Court Opinion

ID: 7913774
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:08:33.464036+00
Date Added: 2024-06-11T16:32:42.020764
License: Public Domain

Barnes, J.,
dissenting:
I dissent because in my opinion Chief Judge Foster correctly construed the applicable statutory provisions and found that these provisions and the testimony did not justify the passage of the order by the Commissioner involved in this case.
The applicable statutory provisions have been fully set out in the majority opinion and need not be repeated. Statutory references will be to Code Article 48A unless otherwise noted.
Assuming, arguendo, that section 77, subparagraph (2) is applicable to a life insurance company such as Baltimore Life, the language of that subparagraph only requires the company to charge against its assets for a determination of its financial con*136dition the “amount, estimated consistent with the provisions of this article, necessary to pay all of its unpaid losses and claims * * (Emphasis supplied). If the General Assembly had intended that the full amount of unpaid claims be charged against the Company’s assets in the financial statement, it would no doubt have said this. If this has been the intention, the legislature would not likely have used the word “estimated” or the words “necessary to pay.” I can only conclude that the language of subparagraph (2) means what the words ordinarily and usually mean and that they express, clearly and without ambiguity, what the General Assembly intended. There is, therefore, nothing to construe. Our duty is then to give effect to the legislative intent as stated in the statute. As we stated in Maryland Medical Service, Inc. v. Carver, 238 Md. 466, 478, 209 A. 2d 582, 588 (1965) :
“The legislative intent is to be sought in the first instance in the words used in the statute and if there is no ambiguity or obscurity in the language used in the statute, there is usually no need to look elsewhere to ascertain the intent of the legislature.”
As the majority opinion points out, all the parties concede that the liability reserve for non-premium paying matured endowments established by Baltimore Life has been estimated by the Company under a realistic formula and that this reserve was-at the time of the proceeding and had been for many years in an amount quite sufficient to pay all of such unpaid claims which would be presented to the Company for payment. The actuarial principle involved is a well established one and was properly applied to the factual situation. Nor is there the slightest question about the Company’s solvency, nor was there any evidence that the continuation of the Company’s accounting practice would in any way impair that solvency. Indeed, if and when such possible impairment might be indicated, the Commissioner has full power under section 82, subparagraph (2) to require the Company “to maintain a loss reserve in such increased amount as is needed to make them adequate.” The Commissioner did not purport to proceed in this case under section 82, subparagraph (2) for the obvious reason, no doubt, that the *137company’s reserve is undoubtedly sufficient based on its experience. I conclude that the long continued practice of Baltimore Life in regard to its reserve was not in conflict with the provisions of subparagraph (2), if these provisions are applicable to life insurance companies.
I have grave doubts that the provisions of subparagraph (2) were intended to apply to life insurance companies at all, but, rather, were intended to apply to casualty companies. Subparagraph (3) of section 77 indicates this. Subparagraph (3) begins with the words “With reference to life and disability insurance and annuity contracts,” and then sets forth four provisions applicable to companies of the types mentioned. This indicates to me that the provisions of subparagraph (2) were not intended to apply to life insurance contracts, but that these contracts were to be governed by subparagraph (3). Here again this is what the language indicates and this language shows the legislative intent. There appears to be no question that the four requirements in subparagraph (3) do not conflict with the accounting practice of Baltimore Life in regard to the reserve in question.
Nor does subparagraph (5) of section 77 in my opinion conflict with the Baltimore Life accounting practice. This subparagraph requires an insurer to charge against its assets “Taxes, expenses and other obligations due or accrued at the date of the statement.” Obviously the reserve is not for “taxes” or “expenses,” and in my opinion, it cannot be within the language “and other obligations.” Applying the maxim of construction, ejusdem generis, (see Smith v. Higinbothom, 187 Md. 115, 48 A. 2d 754 (1946)), the general language would mean “other obligations” like taxes and expenses. Subparagraph (5) was intended to apply to definite amounts inevitably payable to definitely ascertained specific persons.
In my opinion, Baltimore Life properly filled in the form in use by the National Association of Insurance Commissioners referred to in the majority opinion. It is clear to me that Exhibit 11 in that form includes estimated or actuarially computed figures. For example, in line 3 of Part 1 of Exhibit 11 there is an item for “Incurred but unreported (less reinsurance ceded).” This, of necessity, is an estimated or actuarially computed fig*138ure. Line 6 in Part 1, to which the footnote mentioned in the majority opinion refers, is designated “Net Liability.” The footnote reads “Including matured endowments amounting to..... * * *.” Baltimore Life inserted on this blank the amount of the reserve for liability for the claims calculated on the actuarial basis already mentioned. As I see it, this was justified as the word “amounting” refers to liability for the claims, not for their full amount, and the liability is that set up in the reserve. The purpose of the footnote was to show a breakdown in regard to that part of the liability reserve attributable to unpaid matured endowments. •
Melvin Gold, a consulting actuary and a Fellow in the Society of Actuaries, and Abraham Haselcorn, also a Fellow in the Society of Actuaries and an actuary for Lybrand, Ross and Montgomery, testified on behalf of Baltimore Life. They both testified that Baltimore Life had validly employed a classical actuarial approach in the establishment of the reserve for non-premium paying matured endowments by analyzing past experience, setting up the equivalent of a mortality or a continuance table and using the table to estimate future liability. They described the technique as being a “classical or almost pure and simple” method, “a pretty standard approach * * * that is continuously used,” and actuarially sound, even though the approach in its current application by Baltimore Life had not been written up. It is interesting to observe, however, that 30 of the 45 companies which answered the first part of Question 4 on the questionnaire submitted to them by Baltimore Life indicated that they considered the continuance table method of establishing the reserve as employed by Baltimore Life to be a sound one.
I am not impressed by the fact that no other companies use the continuance table method used by Baltimore Life. The question is not whether the method is novel or unique, but whether it is sound. The facts indicate that the method is sound. It adequately provides for the payment of all claims for non-premium paying endowments which will be presented to the Company. It is fair to the policyholders of this well-operated mutual company. The Company is eminently solvent and there is no danger that its accounting practice will render it insolvent. A proper con*139struction of the applicable statutory provisions indicates to me that its accounting practice is not prohibited and the Commissioner’s order was illegal. I would affirm the order of the lower court.