Case Name: In the Matter of Mario A. Procaccino, Individually and as Comptroller of the City of New York, et al., Appellants, v. Richard E. Stewart, as Superintendent of Insurance of the State of New York, et al., Respondents; In the Matter of City of New York, Appellant, v. Richard E. Stewart, as Superintendent of the State of New York, et al., Respondents
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1969-10-02
Citations: 25 N.Y.2d 301
Docket Number: 
Parties: In the Matter of Mario A. Procaccino, Individually and as Comptroller of the City of New York, et al., Appellants, v. Richard E. Stewart, as Superintendent of Insurance of the State of New York, et al., Respondents. In the Matter of City of New York, Appellant, v. Richard E. Stewart, as Superintendent of the State of New York, et al., Respondents.
Judges: 
Reporter: New York Reports
Volume: 25
Pages: 301–309

Head Matter:
In the Matter of Mario A. Procaccino, Individually and as Comptroller of the City of New York, et al., Appellants, v. Richard E. Stewart, as Superintendent of Insurance of the State of New York, et al., Respondents. In the Matter of City of New York, Appellant, v. Richard E. Stewart, as Superintendent of the State of New York, et al., Respondents.
Argued September 30, 1969;
decided October 2, 1969.
Jacob D. Fuchsberg and Irving Lemov for appellants in first above-entitled proceeding.
I. The rate increase was approved in contravention of law. II. The record supports the Special Term finding that the increase approved was in excess of the emergency needs. (Dulberg v. Equitable Life Assur. Soc., 277 N. Y. 17.)
J. Lee Rankin, Corporation Counsel (John R. Thompson, William M. Murphy and Gary Mailman of counsel), for appellant in second above-entitled proceeding.
I. The Superintendent violated lawful procedure in approving a general increase in AHS’ subscriber rates without receiving certification of AHS’ hospital payment rates from the State Commissioner of Health and without himself approving such hospital rates as to reason ableness. (Red Hook Stor. Co. v. Department of Labor, 295 N. Y. 1; Matter of Thaler v. Stern, 44 Misc 2d 278; Orinoco Realty Co. v. Bandler, 233 N. Y. 24; Matter of Mounting & Finishing Co. v. McGoldrick, 294 N. Y. 104; Board v. Hearst Pub., 322 U. S. 111.) II. The Superintendent’s action exceeded the bounds of his implied or inherent power to cope with- an emergency. III. The Superintendent must define the emergency pursuant to which he is exercising his emergency powers. (Matter of Perpente v. Moss, 293 N. Y. 325; Matter of Elite Dairy Prods, v. Ten Eyck, 271 N. Y. 488.) IV. Any rate increase granted pursuant to emergency powers must be for a limited time only. V. A rate increase granted pursuant to emergency powers must be limited in amount to what is necessary to prevent insolvency during the emergency period. VI. In any event, the Superintendent’s decision was arbitrary and capricious. VII. The City of New York has standing to maintain this proceeding. (Looram v. Looram, 269 N. Y. 296; Matter of Nostrand Check Cashing Co. v. Clark, 27 Misc 2d 799; Matter of Donohue v. Cornelius, 17 N Y 2d 390.)
Louis J. Lefkowitz, Attorney-General (Philip Weinberg and Samuel A. Hirshowitz of counsel), for Richard E. Stewart, respondent.
The Special Term Justice impermissibly substituted his judgment for that of the Superintendent of Insurance in annulling the determination, and incorrectly ruled that the Superintendent was powerless to act on the application until the State Health Department promulgates regulations implementing the 1969 amendment to section 2807 of the Public Health Law, the statute requiring hospital-rate approval by the Health Department. (Matter of Old Republic Life Ins. Co. v. Wikler, 12 A D 2d 310, 9 N Y 2d 524; Matter of Compensation Rating Bd. v. Superintendent of Ins., 8 A D 2d 455, 8 N Y 2d 803; Matter of Perman Realty Corp. v. Weaver, 3 A D 2d 723, 3 N Y 2d 821; Matter of Fink v. Cole, 1 N Y 2d 48; Matter of Stracquadanio v. Department of Health, 285 N. Y. 93; Matter of Colton v. Berman, 21 N Y 2d 322; Matter of Park East Land Corp. v. Finkelstein, 299 N. Y. 70; Matter of Mid-Island Hosp. v. Wyman, 25 A D 2d 765; Matter of Guardian Life Ins. Co. v. Bohlinger, 284 App. Div. 110, 308 N. Y. 174; Matter of Mouakad v. Ross, 274 App. Div. 74.)
Robert A. Bicks and Charles M. Mitchell for Associated Hospital Service of New York and another, respondents.
