Title: Md. Ins. Comm'r v. Cent. Acceptance Corp.

State: maryland

Issuer: Maryland Supreme Court

Document:

Maryland Insurance Commissioner v. Central Acceptance Corporation et al., No. 7,
September Term, 2011.
STATUTORY INTERPRETATION - PLAIN MEANING RULE - PREMIUM
FINANCING ACT - ALLOWABLE INTEREST CHARGES ON PREMIUM FINANCE
AGREEMENTS - Section 23-304 of the Insurance Article prohibits premium finance
companies from collecting interest on loans to MAIF customers in excess of 1.15% for any
30-day period.  Premium finance companies are allowed, however, to charge interest on
insurance policies that are later voided ab initio, so long as the interest charged does not
exceed 1.15% for each 30 days (or pro rata period thereof) during which money was
advanced on behalf of a consumer.  
ADMINISTRATIVE LAW - DUE PROCESS - “COMMAND INFLUENCE” - Where there
is no tangible evidence of a supervisor’s improper influence over a subordinate who is
authorized by statute to conduct an administrative hearing and render a final decision, there
is no due process violation.  Where an administrative-hearing officer is deciding only a
question of law, any alleged “command influence” is cured by the non-deferential standard
of review used by a reviewing court.
ADMINISTRATIVE LAW - RULEMAKING VERSUS ADJUDICATION - Where there
is no change in existing law or regulation, and an agency is merely applying existing law to
the undisputed facts of a specific case, the agency is not required to proceed by formal
rulemaking.
ADMINISTRATIVE LAW - PROCEDURAL IRREGULARITIES - An agency’s failure to
follow proper procedures will only be overturned by a reviewing court if a “substantial right”
of the complaining party was violated and, if so, only in the case where prejudice occurred. 
INSURANCE LAW - POWERS OF THE COMMISSIONER OF THE MARYLAND
INSURANCE ADMINISTRATION  - Though not expressly conferred by statute, the
Commissioner of the Maryland Insurance Administration has the implied authority to issue
cease-and-desist orders to enforce the provisions of the Insurance Article.  
Circuit Court for Baltimore City
Case No. 24-C-09-000942
IN THE COURT OF APPEALS
OF MARYLAND
No. 7
September Term, 2011
                                                                             
MARYLAND INSURANCE
COMMISSIONER
v.
CENTRAL ACCEPTANCE CORPORATION
et al.
                                                                             
 
Bell, C.J.,
Harrell
Battaglia
Greene
Adkins
Barbera
Eldridge, John C., (Retired,
Specially 
Assigned),
JJ.
                                                                             
Opinion by Harrell, J.
                                                                             
Filed: December 20, 2011
In 2008, Petitioner, the Maryland Insurance Commissioner (“Commissioner”), issued
a Cease-and-Desist Order to Respondents purporting to prevent them from charging interest
on loans to consumers to pay automobile insurance premiums in excess of the statutory
maximum prescribed in Maryland Code (1957, 2011 Repl. Vol), Insurance Article, § 23-304. 
Respondents are eight of the largest premium finance companies  that provide loans
1
primarily to customers of the Maryland Automobile Insurance Fund (“MAIF”).  Respondents
requested a hearing on the Cease-and-Desist Order.  Respondents requested twice that the
case be transferred to the Office of Administrative Hearings (“OAH”) for hearing and final
decision, but the Commissioner denied the requests.  Instead, the Commissioner delegated
hearing authority to an Associate Deputy Insurance Commissioner (“ADIC”), who presided
over the hearing at the Maryland Insurance Administration (“MIA”), and issued a Final Order
affirming the Commissioner’s Cease-and-Desist Order.   Respondents brought a successful
judicial review action in the Circuit Court for Baltimore City. The Court of Special Appeals
affirmed, agreeing with the Circuit Court’s reasoning that actual “command influence,”
represented by the Commissioner’s delegation of the hearing and final administrative
decision-making responsibility to a subordinate, tainted impermissibly Respondents’ right
to a fair hearing.  We resolve, however, that the MIA hearing was fair and without undue
“command influence.” Therefore, we vacate the judgment of the Court of Special Appeals
  Respondents in this case are Agency Services, Inc., Central Acceptance Company,
1
Inc., H & S Finance Company, Inc., Insurance Billing Services, Inc., Premium Finance of
America, Inc., Senate Acceptance Corp., Inc., U.S. Capital Associates, and Crown Premium
Funding Company.
and direct it to vacate the judgment of  the Circuit Court.  Further, we conclude that the
Commissioner’s interpretation of Ins. Art., § 23-304 is correct, and that Respondents violated
the statute when their premium finance agreements operated to assess a finance charge in 
excess of 1.15% for each 30 days.  We conclude also that two Respondents were assessing
improperly finance charges to customers whose underlying insurance policies were voided
ab initio, because they charged more than 1.15% for each 30 days; however, lawfully applied
finance charges on the premiums advanced for these policies before the policies were
declared void, may be valid. Accordingly, we shall direct that the Court of Special Appeals 
direct the Circuit Court for Baltimore City to affirm for the most part, and reverse in small
part, the decision of the MIA.
I.  Facts and Antecedent Administrative and Judicial Proceedings
The material facts in this case are undisputed.  The MAIF is the insurer of last resort 
for Maryland drivers, where automobile insurance is required statutorily for all motor vehicle
owners.  Maryland Code (1957, 2011 Repl. Vol.), Transp. Art., § 17-103 &  Ins. Art., § 20-
301(a).  The MAIF is prohibited by statute from accepting installment payments on insurance
premiums.  Ins. Art., § 20-507(f)(ii). Premium finance companies (“PFCs”) provide loans,
through premium finance agreements, to the MAIF’s customers who are unable to pay the
premium in a lump sum.   PFCs must register with the MIA before making loans to the
2
  A premium finance company is “a person that engages in the business of entering
2
into or accepting premium finance agreements.”  Maryland Code (1957, 2011 Repl. Vol.),
(continued...)
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MAIF’s insurance customers, and must meet certain financial requirements.  Ins. Art., §§ 23-
201(a) & 23-202.   The Premium Financing Article of the Insurance Article of the Maryland
Code regulates the interest, fees, and charges that PFCs may collect from consumers.   The
3
provision primarily at issue in this case is Ins. Art., § 23-304, which addresses finance
charges:
The finance charge shall be computed:
(1) on the amount of the entire premium loan advanced,
including any taxes or fees that are financed under § 23-301.1 of
this subtitle, after subtracting any down payment on the
premium loan made be the insured;
(2) from the inception date of the insurance contract or from the
due date of the premium, disregarding any grace period or credit
allowed for payment of the premium, through the date when the
final installment under the premium finance agreement is
payable; and 
(3) at a rate not exceeding 1.15% for each 30 days, charged in
advance.
(...continued)
2
Ins. Art., § 23-101(c).  A premium finance agreement is an agreement 
(i) by which an insured or prospective insured promises to pay
a premium finance company the amount advanced or to be
advanced under the agreement, together with the interest and
service fee, to an insurer or an insurance producer in payment of
premiums; and (ii) that contains an assignment of or is otherwise
secured by the unearned premium or refund obtainable from the
insurer on cancellation of the insurance contract.
Ins. Art., § 23-101(b).    
 The Insurance Article regulates the initial service fee (not to exceed $20), a
3
delinquency fee (up to a maximum of 5% of the installment in default), a cancellation charge
(variable), an electronic payment fee (up to $8 for actual expenses), and a dishonored check
fee (not to exceed $25).  Ins. Art., §§ 23-305 to 23-308.  No person may impose greater
charges than those enumerated specifically by Ins. Art § 23.  Ins. Art., § 23-504.  
-3-
Premium finance agreements may be cancelled, in the event of an installment payment
default as specified in the contract, provided the implicated PFC provides the customer with
a notice of intent to cancel at least 10 days prior to cancelling the contract.  Ins. Art., §§ 23-
402(a) & 23-403.  When an insurance contract is canceled–whether by the insurer, insured,
or the PFC–the MAIF returns the gross unearned premiums due under the contract, computed
pro rata, to the PFC.  Ins. Art., § 23-405(a).  The PFC then returns “to the insured the amount
of unearned premium that exceeds any amount due under the premium finance agreement.” 
Ins. Art., § 23-405(b).  
Respondents use the Rule of 78s (sometimes referred to as the “Rule”) to calculate the
amount of interest due with each installment under the premium finance agreement.  The
Rule of 78s is an arithmetic method to calculate earned interest that allows the PFCs to
collect more in interest during the first half of the loan repayment term than the latter half.  
