Lead Opinion
The principal issue in this case is whether R.C. 3905.01(B) and 3905.04 prohibit the licensing of applicants affiliated with non-insurance financial institutions. For the reasons that follow, we hold that the statutes permit such licensing.
I
Background
At the outset it should be recognized that the insurance industry is a mature, highly regulated industry with sophisticated legal and legislative
A great deal of appellants’ brief (and also appellees’ brief) is devoted to arguments as to whether it would be desirable to restrict the licensing of applicants affiliated with non-insurance financial or lending institutions. These are essentially public policy arguments that are more properly addressed to the General Assembly. Coercive “tied-sales” are already prohibited by R.C. 3933.04.
II
Principal Purpose Test
Pursuant to R.C. 3905.01(B) and 3905.04, the Superintendent of Insurance is authorized to deny or revoke a license when he determines that the principal purpose of an agent’s
In applying the principal purpose test, the superintendent historically has considered a variety of factors including a comparison of the agency’s sales to рersons falling within one or more of the enumerated legal relationships with the agency’s total sales. If the agency’s sales to persons falling within one or more of the enumerated legal relationships amounts to fifty-one percent or more of the total premium volume for any one calendar year, then the agency will be presumed to be in violation of the principal purpose prohibition contained in R.C. Chapter 3905. See Bulletin 89-1. No one is challenging the supеrintendent’s use of the fifty-one percent presumption.
R.C. Chapter 3905 is thus clear that there is no impediment whatsoever to licensure unless the “principal purpose test” is violated. It follows that the trial court’s per se disqualification for licensure оf all applicants affiliated with non-insurance financial or lending institutions has no legal support. The court of appeals was correct in reversing the trial court on the per se disqualification. Appellants have not appealed that ruling.
Directly or Indirectly
Appellants’ main argument (that the word “affiliates” should be read into the statute, even though it is not there) is based on a strained application of the adverbial phrase “directly or indirectly,” which does appear in R.C. 3905.04, but not in R.C. 3905.01.
We are guided by certain basic rules of statutory construction: “Words and phrases shall be read in context and construed according to the rules of grammar and common usage. * * * ” R.C. 1.42. “[Referential and qualifying words and phrases, where no contrary intention appears, refer solely to the last antecedent * * Carter v. Youngstown (1946),
Appellants’ argument that the General Assembly intended to include affiliаtes or subsidiaries within the restricted relationships is unpersuasive. There is no reason to believe that the General Assembly would omit relationships it intended to include. In fact, “affiliate of” is defined in an unrelated insurance statute, R.C. 3901.32(A). Likewise, R.C. 3953.21(B), another unrеlated insurance statute, restricts “any subsidiaries thereof.” So too, R.C. 3905.18, relating to life insurance agents, refers to the corporate applicant’s shareholders. It is apparent that the General Assembly knows how to use these words when it so chooses.
We agree with the following analysis by the court of appeals:
“ * * * [Appellants’] suggested construction would alter the plain and unambiguous language of R.C. 3905.04. The phrase ‘directly or indirectly’ modifies its antecedent, ‘solicit, plaсe or effect such insurance.’ The statute restricts the indirect placement of insurance on property for which the applicant is an agent, custodian, vendor, bailee, trustee or payee. * * * [Appellants] would apply thе words ‘directly or indirectly,’ which appear in the middle of the paragraph, to the list of relationships appearing at the end of the paragraph. Thus, under * * * [appellants’] construction, the statute would restrict the placement оf insurance on property for which the applicant is directly or indirectly an agent, custodian etc. Such a construction is not in accord with the plain wording of the statute. The phrase ‘directly or indirectly’ cannot be moved from onе place in a sentence to another as part of statutory construction.”
(1) property of the applicant,
(2) property of the applicant’s relatives, employers or employees,
(3) prоperty for which the applicant is agent, custodian, vendor, bailee, trustee or payee, or
(4) property for which the applicant’s relatives, employers or employees are agent, custodian, vendor, bailee, trustеe or payee.
IV
Alter Ego
Appellants’ secondary argument is that since the financial institution with which the applicant is affiliated would be prohibited from obtaining a license, then the applicant should likewise be prohibited.
