Opinion ID: 2059200
Heading Depth: 1
Heading Rank: 2

Heading: Power of the Commissioner

Text: The Dealers at the outset allude to the doctrine of separation of powers as reflected in Maryland Declaration of Rights, Art. 8. The Dealers assert that because administrative officials have no inherent powers and may exercise only those powers which have been expressly granted to them by the General Assembly or which are necessarily or reasonably implied from those powers so granted, the Commissioner is without power here. They cite such cases as Governor v. Exxon Corp., 279 Md. 410, 440-41, 370 A.2d 1102 (1977), aff'd on other grounds, 437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978), and Pressman v. Barnes, 209 Md. 544, 555, 121 A.2d 816 (1956). Accordingly, it may be worthwhile to examine what was said in those cases. In response to a contention that certain portions of an act constituted an unlawful delegation of legislative authority in violation of Declaration of Rights, Art. 8, Judge Eldridge said for the Court in Exxon: Ordinarily when legislative authority is delegated to administrative officials, there must be sufficient standards for the guidance of the administrative officials. However, it has been recognized that the complexity of modern economic conditions may make it impossible to tailor specific guidelines for every conceivable situation and that latitude in granting discretion is necessary. As stated in Pressman v. Barnes, 209 Md. 544, 555, 121 A.2d 816 (1956): `It is recognized that it would not always be possible for Legislature or City Council to deal directly with the multitude of details in the complex situations upon which it operates.... The modern tendency of the courts is toward greater liberality in permitting grants of discretion to administrative officials in order to facilitate the administration of the laws as the complexity of governmental and economic conditions increases.' See also Montgomery County v. Walsh, 274 Md. 502, 523-524, 336 A.2d 97 (1975), appeal dismissed, 424 U.S. 901, 96 S.Ct. 1091, 47 L.Ed.2d 306 (1976). It would obviously be impractical for the Legislature to set specific guidelines to govern all situations where exceptions to the divestiture dates would be reasonable or where it would be necessary for a producer or refiner to operate a service station on a temporary basis. Id. at 440-41. We have heretofore set forth the statutory bases for the authority of the Commissioner. The argument here runs that the grant of power in § 26 (1) to the Commissioner is to make only such rules as are reasonable and necessary to effectuate the provisions of the article, that the authorization in § 436M is to adopt rules and regulations deemed appropriate and necessary for the supervision of [the] subtitle, and that the bases of authority set forth in § 436H (g) are to assure that the credit health and credit life insurance operations do not result in rates which are excessive in relation to benefits, do not endanger the solvency of the insurer, and do not adversely affect other classes of business of the insurer. Thus, it is argued that the General Assembly [has] carefully circumscribed the Commissioner's rulemaking authority and hence he is without power to do that which he has done. It is elementary that in examining the power of the Commissioner to issue regulations to implement the provisions of the Credit Life and Health Insurance subtitle of the Insurance Code, we should examine the provisions of that subtitle. This is so because the regulations must be read in the context of that enactment. The purpose of the subtitle is defined in § 436C (a) as to promote the public welfare by regulating credit life insurance and credit health insurance. The terms used are defined. A limitation is placed upon the forms of credit life and credit health insurance to be issued. The amounts of payments are regulated. The term of such insurance under § 436F is to commence on the date the debtor becomes obligated to the creditor, except that, if a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to the indebtedness shall commence on the effective date of the policy. Individual policies issued are required to be delivered to the debtors, except that in the case of group insurance a certificate of insurance shall be issued to the debtor. Section 436G (b) specifies the contents of each individual policy or group certificate. The Commissioner by § 436H is vested with the power and authority to approve all forms to be used in connection with such insurance as well as the rates to be charged. The statute contains requirements as to refunds. All policies of credit life insurance and credit health insurance delivered or issued for delivery in this State are required by § 436J to be only by an insurer authorized to do an insurance business [in this State] and shall be issued only through holders of licenses or authorizations issued by the Commissioner. There are statutory provisions relative to claims and to the option of a debtor of