4
  The Rule of 78s is
4
when a loan is to be repaid in monthly installments, each month
of the loan's term is assigned a digit, with the first month's digit
[equaling] the total number of months in the agreed period of
the loan. The second month is then assigned a digit one less than
that of the first, the third month again one less, and so on, until
the digit assigned to the last month equals (1) one. For a twelve
month loan, the sum of the digits (12 + 11 + 10 . . . + 1) of this
arithmetic progression is 78.  This number then serves as the
denominator in a fractional equation, with the numerator being
the sum of the digits for those months expired at the time of the
obligation's prepayment. For example, assuming a twelve month
loan obligation, if the entire loan were prepaid at the end of the
first month, 12/78 of the total finance charge would be retained
(continued...)
-4-
 Respondents require typically ten-month repayment plans, so the Rule is modified to a “Rule
of 55s” in such instances. The Rule is not prohibited specifically by the Insurance Article.
When a premium finance agreement is cancelled early, the Rule operates to the
disadvantage of consumers because the interest charges are weighted more heavily in the
early months of the contract repayment period.   Two of the Respondents, Insurance Billing
5
Services and U.S. Capital Associates, assess finance charges using the Rule, even when the
underlying insurance policy is cancelled or voided ab initio.   The MIA did not disapprove
6
previously the use of the Rule by the PFCs and, in fact, states currently that the Rule is
(...continued)
4
by the creditor. This represents a greater proportion of the
finance charge than in any other month because the borrower
has had the use of the entire amount of the loan for that month.
At the end of the second month, 11/78 of the finance charge
would be retained since the borrower has had the use of 11/12,
or most of the loan proceeds for that month. If the borrower
prepaid the entire obligation at this time, 23/78 of the finance
charge would be considered to have been earned and therefore
would be retained by the creditor. At the end of six months, the
creditor would be entitled to 57/78 of the total finance charge,
and the consumer in turn to 21/78 of such charge.
Bone v. Hibernia Bank, 493 F.2d 135, 137 (9th Cir. 1974).
  For example, on a $1000 premium finance agreement, the total finance charges for
5
10 months would be $115.00.   Using the Rule of 78s, the PFC would collect interest
payments of $20.91 the first month, $18.82 the second month,$16.73 the third month, and
$14.64 the fourth month.  This is a total interest charge of $71.10 if the policy were cancelled
after four months and represents over 61% of the total interest for the policy.  Under the
MIA’s method, equal monthly interest charges of $11.50 would be due.  This would be a
total interest charge of $46.00.  
  Ab initio means “[f]rom the beginning.”  Black’s Law Dictionary 5 (9th ed. 2009).
6
-5-
allowed for computing finance charges, so long as its use does not result in the consumer
being required to pay more than 1.15% interest for any 30-day period.
In May 2008, the predecessor Commissioner of the current Commissioner commenced
an investigation into the earned interest calculations used by the PFCs from 1 November
2007 to 30 April 2008.  In a 19 May 2008 letter, the predecessor Commissioner requested
specific documents from Respondents in order to compile a “Market Conduct Investigation
Report.”  The investigation revealed that, because of how the PFCs used the Rule, consumers
who cancelled their premium finance agreements in the first five months, or whose insurance
policies were declared void ab initio, paid finance charges greater than 1.15% for each 30
days that the loan was outstanding.  The predecessor Commissioner issued a Cease-and-
Desist Order on 6 October 2008 that prevented Respondents from collecting interest in
excess of 1.15% for each 30-day period on any and all premium finance agreements,
including those canceled before maturity.  The Cease-and-Desist Order required also that
Insurance Billing Services and U.S. Capital Associates identify customers who paid interest
on insurance policies voided ab initio by the MAIF and for these PFC’s to refund all interest
charged and pay pre-judgment interest of six percent to those consumers. 
Respondents requested timely a hearing on the Commissioner’s Cease-and-Desist
Order.  The request resulted in a stay of the Order, by operation of statute.  Ins. Art., § 2-212
(providing that a hearing demand made within ten days of an order of the Commissioner
stays the effect of the order until the result of the hearing is set forth in another order).  The
-6-
Commissioner delegated to an ADIC the responsibility to conduct the hearing and make the
final administrative decision.  Respondents requested twice that the hearing be transferred
to and conducted by the OAH, arguing that the ADIC could not be a fair and impartial
presiding official with respect to the Cease-and-Desist Order issued by the Commissioner,
the ADIC’s hierarchical superior.  The Commissioner denied both requests.   The ADIC’s
7
hearing took place over 9 December 2008 to 11 December 2008.  Respondents subpoenaed
the Commissioner to attend the hearing, but he testified actually as a witness for the MIA. 
In that testimony, the Commissioner explained his rationale supporting the investigatory
conclusions and the basis for the Cease-and-Desist Order.  Respondents attempted to show
that the Commissioner ratified previously the use of the Rule by, among other things (see n.
15 infra, introducing evidence that the MIA proposed twice, but withdrew, regulations that
had the same effect as the Cease-and-Desist Order (to force PFCs to charge interest pro rata,
rather than according to the Rule)).
On 22 January 2009, the ADIC issued a Final Order affirming the conclusions of law
and directions in the Commissioner’s Cease-and-Desist Order.  The Final Order concluded
that Respondents were not entitled to have their administrative appeal transferred to the OAH
because the Insurance Article allowed specifically the Commissioner to delegate the role of
hearing officer and that delegation to the OAH was purely discretionary.  The Final Order
  The Commissioner is authorized expressly to delegate hearing authority to an
7
associate deputy commissioner.  Ins. Art., § 2-210(d).  
-7-
required Insurance Billing Services and U. S. Capital Associates to identify customers who
paid a finance charge on underlying policies found to be void ab initio, from and after 6
October 2008 (the date of the Cease-and-Desist Order), and issue refunds to those customers,
with pre-judgment interest.  The ADIC also found that the Commissioner’s Cease-and-Desist
Order was within his statutorily-conferred powers in Ins. Art., § 2-108 and that he was not
required to act, under the circumstances, by issuing a regulation, rather than an ad hoc
decision.
Respondents filed a petition for judicial review in the Circuit Court for Baltimore
City.  The hearing judge, relying on Mayer v. Montgomery County, 143 Md. App. 261, 794
A.2d 704 (2002), found “command influence” because the ADIC adjudicated the conclusions
of her superior, the Commissioner; therefore, the administrative hearing violated
Respondents’ right to fundamental fairness and due process of law.  The hearing judge
declined to address the issue of the statutory interpretation regarding the application of the
finance rate “cap” and ordered the case remanded to the MIA with instructions to provide
Respondents with a hearing on the Commissioner’s Cease-and-Desist Order before an
impartial hearing officer.  On the Commissioner’s appeal, the Court of Special Appeals, in
an unreported opinion, affirmed the Circuit Court’s judgment.  Petitioner filed timely a
petition for writ of certiorari to this Court and Respondent, Premium Finance of America,
Inc., filed timely a cross-petition.  We granted the petition and the cross-petition, Maryland
Insurance Commissioner v. Central Acceptance Corporation, 418 Md. 586, 16 A.3d 977
-8-
(2011), to consider the following questions, which we reword somewhat for clarity:
1) Did the agency determine correctly that § 23-304 of the
Insurance Article, which permits premium finance lenders to
impose on borrowers a finance charge “at a rate not exceeding
1.15% for each 30 days, charged in advance,” prohibits (a) the
practice of front-loading the imposition of finance charges, such
that borrowers whose loan agreements terminate prior to the end
of the loan term pay finance charges in excess of 1.15% for each
30 days, and (b) the practice of imposing finance charges even
where the insurance policy never takes effect?
2) Does the “command influence” rule prohibit, as a matter of
constitutional due process, an administrative agency from
adjudicating a matter after it has issued a pre-hearing ex parte
order in the matter?
3) Does the “command influence” rule apply to a regulatory
proceeding where all material facts were undisputed, where the
agency was deciding a pure question of law, and where the
agency’s legal ruling was subject to judicial review?
4) Is the Commissioners Cease-and-Desist Order contrary to law
because it implements a change in generally applicable policy
that may be implemented only through the adoption of
regulations, not adjudication?
5) Is the Commissioner’s Cease-and-Desist Order contrary to
law because the Cease-and-Desist Order was issued without
complying with the procedural requirements of §§ 2-209 and 23-
207 of the Insurance Article, the sections cited in the Cease-and-
Desist Order as the authority under which the Order was issued?
6) Is the Commissioners Cease-and-Desist Order contrary to law
because the MIA lack the statutory authority to issue cease-and-
desist orders against premium finance companies?
We hold that: (1) based on the facts and circumstances of this case, there was no
undue “command influence” exercised by the Commissioner in delegating to the ADIC the
-9-
responsibilities to hear and decide Respondents’ administrative appeal; (2) the MIA was
permitted to adjudicate the legal issues in this case, rather than proceed by rulemaking; (3)
the Commissioner had the statutory authority to issue the Cease-and-Desist Order; (4) any
alleged procedural irregularities did not affect a substantial right of Respondents; (5) the
MIA interpreted correctly Ins. Art., § 23-304 with respect to calculating the maximum
finance charges; and (6) the PFCs may charge the lawful rate of interest on premiums
advanced for insurance policies later voided ab initio.  Accordingly, we vacate the judgment
of the Court of Special Appeals and remand the case to that court with directions to vacate
the judgment of the Circuit Court and to remand the case to the Circuit Court with directions
to affirm in part, and reverse in part, the MIA’s Final Order, consistent with the views
expressed in this Court’s opinion.
