Court Opinion

ID: 9577694
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:37:08.933809+00
Date Added: 2024-06-11T13:21:03.471882
License: Public Domain

Hale, J.
(dissenting) — I dissent. That the Washington Insurance Examining Bureau may be a useful, efficient and *840prudent organization, performing a needful service to the fire insurance industry and deserving of the Commissioner’s confidence, does not, in my opinion, warrant its exercising the sovereign powers of government nor excuse the government in giving it an unique status. The Insurance Commissioner’s order, effective March 20, 1964, directing all fire insurance companies to submit their premium data to a private corporation appears to be an unconstitutional use of executive power, both creating a monopoly and delegating the police power to a private entity. Aside from its possible unconstitutionality, the order may also violate the state civil service law, for it places the state’s work in private hands. Since statehood, Washington has maintained a constitutional policy against monopoly, and it seems to me that the order under review not only violates this policy by permitting a monopoly, but goes farther and actively fosters one.
Article 12, § 22 of the Washington State Constitution, declares that “Monopolies and trusts shall never be allowed in this state . . . .” The examining bureau comes into existence under RCW 48.19.410, which also permits it to examine the policies of all fire insurance companies to ascertain if they are charging, in each instance, the lawful or posted premium. One should note the permissive nature of the language employed. RCW 48.19.410 (1) states:
The Commissioner may permit the organization and operation of examining bureaus for the examination of policies, daily reports, binders, renewal certificates, endorsements, and other evidences of insurance or of the cancellation thereof, for the purpose of ascertaining that lawful rates are being charged.
The Insurance Commissioner’s order, No. 179, issued pursuant to that statute, not only permits a monopoly, I think, but explicitly creates one in the following language:
For the purpose of ascertaining that lawful rates are being charged and that insurers are adhering to filings made by them or on their behalf, every insurer authorized to write property insurance in the State of Washington shall submit to the Washington Insurance Examining *841Bureau, Inc., for examination, all policies, daily reports, binders, renewal certificates, endorsements and other evidences of insurance or the cancellation thereof . . . .
Turning over to the Washington Insurance Examining Bureau, Inc., a private corporation, sole power, except for the Commissioner, to make initial examinations on fire insurance policies, operates to give the rating bureau an exclusive franchise to engage in the examining business. If this is not monopoly, then the term has little meaning to me.9
Passing now from monopoly to delegation of power, we come to a subtle yet more arresting aspect of the majority decision — that of transferring a segment of the police power to a private corporation or entity. Any business which for sound reasons ought to be subject to regulation for the public good is a business affected with the public interest and may, under the police power, be reasonably regulated in the public interest. Nebbia v. New York, 291 U.S. 502, 78 L. Ed. 940, 54 Sup. Ct. 505, 89 A.L.R. 1469 (1934); 11 Am. Jur. Constitutional Law § 296; Continental Ins. Co. v. Fishback, 154 Wash. 269, 282 Pac. 44 (1929). The whole idea behind the regulation of the insurance business and the adoption of comprehensive insurance codes throughout the fifty states of the Union is that insurance is a business affected with the public interest and, thus, falls within the reasonable exercise of the state’s police powers to protect the public’s welfare. Indeed, so universally is this view accepted nowadays that the idea of state regulation of insurance is rarely challenged, and then usually in such instances only where the particular business activity sought to be regulated is not of itself affected with the public interest. See Northwestern Nat. Ins. Co. v. Fishback, 130 Wash. 490, 228 Pac. 516, 36 A.L.R. 1507 (1924), where a statute prohibiting more than one agent per company in *842towns of less than 50,000 population and more than two in cities over 50,000 was held unconstitutional as not regulating an activity affecting the public interest.
Laws designed to protect the public from insurance fraud, misrepresentation and overreaching, unreasonable or illegal charges, cutthroat competition and insolvent insurance companies clearly uphold the public welfare. Accordingly, a study of the delegation of the police power begins with the undeniable premise that regulating insurance as a business affected with the public interest is constitutionally permissible as an exercise of the police power in protecting the public welfare, peace, safety and health.
' Although a distinction may exist in some instances between the delegation of legislative power per se and a delegation of police power as exercised by the executive hand of government, that distinction seems lacking here. In an analogous situation, a state statute setting up a compulsory code regulating the coal industry, when adopted by a majority of its members, was held to be an unlawful delegation of legislative authority to private individuals because it allowed the majority to force the code upon an unwilling minority. Carter v. Carter Coal Co., 298 U.S. 238, 80 L. Ed. 1160, 56 Sup. Ct. 855 (1936). Similarly, see Ashmore v. Greater Greenville Sewer Dist., 211 S.C. 77, 44 S.E.2d 88, 173 A.L.R. 397 (1947).
We are dealing here with no merely ministerial duties. The police power is an attribute of sovereignty possessed by every state of the Union. 16 Am. Jur. 2d Constitutional Law § 259. Of course, it must be reasonably exercised to attain reasonable ends and cannot be arbitrarily imposed. See County of Spokane v. Valu-Mart, Inc. 69 Wn.2d 712, 419 P.2d 993 (1966). Therefore, if the regulating and policing of the insurance industry is an attribute or element of that sovereignty, the Insurance Commissioner cannot delegate to a private corporation the duties imposed by law upon him with which he carries out that sovereign power. The compulsory referral of all fire insurance policies to a private corporation for its examination to determine if the *843insurance company has complied with the insurance code, in my view, delegates to the private corporation one of the insurance commissioner’s major duties, that of policing the industry to assure that only lawful premiums are charged. Just as the legislature may not delegate to private persons the power to define crimes (16 Am. Jur. 2d Constitutional Law § 249), neither it nor the executive branch of government should be accorded power to delegate the duties of enforcement either.