furnishing the required amount of insurance through existing policies of insurance owned or controlled by him or of procuring and furnishing the required coverage through any insurer authorized to transact an insurance business within this State. Moreover, § 436C (a) states, The provisions of this subtitle shall be liberally construed. Senate Bill 542, which ultimately was enacted as Ch. 464 of the Acts of 1979, contained an authorization for the Commissioner to set maximum rates of commission with the proviso, but the maximum rate may not be less than 30 percent of the premium for an agent who is not the general agent, and may not be less than 4 percent additional to be paid to an agent who is a general agent. This was stricken from the bill and replaced with the language now found in § 436H (g) (1), which we quoted in n. 2. It is argued that [b]y rejecting this language prior to the enactment, the General Assembly indicated that it did not intend to confer any authority on the Commissioner to create a two-tier commission structure. That does not follow. It can just as well be argued that the General Assembly, in its wisdom, deemed it a matter warranting further investigation and that this was a subject best committed to the discretion and expertise of the Commissioner. For that reason, we take a dim view of the Dealers' citation of 2A Sutherland, Statutory Construction § 48.8, at 224 (4th ed. 1973) and Demory Brothers v. Bd. of Pub. Works, 273 Md. 320, 329 A.2d 674 (1974), for their proposition that the rejection of an amendment by the Legislature indicates an intent not to include provisions embodied in the rejected amendment and their argument that [t]he legislative action of rejecting the original text of the bill and deleting language should be accorded even more weight than the mere rejection of a proposed amendment to a bill. We point out that we have said that the fact that a bill on a specific subject fails of passage in the General Assembly is a rather weak reed upon which to lean in ascertaining legislative intent. See, e.g., Police Comm'r v. Dowling, 281 Md. 412, 420-21, 379 A.2d 1007 (1977), and Harden v. Mass Transit Adm., 277 Md. 399, 406, 354 A.2d 817 (1976). It is obvious that any item of expense which takes a minimum of thirty-two cents out of every dollar by way of premium paid to an insurer has a substantial impact upon the financial health of that insurance company. Moreover, it has a direct bearing upon the ultimate charge to the insured since that commission is money never received by the insurer. We point out that the challenge here is not to the power of the Commissioner to set any rate of commission, but to his right to determine that one class of agents should receive more than another. We conclude it was entirely within the power of the administrative agency to make the rule which differentiated between the commissions of affiliated and non-affiliated agents. It must not be forgotten that Regulation 436M-1.21.1 relative to reinsurance treaties was amended on an emergency basis to incorporate the changes necessary by virtue of the adoption of Code (1957, 1979 Repl. Vol., 1980 Cum. Supp.) Art. 48A, § 436P by Ch. 571 of the Acts of 1980 concerning fronting agreements. It forbade an authorized insurer to engage in such an agreement with an unauthorized insurer with respect to any insurance written or issued in this State. [4] The type of reinsurance agreements used and the cost of such agreements have a distinct bearing upon the financial health of an insurance company. The General Assembly demonstrated its concern in this regard by its enactment of § 436P. We are of the view that adoption of the regulation governing reinsurance agreements, even with out-of-state firms, falls within the authority vested in the Commissioner. The well-being of a company doing business in Maryland is just as much affected by a reinsurance agreement with an out-of-state firm as it is with one confining its activities to Maryland. The definition of commissions in Regulations 436M-1.4.6 and 436M-1.4.6.14 are inextricably linked with § 436P. We regard it as within the power of the Commissioner to see that agents do not by sleight of hand evade the regulations otherwise applicable to their actions. Thus, the Commissioner had the power to define commission so as to include reinsurance profits and dividends. The regulations treating as a part of commissions those profits derived from reinsurance, setting up maximum commissions, and providing that reinsurance agreements must be approved by the Commissioner do not run afoul of the prohibition in Art. 48A, § 26 (1) against extend[ing], modify[ing], or conflict[ing] with any provision of ... [Art. 48A] or the reasonable implications thereof. Given that which the Court said in Exxon relative to the power of an administrative agency to make rules and the statutory bases here, we regard the adoption of the contested regulations here by the Commissioner as within the grant of power to that administrative agency.