II.  Standards of Review
In cases involving judicial review of actions by a State administrative agency, we
review directly the action of the agency, rather than the decision of the intervening reviewing
courts.  Consumer Prot. Div. v. Morgan, 387 Md. 125, 160, 874 A.2d 919, 939 (2005)
(citation omitted).  In a proceeding reviewing a contested case action, a reviewing court may:
(1) remand the case for further proceedings;
(2) affirm the final decision; or
(3) reverse or modify the decision if any substantial right of the
petitioner may have been prejudiced because a finding,
conclusion, or decision:
(i) is unconstitutional;
(ii) exceeds the statutory authority or jurisdiction of the
final decisionmaker;
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(iii) results from an unlawful procedure;
(iv) is affected by any other error of law;
(v) is unsupported by competent, material, and substantial
evidence in light of the entire record as submitted; or
(vi) is arbitrary and capricious.
Maryland Code (1957, 2009 Repl. Vol.), State Government Article, § 10-222.  We evaluate
generally a challenge to an agency’s decision to proceed by adjudication rather than
rulemaking under the abuse of discretion standard.  Consumer Prot. Div. v. Consumer Publ’g
Co., 304 Md. 731, 753-54, 501 A.2d 48, 60 (1985) (“[T]he choice between rulemaking and
adjudication lies . . . within the [agency’s] discretion.”) (citations omitted).  This deferential
standard of review is also applied to an agency’s decision whether to delegate a case for
adjudication to the OAH.  Spencer v. Md. State Bd. of Pharmacy, 380 Md. 515, 529, 846
A.2d 341, 349 (2004) (“[T]he discretionary functions of the agency must be reviewed under
a standard more deferential than either the de novo review afforded an agency’s legal
conclusions or the substantial evidence review afforded an agency’s factual findings.”). 
Abuse of discretion review evaluates whether an agency’s action was arbitrary and
capricious.  Id. (“[T]he standard set forth in § 10-222(h)(3)(vi), review of “arbitrary and
capricious” agency actions, provides guidance for the courts as they seek to apply the correct
standard of review to discretionary functions of the agency.”).  
When reviewing an agency’s departure from its procedures, the court looks to whether 
a “substantial right” of a party was violated and whether that party was prejudiced by the
procedural irregularities.  Pollock v. Patuxent Inst. Bd. of Rev., 374 Md. 463, 469 n.3,  823
-11-
A.2d 626, 630 n.3 (2003) (citing Bernstein v. Real Estate Comm’n of Md., 221 Md. 221, 230,
156 A.2d, 657, 662 (1959), appeal dismissed, 363 U.S. 419, 80 S. Ct. 1257, 4 L. Ed. 2d 1515
(1960) (stating that the function of a reviewing court is to reverse or modify and order if
“substantial rights of a petitioner have been improperly prejudiced by a departure from
procedures”). 
When considering a question of statutory interpretation by an agency, we review the
agency’s interpretation according to a non-deferential standard of review.  Miller v.
Comptroller of Md., 398 Md. 272, 280, 920 A.2d 467, 472 (2007) (“[T]he question is one of
statutory interpretation and [is], therefore, a purely legal inquiry.”) (internal quotes and
citations omitted); State Dep’t of Assessments and Tax’n v. N. Balt. Ctr., Inc., 129 Md. App.
588, 595, 743 A.2d 759, 763 (2000) (“The interpretation of a statute normally presents a
question of law.”) (citations omitted).  Nonetheless, we give frequently “weight to an
agency’s experience in interpretation of a statute that it administers,” Schwartz v. Md. State
Bd. of Pharmacy, 385 Md. 543, 554, 870 A.2d 168, 180 (2005), especially when that statute
is ambiguous or unclear.  Div. of Labor & Indus. v. Triangle Gen. Contrs., Inc., 366 Md. 407,
417, 784 A.2d 534, 539-40 (2001).  On the other hand, when the language of the statute is
clear and unambiguous, no deference is due the administrative interpretation.  Id. 
III.  Discussion
A.  “Command Influence”
Respondents’ threshold claim, and the only one decided by the earlier reviewing
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courts, is that the MIA’s hearing on the Commissioner’s Cease-and-Desist Order was
contrary to the Court of Special Appeal’s discussion of Maryland law in its opinion in Mayer. 
In Mayer, a police sergeant filed an administrative grievance challenging the results of a
promotional examination resulting in his classification as “qualified,” rather than “well
qualified” as required for promotion to lieutenant.  Mayer, 143 Md. App. at 264-65, 794 A.2d
at 706-07.  The basis for Mayer’s grievance was that the raters who evaluated his
performance were incompetent or otherwise unqualified to judge him on specific areas of
proficiency.  Mayer, 143 Md. App. at 267, 794 A.2d at 708.  The County Director of the
Office of Human Resources (“OHR”) denied Mayer’s grievance in a written “Step II”
response (according to the County Administrative Procedures), and Mayer appealed that
decision by requesting a “Step III” hearing.  Mayer, 134 Md. App. at 267-68, 794 A.2d at
708. The hearing officer assigned to Mayer’s Step III appeal was the subordinate of the
County Director who denied Mayer’s grievance at the Step II level.  Mayer, 134 Md. App.
at 268, 794 A.2d at 708.  Mayer objected to the hearing officer’s appointment, arguing that
a subordinate of the Director would be under “command influence” and “loath to render a
decision adverse to that of her superior and therefore would not be impartial, or at least
would not appear to be impartial.”  Id.  The Step III hearing officer affirmed the Step II
written denial of Mayer’s grievance.  Id.  Mayer appealed the Step III hearing to the Board
of Appeals, which affirmed the OHR’s actions, and then to the Circuit Court for Montgomery
County, which also affirmed.  Mayer, 134 Md. App. at 269-70, 794 A.2d at 709-10.  The
-13-
Court of Special Appeals reversed, concluding that “there is a substantial likelihood that the
hearing officer’s view of the case will be tainted and that he therefore will not render an
impartial decision; and if there is no actual partiality, the process appears not to be impartial.” 
Mayer, 134 Md. App. at 277, 794 A.2d at 714.  In reaching that conclusion, the Court of
Special Appeals noted as significant that “the Step II responder and the Step III hearing
officer engaged in nearly an identical adjudicatory-type function.”  Mayer, 134 Md. App. at
280, 794 A.2d at 715.  In this case, the intermediate appellate court distinguished the facts
in Mayer from those in our opinions in Spencer and Consumer Publishing, where we held
that a combination of adjudicative and investigative functions within an agency was
permissible.
Respondents maintain their view that the ADIC was under the “command influence”
of the Commissioner, who initiated the original investigation and issued the Cease-and-
Desist Order; therefore, the hearing on the administrative appeal was unfair, or gave the
appearance of being unfair.  The MIA counters that the Commissioner was authorized by the
Insurance Article expressly to delegate the hearing to an ADIC and that a theory of
“command influence” does not apply to hearings where the material facts are not in dispute
and the ADIC was called upon to decide questions of law solely.  We agree with the MIA
that a theory of “command influence” does not apply to the facts of the present case and the
delegation of the hearing and final decision-making to the ADIC was proper.  
The due process concerns expressed by the Court of Special Appeals in Mayer were
-14-
generated by a very specific factual and procedural scenario not analogous to the
circumstances in the instant case.  Unlike Mayer, the ADIC’s hearing was not an “identical
adjudicatory-type function” to what the Commissioner engaged in leading to the issuance of 
the Cease-and-Desist Order.  The Commissioner initiated the “market conduct investigation”
into the PFCs’ finance practices and, upon concluding the report of the investigation, issued
the Cease-and-Desist Order.  The Commissioner’s actions were ex parte in large part 
Respondents’ demand for a hearing as to the Cease-and-Desist Order initiated the
administrative adjudicatory process contemplated by the regulatory scheme.  The ADIC’s
hearing was a contested case hearing with “trial type procedures,” including pre-trial notice,
evidence, privileges, cross-examination, and burdens of proof.  Maryland Code (1957, 2009
Repl. Vol.) State Gov’t Art., §§ 10-208, 10-213, 10-217.  The fact-finding investigation and
Cease-and-Desist Order engaged in by the Commissioner were not an “identical” function
to the contested case hearing held by the ADIC; therefore, the predicate facts and procedures
in Mayer are distinguishable from those in the present case.
Moreover, Mayer involved a hearing officer who was obliged to resolve disputed
questions of fact.  Here, the ADIC was called upon to decide only questions of law.  
