Case Name: STATE of Florida, DEPARTMENT OF INSURANCE, and Bill Gunter as Insurance Commissioner and Treasurer of the State of Florida, Appellants, v. INSURANCE SERVICES OFFICE, Lumbermen's Mutual Casualty Company, United States Fidelity and Guaranty Company, Government Employees Insurance Company, Allstate Insurance Company, State Farm Mutual Automobile Insurance Company, and Nationwide Mutual Fire Insurance Company, Appellees
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 1983-05-03
Citations: 434 So. 2d 908
Docket Number: No. W-367
Parties: STATE of Florida, DEPARTMENT OF INSURANCE, and Bill Gunter as Insurance Commissioner and Treasurer of the State of Florida, Appellants, v. INSURANCE SERVICES OFFICE, Lumbermen’s Mutual Casualty Company, United States Fidelity and Guaranty Company, Government Employees Insurance Company, Allstate Insurance Company, State Farm Mutual Automobile Insurance Company, and Nationwide Mutual Fire Insurance Company, Appellees.
Judges: JOANOS, J., CONCURS with the opinion of LARRY G. SMITH, J., except as to the insufficiency of the economic impact statement. On the sufficiency of the economic impact statement he CONCURS with ROBERT P. SMITH, Jr., C.J., who otherwise DISSENTS WITH AN OPINION.
Reporter: Southern Reporter, Second Series
Volume: 434
Pages: 908–940

Head Matter:
STATE of Florida, DEPARTMENT OF INSURANCE, and Bill Gunter as Insurance Commissioner and Treasurer of the State of Florida, Appellants, v. INSURANCE SERVICES OFFICE, Lumbermen’s Mutual Casualty Company, United States Fidelity and Guaranty Company, Government Employees Insurance Company, Allstate Insurance Company, State Farm Mutual Automobile Insurance Company, and Nationwide Mutual Fire Insurance Company, Appellees.
No. W-367.
District Court of Appeal of Florida, First District.
May 3, 1983.
Rehearing Denied July 6, 1983.
Allan J. Katz and Patrick F. Maroney, Tallahassee, for appellants.
Dean Bunch, Ervin, Varn, Jacobs, Odom & Kitchen, Tallahassee, for appellee Ins. Services Office.
John M. McNatt, Jr., Vincent J. Rio, III, J. Stephen O’Hara, Jr., Mathews, Osborne, Ehrlich, McNatt, Gobelman & Cobb, Jacksonville, for appellee State Farm Mut. Auto. Ins. Co.
W. Donald Cox, Fowler, White, Gillen, Boggs, Villareal & Banker, Tampa, for ap-pellee Nationwide Mut. Fire Ins. Co.
Richard C. McFarlain and William B. Wiley, McFarlain, Bobo, Sternstein, Wiley & Cassedy, Tallahassee, for appellee Allstate Ins. Co. and Government Employees Ins. Co.

Opinion:
LARRY G. SMITH, Judge.
The Department appeals the final order of a hearing officer of the Division of Administrative Hearings, in a rule challenge proceeding, declaring its Rule 4-43.03 to be an invalid exercise of delegated legislative authority. Section 120.56(1), Florida Statutes (1979). The Department also appeals the hearing officer's determination that the statement of economic impact prepared by the Department was not an explicit statement delineating the short and long-term economic consequences of the rule, thus invalidating the rule. Rule 120.-54(2)(c), Florida Statutes (1979). The majority adopts the findings, reasoning and conclusions of the hearing officer on the first point and approves the result. A majority disapproves the hearing officer's ruling on the second point.
In January, 1978, Dade County petitioned the Department to adopt two rules, one prohibiting the continued use of age, sex, marital status, and scholastic achievement as automobile insurance rating factors and the other prohibiting the use of arbitrary territorial boundaries as a factor. After a study, the Department promulgated two rules, Rule 4r-43.03 and Rule 443.04, Florida Administrative Code. Only Rule 4-43.03 is involved in this appeal.
