IN EFFECT PURSUANT TO ARTICLE 9 OF THE INSURANCE CODE."
SINCE WE ARE DEALING WITH LIABILITY INSURANCE, SUBSECTION (C) WOULD APPLY TO YOUR QUESTION. THIS PROVISION PREVENTS UNFAIR DISCRIMINATION BETWEEN INSUREDS HAVING, "SUBSTANTIALLY LIKE INSURING RISK, AND EXPOSURE FACTORS, OR EXPENSE ELEMENTS. . ." I AM OF THE OPINION THAT THE PHRASE, "OR EXPENSE ELEMENTS" JUSTIFIES THE TAKING INTO ACCOUNT A PRIOR LAPSE IN COVERAGE DUE TO NONPAYMENT OF PREMIUMS AS A BASIS FOR ASSIGNING AN INSURED TO A DIFFERENT AND HIGHER RATE CLASSIFICATION. THESE "EXPENSE ELEMENTS" MAY INCLUDE SUCH ITEMS AS COMMISSIONS, LICENSING FEES, TAXES, AND OFFICE EXPENSES WHICH ARISE AS PART OF THE CANCELLATION AS WELL AS ISSUANCE OF AN INSURANCE POLICY.
I HAVE NOT FOUND ANYTHING IN THE INSURANCE CODE ITSELF THAT WOULD PREVENT AN INSURANCE COMPANY FROM UTILIZING THESE EXPENSE FACTORS AN ITS UNDERWRITING GUIDELINES. IT IS THE INSURED INDIVIDUAL' POOR PAYMENT HISTORY, AND THE EXTRA EXPENSES ASSOCIATED WITH THAT PAYMENT HISTORY IN THE FORM OF EXTRA COMMISSIONS, OVERHEAD, ETC., THAT FORMS THE BASIS FOR CLASSIFYING THE INSURED AT A HIGHER RATE. THESE EXTRA EXPENSES TO THE INSURANCE COMPANY FORM VALID AND INDEPENDENT BASIS FOR RECLASSIFICATION THAT IS ENTIRELY UNRELATED TO THE FINANCIAL STATUS OF THE INSURED. THIS RATIONALE IS APPLICABLE TO BOTH UPPER-INCOME INDIVIDUALS THAT FAIL TO TIMELY PAY INSURANCE PREMIUMS AS WELL AS LOWER-INCOME INDIVIDUALS WITH SIMILAR BEHAVIOR. THUS, THE RECLASSIFICATION CONTEMPLATED IN YOUR QUESTION IS NOT DISCRIMINATION, "IN FAVOR OF PARTICULAR PERSONS, OR BETWEEN INSUREDS OR SUBJECTS OF INSURANCE HAVING SUBSTANTIALLY LIKE INSURING RISK, AND EXPOSURE FACTORS, OR EXPENSE ELEMENTS. . .," BUT RATHER, A MERE RECLASSIFICATION BASED ON GREATER COSTS TO THE INSURANCE COMPANY.
II. DISCRIMINATION UNDER THE OKLAHOMA OR FEDERAL CONSTITUTION.
YOUR SECOND QUESTION ASKS WHETHER A HIGHER RATE CLASSIFICATION BY AN INSURANCE COMPANY, BASED SOLELY ON A PREVIOUS CANCELLATION OF AN INSURANCE POLICY, WOULD VIOLATE THE EQUAL PROTECTION PROVISIONS UNDER EITHER STATE OR FEDERAL LAW. YOUR QUESTION IMPLIES EITHER A VIOLATION OF THEFOURTEENTH AMENDMENT TO THE UNITED STATES CONSTITUTION, OR A VIOLATION OF ARTICLE II, SECTION 7 OF THE OKLAHOMA CONSTITUTION.
GENERALLY, ACTIONS BY A PRIVATE ENTITY CANNOT VIOLATE THE EQUAL PROTECTION CLAUSE OF THE FOURTEENTH AMENDMENT TO THE U.S. CONSTITUTION IN THE ABSENCE OF "STATE ACTION." SEE, GILMORE V. CITY OF MONTGOMERY, 417 U.S. 556, 94 S.CT. 2416, 41 L.ED.2D 304, 319 (1974). THIS "STATE ACTION" REFLECTS EXTENSIVE INVOLVEMENT IN A QUESTIONED ACTIVITY BY A GOVERNMENTAL ENTITY. THE MERE LICENSING AND REGULATION BY A GOVERNMENTAL ENTITY IS, BY ITSELF, GENERALLY INSUFFICIENT TO CONSTITUTE A "STATE ACTION" NECESSARY TO IMPLICATE THE EQUAL PROTECTION CLAUSE. ID. AT 319.
YOUR QUESTION CONTEMPLATES DISCRIMINATORY TREATMENT BY A PRIVATE INSURANCE COMPANY THAT IS REGULATED BY THE OKLAHOMA INSURANCE COMMISSION. ASSUMING THAT "STATE ACTION" DOES NOT EXIST, THE EQUAL PROTECTION CLAUSE IS NOT IMPLICATED BY THE ACTIVITIES DESCRIBED IN YOUR QUESTION. I WOULD NOTE THAT THE DECISION TO PROVIDE INSURANCE TO AN INDIVIDUAL WHO HAS HAD A PRIOR CANCELLATION OF AN INSURANCE POLICY WOULD GENERALLY BE GOVERNED BY THE INSURANCE COMPANY'S UNDERWRITING GUIDELINES. THESE UNDERWRITING