415 Mass. 455 | Mass. | 1993
On December 22, 1992, the Commissioner of Insurance (commissioner) entered a decision fixing the private passenger motor vehicle insurance rates for 1993 in accordance with G. L. c. 175, § 113B (1990 ed.). The Automobile Insurers Bureau of Massachusetts
The facts are as follows. On July 2, 1992, after a public hearing, the commissioner determined'that competition was insufficient to assure that private passenger automobile insurance rates would not be excessive. Therefore, in accordance with G. L. c. 175E, § 5 (1990 ed.), she invoked the procedures of G. L. c. 175, § 113B (1990 ed.), to fix and establish such rates for calendar year 1993. Interested parties were invited to participate in the proceedings. Four parties formally intervened: the AIB; the State Rating Bureau of the Division of Insurance (SRB) pursuant to G. L. c. 26, § 8E (1990 ed.); the Attorney General pursuant to G. L. c. 12, § 11F (1990 ed.); and an association of insurance agents concerned with the agents’ commission allowance required by G. L. c. 175, §§ 113B and 162D.
The parties stipulated to all but three issues. The commissioner accepted the stipulations, and hearings were held on the following: (1) the loss trend factors for physical damage
In reviewing the commissioner’s decisions under G. L. c. 175, § 113B, one inquiry is “whether the rates have reasonable support in evidence.” Aetna Casualty & Surety Co. v. Commissioner of Ins., 408 Mass. 363, 378 (1990), quoting Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 384 Mass. 333, 337 (1981). We have noted previously that this standard is indistinguishable from the substantial evidence standard. Id. at 378 n.14, citing Medical Malpractice Joint Underwriting Ass’n v. Commissioner of Ins., 395 Mass. 43, 54 (1985). See also G. L. c. 175, § 113B (commissioner shall justify deviation from recent data by “substantial evidence”); G. L. c. 30A, § 1 (6), second par. (1990 ed.) (“substantial evidence” means such evidence as a reasonable mind might accept as adequate to support a conclusion). In making her decisions, the commissioner is not required to make findings on every issue so long as her findings “indicate the over-all basis for [her] decision.” Aetna Casualty, supra at 374, 378. If there is substantial evidence supporting the commissioner’s decision, we will
1. Fraud adjustment. The AIB challenges the commissioner’s fraudulent claims adjustment on three grounds: (1) the commissioner ignored the statutory scheme for mandating necessary cost containment programs; (2) the adjustment was not based on substantial evidence; and (3) her calculation of the rate adjustment reflects an erroneous interpretation of the record evidence. We shall address the claims seriatim.
a. Statutory scheme. The AIB asserts that the statutory scheme for cost control requires the commissioner to compel specific programs and to direct performance standards to achieve certain cost control objectives. From this assertion, AIB concludes that the commissioner’s failure to rely exclusively on these statutory mechanisms invalidates her rate adjustment. We disagree.
The commissioner is bound to fix and establish insurance premium charges which are “adequate, just, reasonable and nondiscriminatory.” G. L. c. 175, § 113B (1990 ed.). Apart from this duty, the commissioner is also required to “determine whether insurance companies utilize adequate programs to control costs and expenses, in accordance with standards determined or approved by the commissioner.”
In further support of their interpretation, the AIB points to a provision in § 113B which states that “[t]he commissioner shall direct the plan created under [§ 113H] to establish procedures for the implementation, monitoring and enforcement of programs to control costs and expenses identified by the commissioner in accordance with this paragraph.” The plan created under G. L. c. 175, § 113H (1990 ed.), provides motor vehicle liability insurance to applicants who are otherwise unable to obtain it. Hartford Accident & Indem. Co. v. Commissioner of Ins., 407 Mass. 23, 24 (1990). As we explained previously, “[a] 11 motor vehicle insurers in Massachusetts are required to participate in the plan as members of the Commonwealth Automobile Reinsur-ers (CAR).” Id. The AIB argues that this provision, when read together with G. L. c. 175, § 113H (C) and (E) (which require CAR to adopt performance standards for combatting fraud), compels the commissioner to use these standards as the most “effective” means of implementing cost control.
The commissioner also bases her rate adjustment on a finding that excessive payments are due to inadequate cost control efforts by the insurers. Her finding rests on expert testimony indicating that insurers have failed (1) to utilize
c. Rate calculations. Lastly, the AIB contends that the commissioner’s calculation of the rate adjustment reflects an erroneous interpretation of the record. We agree. Relying on the AIB study, the commissioner found that 20% of 1989 bodily injury losses were excessive. She arrived at that conclusion by adding the percentage of fraudulent claims (approximately 10%) to the payments made on built-up claims (46% built-up x 22% average reduction if settled = 10.12 %).
