403 Mass. 370 | Mass. | 1988
This appeal is submitted on a reservation and report by a single justice of the Supreme Judicial Court for the county of Suffolk, and presents challenges to the fixing and establishing of 1987 and 1988 private passenger motor vehicle insurance rates by the Commissioner of Insurance (commissioner). The complex and protracted history of the rate setting processes for those two years encompasses three requests for review of the original 1987 rates set by the commissioner on May 4, 1987, one of which was presented to, and resulted in an order of remand from, this court. Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 401 Mass. 282 (1987) (the 1987 remand order).
On the same day the 1987 remand order was issued, the commissioner issued the 1988 private passenger motor vehicle insurance rates. The Massachusetts Automobile Rating and Accident Prevention Bureau (bureau) filed a complaint for review of those rates pursuant to G. L. c. 175, § 113B, and The Hanover Insurance Company (Hanover) likewise sought review of the commissioner’s denial of its petition to intervene in the 1988 rate hearings and proceedings. A single justice of this court consolidated the two petitions and, while retaining juris
The bureau declined to pursue further appeals regarding the 1987 or 1988 rates. The Attorney General filed a petition for review of the remand decision, although he had not appealed from the commissioner’s original decisions on the 1987 or 1988 rates. The bureau was permitted to intervene as a defendant in the Attorney General’s appeal, which was consolidated by the single justice with Hanover’s appeal, and reserved and reported to this court.
Following the 1987 remand order, the commissioner requested that the four primary parties to the 1987 rate proceedings (the bureau, the State Rating Bureau [SRB], the Attorney General, and the Professional Insurance Agents of New England and Independent Insurance Agents of Massachusetts [agents]), suggest what procedural and substantive steps should be taken to meet the directives of the 1987 remand order. Oral arguments were made and briefs received on the parties’ positions. Similarly, following the 1988 remand order, the commissioner requested that the parties (the bureau, Hanover, the Attorney General, agents, and SRB) articulate positions on which issues of the 1988 rate proceedings were affected by the 1988 remand order. The commissioner then notified the parties of his determination of the obligations of the Division of Insurance under both the 1987 remand order and the 1988 remand order (collectively, the “remand orders”), and consolidated the hearings for both years into one proceeding.
The Attorney General challenges the authority of the commissioner to modify on remand the 1987 and 1988 rates, alleging error in both the procedures followed and the decision
1. Scope of the remand orders. The Attorney General argues that the commissioner impermissibly reopened the rate proceedings by holding hearings after the remand orders and.by addressing issues and considering evidence beyond the scope of the remand orders. We disagree. In its original appeal from the 1987 rate decision, the bureau argued that the exclusion of certain evidence without explanation by the commissioner was error requiring remand. Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 401 Mass, at 285. With respect to three documents concerning past underwriting results
Having reopened the proceedings and admitted the exhibits in evidence,
The Attorney General contends that the commissioner’s subsequent increasing of the rates constitutes retroactive rate making or an impermissible “second look,” relying on Attorney Gen. v. Commissioner of Ins., 370 Mass. 791 (1976). There, we held that a direct appeal was the only way to challenge or correct any legal error committed by the commissioner in setting the rates, id. at 827, a position in keeping with the Legislature’s repeal of the so-called second-look statute, which had permitted adjustments to the current year’s rates when a shortfall was shown to have occurred in a prior year. In the present case, the commissioner has not adjusted the current year’s rates to compensate for a demonstrated shortfall in a prior year. Instead, his analysis of the underwriting results he had previously not taken into account led to his determination that the 1987 and 1988 rates themselves did not meet the statutory standards.
2. Adequacy of the findings and basis in the evidence. The Attorney General contends that the remand decision is not supported by substantial evidence, that the commissioner failed to make adequate findings, and that the commissioner excluded relevant evidence. Our inquiry, in reviewing the commissioner’s decisions, is limited to “whether the rates have reasonable support in evidence.” Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 384 Mass. 333, 337 (1981). The commissioner is required to make findings which indicate the over-all basis for his decision. Id. We will not perform a de novo weighing of the evidence, and we give due weight to the commissioner’s experience, technical competence, specialized knowledge, and discretionary authority. Id. See also Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 389 Mass. 824, 828 (1983).
At the remand hearings, the commissioner considered the previously excluded exhibits and the testimony of experts sponsored by the Attorney General and by the bureau. There was ample evidence from which to conclude, as the commissioner did, that there was an “enormous disparity” between the 1985 and 1986 target underwriting profit allowance and the actual underwriting results in Massachusetts, and that the Massachusetts losses in those years (and in a ten-year average) were greater than country-wide losses for the industry. It was within the commissioner’s discretion to conclude, based on this disparity and the fact that the same methods were used to establish the 1987 and 1988 rates, that the 1987 and 1988 rates were inadequate to provide an opportunity for a fair rate of return.
