Opinion ID: 1955260
Heading Depth: 1
Heading Rank: 5

Heading: Are the rate filings in the deregulated commercial lines of insurance to be regarded as proceedings initiated to change charges?

Text: A literal reading of N.J.S.A. 52:27E-19b lends support to the insurers' argument that they did not initiate these proceedings to gain approval to increase or change rates. No approval was required. The theory of deregulation is that prior review of commercial-lines rate filings serves no public interest. Such lines may be described generically as business insurance  not sold to the ordinary individual consumer. Policies required by almost all New Jerseyans, such as personal automobile insurance and homeowner's insurance, so touch the lives of almost everyone that deregulation has not been extended to them. See N.J.S.A. 17:29AA-3a(9). The argument is that because the Legislature deregulated commercial lines, insurers no longer need initiate a proceeding in order to increase or change rates (the language of 19b), and thus the Public Advocate has no statutory right to be paid for reviewing such actions. The deregulation system is called a use and file system. Filings must be made no later than thirty days after the rates become effective. N.J.S.A. 17:29AA-5. The argument is challenging: if deregulation is to work, it must reduce bureaucratic red tape. But that argument assumes that the Legislature intended not only an initial right to use and file a rate, but also an insulation of the rate from the Public Advocate's public function. Of course the Legislature can divest the Public Advocate of any rate review function in this area, but we do not believe that the legislative history of deregulation extends this far. The broader question is whether the use and file aspect of deregulation of commercial lines insurance was intended to insulate all aspects of such insurance from the Public Advocate's review. On that score we need consider more than the provisions of N.J.S.A. 52:27E-19b. The Public Advocate's charter requires him to establish a Division of Rate Counsel, N.J.S.A. 52:27E-16, whose purpose is to represent and protect the public interest   . N.J.S.A. 52:27E-18. Generally, the Division may intervene in proceedings before and appeals from any State [agency] charged with the regulation or control of any [business]   , and may initiate such proceedings in the public interest. Ibid. Obviously, this authority under N.J.S.A. 52:27E-18 is not co-extensive with the Public Advocate's right to be reimbursed under N.J.S.A. 52:27E-19b (because not every proceeding is initiated by an insurer to change charges). But his mandate is clear. The only question is whether use and file action by insurers is a 19b proceeding. Granted that the Public Advocate has no authority to suspend a deregulated rate, the filing of rates in the deregulated insurance area does not immunize the rates from all governmental review. Under the Commercial Insurance Deregulation Act of 1982, the Commissioner of Insurance may render ineffective any rate that he finds, after a hearing, not in compliance with standards of the Act. N.J.S.A. 17:29AA-13. The Act prescribes factors to be considered in making rates, N.J.S.A. 17:29AA-9, and prohibits rates that are excessive, inadequate or unfairly discriminatory. N.J.S.A. 17:29AA-10. The Commissioner may, in addition, examine the business, affairs, and methods of any organization of insurers that assists in rate-making, and may charge the reasonable cost of that examination to the organization. N.J.S.A. 17:29AA-23. Hence, we believe, as did the Appellate Division, that rate filings under N.J.S.A. 17:29AA-5 may be regarded as proceedings initiated to gain approval of changed rates. An insurer may not raise rates without some informational filings, even if review is after the fact. The Legislature has not shown disinterest in such rates, only that it believes that eliminating the requirement of prior approval will best serve the public interest. After all, the requirements for prior approval often resulted in lengthy delays that prompted the insurers to escalate their initial estimates, hoping to recoup for the regulatory delay. See Assembly Banking and Insurance Committee, Statement to Assembly Committee Substitute for Assembly Bill No. 813 (June 14, 1982). This does not mean that Rate Counsel is to become a shadow commissioner. It may not initiate proceedings to suspend deregulated rates. Only the Commissioner can do that. N.J.S.A. 17:29AA-13. It would frustrate the Legislature's intent to exempt this line of risks from most red tape if the Public Advocate replicated the prior system. Still, we think he retains a limited role here. Within his ambit of authority, we are satisfied that the Legislature intended that his reasonable costs and expenses be reimbursable under 19b.