The insurance companies (whose premium rates are formulated using sex, marital status or scholastic achievement, or some combination thereof) challenged the validity of the rule on the following grounds: (1) the rule extends, modifies, conflicts with or enlarges upon the requirements of the Florida Insurance Code and thus exceeds the Department's rule-making authority; (2) the economic impact statement prepared by the Department in promulgation of the rule is inadequate; (3) the rule is arbitrary and capricious; and (4) the Department did not comply with the procedural requirements of Chapter 120, Florida Statutes. Because the hearing officer determined the first two grounds were dispositive of this controversy, his order does not deal with the last two grounds.
Upon examination of the statutes relied upon by the Department as specific authority for Rule 4-43.03, we have concluded, as did the hearing officer, that these statutes do not authorize the prohibition of the use of sex, marital status, and scholastic achievement as rating factors. The first statute cited in the rule, Section 624.308(1), Florida Statutes (1979), is simply a general grant of authority to the Department to adopt reasonable rules necessary for the implementation of the Insurance Code with the further proviso that such rules as are promulgated by the Department may not extend, modify, or conflict with any law of this state or reasonable implications thereof. As the hearing officer aptly noted, this is nothing more than a statement of what has always been the common law of the state. Department of Labor and Employment Security, Division of Labor v. Florida Homebuilders Assn., 417 So.2d 746 (Fla. 1st DCA 1982); State, Department of Health and Rehabilitative Services v. McTigue, 387 So.2d 454 (Fla. 1st DCA 1980); Dept. of Health and Rehabilitative Services v. Florida Psychiatric Society, 382 So.2d 1280 (Fla. 1st DCA 1980); Seitz v. Duval County School Board, 366 So.2d 119, 121 (Fla. 1st DCA 1979); State, Department of Transportation v. Pan American Construction Co., 338 So.2d 1291, 1293 (Fla. 1st DCA 1976); DeThorne v. Beck, 280 So.2d 448, 449 (Fla. 4th DCA 1973); and Florida Growers Coop Transport v. Department of Revenue, 273 So.2d 142, 144 (Fla. 1st DCA 1973).
The next statute cited in the rule provides more guidance. Section 626.9611, Florida Statutes (1979), provides in part that in promulgating rules identifying specific practices which are prohibited by Section 626.9541, Florida Statutes (1979) (which defines unfair methods of competition and unfair or deceptive acts or practices and is part of the Unfair Insurance Trade Practices Act) the Department may not enact a rule which shall enlarge upon or extend the provisions of Section 626.9541.
At the heart of this controversy is section 626.9541(15)(h), Florida Statutes (1979), one of the laws being implemented by Rule 4 — 43.03, which provides as follows:
(h) No insurer shall, with respect to premiums charged for automobile insurance, unfairly discriminate solely on the basis of age, sex, marital status, or scholastic achievement.
In enacting this statute the legislature obviously intended to permit discrimination based on sex, marital status, and scholastic achievement so long as this discrimination is not unfair or based solely on these factors. Yet the Department, by promulgating Rule 4-43.03, imposed a total prohibition against the use of sex, marital status or scholastic achievement in the formulation of premiums or rate classifications. The legislative history of Section 626.-9541(15)(h) irrefutably shows that the legislature expressly considered, but rejected, provisions which would prohibit the use of these factors as unfairly discriminatory. This provides strong evidence that the legislature did not intend, by enactment of Section 626.9541(15)(h), to completely prohibit the use of these factors. This history provides strong support for the hearing officer's determination that the Department's contrary construction of the statute in Rule 4-43.03 is unauthorized. Mayo v. American Agricultural Chemical Company, 101 Fla. 279, 133 So. 885 (1931). As the Supreme Court stated in State ex rel. Finlayson v. Amos, 76 Fla. 26, 79 So. 433 (1918):
There is no authority for a department of the government charged with the execution of a law, to restore a provision which the legislature strikes from the act when in progress of its passage. Whatever the legislature does within its constitutional authority, no other department of the government may change, modify, alter, or amend.
Thus we agree with the hearing officer's determination that Rule 4 — 43.03 extends, modifies and conflicts with Section 626.- 9541(15)(h), and is therefore invalid under Section 120.54(2)(c).