In examining the evidence to determine the cause of the inadequacy, the commissioner reasonably concluded that “mis-estimates” in loss allowances caused the deficiencies in preceding years, and that since the loss trending methodology was essentially the same from 1985 through 1988, the deficiencies would persist in 1987 and 1988 — making the rates as previously
Likewise, there is no error in the commissioner’s exclusion of certain evidence. It was within the commissioner’s discretion to exclude the testimony of Dr. Chang, the Attorney General’s witness, on either of the grounds given — that of its being untimely filed or its being duplicative of other testimony. In any event, the commissioner indicated that, even if such testimony had been admitted, he would have discounted it as unconvincing and irrelevant. Therefore, this ruling presents no basis on which to disturb the commissioner’s decision. Nor is there any merit to the Attorney General’s challenges to the com
The Attorney General also complains of the exclusion of actual investment results and evidence of “normative ratemak-ing,” including testimony of 1988 claim frequency projections. The commissioner properly concluded that actual investment results are not part of the model used to establish the profit allowance provision and that since the Attorney General had not appealed the 1988 rate decision, he could not challenge at the remand hearings the exclusion of testimony from the original 1988 proceedings.
3. Adequacy of notice. The Attorney General also challenges the adequacy of the notice given by the commissioner, contending both that the commissioner was required by G. L. c. 175, § 113B, and by the commissioner’s regulation, 211 Code Mass. Regs. § 77.04 (1987), to publish notice of the remand hearings, and that the notice of the scope of the remand hearings given to the Attorney General was inadequate. In addition, the Attorney General complains that the remand hearing schedule set by the commissioner deprived the Attorney General (and consumers) of a fair opportunity to prepare and be heard. We disagree.
The Attorney General argues for a literal interpretation of the c. 175, § 113B, requirement that premiums be set “after due hearing and investigation,” and that the commissioner publish notice before “every such hearing.” He further contends that, under the commissioner’s regulations, the notice provisions of G. L. c. 175, § 113B, apply to “any hearing and investigation held to fix and establish . . . premium charges . . . .”211 Code Mass. Regs. § 77.02 (1987). At the outset of the 1987 and 1988 rate setting procedures, the commissioner gave adequate, formal notice which complied with statutory requirements, so that interested persons could participate. The remand hearings did not constitute a new or original investigation, nor, as in Fish v. Building Inspector of Falmouth, 357 Mass. 774 (1970), cited by the Attorney General, did the remand hearings or decision relate to “different relief from that originally sought,” id. at 775, or rest on “evidence obtained
We also conclude that the commissioner’s letters to the parties provided adequate notice of the scope of the hearings. He informed them that the record would be reopened to admit the previously excluded evidence, and solicited their views regarding the effect on the rates of the underwriting results shown in the exhibits. The commissioner’s letters of February 1 and February 3, 1988, defined the issues to be considered at the remand hearings.
4. Right of Hanover to intervene. While conceding that any evidence it would have presented at the original 1988 rate hearings would not have changed the result, and that no harm or prejudice to it exists, Hanover argues that we should decide its appeal of the commissioner’s denial of its petition to intervene. We decline to do so.
These cases are remanded to the single justice for entry of judgment dismissing Hanover’s appeal and affirming the 1987 and 1988 findings and decision of the commissioner.
So ordered.
The opinion contains a more detailed summary of the 1987 hearings and appeals.
Marked for identification as exhibits 159, 183, and 201. “Underwriting results” show the industry’s profit or loss solely from underwriting insurance. By themselves they do not reflect over-all industry profitability. See Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 401 Mass, at 284, 286, and cases cited.
He also determined that an additional exhibit, No. 72, provided “a supporting calculation” for one of the other exhibits and admitted it in evidence, a determination which was within his discretion.
In view of the commissioner’s admitted inability to articulate a reason for excluding the evidence, it is difficult to understand arguments that he should have done otherwise.
The 1987 and 1988 proceedings involved a total of 122 days of hearings and 25,000 pages of record.
The rates established by the commissioner are comprised of three components: (1) loss allowance (primarily from payment of claims); (2) expense allowance (nonclaim expenses); and (3) underwriting profit allowance (an estimate of profit from the business of selling insurance). Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 389 Mass. 824, 826 (1983).
The commissioner also properly excluded new and updated evidence offered by the bureau, recognizing that even though the proceedings constituted a statutory appeal, as distinguished from a “second look,” the remand hearing nonetheless was not an opportunity to relitigate all issues or to consider wholly new evidence.
For example, the Attorney General argued that random fluctuations alone could account for three to five percent of the difference.
The bureau submitted evidence that applying the loss ratio method resulted in increases of 13.8% for 1987 and 12.9% for 1988.
See note 9, supra.
Written testimony filed by the bureau on January 21, 1988, also gave the Attorney General notice of the bureau’s proposed evidence and arguments, at least as to the significance of the excluded evidence on the 1987 rates.