916), defined
preponderance of evidence as ‘evidence more worthy of belief,’ or ‘the greater weight of the evidence’ or ‘testimony that brings the greater conviction of truth.‘” Steele v. North Dakota Workmen‘s Comp. Bur., 273 N.W.2d 692, 696-97 (N.D.1978).
In reviewing the findings of an administrator under the Administrative Agencies Practice Act, notwithstanding the amendment to Section
In contrast to questions of fact, questions of law are fully reviewable by our court. See State Hospital v. N. D. Employment Sec. Bur., 239 N.W.2d 819, 822 (N.D.1976); Bank of Hamilton v. State Banking Board, 236 N.W.2d 921, 925 (N.D.1976); In re Sales & Use Tax Det. by St. Tax Com‘r, 225 N.W.2d 571, 576 (N.D.1974). Let us examine the Commissioner‘s findings pertinent to the filing.
From a procedural standpoint, the Commissioner‘s findings indicate that Allstate made separate filings, one on behalf of Allstate Insurance Company, and the other on behalf of Allstate Indemnity Company, for revised rules and rates, which were disapproved by the Commissioner; that thereafter Allstate sought and received a hearing on the filings, which hearing was conducted by special hearing examiner, Norbert J. Lange, on July 12, 1977; that on August 4, 1977, the Commissioner advised Allstate that its filings had been disapproved because Allstate employed a “trend factor“, a practice which the Commissioner disapproved; that on August 17, 1977, Allstate sought a rehearing on the disapproval and that a rehearing was granted and was held on November 22, 1977, before Alfred A. Thompson, as special hearing examiner; that on December 23, 1977, a delayed exhibit, denominated exhibit no. 23, was filed with the examiner, and that thereafter Allstate sought and received an additional hearing which was held on February 6, 1978; and that thereafter the examiner requested that each side serve and file briefs and proposed findings of fact and that the last of such briefs was received by the examiner on March 30, 1978.
Incidentally, the record discloses that the special hearing examiner filed his findings with the Commissioner on the 6th day of April, 1978, wherein the examiner adopted certain numbered findings proposed by counsel for the Commissioner, adopted certain numbered findings proposed by Allstate, and in addition made special findings.
It is interesting to note that until that time the Commissioner had consistently rejected the filings of Allstate on the grounds that trend factors were used and he did not approve of same. In part 4 of the additional findings submitted by examiner Thompson, it is stated:
“4. That the use of ‘trend factors’ is a realistic and legally acceptable adjunct to and method of projecting rate-level requirements and of making rate-prognosis and falls within the purview of
Sec. 26-28-03(a) [26-28-03, subd. 1, par. a] NDCC .”
In the Commissioner‘s findings dated May 19, 1978, the Commissioner adopted the proposed findings recommended by Examiner Thompson which were recommended by counsel for the Commissioner, but rejected most of the proposed findings submitted by Allstate which were approved and recommended by hearing examiner Thompson. As for the additional findings recommended by the hearing examiner, the Commissioner adopted all of those except part 4. relating to trend factors.
Our view of the Commissioner‘s findings are that the crucial points are contained in what he has denominated additional findings and more specifically additional findings 4. through 9. They read as follows:
“4. A ‘long time’ (sample) period in most cases serves better to indicate accu-
rately future trends than does a ‘short term’ (sample) period.
“5. The straight-line (linear) regression technique employed by Allstate in its application may accurately predict future trends in the industry; but it is not the only technique which may be employed for this purpose, and other techniques should be employed by Allstate in its application to affirm the reliability of the technique Allstate has employed.
“6. The witnesses for the Commissioner, Ceyhoun and Hoag, in their exhibit # 23, have dwelt upon the use of two other trending techniques which might have been employed by Allstate, those techniques defined and set forth on pages # 18 and # 35 of exhibit # 23.
“7. That although Allstate has discounted the reliability of the trending techniques suggested by Ceyhoun and Hoag, in exhibit # 23, Allstate has not conclusively shown such techniques to be inappropriate if employed by Allstate in its filing.
