Opinion ID: 2073828
Heading Depth: 1
Heading Rank: 4

Heading: questions about the second look

Text: A. As to the Bodily-Injury Decision. Applicable to the Commissioner's consideration in 1975 of bodily-injury rates for 1976 was an unusual second look statute providing that if the premium charges for any current calendar year (here 1975) were found to be excessive, unjust, unreasonable, discriminatory or inadequate, the Commissioner was to take these facts into account and fix the charges for the ensuing year (1976) at levels which he determined would produce adequate, just, reasonable, nondiscriminatory or not excessive charges for the two years taken together. G.L.c. 175, § 113B, as amended through St. 1971, c. 977, § 1A; see Employer's Commercial Union Ins. Co. v. Commissioner of Ins., 362 Mass. 34, 37 (1972). In the bodily-injury decision the Commissioner decided against adjusting the rates, otherwise to be set for 1976, by reason of a claimed inadequacy of the 1975 rates. The Bureau's rather strenuous argument in its brief that the Commissioner erred is not matched by much that is substantial in the transcript of the hearing, and the Commissioner's observation that [n]o party at the hearings explored this matter in great depth, either factually or legally, seems quite accurate. A Bureau exhibit and counsel for the Bureau in an opening statement made passing reference to the inadequacy of 1975 rates, and the only focus on the matter during the hearing was in a few general questions put to the Bureau's actuary. [38] Indeed most of the attention given to rates for prior years was on the question whether the 1976 rates should be adjusted downward, pursuant to special legislation to recapture any excess profit made by insurers in 1974. [39] St. 1973, c. 1113. The failure of the Bureau to press a case for adjustment at the hearing may well be taken to bar their raising the issue on appeal. But if the merits are to be examined as far as is possible, we think the Commissioner had adequate pragmatic reasons to justify his action. Rates frequently miss their target for the given year but prove more accurate over the longer term; the public would be disserved by constant tinkering with the rates to meet a tight standard of accuracy in each year. So also yearly adjustments to compensate for adverse experience might blunt efforts to encourage efficient and economical operation by the insurers. Such considerations led to the conclusion that the second look provision should not require rate adjustment where, as in 1975, the current rates could not be said to be dramatically less accurate than rates in other years. This view is consistent with the statutory language. Inadequate and excessive do not define precise boundaries (cf. Massachusetts Bonding & Ins. Co. v. Commissioner of Ins., 329 Mass. 265, 270 [1952]), and the sense of the statute is that adjustment is not contemplated except where experience shows an egregious failing either way. No such showing was made here. [40] B. As to Property-Damage Decision. On November 26, 1975, while the hearing on property-damage rates was under way, St. 1975, c. 707, §§ 1A and 9, was approved repealing the second look provision. The Commissioner read the statute as ending his obligation to consider adjustment of 1976 rates to take account of any 1975 shortfall, which according to the Bureau's allegations was very considerable. [41] The Commissioner's reading of the statute appears to us to be correct. While the repealer does not state expressly that it is to affect the setting of 1976 rates, and could possibly be thought to deal only with 1977 rates so far as adjustment for 1976 experience was concerned, the fact is that § 9 says the repealer provision of § 1A shall take effect upon the passage of this act, and the entire act has an emergency preamble which says that deferred operation would tend to defeat ... [the act's] purpose which is to provide immediate relief to owners of motor vehicles from the high costs of compulsory property protection insurance. The milieu in which the repealer was enacted suggested strongly to the Commissioner, as it does to us, that the Legislature wanted truly immediate effect. [42] Decisions interpreting quite different enactments with different backgrounds, such as City Council of Waltham v. Vinciullo, 364 Mass. 624, 628-629 (1974), cited by the Bureau, are not helpful here. This brings us to the Bureau's constitutional claim which, however, we think not so weighty as to influence interpretation of the statute even if there was real room for doubt as to its intended meaning. See Mile Road Corp. v. Boston, 345 Mass. 379, 383, appeal dismissed, 373 U.S. 541 (1963). The situation during the period of the second look statute was that, in addition to a remedy for correction of rates by regular appeal, there was an unusual administrative-judicial remedy in the form of a second look. An appeal raised questions about the legality of the rates. The second look did not concern itself with legal issues but with practical experience under the rates. The second look procedure was made available without any constitutional compulsion, for its is clear that the rates for a given year cannot be argued to be confiscatory because of industry losses in previous years. Public Util. Comm'rs v. New York Tel. Co., 271 U.S. 23, 31 (1926). We think the State could decide to abandon the second look procedure and retain only the appeal. Abolition of the second look in fixing 1976 rates would raise no question if legislated before 1975 rates were set; and we think the same would hold for abolition of the second look legislated during the period for taking an appeal, because the right to appeal would not have been lost. It can be argued that the present case is legally different from the one last mentioned because abolition of the second look occurred after the time for taking an appeal had run and the insurers had failed to appeal though entitled to do so. Debate in terms of vested rights and retroactivity actually comes down to the proposition that the insurers relied, in failing to take an appeal, on the then existence of the remedy of the second look, and that this reliance is entitled to constitutional protection to the extent of preserving the second look despite the legislative repeal. [43] Nothing in the record suggests that in fact the insurers relied on the possibility of a second look in forgoing direct appeal. Nothing in the theory or design of the second look statute suggests that it was enacted procedurally as an alternative to a direct appeal, or substantively to give the same relief as a direct appeal; its function was rather to adjust in year two for the unfolding of events in year one in a manner which differed from a legally correct predication or estimate made by the Commissioner in setting rates for year one. If legal error was committed by the Commissioner, direct appeal was the only way to correct it, notwithstanding the possibility of some equitable offset in year two through the second look. Nor, in the circumstances, could the insurers reasonably have relied on the second look as a basis for forgoing an appeal. As members of an industry whose rates had long been regulated in the public interest, the companies must be charged with knowledge that changes in regulatory legislation were likely and that the possibility of cumulative relief embodied in the second look statute was not an eternal expedient or verity. They were bound to know that much more solid interests or expectations than a second look have been held subject to the evolving exercise of regulatory powers. See, e.g., Mile Rd. Corp. v. Boston, 345 Mass. 379, 383-384, appeal dismissed, 373 U.S. 541 (1963); Paquette v. Fall River, 338 Mass. 368, 375-376 (1959); Boston Real Estate Bd. v. Department of Pub. Util., 334 Mass. 477, 488-491 (1956); Federal Housing Administration v. Darlington, Inc., 358 U.S. 84, 90-92 (1958); Queenside Hills Realty Co. v. Saxl, 328 U.S. 80, 83 (1946); Western Union Tel. Co. v. Louisville & Nashville R.R., 258 U.S. 13, 20, 22 (1922); Union Dry Goods Co. v. Georgia Pub. Serv. Corp., 248 U.S. 372, 377 (1919); Louisville & Nashville R.R. v. Mottley, 219 U.S. 467, 482-486 (1911); South Terminal Corp. v. EPA, 504 F.2d 646, 678 (1st Cir.1974). Their forgoing an appeal could not assure the companies of a second look which the Legislature could otherwise constitutionally repeal. Cf. Hughes, C.J., in Sproles v. Binford, 286 U.S. 374, 390-391 (1932).