2. Expenses adjustment. The 1993 competition adjustment factor is based on virtually the same evidence which we found sufficient first in Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 381 Mass. 592, 602-603 (1980), and again in Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 384 Mass. 333, 337-338 (1981), i.e., a wide and unexplained variation in expenses among companies writing automobile insurance policies in Massachusetts. The commissioner’s methodology has also remained essentially the same. We reasoned that “[wjhere a particular item of cost varies widely from company to company and the Commissioner is fixing industry-wide rates, [she] must be allowed considerable discretion to exclude the highest costs from consideration, even
3. Disposition. We remand the case to the county court which shall issue an order for the commissioner to recalculate the rate adjustments for 1993 in a manner consistent with this opinion and to hold further hearings, if necessary, on the percentage of bodily injury losses that were excessive.
So ordered.
The Automobile Insurers Bureau of Massachusetts is an unincorporated voluntary association of insurance companies licensed to write automobile insurance in Massachusetts. It was formerly known as the Massachusetts Automobile Rating and Accident Prevention Bureau. See Aetna Casualty & Surety Co. v. Commissioner of Ins., 408 Mass. 363, 364 n.2 (1990).
Even with these reductions, the commissioner’s decision still increases the general 1993 rates for private passenger automobiles by 5.2%.
The provision of § 113B dealing with cost control programs reads: “The commissioner upon the basis of information which shall be filed by the [AIB], shall determine whether insurance companies utilize adequate programs to control costs and expenses, in accordance with standards determined or approved by the commissioner. At a minimum, such programs shall be designed to have a material impact on premium charges by reducing costs and expenses incurred by insurance companies. In the event the [AIB] fails to make such filing, or if the commissioner determines that the filing is deficient or that the programs are inadequate, the commissioner shall limit in any manner he determines to be appropriate the amount of any adjustment in premium charges based upon changes in costs and expenses.”
The commissioner has promulgated regulations specifying what information the AIB must provide in its annual rate filing. 211 Code Mass.
Even if we agreed with the AIB that the statute requires the commissioner to mandate specific cost control programs, the plain language of the statute still requires the commissioner to evaluate the effectiveness of those programs. Therefore, any failure by the commissioner to enumerate specific programs would not affect her authority to determine if existing cost control measures were “adequate” and to adjust the rates appropriately.
General Laws c. 175, § 113H (C) (1990 ed.), reads in part: “The governing committee [of the plan] shall . . . prepare performance standards for the handling and payment of claims by the service carriers. Such standards shall be designed to ensure the speedy settlement of valid claims at
Section 113H (E) reads in part: “The plan shall adopt performance standards for claims handling and anti-fraud efforts, including but not limited to programs to control costs and expenses as described in [§ 113B], for risks insured or reinsured by the plan. . . . The plan shall propose and the commissioner shall establish rules concerning the submission of data by insurers.”
The commissioner does not require each insurer to maintain identical cost control programs, 211 Code Mass. Regs. § 93.05 (3), and there is nothing in § 113B which mandates them to do so.
The commissioner also found that the AIB’s filing was “deficient” as a matter of law but chose not to base her rate adjustment on that finding alone. Under § 113B, the commissioner is authorized to modify rate adjustments upon a finding either that the filing was deficient or that the cost control programs were inadequate.
Since the AIB provided no evidence to the contrary, the commissioner assumed that the 1991 losses, which form the basis for the 1993 rates, would be similar. '
The AIB 1989 study does not state what percentage of built-up claims eventually were settled.
We are aware that the commissioner cannot calculate precisely the percentage of 1989 losses that were excessive, beyond the 10% or so that were fraudulent, because there is no information regarding actual losses attributable to built-up claims alone. We further recognize that under G. L. c. 175, § 113B, the burden to produce such evidence rests with the AIB. The law, however, does not require exactness in setting rates. See Attorney Gen. v. Commissioner of Ins., 403 Mass. 370, 377 (1988) (mathematical precision not required in setting rates); Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 401 Mass. 282, 301 (1987) (exact quantification unnecessary if rate reduction within range of possible reductions supported by the evidence).
As noted above, the AIB asserts that only 2% of claims are deniable on the basis of fraud. On the other hand, the State Rating Bureau and the Attorney General presented evidence that a conservative rate reduction would amount to 8.39% for bodily injury claims and 2.94% for personal injury protection claims. Starting from her conclusion that as much as 20 % of bodily injury losses were excessive, the commissioner determined that rate reductions of 4% and 2%, respectively, would be appropriate. The commissioner justified the difference between the two rates by concluding that fraud was more likely to occur in bodily injury claims that cover damages for pain and suffering.