Nevertheless, the Department urges that the rule does not conflict with the statute because the use of sex, marital status, and scholastic achievement in the formulation of premium rates necessarily unfairly discriminates solely on the basis of those criteria. Hence, the Department contends that in promulgating Rule 4-43.03, it implemented Section 627.031(l)(a), Florida Statutes (1979), which provides that it is the purpose of the Insurance Code to "... promote the public welfare by regulating insurance rates . to the end that they shall not be . unfairly discriminatory...." The Department also maintains that it implemented Section 627.062(1), Florida Statutes (1979), which provides: "The rates for all classes of insurance to which the provisions of this part are applicable shall not be . unfairly discriminatory."
"Unfairly discriminatory" is not defined in the Code. However, Section 627.0651, Florida Statutes (1979) (also implemented, according to the Department, in its promulgation of Rule 4r-43.03), provides several standards to be applied by the Department in making a determination as to whether a rate is unfairly discriminatory. In particular, Section 627.0651(6) provides:
(6) One rate • shall be deemed unfairly discriminatory in relation to another in the same class if it clearly fails to reflect equitably the difference in expected losses and expenses, (emphasis supplied)
It is the Department's contention that "unfairly discriminatory" and "equitably" are not technical terms of art and should be given their common ordinary meaning. Giving these words their common ordinary meaning, the Department urges, a rating factor will be deemed unfairly discriminatory and inequitable unless it has a causal connection to expected losses. Thus the Department reasons that since sex, marital status and scholastic achievement have no direct or indirect causal connection to a person's driving habits they are necessarily unfairly discriminatory and inequitable rating factors. The Department further reasons that these rating factors are always unfairly discriminatory because their use results in the misclassification of a large number of individuals who share the distinguishing feature of the group (e.g. male sex) but do not share the "average" driving characteristics of the group.
On the other hand, the insurance companies contend that "unfairly discriminatory" and "equitable" are technical words, with a particular meaning in the insurance industry, and that Section 626.9541(15)(h) must be construed with this meaning in mind. United States v. Cuomo, 525 F.2d 1285, 1291 (5th Cir.1976). Reading Section 627.0651(6) in pari materia with the other standards contained in Section 627.0651(3) through (8), the insurance companies urge that the word "equitably" (used in Section 627.0651(6)), means "accurately" in the actuarial sense. The hearing officer agreed, finding that the most equitable classification factors are those that are the most actuarially sound. In making this finding, the hearing officer relied upon the testimony of the Department's own Chief Actuary and Director of the Division of Rating. The hearing officer further found that the classification factors of sex, marital status and scholastic achievement, in light of the present state of the art in the industry, enhanced the actu arial soundness of a rate classification for automobile insurance. Thus, as the hearing officer concluded, the Department has not established that the use of the criteria prohibited by Rule 4-43.03 necessarily results in unfair discrimination.
We find it highly significant that in presenting its argument on this point the Department has changed its own interpretation of the word "equitably," as used in Section 627.0651(6), as well as its interpretation of the phrase "unfairly discriminatory," relevant to this proceeding. Historically, the Department has measured the equi-tableness of a rating factor by its predictive accuracy. Further, until the enactment of the challenged rule, the Department interpreted the insurance code and Section 626.-9541(15)(h) as permitting rate classification plans using sex, marital status and scholastic achievement criteria in their formulation.
We also attach great significance to the finding of the hearing officer that the Department did not offer evidence or testimony sufficient to establish that factual changes of any nature have occurred, or that the Department has become aware of new factual information, which would support a deviation from their historic interpretation of the Florida Insurance Code. The Department has not challenged this finding. Instead, the Department urges that we should accept the rule because the record contains competent substantial evidence in support of the rule. Agrico Chemical Company v. State, Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978). This argument ignores the fact that Rule 4-43.03 facially conflicts with Section 626.9541(15)(h). The question in this case is not the arbitrariness or capriciousness of the rule as it was in Agrico; the wisdom of the rule is not before us. Our concern is with the existence of statutory authority for Rule 4 — 43.03, or its absence. Department of Health and Rehabilitative Services v. Florida Psychiatric Society, Inc., 382 So.2d 1280 (Fla. 1st DCA 1980).
