Title: Federated American Ins. Co. v. Marquardt

State: washington

Issuer: Washington Supreme Court

Document:

108 Wn.2d 651 (1987) 741 P.2d 18 FEDERATED AMERICAN INSURANCE COMPANY, ET AL, Appellants, v. RICHARD G. MARQUARDT, as Insurance Commissioner, Respondent. No. 53597-3. The Supreme Court of Washington, En Banc. August 6, 1987. Matt Murray (of Murray, Dunham & Murray), for appellants. Kenneth O. Eikenberry, Attorney General, and Donald F. Cofer, Assistant, for respondent. CALLOW, J. At issue is the validity of an automobile insurance regulation adopted by the State Insurance Commissioner. The trial court found the regulation to be validly promulgated and constitutional. We affirm. On December 27, 1984, the Commissioner adopted WAC 284-30-500(2)(b) by an order filed with the Code Reviser. The regulation provides: The Commissioner, in a "Statement of Purpose" filed earlier with the Code Reviser, had described the purpose of the new regulation as follows: State Register XX-XX-XXX (1984). The plaintiffs, Federated American Insurance Company and National Merit Insurance Company (companies), filed a petition for declaratory judgment seeking to have WAC *654 XXX-XX-XXX(2)(b) declared invalid. They contended that (1) the Insurance Commissioner lacks the statutory authority to promulgate the regulation, (2) the regulation unconstitutionally impairs the obligations of contracts, and (3) the regulation unconstitutionally deprives the companies of their right to due process. The trial court granted the Commissioner's cross motion for summary judgment, holding the regulation valid and constitutional. The companies appeal. We turn first to the question of whether the Commissioner possesses the statutory authority to enact the challenged regulation. The Commissioner, as to this question, relies primarily on RCW 48.30.010, which provides: (Italics ours.) [1] The Insurance Commissioner has broad powers over the control, supervision and direction of the insurance business. 2A G. Couch, Insurance § 21:5, at 240 (2d ed. 1984). The Legislature, by enacting RCW 48.30.010(2), has granted the Commissioner the authority to define various acts or practices as unfair or deceptive. Horan v. Marquardt, 29 Wn. App. 801, 803, 630 P.2d 947 (1981). Where the Legislature has specifically delegated to an administrator the power to make regulations, such regulations are presumed valid. The burden of overcoming this presumption lies on the challenger. Brannan v. Department of *655 Labor & Indus., 104 Wn.2d 55, 60, 700 P.2d 1139 (1985); Weyerhaeuser Co. v. Department of Ecology, 86 Wn.2d 310, 314-15, 545 P.2d 5 (1976). Judicial review is limited to a determination of whether the regulation in question is reasonably consistent with the statute being implemented. Brannan; Weyerhaeuser. As emphasized in Weyerhaeuser, at 314, quoting from 1 K. Davis, Administrative Law § 5.05, at 315 (1958): Accord, 2A G. Couch § 21:5, at 240-41. The companies contend that, notwithstanding the Commissioner's broad power to regulate unfair or deceptive practices, the Commissioner here has exceeded his statutory authority by engaging in impermissible "legislation". They cite Fahn v. Cowlitz Cy., 93 Wn.2d 368, 374, 610 P.2d 857, 621 P.2d 1293 (1980), which observed: (Citations omitted.) They argue that WAC 284-30-500(2)(b) requires all companies to offer no-fault PIP insurance (i.e., medical, hospital, wage loss, and loss of services benefits), in the amounts stated in the regulation, to any potential purchaser of automobile insurance who so requests. The companies thus contend that the Commissioner has attempted to legislate a mandatory no-fault insurance system in this State. *656 We do not read the challenged regulation as broadly. The Commissioner, who is responsible for the drafting of the language therein, emphatically states that the regulation was intended not to radically alter existing insurance laws. The Attorney General, as counsel for the Commissioner, concedes in his brief: (Italics ours.) [2] We agree with the trial court's observation that WAC 284-30-500(2)(b) is not a "model of clarity". In such situations, the Commissioner's interpretation of his own regulation is entitled to great weight. State Liquor Control Bd. v. State Personnel Bd., 88 Wn.2d 368, 379, 561 P.2d 195 (1977); Vliet v. Department of Labor & Indus., 30 Wn. App. 709, 713, 638 P.2d 112 (1981), review denied, 97 Wn.2d 1002 (1982); Spry v. Miller, 25 Wn. App. 741, 745, 610 P.2d 931 (1980). When WAC 284-30-500(2)(b) is given the limited interpretation urged by the Commissioner, it does not constitute mandatory no-fault legislation. Rather it is merely a permissible regulation of the voluntary no-fault insurance market which has existed in this State since 1973. (See State Ins. Comm'r Bull. 73-6 (1973).) The Commissioner does not require companies to provide the types of protection specified in WAC 284-30-500(2)(b). The *657 Commissioner has only required the insurer, if it provides such protection at all (medical payments or PIP), to offer it in the enumerated amounts to insureds who so request. The Commissioner reasonably could determine that an insurer's failure to offer the enumerated amounts of insurance under these circumstances is an "unfair or deceptive" practice. See RCW 48.30.010(2). The "Statement of Purpose" for WAC 284-30-500(2)(b) points out that lesser amounts of insurance may no longer provide insureds with the protection they need to cover lost wages and medical expenses. We find that the Commissioner reasonably could conclude that to offer lost wages and medical coverages in amounts smaller than he has required in the regulation would lead the insured to a sense of false security in present day economic conditions. The Commissioner could find that such small coverages could do little to make up for actual lost wages and medical costs and would actually be deceptive to the insurance buyer. As noted in Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wn.2d 203, 213, 643 P.2d 441 (1982): The regulation here is within the authority of the statute empowering the Commissioner to define unfair or deceptive practices. Brannan v. Department of Labor & Indus., 104 Wn.2d 55, 60, 700 P.2d 1139 (1985). [3] The companies raise additional challenges to the regulation. First, they contend that RCW 48.30.010 only allows the Commissioner to define and prohibit practices which are "deceptive", and that the practices at issue here, even if reasonably deemed "unfair", are not deceptive. The statutory language, however, expressly grants the Commissioner authority to regulate "unfair or deceptive" practices *658 (italics ours). Words in a statute are to be given their plain and ordinary meaning unless a contrary intent appears. Hewson Constr., Inc. v. Reintree Corp., 101 Wn.2d 819, 826, 685 P.2d 1062 (1984). Thus, as was true in Horan v. Marquardt, 29 Wn. App. 801, 807, 630 P.2d 947 (1981): (Italics ours.) [4] The companies also argue that (1) WAC 284-30-500(2)(b) may impose a burden on smaller companies who wish to offer PIP insurance but not in the amounts specified in the rule; and (2) if higher amounts of PIP insurance are required, they should be required in all cases, and not only where an insured requests the higher amounts. These arguments, however, address the wisdom or desirability of the regulation, and are beyond the purview of this court. Weyerhaeuser Co. v. Department of Ecology, 86 Wn.2d 310, 314, 545 P.2d 5 (1976). Next, the companies claim that WAC 284-30-500(2)(b) violates both the state and federal constitutional provisions which prohibit the impairment of contracts. See Const. art. 1, § 23; U.S. Const. art. 1, § 10. We disagree. [5, 6] The constitutional provisions are inapplicable to insurance contracts written after the effective date of the regulation. A contract is not considered impaired by a statute or regulation in force when the contract was made, since it is presumed that the contract was made in contemplation of existing law. See Minish v. Hanson, 64 Wn.2d 113, 115, 390 P.2d 704 (1964); Eskay Plastics, Ltd. v. Chappell, 34 Wn. App. 210, 212, 660 P.2d 764 (1983). Nor are contracts written prior to the regulation unconstitutionally impaired. As previously emphasized: (Citations omitted.) Kueckelhan v. Federal Old Line Ins. Co. (Mut.), 69 Wn.2d 392, 405, 418 P.2d 443 (1966). Furthermore, as noted in Crane Towing, Inc. v. Gorton, 89 Wn.2d 161, 174, 570 P.2d 428, 97 A.L.R.3d 482 (1977): Accord, Aetna Life Ins. Co. v. Washington Life & Disab. Ins. Guar. Ass'n, 83 Wn.2d 523, 539, 520 P.2d 162 (1974). The companies have called our attention to Ketcham v. King Cy. Med. Serv. Corp., 81 Wn.2d 565, 570, 502 P.2d 1197 (1972), which contains the following statement: (Citations omitted.) We adopt that statement in support of the proposition that reasonable regulations designed to secure the general welfare of the community are constitutional if the regulations might achieve such a benefit. Ketcham involved a challenge to a statute which required *660 payment of the statements of optometrists for services even though optometrists were not participating provider-members of the health care service organization. The court held that to impose such a burden on the service organization was unconstitutional as an impairment of contract. The court continued, at page 576: (Citations omitted.) We find nothing in Ketcham which precludes the Commissioner from requiring insurance contracts offered after the promulgation of the regulation to include higher levels of coverage for wage loss and medical costs. Nor do we find Ketcham indicating that the Commissioner, by the exercise of his authority to regulate, has altered, imposed new conditions on, or lessened the value of previously existing insurance contracts. Here, the Legislature has expressly granted the Commissioner the authority to define "unfair or deceptive" practices in the insurance business. The Commissioner acted pursuant to this authority in promulgating WAC 284-30-500(2)(b), a regulation intended to provide insureds with adequate vehicle insurance protection and to assure that the effects of inflation not be permitted to erode that coverage previously deemed sufficient. We find no unconstitutional impairment of contract. The companies finally contend that the challenged regulation, WAC 284-30-500(2)(b), violates their right to due process. Their argument does not involve alleged procedural rights, but rather is simply a claim based upon "substantive due process" rights. The companies rely primarily *661 on Northwestern Nat'l Ins. Co. v. Fishback, 130 Wash. 490, 228 P. 516, 36 A.L.R. 1507 (1924). However, that opinion found no reasonable relationship between the regulation there involved, which limited the number of agents allowed to any one company in an area, and the public welfare. The decision dealt with a restriction on the right of citizens to pursue a particular vocation (insurance agent) and struck down as discriminatory a statute which denied persons the right to follow that calling; it did not deal with the regulation of the conduct of the insurance business. [7] Here a reasonable relationship does exist between the manner in which insurance coverage is offered to prospective customers and the public welfare. In matters relating to the conduct of the insurance business courts should not substitute their economic beliefs for the judgment of legislative bodies and should defer to the Legislature in the exercise of its police power to accomplish the regulation of unfair or deceptive economic practices. Aetna, at 534, citing Ferguson v. Skrupa, 372 U.S. 726, 10 L. Ed. 2d 93, 83 S. Ct. 1028, 95 A.L.R.2d 1347 (1963). We uphold the challenged regulation as validly promulgated and constitutional. The judgment of the trial court is affirmed. PEARSON, C.J., and UTTER, BRACHTENBACH, DOLLIVER, DORE, ANDERSEN, GOODLOE, and DURHAM, JJ., concur.