“8. That without the use of alternate techniques, the Commissioner cannot realistically know whether the filing by Allstate accurately defines and supports the propositions which Allstate has set forth in the filing.
“9. Allstate‘s filings do not meet the requirements of Chapter 26-28 NDCC.”
Let us briefly analyze and discuss those additional findings of the Commissioner.
Part 4. does not seem to be a disputable issue or one that is actually disputed, but a reasonable answer was given thereto by Allstate to the effect that because of the advent of no-fault insurance in the recent past in North Dakota, it was not possible to have a long-time sample.
Additional parts 5. through 8. relate to the Commissioner‘s preference for the application of the two alternative techniques suggested by Dr. Fikret Ceyhun of the Department of Economics of the University of North Dakota, and his associate, Mr. Paul Hoag, over the straight-line regression technique employed by Allstate in its efforts to predict future costs or trends in the industry.
Notwithstanding that this court has indicated its reluctance to substitute its own judgment for that of qualified experts in matters entrusted to administrative agencies (see Johnson v. Elkin, 263 N.W.2d 123, 130 (N.D.1978); Bank of Hamilton v. State Banking Board, supra at 925; Application of Bank of Rhame, 231 N.W.2d 801, 811-12 (N.D.1975); First American Bank & Trust Co. v. Ellwein, 221 N.W.2d 509, 518 (N.D.1974), cert den., 419 U.S. 1026 (1974)), we believe that the Commissioner has a greater responsibility in considering applications of this kind than merely concluding that one or more techniques for determining future costs are more acceptable than the one employed by the applicant.
Unless the technique employed by the applicant in determining the costs results in rates which are excessive, or inadequate, or unfairly discriminatory, contrary to
In the instant case, a synopsis of the Allstate filing reads as follows:
“In this filing we are increasing rate levels for the bodily injury, property damage and collision coverages and reducing rate levels for the personal injury protection coverage. No change in overall rate level is planned for uninsured motorists, comprehensive or towing. We are also increasing the factors for bodily injury limits above the $10,000/$20,000 level. In addition, we are revising the territorial rate relativities, classification differentials, age and symbol group relativities
and factors for rating the physical damage coverages. Finally, numerous rules changes are included.
“The combined effect of all of these changes is an increase of 18.9 percent in our North Dakota private passenger automobile income.”
The filing includes the following pertinent information relative to percentage changes indicated and percentage changes proposed by Allstate:
| “Coverage | Percent Change Indicated | Percent Change Proposed |
|---|---|---|
| Bodily Injury | + 141.4% | + 30.0% |
| Property Damage | + 36.7 | + 30.2 |
| Personal Injury Prot. | - 29.7 | - 20.0 |
| Uninsured Motorists | - 42.0 | N/C |
| Collision | + 39.5 | + 30.0 |
| Comprehensive | - 6.0 | 0.0 |
| Towing | + 2.9 | N/C |
| Total | + 32.1% | + 15.0% |
“As noted above, we are also proposing an increase in our bodily injury increased limits table. The additional income that will be derived from this change increases the 15.0 percent figure shown above to the 18.9 percent used earlier. Based on our 1976 written premium adjusted to current rate level we estimate that this change will increase our North Dakota private passenger automobile income by approximately $329,000.”
Although the Commissioner has been critical of the fact that Allstate‘s indicated percentage changes are greater generally than its proposed percentage changes, that alone cannot be a basis for denying the proposed rate changes. In that regard, it is significant to note part two of Section
“2. Except to the extent necessary to meet the provisions of subdivision d of subsection 1, uniformity among insurers in any matters within the scope of this section is neither required nor prohibited.”
§ 26-28-03(2), N.D.C.C.