I. The Superintendent of Insurance was not obliged to receive ‘ ‘ certification ” of hospital payment rates from the State Commissioner of Health under the newly amended Public Health Law, before approving AHS’ subscriber charge change. II. Special Term’s view disables prospective subscriber rate-making. III. Settled law supports the Superintendent’s action here, based on reasoned judgments as to Blue Cross’ future costs. (People ex rel. Consolidated Water Co. of Utica v. Maltbie, 275 N. Y. 357, 303 U. S. 158; Matter of Mouakad v. Ross, 274 App. Div. 74, 298 N. Y. 922.) IV. For the Commissioner of Health’s view as to the prospects of 1970 hospital costs, the city would have this court substitute the city’s own appraisal, based on inaccurate characterization of . how the present Blue Cross formula works, and a claimed superior insight into what new hospital reimbursement standards will provide. V. The Appellate Division correctly held that “ Special Term may not substitute its judgment for that exercised, if properly done, by the ” Insurance Department. (Matter of Gambino v. State Liq. Auth., 4 A D 2d 37, 4 N Y 2d 997.)

Opinion:
Chief Judge Fuld.
Since, in our view, the Superintendent, in approving the increase in subscriber rates, acted neither in excess of his jurisdiction, in violation of lawful procedure nor in abuse of discretion or arbitrarily, the courts have no alternative but to confirm his determination (CPLR 7803).
On August 15,1969 the Superintendent of Insurance approved an increase, averaging 43.3%, in the rates which the respondent Associated Hospital Service of New York (AHS) could charge its community-rated Blue Cross subscribers. The petitioners, seeking to annul that determination, contend that the Superintendent was without power to grant any increase in excess of a temporary " emergency " one of 33% and that, in any event, his decision was arbitrary.
Under subdivision 2 of section 255 of the Insurance Law, AHS is required, when it seeks to increase its rates, to submit a proposed schedule to the Superintendent of Insurance for his approval. The statute provides that such approval may be refused if the proposed rates are ' excessive." The petitioners do not argue that the proposed rates violate this standard but urge, instead, that a newly enacted amendment to section 2807 of the Public Health Law (L. 1969, ch. 957), coupled with section 254 of the Insurance Law, operates to limit the Superintendent, for the time being, to approval of a short term "emergency " increase.
These statutory provisions relate, not to the rates charged to the subscribers, but to the schedule of payments which AHS makes to hospitals for the services they provide. Section 2807 of the Public Health Law requires that, after December 31,1969, such payments must be certified by the State Commissioner of Health as " reasonably related to the costs of efficient production of such service " and section 254 of the Insurance Law declares that they must be approved " as to reasonableness " by the Superintendent of Insurance. Despite the petitioners' contentions, there is nothing in these sections which purports to limit or circumscribe the Superintendent's power to approve schedules for subscriber rates pending the certification of hospital payments by the Health Commissioner. As the Superintendent noted in the course of his decision, " [t]here is no required time sequence for regulatory approval of subscriber rates, on the one hand, and regulatory approval of hospital payment rates on the other." The approval of hospital payment rates, as certified by the Commissioner of Health under section 2807 of the Public Health Law, and the determination of reasonableness of proposed subscriber rates under section 255 of the Insurance Law appear to be procedurally independent and there is nothing in the legislation to prevent the Superintendent from acting upon a proposal to increase subscriber rates even though the Commissioner has not yet certified the rates for hospital payments.
Nor did the Superintendent abuse his discretion or act arbitrarily, as the petitioners insist, by approving (in August of 1969) an increase in AHS's subscriber rates which was to remain in effect through December 31, 1970, before the cost to it of hospital services became definitively known. At the time the application was made— and this is conceded — AHS was faced with imminent statutory .insolvency and it did not appear that hospital payment schedules, under the new statutory formulation, would be available until some time in 1970. Under the circumstances, it was permissible, indeed essential, for the Superintendent to estimate such payments, basing his determination, as the record clearly demonstrates he did, upon reasonable cost projections. (Cf. People ex rel. Consolidated Water Co. v. Maltbie, 275 N. Y. 357, 368.) In fact, the only evidence adduced at the hearing relating to the cost projections adopted by the Superintendent was the testimony of the Deputy Commissioner of Health that such cost projections were, if anything, too conservative and too low. There is nothing in the record to support the inference—which the petitioners seek to have the court draw—that the implementation of the new system of computing hospital reimbursement rates (under amended section 2807) will result in such a significant change in AHS's over-all costs during the period of the rate increase here at issue as to justify labeling the Superintendent's determination arbitrary. Moreover, considering the expense and inconvenience—both to AHS and its subscribers —of a further rate change, it was entirely reasonable for the Superintendent to fix a rate that would be adequate for a 15-month period rather than the limited 4-month so-called " emergency " period proposed by the petitioners.
The order appealed from should be affirmed, without costs.
. Subdivision 2 of section 255 reads, in relevant part, as follows: " No corporation subject to the provisions of this article shall enter into any contract with a subscriber unless and until it shall have filed with the superintendent of insurance a full schedule of the rates to be paid by the subscribers to such contracts and shall have obtained the superintendent's approval thereof. The superintendent may refuse such approval if he finds that such rates are excessive, inadequate or unfairly discriminatory."