Court Opinion

ID: 9689757
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:45:46.657627+00
Date Added: 2024-06-11T18:18:51.937949
License: Public Domain

JON P. WILCOX, J.
¶ 81. (dissenting). The majority concludes that Wis. Admin. Code § INS 4.01(2)(e) exceeds the statutory authority of the Office of the Commissioner of Insurance (OCI) because it conflicts with the language and legislative intent of Wis. Stat. § 632.05(2). Majority op. at ¶ 79. I believe that § INS 4.01(2)(e) is a reasonable interpretive rule that does not conflict with the language or intent of *251§ 632.05(2). I would not overturn the OCI's reasonable, longstanding rule.
¶ 82. Wisconsin Stat. § 601.41 (1997-98)1 authorizes the OCI to administer Chapters 600 to 655 of the Wisconsin Statutes and to promulgate interpretive rules. Thus, the OCI is authorized to "prescribe forms and procedures in connection with any statute enforced or administered by it, if the agency considers it necessary to effectuate the purpose of the statute." Wis. Stat. § 227.11(2)(b). The public policy reflected in agency rule-making "is no less fundamental or well-defined merely because it is to be found not in a statute but in the administrative code." Winkelman v. Beloit Mem'l Hosp., 168 Wis. 2d 12, 23, 483 N.W.2d 211 (1992). Although this court may declare an interpretive, rule invalid, it should not do so unless the rule violates the constitution, exceeds the statutory authority of the agency adopting it, or was adopted without compliance with statutory rule-making procedures. Wis. Stat. § 227.40(4)(a).
¶ 83. Administrative rules promulgated pursuant to a power delegated by the legislature " 'should be construed together with the statute to make, if possible, an effectual piece of legislation in harmony with common sense and sound reason.'" State v. Busch, 217 Wis. 2d 429, 441, 576 N.W.2d 904 (1998)(quoting Law Enforcement Standards Bd. v. Village of Lyndon Station, 101 Wis. 2d 472, 489, 305 N.W.2d 89 (1981)). Even if Wis. Stat. § 632.05(2) is unambiguous, Wis. Admin. Code INS § 4.01(2)(e) is not necessarily invalid unless it conflicts with the statute. See Basic Prods. Corp. v. Department of Taxation, 19 Wis. 2d 183, 186, 120 *252N.W.2d 161 (1963). I would not conclude that § INS 4.01(2)(e) conflicts with § 632.05(2).
¶ 84. Wisconsin Admin. Code § INS 4.01(2)(e) does not contradict the statute. It merely clarifies the meaning of the word "dwelling" by distinguishing between people who conduct a business out of their residence and those who reside at their place of business. As the trial court stated:
It is true that by clarifying the word "dwelling", the OCI was in essence limiting and restricting the scope of the valued policy law. However, by doing so, the OCI was not contravening the words or intent of the statute; by categorizing the word "dwelling" and consequently narrowing the applicability of the valued policy law, the OCI was not exceeding its power or promulgating a rule that conflicts with state law. Rather, the OCI was clarifying and interpreting the provisions of a statute that it was charged to administer and enforce; a statute whose plain meaning could yield situations inconsistent with the original intent of the legislature.
¶ 85. The majority stretches the OCI's argument in order to make it appear excessive. The majority claims that the OCI uses "inverse logic." Majority op. at ¶ 37 (explaining that even if "if p, then q" is true, it does not necessarily follow that "if not p, not q" is also true). However, the OCI does not rely on inverse logic. The OCI does not argue that a building can never be a dwelling if it is also used for commercial purposes. The OCI merely argues that when a building is put to both commercial and residential use, a question arises about whether the building is still "owned and occupied by the insured as a dwelling." Wisconsin Admin. Code INS § 4.01(2)(e) is a reasonable interpretation that provides a clear rule in such cases. Moreover, Wis. Admin. *253Code § INS 4.01(2)(e) itself recognizes that commercial use does not automatically affect a property's status as a "dwelling." Under the rule, "[a] policy insuring real property any part of which is used for commercial (non-dwelling) purposes other than on an incidental basis is not subject to s. 632.05(2), Stats." § INS 4.01(2)(e). Thus, the rule provides that incidental commercial use does not affect a building's status as a dwelling.