We have examined all of the exhibits submitted on behalf of Allstate, and particularly exhibit 23 prepared by Dr. Ceyhoun and Mr. Hoag on behalf of the Commissioner, in light of the transcripts of the three hearings, and conclude that Allstate has established a basis for its filing, notwithstanding that Dr. Ceyhoun and Mr. Hoag may be correct in their analysis of the filing to the extent that methodologies, other than the one used by Allstate, are available to determine whether Allstate used the best available one. Illustrative of Mr. Hoag‘s view is his testimony as follows:
“And when we look at the Allstate document we cannot understand from the document why the straight line is used. Now, again, we are trying to make a good faith argument here and take the best case from Allstate‘s point of view. If there are technical reasons why straight lines should be used, then it‘s our position that that ought to be explained in the public record and we comment upon that.
* * * * * *
“we are not saying that Allstate or any other insurance company should be required to use either of these methods. That‘s not the purpose, and we‘re not saying that. That‘s not our position at all. What we are saying is that these two methods are as equally logical and definable as the method used in the Allstate filing. That is, I contend that I could take the Allstate data, the Allstate language, use these particular methods, and I would have an equally logical and defensible filing. I think that it would have many defects just as I think the Allstate filing does. I think it would be an insufficient public record.”
Dr. Ceyhoun asserts that one of the alternative approaches suggested by him would be 95 percent reliable in a certain instance, whereas the equation used by Allstate was only 85 percent reliable.4 Neither he nor
Lest we leave the impression by this discussion that Allstate agreed that it used an inappropriate method of forecasting costs, it should be noted that Allstate did not so agree, instead it asserted through its senior actuary, Mr. Darrell Ehlert, the reasoning supporting the use of “a simple straight line regression“.5
Allstate and the Commissioner are apparently agreed that the Insurance Commissioner‘s authority in reviewing a filing is limited and that he, unlike other rate-making authorities, cannot accept the filing in part and reject it in part. It is not so clear, however, that they agree that the Commissioner must either approve or disapprove that which the insurance company elects to submit. In support of his position that he may only accept the filing wholly or reject it wholly, the Commissioner refers us to Nationwide Mutual Insurance Company v. Williams, 188 So.2d 368, 369 (Fla.Dist.Ct. App.1966). We think that the most relevant part of that decision is that part which reads: “We observe a legislative deficiency upon the subject of regulating insurance rates by not allowing some flexibility on the part of the Insurance Commissioner in reviewing filings.” 188 So.2d at 369.
We cite this case and quote the above for the reason that we believe that our legislature could make this field of the law more workable if it permitted the Commissioner authority to accept in part and reject in part. North Carolina has apparently done so, see State ex rel. Com‘r of Insurance v. N. C. Fire Insurance, 292 N.C. 471, 234 S.E.2d 720, 731 (1977).
Throughout the proceedings prior to the taking of this appeal, the Commissioner has taken the view that trending may not be considered in filings of this nature. On appeal, the Commissioner has apparently modified his position by in essence conceding that although trending may be a factor to be considered when giving effect to past and prospective loss experience, as he has the right to weigh the factors, he can weigh certain factors at zero and thus could weigh trending at zero in this case. In support thereof, he refers us to State ex rel. Com‘r of Insurance v. N. C. Fire Insurance, supra. Our examination of that case causes us to believe that the Commissioner has placed a strained meaning upon it.
“In providing, in G.S. 58-131.2, that the Commissioner shall give consideration to the matters there specifically enumerated, including ‘the experience of the fire insurance business’ during five years or more, it was obviously not the intent of the Legislature to make any one, or all, of these matters conclusive. The statute directs the Commissioner to give consideration ‘to all reasonable and related factors.’ The weight to be given the respective factors is for the Commissioner to determine in the exercise of his sound discretion and expertise, but he may not arrive at his determination as to the propriety of the filing by shutting his eyes to experience shown by evidence of reasonably probative value simply because it is not presented to him in the customary statistical form.