8
  Petitioner and Respondents entered into a Joint Stipulation as to Document Review
8
before the MIA hearing, which amounted to an agreement to the material facts of the present
case.  In their briefs to us, however, Respondents appear to retreat from the agreed upon
facts, especially as to the MIA’s supposed past implied approvals of the use of the Rule;
however, the MIA does not contest that it approved the use of the Rule and, in fact, continues
to approve of the Rule in certain cases.  Although it may be, with the benefit of hindsight,
(continued...)
-15-
Respondents argue that this is a distinction without significance; we do not agree.  As
recognized by the Court of Special Appeals in Mayer, judicial review of an agency action on
a question of law engages a generally non-deferential standard of review.  143 Md. App. at
271, 794 A.2d at 710 (“In contrast to the deferential review accorded to an agency’s factual
findings, questions of law receive no deference on review; we are not bound by the agency’s
interpretation of law.”) (citing Caucus Distribs. v. Md. Sec. Comm’r, 320 Md. 313, 324, 577
A.2d 783, 788 (1990)).  Judicial review of agency fact-finding, on the other hand, is given
significant deference.  Milliman, Inc. v. Md. State Ret. Pension Sys., 421 Md. 130, 152, 25
A.3d 988, 1001 (2011) (“[A] reviewing court must defer to the agency’s fact-finding and
drawing of inferences if they are supported by the record.”) (quoting Motor Vehicle Admin.
v. Shea, 415 Md. 1, 14, 997 A.2d 768, 775-76 (2010)) (internal quotations omitted).  Were
the ADIC subject to the Commissioner’s “command influence,” and Respondents have not
shown that she was,  judicial review would cure any errors of law.   
9
Respondents requested twice that the Commissioner transfer the administrative appeal
to the OAH for hearing and decision, and twice the Commissioner denied that request. 
(...continued)
8
that Respondents’ wish now to call upon divergent inferences drawn from the agreed-upon
facts in this case, that does not mean that the ADIC was deciding issues other than largely
questions of law as a result of the administrative hearing.
 Respondents offer as the only indicia of “command influence” that the
9
Commissioner’s legal advisor sat beside the ADIC throughout the hearing and that the
Commissioner testified as a witness; therefore, the Commissioner must have influenced the
ADIC’s decision, or it appeared to be so.  
-16-
Under the State Administrative Procedures Act (“APA”), the decision to delegate a case to
the OAH for hearing and a proposed or final administrative decision lies solely within the
discretion of the agency, although the particular facts of a given case may compel a specific
choice if fundamental fairness demands.  State Gov’t Art., § 10-205(a).    For example, in
10
Spencer, several members of the Board of Pharmacy, having been involved in failed
settlement negotiations with Spencer,  refused to recuse themselves from the hearing on the
merits that ensued.  380 Md. at 520-22, 846 A.2d at 343-45.  Spencer requested that the
hearing be transferred to the OAH, was denied, and, on judicial review, argued that the
refusal to transfer her case was a violation of due process.  Spencer, 380 Md. at 524, 846
A.2d at 346.  We held that the decision whether to transfer a case to the OAH was within the
agency’s discretion, and would be reviewed under the “arbitrary and capricious” standard. 
Spencer, 380 Md. at 531, 846 A.2d at 350. (“[A]n agency’s prerogative with respect to case
  Maryland Code (1957, 2009 Repl. Vol.) State Gov’t Art., § 10-205(a) provides,
10
(a) To whom delegated; limitation. – (1) Except as provided in
paragraph (2) of this subsection, a board, commission, or agency
head authorized to conduct a contested case hearing shall: 
(i) conduct the hearing; or
(ii) delegate the authority to conduct the contested case
hearing to:
1. the Office [of Administrative Hearings]; or
2. With the prior written approval of the Chief
Administrative Law Judge, a person not employed by the Office.
. . . 
 
-17-
referral to OAH is similar in scope to that of the prerogative in determining the severity of
sanctions, or to that of forgoing prosecution of a particular individual.”).  Even though the
members of the Board in Spencer erred in not recusing themselves from hearing Spencer’s
matter, we concluded that this error alone was not so egregious a problem that it could not
be cured on remand by anything other than a delegation to the OAH to hold a new hearing. 
380 Md. at 527, 846 A.2d at 344-49. 
In the present case, there has been no showing of “fraud or egregious behavior on
behalf of the agency” that would persuade us that the Commissioner, the ADIC, or the MIA
acted arbitrarily or capriciously.  Spencer, 380 Md. at 533, 846 A.2d at 352.  The
Commissioner was authorized by the State APA either to hold a hearing or delegate all or
part of the hearing and decision-making responsibilities to the OAH.  State Gov’t Art., § 10-
205(a).  The Commissioner was authorized, also by statute, to delegate internally the hearing
and decision-making responsibilities to the ADIC. Ins. Art., § 2-210(d). The Commissioner
initiated an investigation and issued a Cease-and-Desist Order based on his findings.
Although the Commissioner did participate in the resultant hearing as a witness, he was
questioned by both the MIA and Respondents about his reasons for issuing the Cease-and-
Desist Order; his view of, and the alleged former position of the MIA, on the use of the Rule;
his role in the MIA’s relevant legislative advocacy; and his view on the practice regarding
premium refunds on policies voided ab initio. The transcripts of the MIA hearing do not
indicate any episodic or systemic impropriety on the part of the Commissioner or the ADIC. 
-18-
Respondents argue that the influence of the Commissioner was entwined
impermissibly with the ADIC’s conduct of the hearing. Section 2-209 of the Insurance
Article allows specifically the Commissioner to “testify and offer other proper evidence
about [the] information obtained during an examination.”  Ins. Art., § 2-209(d)(1), (d)(2). 
Notwithstanding that the ADIC was appointed by the Commissioner, without some additional
evidence, we shall not assume that the ADIC, who is authorized to preside over hearings at
the MIA, is unable to resist “command influence” in any given case and, therefore, unable
to provide a fair hearing to Respondents.  
Respondents maintain that they were not afforded a fair hearing because it is improper
generally for an agency to conduct a hearing after the agency head issues an ex parte order. 
We, as well as our intermediate appellate court brethren, have held in numerous cases that
the combination of adjudicatory and investigatory functions in an agency is not, per se, a
violation of due process.  Consumer Publ’g Co., 304 Md. at 763, 501 A.2d at 64-65; Morgan,
387 Md. at 194, 874 A.2d at 1469; State Bd. of Physicians v. Bernstein, 167 Md. App. 714,
894 A.2d 621 (2006); Rosov v. Md. State Bd. of Dental Exam’rs, 163 Md. App. 98, 877 A.2d
1111 (2005).  These cases relied on the U.S. Supreme Court’s decision in Withrow v. Larkin,
421 U.S. 35, 95 S. Ct. 1456, 43 L. Ed. 2d 712 (1975).  In Withrow, a physician argued that
a state board violated his due process when the board conducted a hearing on charges it
investigated before authorizing the bringing of charges. 421 U.S. at 40, 95 S. Ct. at 1461, 43
L. Ed. 2d at 720.  The U.S. Supreme Court rejected the physician’s argument, reasoning that:
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[t]he contention that the combination of investigative and
adjudicative function necessarily creates an unconstitutional risk
of bias in an administrative adjudication . . . must overcome a
presumption of honesty and integrity in those serving as
adjudicators; and it must convince that, under a realistic
appraisal of psychological tendencies and human weakness,
conferring investigative and adjudicative powers on the same
individuals poses such a risk of actual bias or prejudgment that
the practice must be forbidden if the guarantee of due process is
to be adequately implemented.
421 U.S. at 47, 95 S. Ct. at 1464, 43 L. Ed. 2d at 723-24.  Further, the Court found that “[i]t
is also very typical for the members of administrative agencies to receive the results of
investigations, to approve the filing of charges or formal complaints instituting enforcement
proceedings, and then to participate in the ensuing hearings.”  Withrow, 421 U.S. at 56, 95
S. Ct. at 1469, 43 L. Ed. 2d at 729. The Court held that the combination of adjudicatory and
investigatory functions does not violate due process.  Id.   The Court left open, however, the
possibility that, in special circumstances, the combination of functions may present a “risk
of unfairness [that] is intolerably high.”  Withrow, 421 U.S. at 58, 95 S. Ct. at 1470, 43 L. Ed.
2d at 730. 
In Consumer Publishing, we upheld the Consumer Protection Division’s investigation,
filing of charges, and adjudication of allegedly deceptive advertising of “diet pills” in
Maryland newspapers.  304 Md. at 737, 501 A.2d at 51-52.  The statutory enumeration of the
express and implied powers of the Consumer Protection Division included: receiving and
investigating consumer complaints; investigating possibly unfair or deceptive trade practices;
seeking a temporary or permanent injunction; and exercising and performing “any other
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function, power and duty appropriate to protect and promote the welfare of consumers.” 