Turning again to the statutes, we note that when the legislature enacted Section 626.9541(15)(h), it also reenacted Section 627.0651(3) through (8); which correspond with the Department's settled interpretation that rates "reflect equitably the difference in expected losses" if the rates reflect those differences as accurately as possible. Thus, by implication, the legislature approved the interpretation that rates based upon sex, marital status or scholastic achievement are unfair only if those rating factors are found to be actuarially unsound. State ex rel. Szabo Food Services, Inc. v. Dickinson, 286 So.2d 529, 531 (Fla.1973). As previously stated, the evidence below overwhelmingly shows these factors are actuarially sound. We conclude, therefore, that even under the alternate theory advanced by the Department, the statutes do not authorize a blanket prohibition against use of these factors.
With respect to the economic impact statement prepared by the Department, I would differ with my colleagues, Chief Judge Robert Smith and Judge Joanos, and would approve the hearing officer's findings that:
10. The elimination of the subject criteria by the Rule will require insurance companies writing automobile insurance in Florida to devise and file new rate classification plans. Such action on the part of the insurance companies will cause them to incur expenses, possibly substantial in nature. The Economic Impact Statement contains no estimate of, nor reflects any inquiry into, the expense to the industry or individual insurance companies of devising new rate classification plans for use in Florida.
11. In Paragraph 1 of the Economic Impact Statement it is estimated that the cost to the Department of implementing the Rule will be approximately $6,000.00. The evidence establishes that this estimate, at best, reflects only the cost to the Department of the adoption process. It is not intended to reflect any cost to the Department of the actual implementation of the Rule. It is reasonable to assume that because of the Rule there will be a significant increase in the number of rate filings with the Department which the Department will be required to review. The Economic Impact Statement reflects no assessment of any kind, of this potential cost to the Department.
12. There is a class of individuals in Florida presently receiving the benefit of discounted premiums through "good student discounts" offered by one or more insurance companies. This class of individuals will be adversely affected by the Rule in that they may no longer receive the discount they are now receiving. No estimate of this cost to that class of individuals is reflected in the Economic Impact Statement and, in fact, no such estimate was made. Further, the testimony establishes that there was no reason why such an estimate could not have been included in the Economic Impact Statement .
I would find that the economic impact statement is not the analysis of the estimated cost consequences of the proposed rule envisioned by the legislature, and is therefore inadequate. Westchester General Hospital v. State Department of Health and Rehabilitative Services, 417 So.2d 261 (Fla. 1st DCA 1982); Cf. Florida-Texas Freight Inc. v. Hawkins, 379 So.2d 944 (Fla.1979).
Accordingly, the order of the hearing officer is AFFIRMED.
JOANOS, J., CONCURS with the opinion of LARRY G. SMITH, J., except as to the insufficiency of the economic impact statement. On the sufficiency of the economic impact statement he CONCURS with ROBERT P. SMITH, Jr., C.J., who otherwise DISSENTS WITH AN OPINION.
. Rule 4-43.03 Unfair Discrimination in Private Passenger Motor Vehicle Insurance Rates— Based on Sex, Marital Status and Scholastic Achievement.
(1) No insurer authorized to engage in the business of insurance in the State of Florida shall establish classifications or premium rates for any policy, contract or certificate of private passenger motor vehicle insurance based upon the sex, marital status or scholastic achievement of the person or persons insured.
(2) This rule shall become effective on March 1, 1980.
.Noticeably, the use of age as a rating factor was not prohibited in Rule 4-43.03, as the Department found a strong correlation between age classifications and loss experience resulting from vehicle accidents. Further, no workable alternative to age as a primary risk assessment factor was suggested, and without that, it was concluded that elimination of age as a rating variable would lead only to greater inequities. Interestingly, the Department has also not come forth with verified alternatives to sex, marital status and scholastic achievement, although these have proven reliability as rating factors. Yet use of these factors seems to have been forbidden in large part because they are "socially unacceptable." Florida's Automobile Insurance Rate Classification System: Report To The Insurance Commissioner And The Commissioner's Orders and Findings.
