Case Name: In the Matter of Northwestern National Insurance Company, Respondent, against Louis H. Pink, as Superintendent of Insurance of the State of New York, Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1942-07-29
Citations: 288 N.Y. 359
Docket Number: 
Parties: In the Matter of Northwestern National Insurance Company, Respondent, against Louis H. Pink, as Superintendent of Insurance of the State of New York, Appellant.
Judges: 
Reporter: New York Reports
Volume: 288
Pages: 359–364

Head Matter:
In the Matter of Northwestern National Insurance Company, Respondent, against Louis H. Pink, as Superintendent of Insurance of the State of New York, Appellant.
Argued March 11,1940;
decided July 29, 1942.
John J. Bennett, Jr., Attorney-General (Henry Epstein, William J. Cahill and M. Kaplan of counsel), for appellant.
In denying petitioner’s license under the facts herein stated the Superintendent of Insurance has exercised his given powers within the area of discretion marked out by the Insurance Law. (German Alliance Ins. Co. v. Lewis, 233 U. S. 389; O’Gorman & Young, Inc., v. Hartford Fire Ins. Co., 282 U. S. 251; Buffalo Assn. of Fire Underwriters v. Noxsel-Dimick Co., 235 App. Div. 92; Matter of Importers & Exporters Ins. Co. v. Rhoades, 239 N. Y. 420.)
Frederick T. Case for respondent.
The statutes do not give the • Superintendent of Insurance any power to regulate or limit rates of commission to be paid to fire insurance brokers and he has only such powers as the law gives him. (Matter of N. J. Fidelity & Plate Glass Ins. Co. v. Van Schaick, 236 App. Div. 223; 261 N. Y. 521; Wallace & Co. v. Ferguson, 70 Ore. 306; Liverpool & London & Globe Ins. Co. v. Clunie, 88 Fed. Rep. 160; Matter of Continental Guaranty Corp. v. Craig, 240 N. Y. 354; People ex rel. Municipal Gas Co. v. Pub. Serv. Comm., 224 N. Y. 156; People ex rel. N. Y., N. H. & H. R. R. Co. v. Wilcox, 200 N. Y. 423.) The powers of the Superintendent of Insurance to supervise rates of premium do: not give him power to fix or regulate rates of commission for brokers. (Matter of Importers & Exporters Ins. Co. v. Rhoades, 239 N. Y. 420; Buffalo Assn. of Fire Underwriters v. Noxsel-Dimick Co., 235 App. Div. 92; People ex rel. N. Y. Fire Ins. Exchange v. Phillips, 237 N. Y. 167; Commercial Standard Ins. Co. v. Board of Ins. Commrs. of Texas, 34 S. W. Rep. [2d] 343.) The belief of the Superintendent of Insurance that so-called “ excess commissions ” are an evil cannot serve to extend his power beyond what the law gives him. (Matter of Smith v. Morgan, 253 App. Div. 239; Matter of New York Good Humor, Inc., v. Morgan, 171 Misc. Rep. 899; Matter of Levy v. Valentine, 172 Misc. Rep. 130.) The power of the Superintendent of Insurance to grant and revoke licenses does not authorize indirect control of matters not entrusted to his control. (Commercial Standard Ins. Co. v. Board of Insurance Commissioners, 34 S. W. Rep. [2d] 343; Matter of Factory Mutual Liability Ins. Co. v. Behan, 233 App. Div. 614; Homesteaders Life Ins. Co., 224 Iowa, 173; Matter of American Molasses Co. v. McGoldrick, 256 App. Div. 649; Matter of Small v. Moss, 255 App. Div. 1; 279 N. Y. 288; Matter of Picone v. Commissioner of Licenses, 241 N. Y. 157; Chicagoland Agencies v. Palmer, 364 Ill. 13; Green Point Sav. Bank v. Zoning Appeals Board, 281 N. Y. 534.)

Opinion:
Loughran, J.
This is an appeal by the Superintendent of Insurance from an order directing him to issue to the petitioner a renewal of its foreign insurer's license to do business in this State.
The Insurance Law (Cons. Laws, ch. 28) provides: " The superintendent shall issue a renewal license to any "foreign or alien insurer if he shall be satisfied, by such proof as he may require, that such an insurer is not delinquent with respect to any requirement imposed by this chapter and that its continuance in business in this state will not be hazardous or prejudicial to the best interests of the people of this state " (§ 42, subd. 2). The Superintendent found that the petitioner had paid " excess commissions " to brokers who brought in its local fire insurance business. He made also this finding: " The payment of excess commissions is an evil in the business and reacts disadvantageously to the policyholders, companies, and producers. The interests of the people of this State will be best promoted by a discontinuance of the practice."
This basis for the refusal to renew the petitioner's license has been explained by the Superintendent in these words: " The payment of excess commissions has been an abuse in the fire insurance business for many years. It goes back at least to 1898. Chaos in fire insurance rates followed the collapse of the ' Tariff Association ' in that year. Due to that chaos in 1898 a meeting was called which was attended by representatives of nearly every joint stock fire insurance company doing business in New York and which resulted in the formation of the New York Fire Insurance Exchange. Companies writing approximately ninety-eight per cent of the fire insurance premiums in the metropolitan area are members of the Exchange. The companies which are members and which write ninety-eight per cent of the business have voluntarily agreed upon a rate of commissions to be paid to brokers. The Northwestern National Insurance Company [this petitioner] is not a member, of the Exchange. I might as well state we have no fault to find with the Northwestern insofar as its financial strength goes,1 or insofar as its practices go, excepting in this particular matter. The company itself is financially sound and no question is raised except with regard to its practice of paying excess commissions."
In other words, the determination of the Superintendent was to this effect: No foreign or alien insurer may do the business of fire insurance in this State unless it adopts for that purpose the rate of • brokerage commissions formulated by the voluntary agreement of the members of the New York Fire Insurance Exchange. We do not read the foregoing provision of the statute as an authorization to the Superintendent to construct a prohibition of that size.
Rate making is a governmental process which according to the accepted classification is legislative, not judicial (Norwegian Nitrogen Products Co. v. United States, 288 U. S. 294, 318). The Legislature, of course, can limit to a reasonable extent the rates of commissions to be paid to brokers of insurance and its competency in that regard can be committed to an administrative body. But the Superintendent here disavowed any delegation to him of such power. On that point, he said: " I believe and have frequently stated that eventually it will probably be necessary for the Legislature to give the Department some direct control over commissions for the proper policing of the business. I have also stated and again repeat that in view of the fact that the Legislature has not given such direct control to the Department I do not wish to fix commissions." There is no denying, however, that the rate of commissions declared by the members of the New York Fire Insurance Exchange was fixed with the compulsion of a law against foreign insurers, in consequence of the departmental determination of which the petitioner complains.
Section 42 of the Insurance Law (supra) cannot be taken to have conferred such an equivalent of a power which the Legislature has refused to grant expressly. The regulation authorized by section 42 is obviously aimed at delinquencies or deficiencies of an individual concern. The pronouncement of general policy here attempted by the Superintendent was not justified by that section.
The order should be affirmed, with costs.