Opinion ID: 408092
Heading Depth: 1
Heading Rank: 4

Heading: applicability of the insurance act

Text: 63 The Missouri Insurance Holding Companies Act (Insurance Act), Mo.Rev.Stat. § 382.010 et seq., is patterned on a model act drafted by the National Association of Insurance Commissioners. The model act, entitled the Insurance Holding Companies Act, was drafted in 1969 and has presently been adopted, in various versions, by a majority of the states. 18 64 The challenged provisions provide, in effect, that before any person can acquire control of a domestic insurer it must file with the director and send to the insurer a detailed disclosure statement and also have its offer approved by the director after a public hearing. Section 382.040, which defines the applicability of the acquisition provisions, defines domestic insurer as (f)or purposes of this section, a domestic insurer shall include any other person controlling a domestic insurer if such other person is either directly or through its affiliates primarily engaged in the business of insurance  (emphasis added). 65 On September 10, 1981, National was advised by letter that it was the opinion of the Director that the acquisition provisions applied to National's tender offer because LLC controlled a domestic insurer. 19 National Exhibit No. 6. National challenged the applicability of § 382.040 on the basis that LLC was not a domestic insurer because it was not engaged primarily in the business of insurance. The district court did not address the issue and the state court simply deferred to the Director's opinion. Personal Life Insurance Co. v. National City Lines, supra, No. CV181-734CC, slip op. at 3. We disagree with the Director's interpretation and hold that § 382.040 is inapplicable on its face to National because it was not attempting to acquire control of a domestic insurer. 20 66 The term domestic insurer as defined in § 382.040 includes both domestic insurers and companies which control domestic insurers if those companies are directly or through their affiliates primarily engaged in the business of insurance. The syntax clearly implies that there are two distinct threshold requirements for applicability to non-domestic insurers: (1) they must control a domestic insurer; and (2) they must, considering the aggregate of business activity, be primarily engaged in the business of insurance. As a rule, a definition which declares what a term means is binding upon the court. See Colautti v. Franklin, 439 U.S. 379, 392-93 n.10, 99 S.Ct. 675, 684, 58 L.Ed.2d 596 citing 2A C. Sands, Statutes and Statutory Construction § 47.07 (4th ed. Supp. 1978); Conoco, Inc. v. Federal Energy Regulatory Comm'n, 622 F.2d 796, 798 (5th Cir. 1980). 67 In the present case LLC does not satisfy the second threshold requirement. The entire LLC corporate group derives approximately ten percent of its operating revenues and nine percent of its assets from the insurance subsidiary. 21 Therefore, even though it does control a domestic insurer, LLC itself does not fall within the statutory definition because it is not primarily engaged in the business of insurance. The Director's determination that LLC is a domestic insurer ignores the second requirement in violation of the canon of construction that a statute should be interpreted so as not to render one part inoperative. See United States v. Menosche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 519-20, 99 L.Ed. 615 (1955). 68 The only support for the Director's position was his statement that domestic insurer included anybody that would have any interest in how insurance companies operate. Deposition of Donald Ainsworth at 12. 22 However, that construction is at odds with the plain meaning of § 382.040. The plain meaning of a statute should be rejected only if there is substantial unambiguous evidence supporting a contrary interpretation. See Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1979); Matala v. Consolidation Coal Co., 647 F.2d 427, 429 (4th Cir. 1981); Blue Cross Association v. Harris, 622 F.2d 972, 977 (8th Cir. 1980). 69 In the present case appellants have not directed us to any legislative history or cases supporting their interpretation. Our research indicates that no court has decided the precise issue before us. However, the cases we have found discussing the application of the acquisition provisions of the Insurance Holding Companies Act only involved the acquisition of control of domestic insurers, see, e.g., Roussel v. Boren, --- F.Supp. ----, No. 78-2345 (E.D.La. Nov. 6, 1978); Berger v. General United Group, 268 N.W.2d 630 (Iowa 1978), or the acquisition of control of parent companies primarily engaged in the business of insurance, see, e.g., In re Application of Midwestern Fidelity, 26 Pa.Cmwlth. 211, 363 A.2d 892 (1976). 70 In addition, our examination of other states' Insurance Holding Acts indicates that they also impose a dual threshold requirement of applicability to persons acquiring non-domestic insurers. The Minnesota Act defines domestic insurer as a domestic insurer or ... a person which (1) is in control of a domestic insurer, and (2) is engaged primarily either directly or indirectly through its subsidiaries in the business of insurance .... Minn.Stat.Ann. § 600.02 (emphasis added). Iowa's act also clearly establishes the dual requirements. It defines domestic insurer as (f)or purposes of this section a domestic insurer shall include any other person controlling a domestic insurer unless such other person is either directly or through its affiliates primarily engaged in business other than the business of insurance. Iowa Code Ann. § 521A.3 (West) (emphasis added). 71 Having found no clear indication of legislative intent to the contrary, we hold that the definition of domestic insurer found in § 382.040 is binding upon us. We further hold that under the statutory definition LLC is not a domestic insurer and therefore the provisions of the Insurance Act governing acquisition of control of a domestic insurer are inapplicable to National. 72 In summary, we conclude that the Missouri Takeover Act is invalid under the Supremacy and Commerce Clauses of the federal Constitution. We further conclude that the Missouri Insurance Act does not apply to National's efforts to acquire control of LLC because LLC is not directly or through its affiliates primarily engaged in the business of insurance. 73