¶ 86. The undisputed facts of this case demonstrate why the rule is a reasonable interpretation of the statute. The Seiders presented themselves to the insurer as a business, and they insured the Steinthal Valley Lodge for business purposes. The policy the Seiders obtained was a Commercial Package Policy, which described the premises as a "restaurant." Majority op. at ¶ 8. The insureds were identified as "Richard R. Seider and Jean M. Seider, dlbla Steinthal Lodge.” Id. (emphasis added). Nothing in the policy described the premises as having any residential purpose. The policy explicitly indicated that if a loss occurred, coverage would be limited to the property's actual cash value. Id. at ¶ 9. Having obtained this "actual cash value" policy of commercial insurance for their restaurant business, the Seiders now seek to take advantage of the valued policy law, which by its own terms applies to "real property which is owned and occupied by the insured as a dwelling." Wis. Stat. § 632.05(2).
¶ 87. Property insurance boils down to a risk-loss analysis. In the insurance context, a rule that defines "dwelling" by distinguishing between "incidental" and "non-incidental" commercial usage makes sense. Common sense illuminates the importance of this difference. For example, compare an attorney who makes business-related phone calls out of his or her home with the Seiders, who reside in the same building *254where they conduct their restaurant business. Restaurants typically contain a deep fryer in the kitchen and serve food or alcoholic beverages to many patrons every evening. Obviously, there is a much greater risk that the building that contains a restaurant will be wholly destroyed by some accident such as a fire. Insurers rely on this distinction, along with all other rules and regulations, when determining policy rates.
¶ 88. Contrary to the majority, I believe that the legislative history supports Wis. Admin. Code § INS 4.01(2)(e). Beginning in 1874 and until its repeal in 1975, the valued policy law applied to all real property. See Majority op. at ¶¶ 54, 56. In 1979 the legislature reenacted the valued policy law in modified form, covering only property "which is owned and occupied by the insured as a dwelling." Id. at ¶¶ 58 — 59. This history shows that the legislature only wished to extend the valued policy law protection to property that is used as a "dwelling." The OCI used its rule-making authority to clarify the application of the statute in multiple-use situations like the one in this case.
¶ 89. Moreover, the legislature had the opportunity to reject the rule before it went into effect and during the 18 years before this case came to this court. In 1981 the rule was referred to the Assembly Committee on Financial Institutions for review under Wis. Stat. § 227.018(4X1979-80). Representative Potter, who chaired the committee, asked the OCI to respond to several questions, including the rationale for Wis. Admin. Code § INS 4.01(2)(e). Letter from Calvin J. Potter, Chairperson, Assembly Committee on Financial Institutions, to Thomas R. Hefty, Deputy Commissioner, Office of the Commissioner of Insurance (Feb. 11, 1981). Specifically, Representative Potter wrote, "would you please respond to these ques*255tions by February 23, 1981, in order to assist me in determining whether scheduling a meeting with the Insurance Commissioner's Office, pursuant to § 227.018(4)(b), Stats., is necessary." Id. The deputy commissioner of the OCI responded that the rationale for the rule "is that [Wis. Stat. § ] 632.05(2) only applies to real property which is owned and occupied by the insured as a dwelling. If a property is being used for commercial purposes, then it is no longer considered as being a dwelling." Letter from Thomas R. Hefty, Deputy Commissioner, Office of the Commissioner of Insurance, to Calvin J. Potter, Chairperson, Assembly Committee on Financial Institutions (Feb. 19, 1981). The committee had the power to object to the rule and refer the rule to the joint committee for review of administrative rules. See Wis. Stat. § 227.018(4)(d) and (5)(a) (1979-80). However, the legislature took no further action, and the rule went into effect and has been the law of Wisconsin for 18 years. This sequence of events supports the conclusion that the legislature considered the OCI's interpretation of the valued policy law to be reasonable.
¶ 90. In sum, I believe that Wis. Admin. Code INS § 4.01(2)(e) is a reasonable interpretive rule that does not conflict with Wis. Stat. § 632.05(2). The OCI has enforced this rule, relied on by policyholders and insurers, for over 18 years. The legislature was aware of, yet took no action against, the rule. The Seiders purchased a commercial insurance policy for a restaurant, and their commercial usage of the premises was not "incidental." Under the OCI's reasonable interpretive rule, the valued policy law is inapplicable. Therefore, I respectfully dissent.
*256¶ 91. I am authorized to state that Justice N. PATRICK CROOKS joins this dissent.

 Subsequent references to Wisconsin Statutes are to the 1995-96 volumes unless otherwise indicated.