Consumer Publ’g, 304 Md. at 745, 501 A.2d at 55.  We concluded that the Consumer
Protection Division’s actions did not exceed the tolerance of Withrow because the Consumer
Protection Division of the Office of the Attorney General received the results of the
investigation and approved the filing of charges, but did not officiate at the hearing. 
Consumer Publ’g, 304 Md. at 763, 501 A.2d at 64-65.  Rather, a law school professor was
appointed by the Chief of the Consumer Protection Division (to whom the Attorney General
delegated the responsibility) to sit as a special hearing officer, pursuant to then-existing
statutory authority.  Consumer Publ’g, 304 Md. at 769, 501 A.2d at 68.  Conversely, the
hearing officer did not participate in the investigation; therefore, there was no evidence of
impropriety violative of due process.  Consumer Publ’g, 304 Md. at 763, 501 A.2d at 64-65. 
Consumer Publishing also alleged irregularity because the Attorney General of
Maryland issued a press release on the same day the charges were filed, thereby supplying
evidence that the Attorney General “prejudged” the merits of the case.  Consumer Publ’g,
304 Md. at 764, 501 A.2d at 65.  Unimpressed, we found the issuance of the press release,
concurrent with issuing charges, did not violate due process.  Id. (citing Roberts v. Morton,
549 F.2d 158, 164 (10th Cir. 1976)), cert. denied, 434 U.S. 834, 98 S. Ct. 121, 54 L. Ed. 2d
95 (1977).  Even had the press release revealed that the Attorney General somehow
“prejudged” the case, that alone did not rise necessarily to the level of a due process
violation.  Consumer Publ’g, 304 Md. at 766, 501 A.2d at 66 (citing Shaughnessy v. United
-21-
States, 349 U.S. 280, 75 S. Ct. 746, 99 L. Ed. 2d 1074 (1955)).  Bias that rises to the level
of a due process violation required “[s]tatements on the merits by those who must make
factual determination on contested fact issues . . . where fact finding is critical.” Id. (citing
Staton v. Mayes, 552 F.2d 908, 914 (10th. Cir. 1977)), cert. denied, 434 U.S. 907, 98 S. Ct.
309, 54 L. Ed. 2d 195 (1977)).  
In Morgan, the Consumer Protection Division’s investigation into, and hearing on
charges of, improper home appraisals, passed muster when we found circumstances similar
to those in Consumer Publishing.  387 Md. at 195, 874 A.2d at 960.  Morgan did not meet
the Withrow burden that a party alleging a violation of due process “must overcome a
presumption of honesty and integrity in those serving as adjudicators.”  Id.  In Morgan, there
was no evidence or allegations of any facts or circumstances presenting an elevated risk of
unfairness Morgan’s argument rested instead on the per se invalidity of the Consumer
Protection Division’s general internal procedures for investigating, prosecuting, and
adjudicating cases.  Id.  
The present case falls squarely within the core reasoning of Consumer Publishing,
Morgan, and Withrow.  We proceed from the presumption that the ADIC conducted the MIA
hearing with honesty and integrity, absent evidence to the contrary (having the
Commissioner’s legal advisor at her side is insufficient).  The record does not reflect that the
ADIC participated in the investigation or issuance of the Cease-and-Desist Order.  Although
the Commissioner participated as a witness at the hearing to explain his rationale for the
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Cease-and-Desist Order, there is no evidence in the record that he (or his legal advisor)
participated in the ultimate administrative decision-making process or influenced improperly
the ADIC.   Simply because the ADIC was delegated by the Commissioner to conduct the
11
hearing does not make her a fortiori a slavish lapdog subject to the Commissioner’s will.  
12
Respondents simply have not overcome the presumption that the ADIC was a proper delagee
of the hearing and decision-making responsibilities.  Respondents rest, as Morgan did, on the
per se, blanket inability of an agency to hear fairly a contested case, after it investigates and
issues a Cease-and-Desist Order.  The argument that the Commissioner “prejudged” the
merits of the eventual hearing is not persuasive, because the Commissioner delegated
properly the hearing and decision-making responsibilities to the ADIC; therefore, the
Commissioner was not a person who “must make factual determinations on contested fact
issues . . . where fact finding is critical.”  There were no material factual disputes to be
resolved at the administrative hearing. Moreover, as discussed supra, there is no tangible
evidence of actual or perceived “command influence.”  Finally, even if the appearance of
“command influence” existed, as Respondents allege, the reviewing court’s non-deferential
   The Commissioner’s presence at the hearing ostensibly was compelled by
11
Respondents’ subpoena for his presence.  While this fact is not dispositive of their claim, it
is a bit anomalous for Respondents to request a witness to attend and then complain that the
witness’s presence was indicative of “command influence” or an improper combination of
investigatory and adjudicatory proceedings within an agency.  
  The ADIC is an attorney admitted to the Maryland Bar and bound by her oath to
12
uphold the U.S. and Maryland Constitutions, including the protections of due process of law. 
Maryland Code (1989, 2010 Repl. Vol.), Bus. Occ. & Prof. Art., § 10-212.  
-23-
standard of review of the issues of law decided by the ADIC would ensure that any errors of
law would be considered fairly.  
Having resolved that the Circuit Court and the Court of Special Appeals erred in how
they decided the only question reached by those courts, from among the several placed before
them, we, in the exercise of our discretion (and because the other questions presented were
pressed by the parties below and may fairly be decided on the record made), shall decide the
other questions presented.
B.  Propriety of the Cease-and-Desist Order.
i.  Was the MIA required to proceed via formal rulemaking?
We review the MIA’s decision to proceed by adjudication, rather than rulemaking,
according to the very deferential abuse of discretion standard, where only actions that are
“arbitrary and capricious” are overturned.  Consumer Publ’g, 304 Md. at 54-55, 501 A.2d
at 60; Spencer, 380 Md. at 529, 846 A.2d at 349.  In Consumer Publishing, an advertising
company argued that the Consumer Protection Division was required to proceed by
rulemaking, rather than adjudication, because resolution of the dispute over alleged
“deceptive” advertising practices would be industry-wide in impact.  304 Md. at 753, 501
A.2d at 60.  We disagreed, concluding that even if the practices were shown to be industry-
wide, the agency would not be limited to a rulemaking remedy because courts have held
generally that agencies “[are] not precluded from announcing new principles in . . .
adjudicative proceeding[s] and that the choice between rulemaking and adjudication lies . .
-24-
. within the [agency’s] discretion.” Id. (quoting NLRB v. Bell Aerospace Co., 416 U.S. 267,
293, 95 S.Ct. 1757, 1771, 40 L. Ed. 2d 134, 153 (1974) (summarizing the holdings in SEC
v. Chenery Corp., 332 U.S. 194, 67 S. Ct. 1575, 91 L. Ed. 2d 1995 (1947) and NLRB v.
Wyman-Gordon Co., 394 U.S. 759, 89 S. Ct. 1426,  22 L. Ed. 2d 709  (1969)).  
The U.S. Supreme Court, in Chenery, emphasized the importance of allowing
agencies to retain the flexibility to determine when to proceed by rulemaking in order to
maintain an effective administrative process.  332 U.S. at 202-03, 67 S. Ct. at 1580-81, 91
L. Ed. 2d at 2003 (“There is thus a very definite place for the case-by-case evolution of
statutory standards.  And the choice made between proceeding by general rule or by
individual, ad hoc litigation is one that lies primarily in the informed discretion of the
administrative agency.”) We mentioned in Consumer Publishing the more restrictive rule
explicated in Ford Motor Co. v. FTC, 673 F.2d 1008, 1009 (9th Cir. 1981), cert. denied, 459
U.S. 999, 103 S. Ct. 358, 74 L. Ed. 2d 394 (1983), that rulemaking should be required when
an agency adopts a new, retrospectively applied, ruling with widespread application.  Even
under the narrower view in Ford Motor, however, we opined that the Consumer Protection
Division there did not “change existing law . . . of widespread application,” but simply
applied the statute to the facts in the case.  304 Md. at 756, 501 A.2d at 61.  
In Baltimore Gas & Electric Company v. Public Service Commission, 305 Md. 145,
153, 501 A.2d 1307, 1310-11 (1986), Baltimore Gas & Electric (“BGE”) sought three
separate fuel rate adjustments from the Public Service Commission (“PSC”).  At issue in the
-25-
eventual administrative appeals were the portions of each fuel rate adjustment attributed to
the cost of purchasing alternative electricity during forced power outages.  Balt. Gas &
Electric, 305 Md. at 153, 501 A.2d 1311.  Section 54(F) of the Public Service Commission
Law directed the PSC to base any decision on fuel rate adjustments on four enumerated
factors.   Maryland Code (1957, 1980 Repl. Vol.) Article 78 § 54F.  After evidentiary
13
hearings, the PSC denied, under § 54F(f)(4) requiring BGE to maintain the “productive
capacity of all its generating plants at a reasonable level,” portions of the requested rate
increases because BGE had not proved the outages were not due to improper management.