. Rule 4-43.04 prohibits insurers from establishing premium rates based upon arbitrary territorial boundaries which are unfairly discriminatory. This rule was not challenged in this proceeding and therefore will not be addressed.
. Rule 4 — 43.03 refers to rulemaking authority of the Department under Sections 624.308(1) and 626.9611, Florida Statutes (1979); and as the laws being implemented Sections 626.-9541(15)(h), 627.031(1)(a), 627.062(1), and 627.-0651, Florida Statutes (1979).
. Senate Bill 1181, which amended Section 626.9541(15) by adding paragraph (h) was passed by voice vote of the Senate on May 18, 1977, 1977 Senate Journal 438. A previously proposed amendment read: "Rates for any class based solely on age, sex, school grades, education or lack of driver education shall be deemed unfairly discriminatory." This was considered but rejected in the Senate Commerce Committee on May 10, 1977.
CS/SB 1181 travelled to the House of Representatives, where the House struck the entire Senate Bill and substituted another version which contained no anti-discrimination provision. 1977 House Journal 918-926. On June 1, 1977, the House considered an amendment which would have prohibited rate differentials based on age but this amendment failed. 1977 House Journal 959. However, an amendment prohibiting rate differentials based on dissolution of marriage or separation passed. 1977 House Journal 960.
A conference committee appointed to resolve the differences between the House and Senate versions of CS/SB 1181 ultimately settled on the language in the Senate Bill which is identical to the language presently contained in Section 626.9541(15)(h). 1977 Senate Journal 857, 862, and 1977 House Journal 1229, 1234. The House and Senate approved the conference committee report and Section 626.9541 (15)(h) ultimately became the law of this state. 1977 Senate Journal 871; 1977 House Journal 1243; and 1977 Florida Laws, Ch. 77-468.
. Here, somewhat paradoxically, by urging a construction of these terms based upon their common, ordinary meanings, the Department disavows the utilization of any special "agency expertise" in its interpretation of the statute. This mitigates, if it does not entirely eliminate, the rule calling upon the court to accord "great deference" to the agency's interpretation of the statute. See Sans Souci v. Div. of Fla. Land Sales and Condominiums, Department of Business Regulation, 421 So.2d 623 (Fla. 1st DCA 1982); State Department of Health and Rehabilitative Services v. Framat Realty, 407 So.2d 238 (Fla. 1st DCA 1981).
. We note that a similar argument was recently made to a Louisiana Court of Appeals, in a proceeding which found the Louisiana Insurance Commissioner seeking to prohibit rate classifications based ón age and sex, and was rejected. Insurance Services Office v. Commissioner of Insurance, 381 So.2d 515 (La.Ct. of App.1979).
.The Department does not dispute this finding and has in fact admitted that within some groups (all policyholders 25 years of age and under, in a similar usage category) the subgroup consisting of all females has a lower actual or expected loss experience than the subgroup consisting of all males, and that a subgroup consisting of all married policyholders also has a lower actual or expected loss experience than the subgroup consisting of all unmarried policyholders. Further, there was testimony that there are differences in expected loss experience between those who qualify for scholastic achievement discount and those who do not.
. Section 626.9541(15)(h) became effective September 1, 1977.
. Quoted language is from Section 627.-0651(6), Florida Statutes. See also, particularly, the language of Section 627.0651(7), (8).
. The hearing officer's final order contains the conclusion that the economic impact statement prepared by the Department does not delineate the short and long term consequences of the proposed rule. Although Section 120.54(2)(a), Florida Statutes (1977) required the hearing officer to consider the short and long term economic consequences of a proposed rule, it was amended in 1978, eliminating this requirement. Nevertheless, it is clear from a reading of the hearing officer's order that he correctly applied the criteria contained in the newly amended Section 120.54(2)(a), Florida Statutes (1979) in making his determination that the proposed rule's economic impact statement was inadequate. Thus, in my view, the hearing officer's passing reference to the short and long term economic effects of the proposed rule was inconsequential. Further, I would point out that the Department has not raised this as error nor challenged the hearing officer's conclusion concerning the economic impact statement on this basis.