“The credibility of evidence, whether offered by the Bureau, the Department of Insurance or a protestant, and the weight to be given such evidence, are to
be determined by the Commissioner. In re Filing by Fire Insurance Rating Bureau, supra. However, in this determination, as in other aspects of such rate-making proceeding, the Commissioner may not act arbitrarily, rejecting as untrustworthy, for no stated or apparent reason, uncontradicted testimony or data submitted through competent and unimpeached witnesses.” 292 N.C. at 488-489, 234 S.E.2d at 729-730. [Emphasis added.]
In that case, the Commissioner had declined to consider certain evidence submitted to it covering a three-year-period indicating a loss apparently because it did not cover the five-year-period. The Supreme Court of North Carolina found that to be error.
It is our view that the Commissioner cannot in the instant case, in the guise of weighing the factors, completely disregard what has been discussed throughout this opinion as trending, or in other words, cannot completely disregard data which includes therein an estimation of prospective losses based upon past experience.
We think appropriate the approach which the trial court suggested in its memorandum opinion as follows:
“As indicated previously herein, Allstate‘s application results in a prima facie showing that a rate increase is necessary. At that point it becomes incumbent upon someone, including the Commissioner, either to
(1) demonstrate specifically that the evidence submitted is in some manner deficient and that the deficiencies are so extensive that the need for the relief requested has not been demonstrated, or
(2) that there is other equally credible evidence of record justifying some other conclusion, or
(3) that it is not possible to make a decision upon the evidence submitted because insufficient information was given.
“In the case of the first two alternatives, the Commissioner would be justified in denying the application. In the case of the third alternative, the appropriate procedure is not to deny the application but to elicit or obtain the missing information and then complete the evaluation.”
For the reasons stated in this opinion we conclude that the Commissioner‘s order is neither supported by a preponderance of the evidence, nor is it in accordance with law; thus it must be reversed. We adopt the judgment of the district court and, accordingly, the judgment of the district court is affirmed.
SAND and PAULSON, JJ., and LARRY M. HATCH, District Judge, concur.
LARRY M. HATCH, D. J., sitting in place of VANDE WALLE, J., disqualified.
PEDERSON, Justice, concurring specially.
The Legislature said that the purpose of the casualty insurance rate law is to promote public welfare by regulating insurance rates to the end that those rates not be excessive, inadequate or unfairly discriminatory. The Legislature further said that it was not intended (1) that reasonable competition should be prohibited or discouraged, or (2) that uniformity in insurance rates, rating systems, rating plans or practices should be unnecessarily prohibited or encouraged. Finally, the Legislature said that the law shall be liberally interpreted to carry out these purposes. See
As far as I can determine after many months of evaluations, administrative hearings and judicial reviews, no one yet has said whether the Allstate rates are excessive, inadequate or unfairly discriminatory.
The author of the majority opinion, in 1970, wrote that “it is not the function of the judiciary to act as a super board of review,” and that it is not for the court to substitute its judgment for that of the lawfully designated authorities. See Appeal of Johnson, 173 N.W.2d 475 (N.D.1970). Although that was not a review pursuant to
This all leaves me in a quandary. By affirming the judgment of the district court, which in effect authorized the increased rates for Allstate, it appears that we are fulfilling the function prescribed by the Legislature. Are we not, then, infringing upon the authority of the insurance commissioner and taking on the role of a “super board” or “super commissioner“? I understand the majority opinion to infer that because of the refusal of the commissioner to evaluate Allstate‘s proposed rates as excessive, inadequate or unfairly discriminatory, the courts must, by necessity, allow them to become effective. This may be the only alternative available, but it impresses me that we are saying to the commissioner, “you didn‘t do this right,” so we are going to penalize the public by making it pay insurance rates which might even be excessive.
The problem is eventually legislative. The all-or-nothing interpretation that both Allstate and the commissioner place upon Chapter 26-28, NDCC, violates my sense of reasonableness. The statute ought to be changed. During oral argument, counsel for the commissioner said that he was always willing to negotiate with applicants. I think that public interest requires that we leave room for those negotiations. My concurrence arises out of necessity—not necessarily conviction.