Opinion ID: 1293583
Heading Depth: 1
Heading Rank: 6

Heading: Material and Substantial Evidence

Text: We next address the question whether the Commissioner's findings and conclusions with respect to this portion of his order were unsupported by material and substantial evidence in view of the entire record as submitted  as contemplated by G.S. 58-9.6(b)(5) and G.S. 150A-51(5). (Emphasis added.) We reiterate the rule stated in Section II. A. 1 of this opinion that it is for the administrative agency to determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences from the facts, and to appraise conflicting and circumstantial evidence. 73 C.J.S. Public Administrative Bodies and Procedure, supra at § 126. It is not our function to substitute our judgment for that of the Commissioner when the evidence is conflicting. However, as also indicated above, when evidence is conflicting, the standard for judicial review of administrative decisions in North Carolina is that of the whole record test. Thompson v. Wake County Board of Education, supra ; In re Rogers, supra . As Justice Exum stated in In re Rogers : The `whole record' test is not a tool of judicial intrusion; instead, it merely gives a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence. See Jaffe, Judicial Control of Administrative Action . . . 601 [(1965)]; Daye, supra at 920-921. 297 N.C. at 65, 253 S.E.2d at 922. In Thompson v. Wake County , Justice Copeland clearly explained the whole record test: This standard of judicial review is known as the whole record test and must be distinguished from both de novo review and the any competent evidence standard of review. Universal Camera Corp. v. N.L.R.B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951); Underwood v. Board of Alcoholic Control, 278 N.C. 623, 181 S.E.2d 1 (1971); Hanft, Some Aspects of Evidence in Adjudication by Administrative Agencies in North Carolina, 49 N.C.L.Rev. 635, 668-74 (1971); Hanft, Administrative Law, 45 N.C.L.Rev. 816, 816-19 (1967). The whole record test does not allow the reviewing court to replace the Board's judgment as between two reasonably conflicting views, even though the court could justifiably have reached a different result had the matter been before it de novo, Universal Camera Corp., supra. On the other hand, the whole record rule requires the court, in determining the substantiality of evidence supporting the Board's decision, to take into account whatever in the record fairly detracts from the weight of the Board's evidence. Under the whole evidence rule, the court may not consider the evidence which in and of itself justifies the Board's result, without taking into account contradictory evidence or evidence from which conflicting inferences could be drawn. Universal Camera Corp., supra. 292 N.C. at 410, 233 S.E.2d at 541. Applying the foregoing, we proceed to review the evidence to determine whether it is substantial in view of the entire record to support the Commissioner's findings and conclusions. We first note that G.S. 58-248.33(l) which prohibits rates which are excessive, inadequate or unfairly discriminatory contains no definition of the latter phrase. That same statute provides, however, that [a]ll rates shall be on an actuarially sound basis. Id. Moreover, it provides that [t]here shall be a strong presumption that the rates and premiums for the business of the Facility are neither unreasonable nor excessive. Id. While the Commissioner's findings with respect to the numbers and percentages of ceded exposures which had not had assessed any SDIP points nor caused claim payments to be made are supported by the record, the Commissioner has made no findings with respect to the statutory standard actuarially sound. This is so even though the record is replete with evidence indicating that the proposed differential for the rate increase between ceded and voluntary business is actuarially justified. For example, the evidence for the Rate Bureau indicated there were only 1.42 claims per hundred cars involving bodily injury for voluntary risk policyholders in contrast with 2.95 accidents per hundred cars involving bodily injury for ceded risk policyholders. For property damage, the corresponding figures for voluntary risk were 5.70 accidents per hundred cars as compared to 10.21 for ceded risk. The statistics revealed in the following chart indicated the pure premium or average loss per car was also significant: Bodily Property Injury Damage Voluntary Risks $22.17 $23.85 Ceded Risks 56.12 47.59 In other words, the claim frequency for Facility business for bodily injury was 108% higher than for a voluntary insured. For property damage, the claim frequency was 79% higher for a Facility insured than for a voluntary insured. On an average loss per car basis, the pure premium for a Facility insured for bodily injury liability was 153% higher and for property damage liability the Facility insured had a loss cost of 99.5% higher than a voluntary insured. The Commissioner's order also relies heavily on the percentage of insureds who had no SDIP points or claims assessed. The record indicates extensive questioning concerning what are referred to as clean risks. As we understand it from the record, parties to the hearing proceeded under the understanding that a clean risk was one who had neither SDIP points nor a claim assessed during the preceding three-year period. [5] The Commissioner's findings and conclusions concerning these statistics and the current composition of the Facility indicate that he bases his conclusions primarily on what he considers unfair discrimination between a clean risk in the Facility and those in the voluntary market. Again, however, in following the statutory guide that the rates be actuarially sound, the statistics are significant. The following chart from the Rate Bureau's exhibits indicates the claim frequency per hundred cars: Bodily Property Injury Damage Voluntary Clean Risks 1.30 5.46 Clean Risks in Facility 2.73 9.56 Increased Claim Frequency of Ceded Risks (110% higher) (75% higher) Moreover, the comparable pure premium statistics (average loss per car) indicate: Bodily Property Injury Damage Voluntary Clean Risks $20.41 $22.52 Clean Risks in Facility 51.96 43.93 Increased Average Loss of Ceded Risks (155% higher) (95% higher) We also note that, while as indicated above, the Commissioner's alarming statistical finding that 62.3% of those in the Facility had neither SDIP points nor claims paid is supported by the evidence, the record indicates that his statistics were based on the experience for all carriers writing in North Carolina for the accident year ending June 30, 1976. Clearly, these statistics would not reveal the SDIP record or claims made for these insureds for the three-year period which we glean from the record to be contemplated by the definition of a clean risk. Apparently, the data relied upon by the Commissioner covers only the one-year period. We assume that data for the preceding accident year is that most commonly relied upon when a filing is made. However, it is obviously inconsistent to show concern about the composition of a Facility with respect to its high percentage of clean risks and not include statistics covering a three-year period; while the high percentage of insureds in the Facility might not have had any SDIP points assessed or claims made during the preceding year, this certainly does not mean that these insureds are clean risks. Some of them, perhaps many of them, might well not be clean risks if the three-year period were considered. Therefore, on the basis of our review of the entire record, we are compelled to conclude that the Commissioner failed to consider material and substantial evidence concerning the actuarial soundness of the statistics and that the findings which the Commissioner made, while supported by the evidence, are legally irrelevant in light of the limitation to a one-year period. The evidence supporting the Commissioner's findings and conclusions is, therefore, in our view, insubstantial.