If, as it is stated as a general rule in 16 C.J.S. Constitutional Law § 179, neither the legislature nor any inferior legislative body to which a part of the police power has been granted can lawfully alienate, surrender or delegate to another by any grant, contract or delegation any part of such power, then the executive branch of government, charged as it is by law with carrying out and enforcing the police power, should be equally limited. The executive branch, as with the legislative branch, ought not have power to clothe private persons with the power of government in a self-governing democracy.
Implicit in the majority opinion is the view that whatever illegality exists in such delegation of power is cured by the right of appeal to the Commissioner and his ultimate power of supervision over the Bureau’s operations. But these same rights of appeal and duty to supervise can be said to inhere in any illegal delegation of power, either expressly in the grant of such power or impliedly as a condition thereof and, therefore, do not save the measure from any illegality found in it. The illegality consists not in the danger or even likelihood that the insurance commissioner will either fail to supervise carefully or give conscientious review to any appeals, but rather in a violation of the constitution that designedly protects us from those unspecified and unidentifiable hazards to self government lurking in a delivery of the powers of government into the hands of private persons or corporations.
The record contains no hint that the Insurance Commissioner has conducted his office inefficiently, inadvisedly, or *844improperly. But the test is not whether a good public administrator may act wisely under a power, but rather how unwisely a bad administrator can act under it. Consider the danger to our institution if the Chief of the Washington State Patrol or the chief of police of a large city were empowered to delegate his powers and duties to a private corporation; or, if the power and duty to make the first investigations of air and water pollution were placed in the exclusive hands of a cooperative enterprise owned entirely by the regulated industries; or if banking institutions were at the outset turned over to the representatives of regulated institutions for examination; or if packers, canners and pharmaceutical houses were exclusively empowered to make the initial tests to decide whether the food, drugs and pharmaceuticals going into the channels of commerce meet the standards fixed by law for the public’s protection.
One can readily see in these few examples the real dangers inhering in the apparently innocent delegation of power presented by the instant case — dangers not obviated by supervision or rights of appeal — for the major steps in law enforcement of any kind occur largely when the state’s representatives make their initial contact with the violations.
I am mindful that this court in Storey v. Seattle, 124 Wash. 598, 215 Pac. 514 (1923), upheld a city ordinance appointing the King County Humane Society as official city poundmaster and authorizing it, inter alia, to impound all unlicensed animals running at large, and giving the society authority to enforce the animal control laws and collect license fees, and receive 85 per cent thereof for its services. But that case, I think, is quite distinguishable, if not sui generis.
Because the humane society was, in that case, charged with the duty of removing dead and diseased animals from the streets, we regarded the delegation of duties in much *845the same light as we would an exclusive contract for garbage collection and, accordingly, upheld the arrangement.
But even if enforcement of animal control laws and enforcement of the insurance code are deemed analogous, that case, I hope, would be held to rest on its own rationale. After all, where else in our urban society do we find such completely irreconcilable and irately defended positions as those inevitably asserted by householders who own dogs and cats as opposed to their neighbors who do not. Mere considerations of constitutional law, I hope, would never override the happy policy of transferring from the police department responsibility for dogs, cats and other pets to persons possessing both the diplomacy and hardihood to accept the job.
Turning now to a final and subsidiary point which perhaps begs the question under discussion, but, nevertheless, invites comment: The Commissioner’s order, it seems to me, tends to place outside the state’s civil service system a substantial number of persons engaged in the state’s work. Since 1961, the state has had a state civil service law. RCW 41.06; Laws of 1961, ch. 1, § 1, p. 7. It covers all state employees, putting their appointments, promotions, tenure, transfers and classifications under a merit system (RCW 41.06.010), and exempting from its coverage only those employees specifically designated in the act. RCW 41.06.070.
If regularly employed full-time employees are necessary in enforcing the insurance code, generally, and the work of the Bureau is essential in maintaining the legal premium schedules through daily examination of all fire policies in particular, then the operation of an examining bureau seems to me to be a regular service of state government in regulating the fire insurance business and employees of the Bureau should be deemed performing the work of state employees.
I think, therefore, that the employees of the Washington Insurance Examining Bureau are actually engaged in per*846forming services for the state in behalf of the Insurance Commissioner and should be included among the personnel of his department.
Therefore, I would reverse.
Hunter, J., concurs with Hale, J.
Hill and Rosellini, JJ., concur in the result of the dissent.
July 3,1967. Petition for rehearing denied.

It should be noted that this state’s antimonopoly provision in the constitution (Article 12 § 22), was adopted after the Supreme Court of the United States had upheld a Louisiana statute establishing a private monopoly in the butchering and meat industry in The Slaughter-House Cases, 83 U.S. (16 Wall.) 36, 21 L. Ed. 394 (1873). Our constitution adopted in 1889 should be regarded as a remedy for this situation.