Id.  
BGE appealed the PSC’s decision, arguing that the PSC interpreted improperly the
“reasonable level” provision of § 54(F)(f)(4), id., based on the fact that a year prior to the
first forced outage, the PSC approved BGE’s initial application for fuel rates under § 54(F),
noting that BGE’s availability of generating units was well above the industry average.   Balt.
Gas & Electric, 305 Md. at 163, 501 A.2d at 1316.  BGE argued that the PSC’s application
of “reasonable level” to the later rate adjustment request was improper because the PSC
investigated the cause of specific outages, rather than relying solely on the well-above-
  The PSC must consider whether “(1) [o]nly changes in the actual costs of the
13
components of the fuel rate are included in the proposed change; (2) [t]he applicant has used
the most economical mix of all types of generation and purpose; (3) [t]he applicant has made
every reasonable effort to minimize fuel costs and followed competitive procurement
practices; (4) the applicant has maintained the productive capacity of all its generating plants
at a reasonable level.”  Maryland Code (1957, 1980 Repl. Vol.) Article 78 § 54F(f).  
-26-
average generator availability found in the earlier application. Balt. Gas & Electric, 305 Md.
at 169, 501 A.2d at 1319.  We rejected BGE’s argument, concluding that “reasonable level”
was a vague term, that the PSC, when it issued the order after the first rate adjustment
hearing, outlined the internal procedures used to evaluate reasonableness, and that those
procedures allowed specifically the PSC to investigate specific outages.  Balt. Gas &
Electric, 305 Md. at 159-61, 501 A.2d at 1314-15. We found persuasive that the PSC
maintained this interpretation during the subsequent hearings.  Id.  We concluded that the
PSC’s interpretation of “reasonable level” was proper, that it articulated clearly internal
procedures for determining “reasonable level” through an adjudicative proceeding, and that
its application of the internal procedures was consistent.  Balt. Gas & Electric, 305 Md. at
165, 501 A.2d at 1319.   This was not a case “in which materially modified or new standards
were applied [retrospectively] to the detriment of a company that had relied upon the [PSC’s]
past pronouncements; rather, this was a situation where “the orderly growth and development
of legal principles” was achieved through contested case proceedings.  Id.
We held, however, that rulemaking was required, rather than adjudication, in the
particular circumstances presented in CBS Inc. v. Comptroller of the Treasury, 319 Md. 687,
688, 575 A.2d 324, 324 (1990) (“CBS”).  In the years up to, and including 1980 and 1981,
CBS, a New York corporation, calculated its Maryland taxes according to the three-factor
formula in Code of Maryland Regulations (“COMAR”) § 03.04.01.03E (which governs
apportionment of taxes for a unitary corporation) that apportioned a part of CBS’s taxable
-27-
income to Maryland.  CBS, 319 Md. at 690, 575 A.2d at 325.  The calculation of the formula
was influenced by the fact that CBS had nationwide advertising receipts, but no property or
payroll in Maryland.  Id.  In the years prior to 1980, the calculation was reviewed by the
Comptroller during tax audits and no adjustments were made to the formula.  Id.   In 1980
and 1981, the Comptroller audited CBS’s tax returns and insisted, for the first time, that the
formula be modified to compare the total network audience to the specific audience in
Maryland, which resulted in a significant increase in taxes.  Id.  After a hearing officer in the
State Income Tax Division upheld the Comptroller’s audit, CBS appealed to the Maryland
Tax Court, which sided with CBS, agreeing that a change in tax calculation needed to be
accomplished through rulemaking and not by ad hoc adjudication.  Id.   The Circuit Court
for Baltimore City, at the Comptroller’s behest, reversed the Tax Court and affirmed the
Comptroller’s decision.  CBS, 319 Md. at 691, 575 A.2d at 325.  When the case reached our
Court, however, we agreed with the finding of the Tax Court that, “when a policy of general
application, embodied in or represented by a rule, is changed to a different policy of general
application, the change must be accomplished by rulemaking.”  CBS, 319 Md. at 696, 575
A.2d at 328.  The Tax Court found that, until the audits of 1980 and 1981, the Comptroller
consistently interpreted the COMAR § 03.04.01.03E as allowing CBS, and other
corporations, to include national advertising revenues in its tax calculations.  CBS, 319 Md.
at 697, 575 A.2d at 329. The Comptroller’s change to the “audience share method” of
apportioning advertising revenue was a “substantial deviation” from the prior interpretation,
-28-
that “in no way can . . . be termed refinement.” Id.  We distinguished Consumer Publishing
on the basis that there was an existing regulation in the COMAR and the adjudication in CBS
resulted in a change to existing regulations with widespread application.  CBS, 319 Md. at
699, 575 A.2d at 330. 
A recent treatise on Maryland Administrative Law comments that rulemaking is
preferable to, or viewed as fairer than, adjudication because the resultant rules are binding
on an entire industry, rather than only on the  parties to the contested case.  Arnold Rochvarg,
Principles and Practice of Maryland Administrative Law 266-67 (2011).  Also, rulemaking,
it is claimed, provides greater notice and public participation and applies only to future
conduct, rather than operating retrospectively.  Id. Professor Rochvarg opines further,
however, that an agency’s decision to proceed by adjudication, rather than rulemaking,
should not be the grounds for overturning a discrete adjudication, despite this Court’s
reasoning in CBS.  Rochvarg, supra, at 268.  He bases this notion on the fact that parties to
a contested case hearing receive more procedural rights than they would have during the
rulemaking process, including the right to cross-examine witnesses and the requirement that
the agency’s decision must be based entirely on the hearing record.  Rochvarg, supra, at 268-
69.
The present case, it seems to us, falls within the holding of Consumer Publishing,
rather than the exception to the rule articulated in CBS.  As in Consumer Publishing, there
was no change in existing law or regulation in the present case, but rather an application of
-29-
the existing law to the facts in the case.  Even if the MIA’s enforcement posture was arguably
at odds with an inference drawn from its past disinclination to adopt rules prohibiting
application of the Rule of 78s, Chenery teaches that agencies “are not precluded from
announcing new principles in adjudicative proceedings.”   This is similar to the “orderly
growth and development of legal principles” upon which we based our decision on BGE. 
The parties to the contested case here are the nine largest PFCs in the industry.14
Importantly, the reach of the Final Order was not retrospective, instead deciding the
facts before it and imposing requirements for prospective activities, including prohibitions
on using past approved forms that violate Ins. Art., § 23-304 and imposing finance charges
that exceed 1.15% for each 30 days on any and all premium finance agreements (including
those found later to be void ab initio).  In the special circumstances of Insurance Billing
Services and U.S. Capital Associates, the Final Order required a refund of finance charges
where the underlying insurance policies were declared void ab initio, plus pre-judgment
interest, but from the date of the Cease-and-Desist Order.  
The parties in this case were given all of the procedural rights of a contested case
hearing under the State APA.  Respondents had ample time and ability to produce a full
record at the administrative hearing and to cross-examine witnesses for the MIA, including
  The Commissioner issued contemporaneously a press release with the Cease-and-
14
Desist Order.  In addition, the MIA issued a bulletin to all PFCs and interested parties on 10
October 2008, reminding the parties of the requirements of Ins. Art., § 23-304.  The press
release and bulletin provided public notice to other PFCs that may have been calculating
interest charges under Ins. Art., § 23-304 improperly.  
-30-
the Commissioner.  The decision of the ADIC was based on the record.  The hearing and
Final Order, upon judicial review, were subject generally to non-deferential standards of
judicial review as to claimed errors of law.
Respondents argue that the past actions (and inactions) of the MIA, condoning
implicitly the use of the Rule of 78s by the PFCs, were changed substantially by the Cease-
and-Desist Order, and therefore, the holding of CBS should apply to the present case.   The
15
holding of CBS is confined, however, to situations where the agency’s adjudication changed
substantially the application or effect of an existing law or regulation, not to an agency’s
interpretation of a stand-alone statute.  No law or regulation was changed by the MIA and,
based on our interpretation of Ins. Art. § 23-304, infra, we fail see any benefit in a public
rulemaking process for the agency to receive comments on the interpretation of a statute that
is, in our view, clear on its face.    
ii.  Did the Commissioner have statutory authority to issue the 
Cease-and-Desist Order to the PFC’s?
Respondents argue that the Commissioner has no statutory authority to issue cease-
and-desist orders against the PFCs.  They point to express grants of authority to issue cease-
  Respondents offer as proof of the MIA’s condonation: (1) past PFCs’ registration
15
statements and premium finance agreements where the PFCs state that they used the Rule;
(2) a facsimile sent in 1994 from the MIA to a PFC acknowledging that PFCs use the Rule;
and (3) a letter from an Assistant Attorney General to the General Assembly saying that a
PFC may “elect its own method” of calculating finance charges under Ins. Art., § 23-304.
