Opinion ID: 2359555
Heading Depth: 1
Heading Rank: 4

Heading: The Matthews Case

Text: James E. Matthews of Baltimore City had an automobile liability insurance policy issued by Lumbermen's Mutual Casualty Company. On August 11, 1981, Lumbermen's sent Mr. Matthews a Notice Of Intent Not To Renew which was virtually identical to the notice sent by American Motorist in the Carter case, although the incidents forming the basis for the decision were three traffic violations in 1980. As in the Carter case, the notice sent to Mr. Matthews referred to the study done in California, recited that the insurer was entitled to surcharge Mr. Matthews under its filed rating plan, complained that the surcharged rates under the rating plan were inadequate, and stated that keeping an insured such as Mr. Matthews has a direct adverse bearing on the economic and business purpose of the company. Mr. Matthews protested the intended action and requested a hearing before the Insurance Commissioner or his designee. At the administrative hearing, the only witness for Lumbermen's was again Ruth Sheehan, underwriting supervisor for the Kemper Insurance Group. Miss Sheehan initially testified that the reason for the nonrenewal was that Mr. Matthew's driving record, dated September 9, 1981, disclosed three traffic convictions, namely an automatic signal violation on January 30, 1980, exceeding the speed limit on May 31, 1980, and failure to obey a stop or yield sign on October 26, 1980. Miss Sheehan reiterated that, under Lumbermen's underwriting guidelines, any operator with more than one accident or conviction within a three year period is an unacceptable operator so as to disqualify this person for continued coverage with Lumbermen's. She stated again that this guideline was based on the company's own experience as well as various studies, including the California study. As in the Carter case, Miss Sheehan offered no data or evidence with respect to the company's experience, and none of the studies was introduced in evidence. Miss Sheehan did say that, among major conclusions reached by this [California] study are that the best single predictor of accident involves conviction record, and that an operator with three moving traffic violations within a three year period has 3.54 times an increased probability of an accident than does a violation free driver. Miss Sheehan acknowledged that Lumbermen's rating plan on file covered the instant situation, that it authorized a surcharge for certain initial traffic violations but not others, and that it allowed surcharges for Mr. Matthews's second and third violations. [11] She went on to testify that the company would refuse to renew any of its drivers in Maryland who have more than one moving traffic violation over a three year period, despite its ability to surcharge under the rating plan. She stated that the amount of the surcharge under the rating plan does not compensate the company for the increased risk. Mr. Matthews testified that he had been driving in Maryland since 1963 when he was discharged from the Air Force, that he had never had an accident, and that he had had no traffic violations on his record since 1963 except for the three tickets which he received and paid in 1980. Even though the study itself was not in evidence, Mr. Matthews stated that the California study relied on by Lumbermen's was done ... sometime before 1968. Mr. Matthews also disputed Miss Sheehan's testimony concerning the conclusions of the California study. Mr. Matthews submitted into evidence Lumbermen's current rating plan which the company had filed with the Insurance Commissioner and the Commissioner had approved. At the conclusion of the hearing, Lumbermen's counsel argued that the ability of the insurer to surcharge under its rating plan did not furnish a ground for upholding Mr. Matthews's protest, as the amount of the surcharge does not adequately compensate the company. Counsel made the proffer that, were she asked, Miss Sheehan would testify that the surcharges under the plan were adequate only when there were family automobile policies in which you have more than one driver, each having one... accident or violation, but with no individual driver having more than one accident or violation. Subsequently the Insurance Commissioner, by the Hearing Officer, filed an order finding that the Licensee [insurer] has failed to show how this risk exceeds the surcharge capability of the Licensee's approved rating plan. The order concluded that Lumberman's had violated Art. 48A, §§ 234A and 240AA, and it required that Lumbermen's continue in effect Mr. Matthews's coverage.