The court of appeals correctly rejected this rigid approach, but, applying State, ex rel. Johnson & Higgins Co., v. Safford (1927),
In Safford, the relator was an Ohio corporation organized for the purpose of acting as local agent of fire insurance companies in the writing and placing of contracts of indemnity in Ohio. A majority of the stock of relator was owned and controlled by a foreign corporatiоn engaged in insurance business. Ohio law prevented the licensing of a non-resident. The Superintendent of Insurance refused to issue a license to relator. Relator brought a mandamus action against the superintendent to compel the issuance of a license. Based on the facts of that case, the court denied the writ concluding “that the relator company is but the alter ego of a nonresident insurance broker corporation desiring to write insurance in Ohio, but unable to obtain a resident license, and that the course pursued by it is but an attempt to do by indirection that which cannot be accomplished by direct legal methods.” Id. at 583,
We believe that the court of appeals correctly applied the Safford rule. Whether a particular applicant for a license is but the alter ego of an otherwise precluded entity requires a case-by-case analysis.
Conclusion
Based on the above, we hold that R.C. 3905.01(B) and 3905.04 do not prohibit the licensing of applicants affiliated with non-insurance financial institutions.
We further hold that an applicant for a license as an other-than-life insurance agent is not precluded from licensure by R.C. 3905.01(B) and 3905.04 merely because an affiliate of the applicant would be precluded thereunder, unless the applicant is but the alter ego of the otherwise precluded affiliate.
Accordingly, the judgment of the court of apрeals is affirmed.
Judgment affirmed.
Notes
. An agent may be, inter alia, a natural person or a corporation. R.C. 3901.19(A).
Dissenting Opinion
dissenting. Since I believe the majority has totally misconstrued the clear thrust of R.C. 3905.01(B) and 3905.04, I must respectfully dissent from the majority opinion.
In my view, 1988 Ohio Atty. Gen. Ops. No. 88-056, relied on by the Superintendent of Insurance in Bulletin 89-1 and embraced by the majority herein, has emasculated the statutory mandate set forth in R.C. 3905.04 as it relates to R.C. 3905.01. As cogently analyzed by the referee in the trial court below, the mаjority’s holding will merely foster unfair and anti-competitive practices by non-insurance businesses:
“ * * * The following scenario is employed to illustrate why, if permitted to proceed, the Department’s proposal is violative of the aforеmentioned sections. Bank A, as a parent corporation, incorporates Agency B which, pursuant to R.C. 3905.01, applies to the Department of Insurance for agency licensing. Agency B is licensed by the Department. Consumer C goes to Bаnk A for financing of an automobile loan and is led to purchase automobile insurance from Agency B as an inducement so that the financing may be obtained from Bank A. Consumer C is a ‘vendee’ and quite possibly a
“The incentive for anti-competitive dealings under the foregoing factual scenario is clear. Bank A may encourage the use of Agency B through the use of lower financing rates or less stringent criteria for loan qualifications. The anti-competitive business environment likely to result from non-insurance businesses incorporating insurance agencies to provide homeowner’s insurance, motor vehicle insurance, and other forms of property and casualty insurance is antithetical to the businеss purpose rule upon which R.C. [Chapter] 3901 et seq. is grounded.
“In short, the proposal of the Department to license affiliates of non-insurance lending institutions and others outlined in 89-1 would work irreparable harm upon Plaintiff herein and should be enjoined. The proрosal is contrary to the business purpose rule espoused by the Supreme Court in State, ex rel. Federal Union Ins., v. Warner [1934],
As this court stated in Warner, supra, at 264,
While the language of the statutes in issue was not artfully drafted, I believe the plain import of the language attempts to prevent banks and other entities from subtly coercing customers to purchase insurance from their affiliates or subsidiaries.
The majority dismisses such concerns as merely “public policy arguments that are more properly addressed to the General Assembly.” However, such facile reasoning abdicates this court’s constitutional role in interpreting stat
Based on the foregoing, I would reverse the judgment of the court of appeals below and reinstate the trial court’s judgment.