-31-
and-desist orders in other sections of the Insurance Article  as an indication that the absence
16
of a similar enumerated power in the Premium Financing Title means that the Legislature
intended that the Commissioner have no authority to issue the present Cease-and-Desist
Order to the PFCs.  This argument implicates the maxim of statutory construction, expressio
unius est exclusio alterius, meaning  “to express or include one thing implies the exclusion
of the other, or of the alternative."   Breslin v. Powell, 421 Md. 266, 286, 26 A.3d 878, 891
(2011) (citing Kirkwood v. Provident Sav. Bank of Balt., 205 Md. 48, 55, 106 A.2d 103, 107
(1957)); see also Black’s Law Dictionary 661 (9th ed. 2009).  We have cautioned against the
too easy use of this statutory construction tool to override the clear intent of the Legislature,
and in this case we are not persuaded by Respondents to ignore our advice in that regard.  See
Kirkwood, 205 Md. at 55, 106 A.2d at 107.  A broad grant of power is given to the
Commissioner to enforce the Insurance Article.  Section 2-108 of the Insurance Article sets
forth the general powers and duties of the Commissioner:  
In addition to any powers and duties set forth elsewhere
by the laws of the State, the Commissioner:
(1) has the powers and authority expressly conferred on the
Commissioner by or reasonably implied from this article;
(2) shall enforce this article;
(3) shall perform the duties imposed on the Commissioner by
 The general requirements allude to the Commissioner’s power to issue cease-and-
16
desist orders to insurers when there are circumstances involving threats of insolvency and
irreparable loss and injury to property or the general public.  Ins. Art., § 4-114.  The power
to issue cease-and-desist orders is also explicitly mentioned in Ins. Art., §27-103 (governing
unfair trade practices), and in Ins. Art., §25-308 (governing group self-insurance for workers
compensation).  
-32-
this article; and
(4) in addition to examinations and investigations expressly
authorized, may conduct examinations and investigations of
insurance matters as necessary to fulfill the purposes of this
article. (Emphasis added.)
Respondents imagine that the Commissioner’s powers to enforce the Insurance Article
are limited to bringing “an action in a court of competent jurisdiction to enforce this article
or an order issued by the Commissioner under this article” and, therefore, he/she may not
issue a cease-and-desist order unless that power is enumerated specifically  in a particular
title.  See Ins. Art., § 2-201(a).  We rejected the same argument, and upheld the
Commissioner’s power to enforce the provisions of the Insurance Article, in Insurance
Commissioner v. Property & Casualty Insurance Guaranty Corp., 313 Md. 518, 546 A.2d
458 (1988). There, we affirmed the Commissioner’s authority to order Property Casualty
Insurance Guarantee Corporation (“PCIGC”) to pay personal injury protection claims, on
behalf of insolvent insurers, despite that “[n]owhere in the Insurance Code is the power to
order PCIGC to pay claims expressly conferred upon the Commissioner,” and the particular
section addressing “the powers of the Commissioner with respect to PCIGC, contains no
express authorization.”  Ins. Comm’r, 313 Md. at 526-28, 546 A.2d at 463.  
We agree with the MIA that enforcement orders, including the initial Cease-and-
Desist Order and the Final Order issued as a result of the administrative hearing here, are
basic elements in a “regulator’s toolkit.”  Section 2-108 of the Insurance Article requires that
the Commissioner “shall enforce” the Insurance Article.  (Emphasis added.)  In the Premium
-33-
Financing Title, the Commissioner is given the authority to investigate and examine the
books, records, and accounts of the PFCs.  Ins. Art., § 23-103(a).  After an investigation, the
Commissioner is required to issue a report of his/her findings under Ins. Art., § 2-209.    Ins.
Art., § 23-103(c).  These reports provide the explanation and required “grounds on which”
an order must be based.   Ins. Art., § 2-204(b)(iii).
17
The Premium Financing Title authorizes the Commissioner to “suspend, revoke, or
refuse to renew the registration” of a registered PFC if it fails to comply with a “lawful
requirement of the Commissioner,” or if it violates a provision of the Title.  Ins. Art., § 23-
208(a)(1), (a)(2).  Further, the Commissioner is authorized to impose civil monetary penalties
or restitution.   Ins. Art., § 23-208(b)(1)(i), (b)(1)(ii).  In the cases of Respondents Insurance
18
  Under the enforcement provisions of the Insurance Article, orders and notices are
17
governed by § 2-204, which states:
([1])(a) Form. – An order or notice of the Commissioner must
be in writing and signed by the Commissioner or an individual
authorized by the Commissioner.
(b) Contents of order. – (1) An order of the Commissioner shall
state:
(i) its effective date;
(ii) its purpose;
(iii) the ground on which it is based; and
(iv) the provisions of this article under which action is or
proposed to be taken.
(2) Failure to designate a particular provision of this article in
accordance with paragraph (1)(iv) of this subsection does not
deprive the Commissioner of the right to rely on that provision.
. . .
  “For purposes of this subsection, restitution means the sum of money that, if paid
18
(continued...)
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Billing Services and U.S. Capital Associates, the Commissioner was authorized specifically
by § 23-208 to order these PFCs to provide restitution (in the form of a refund, plus pre-
judgment interest) to consumers whose underlying insurance policies were declared
ultimately void ab initio, after the Cease-and-Desist Order was issued.   In the case of the
remaining PFCs, the authority to issue the Cease-and-Desist Order against them, compelling
compliance with Ins. Art. § 23-304, may be implied reasonably from the overall regulatory
scheme revealed in the Insurance Article.  The Commissioner is charged with enforcing the
provisions of the Insurance Article, including the Premium Financing Title.  It does not stand
to reason that the Commissioner would be authorized only to suspend altogether a PFC from
the business of premium financing, or impose civil penalties, but not authorized to order
registered PFCs to comply with the provisions of the Premium Financing Title.  We decline
to interpret the regulatory scheme to limit the Commissioner to instituting actions in circuit
courts or banning a PFC from the business of premium financing in order to compel
compliance with a discreet requirement of the Insurance Article.  As in Insurance
Commissioner, despite the absence of an express authorization or power, we conclude that
the statute reasonably implies that the Commissioner is empowered to issue enforcement
orders seeking to compel compliance with Ins. Art. § 23-304.  
(...continued)
18
to a person that suffers financial injury as a result of violation of this title, will restore the
person to the same financial position the person would have been in had the violation not
occurred.”  Ins. Art., § 23-208(b)(2).
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iii.  Did the Cease-and-Desist Order comply with procedural requirements of the
Insurance Article?
We review an alleged violation of regulatory procedures to see if there is a violation
of a “substantial right” of the complaining party and, if so, whether prejudice occurred. 
Pollock, 374 Md. at 469 n.3, 823 A.2d at 630 n3.  Respondents claim that the
Commissioner’s Cease-and-Desist Order violated the procedural requirements of the
Insurance Article by failing to comply with § 2-209 requiring the MIA to “give a copy of the
proposed report to the person that was examined” at least 30 days before filing a report and
making it public.  The MIA, in response, makes a distinction between a formal examination
and the less formal investigation (or analysis) here, each having different procedural
requirements.  
There is no need for us to dissect the Insurance Article to determine whether an
examination, investigation, or analysis was conducted, or what the associated procedural
requirements may be with regard to each inquisitory exercise.  The only question we need
to ponder here is whether, assuming such a shortcoming as the PFCs point to, a substantial
right of the PFCs was violated. We answer that question in the negative.  The investigation
by the Commissioner was based on undisputed facts that were stipulated to eventually by all
parties at the administrative hearing.  The rationale for the Commissioner’s decision was
detailed in the Cease-and-Desist Order, provided to Respondents.  The results of the
investigation were provided to the PFCs in advance of the administrative hearing.  The
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automatic stay of the Cease-and-Desist Order, triggered by the PFCs’ request for a hearing,
and the subsequent hearing, provided substantially similar procedural protections for the
PFCs than are given by Ins. Art., § 2-209.  The notice provisions of Ins. Art., § 2-209(c)
allow the person examined an opportunity for a hearing to comment on the report and to
suggest changes to the proposed report.  
Section 2-209 only requires the Commissioner to accept changes to the report, sought
by a responding party, that he/she “considers proper.”  The ultimate dispute in this case is
over the interpretation of Ins. Art., § 23-304.  It is unlikely that the Commissioner would
have accepted the PFCs’ interpretation of the statute advanced here had he given them 30-
days advance notice of the report and received the PFCs’ views during that period.  Thus,
even assuming the alleged procedural misstep by the MIA, there was no substantial
impairment of any rights of the PFCs and no prejudice to the conduct of the hearing or any
subsequent judicial review proceeding.
C.  Statutory Interpretation of § 23-304
After some struggle with the procedural issues supra, we grapple finally with the main
gravamen of this process that began in 2008.  Quixotically, resolution of the statutory
interpretation question proves the easiest to resolve.  
Our goal is to “ascertain and effectuate the intent of the Legislature.”  Mayor & Town
Council of Oakland v. Mayor & Town Council of Mountain Lake Park, 392 Md. 301, 316,
896 A.2d 1036, 1045 (2006). We look first to the plain language of a statute, giving the
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words their natural and ordinary meaning.  Breslin, 421 Md. at 286, 26 A.3d at 891 (citing
State Dep’t of Assessments and Tax’n v. Md.-Nat’l Capital Park & Planning Comm’n, 348
Md. 2, 13, 702 A.2d 690, 696 (1997)).  To determine the plain meaning of language, we may
consider always the context in which it appears.  State v. Pagano, 341 Md. 129, 133, 669
A.2d 1339, 1341 (1996) (citing Kaczorowksi v. Mayor & City Council of Balt., 309 Md. 505,
514, 525 A.2d 628, 632 (1987) (the meaning of the plain language “is controlled by the
context in which it appears”)).  If the statute is clear and unambiguous on its face, our inquiry
ends usually.  Id. (citing Marriot Emps. Fed. Credit Union v. MVA, 346 Md. 437, 445, 697
A.2d 455, 458 (1997)).  If the statute is ambiguous, we turn to our arsenal of other statutory
interpretation forensic tools.  Breslin, 421 Md. at 287, 26 A.3d at 891  (citing Lewis v. State,
348 Md. 648, 653, 705 A.2d 1128, 1131 (1998)) (“[C]ourts will look for other clues – e.g.,
the construction of the statute, the relation of the statute to other laws in a legislative scheme,
the legislative history, and the general purpose and intent of the statute.”). 
The section of the Premium Finance Title that addresses finance charges states:
The finance charge shall be computed:
(1) on the amount of the entire premium loan advanced,
including any taxes or fees that are financed under §23-301.1 of
this subtitle, after subtracting any down payment on the
premium loan made be the insured;
(2) from the inception date of the insurance contract or from the
due date of the premium, disregarding any grace period or credit
allowed for payment of the premium, through the date when the
final installment under the premium finance agreement is
payable; and 
(3) at a rate not exceeding 1.15% for each 30 days, charged in
advance.
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Ins. Art.,  § 23-304.  Respondents argue that Ins. Art., § 23-304 does not specify a
methodology for earning interest, only computing interest over the life of the premium
finance agreement.  They maintain further that the General Assembly’s addition of Ins. Art.,
§ 23-206(b)(3), requiring premium finance companies to disclose “the method or formula
used to calculate the finance charges,” means that they may charge whatever interest rate they
want for each 30-day period, so long as the overall finance charge paid and received over the
life of the loan does not exceed 1.15 percent. On the other hand, the MIA argues that the
finance charge computation within Ins. Art., § 23-304 is plain on its face, with no ambiguity.
We agree with the MIA.  
Although Ins. Art., § 23-304 does not prescribe a particular method for calculating the
amount of interest per month, the section provides clearly a maximum finance charge for
each 30-day period.  The word “rate” means a “fixed ratio between two things,” “a charge,
payment, or price fixed according to a ratio, scale or standard,” or “an amount of payment
or charge based on another amount.”  Webster’s Ninth New Collegiate Dictionary 976
(Frederick C. Mish et al. eds., 1989).  Here, the fixed charge is “not exceeding 1.15%” on
the entire amount of the loan premium and the denominator of the ratio, or the standard, is
“each 30 days.”  Ins. Art., § 23-304 does not state a maximum annualized amount of interest;
had that been the Legislature’s intent, the fixed durational term would have been “per
annum” or “annually.”  We assume that the General Assembly meant what it said, and the
interest charge may not exceed 1.15%, of the entire amount of the loan, during any 30 day
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period.   To interpret this section any other way would render meaningless the very specific
19
durational terms of Ins. Art., § 23-304(c).  Respondents assert that this voids per se the Rule
of 78s. We find that, so long as the interest rate does not exceed the statutory maximum, the
PFCs are free to assess unequal monthly interest charges, according to the Rule or another
method.   Merely because the statute sets forth a maximum finance charge does not mean
20
the PFCs are obliged to charge their customers the maximum.  
Even were we to find Ins. Art., § 23-304 ambiguous, the result would not be different. 
The remedial nature of the premium financing statute means that the statutory cap on
monthly finance charges is designed to protect consumers.  Gov’t Emps. Ins. Co. v. Taylor,
270 Md. 11, 17-18, 310 A.2d 49, 53 (1973)  (citing Moore v. London Guarantee, 233 Md.
425, 429, 197 A.2d 132, 134 (1964)) (stating that remedial legislation “must be liberally
  While we need not investigate the statutory history here because Ins. Art., § 23-304
19
is plain on its face, we note the magnitude and nature of the changes made by the 1965
amendments to the Premium Financing Title as confirmation of our conclusion.  See Chapter
844 of the Acts of 1965.  The General Assembly removed a complicated system for
calculating the service charge as an annual rate, based on the length of the loan, along with
a section that provided the service charge monthly installments were to be substantially
equal.  This complicated language, comprising almost five paragraphs, was replaced with a
simple rate of “one half of one per cent per one hundred dollars ($100.00) for each thirty
days, charged in advance, upon the entire amount advanced . . . .”  If the General Assembly
intended to specify an annual rate of interest for the entire amount of the premium finance
agreement, it would have left the rate as an annual one, rather than changing radically to
“each 30 days.” 
  Respondents argue that this result will compel them to charge interest rates well
20
below the market in order to comply; however, we note that they may earn competitive
market rates, up to the statutory maximum, so long as they spread out equally the charges
over the term of the finance period.  
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construed to advance the remedy which was designed to eradicate and eliminate the mischief
found to exist”).  The Premium Financing Title was designed to reign in “usurious interest
and excessive service charges” on premium finance agreements.  Gov’t Emps. Ins. Co., 270
Md. at 17, 310 A.2d at 52.  Respondent PFCs are able to collect cancellation charges under
Ins. Art., § 23-307 when a customer defaults on his/her payment obligations, and as discussed
supra, Ins. Art., § 23-304 determines the maximum monthly finance charges.  Ins. Art., 23-
504 prohibits charges in excess of those authorized by the Premium Financing Title.  The
Rule, using the maximum allowed finance charge on a policy, when cancelled prior to
maturity, violates the Title by collecting excessive charges on the front end.                     
Where the underlying insurance policy is void ab initio, Ins. Art., § 23-304(2) states
that the “finance charge shall be computed: . . . from the inception date of the insurance
contract or from the due date of the premium . . . .”  The MIA argues that the PFCs financed
nothing if the underlying policy was void.  During cross-examination of the Commissioner
by the PFCs at the administrative hearing, he admitted that money was transferred from a
PFC to the MAIF, even when the policy was voided thereafter.  This is because payment of
the full premium for the insurance policy is due to the MAIF with the consumer’s
application.  COMAR 14.07.02.03(G)(2).  At the hearing, the Commissioner acknowledged
further that it could be as much as a month between when a PFC forwards the money, on
behalf of the consumer who submitted an application to the MAIF, and when the premium
was returned to the PFC after a policy is declared void.  
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We assume that the General Assembly did not intend to create surplusage by including
the disjunctive phrase “or the due date of the premium” in the statute, and that it meant what
it said.  This is supported by the reality that PFCs extend the benefits of financing to premium
finance customers from the moment when they forward money to the MAIF.  The plain
language of Ins. Art., § 23-304(2) makes clear that there may be different dates used to
calculate the length of time for calculating finance charges, one where an insurance policy
comes to inception and another where the contract does not come into existence, but “the
amount of the entire premium loan” has been advanced by a PFC.   This loaned money, even
if it is eventually refunded, is entitled to have finance charges assessed against it until
returned to the lending PFC.  Therefore, it is permissible for the PFCs to assess finance
charges, even where a policy is declared void, ab initio or otherwise, so long as the finance
charges do not exceed 1.15% for each 30 days (or pro rata portion thereof) during which the
money was advanced.
JUDGMENT OF THE COURT OF SPECIAL
APPEALS 
VACATED 
AND 
CASE
REMANDED TO THAT COURT WITH
DIRECTIONS 
TO 
VACATE 
THE 
JUDGMENT OF THE CIRCUIT COURT
FOR BALTIMORE CITY AND TO REMAND
THE CASE TO THE CIRCUIT COURT
WITH DIRECTIONS TO AFFIRM IN PART
AND REVERSE IN PART THE DECISION
OF THE MARYLAND INSURANCE
COMMISSION, CONSISTENT WITH THIS
OPINION.  COSTS IN THIS COURT AND
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THE COURT OF SPECIAL APPEALS TO
BE PAID BY, AND EQUALLY DIVIDED
AMONG, RESPONDENTS.
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