Court Opinion

ID: 9758116
Source: CourtListenerOpinion
Date Created: 2023-08-28 23:12:19.614614+00
Date Added: 2024-06-11T10:00:14.341931
License: Public Domain

McDERMOTT, Justice,
dissenting.
Young women drivers, for actuarial purposes, have hitherto constituted a class. Among their other winsome ways, they have proved less accident prone than their young male counterparts. Insurance premiums were computed according to their actuarial experience as a class: being less accident prone, they received the concomitant benefit of lower premiums.
The Insurance Commissioner has, upon his own, decided that whatever the actuarial experience of young women as a class, young women are persons and should bear no actuarial adjective; that just because they are women, they cannot be classified different from men.
Such considerations doubtless have their place, even when they rub the paradox that to be fair to all we must be unfair to some. To deny persons access to a class or remove them from a classification, to which, for all present purposes, *590they are entitled, may settle a larger issue and serve larger purposes. That is not, however, for the Insurance Commissioner to say.
In the principality of Problemática, there are mansions, pre-fabs and tents, good actors, non-actors, warm, cold and indifferent. How many of a class will see the sunset of a given day, heed the call to matins, bend a fender, choose orange over strawberry or leave for Katmandu? Give or take a scoop, actuaries have a better hunch for hedging bets than a rabbit’s foot or knocking wood.
In this regard, gender may become pertinent as a pragmatic factor, and not a philosophic or natural distinction. Pragmatic factors of occupation, duties and functions, place, occasion and means are neutral gender qua gender. It may well be that a social policy dictates that all classifications that distinguish men from women, young from old, sick from well, are inherently unfair.1 However, such a policy should be promulgated by more authority than that possessed by an Insurance Commissioner, or under these circumstances, this Court, for the function of fostering social policy is the duty and prerogative of the Legislature.
I dissent upon several grounds, the first being that the Commissioner went beyond his function as an administrator to foster a social policy. To do so, the Commissioner took words of art and painted a picture, not from the palette provided by the Legislature, but with his own jackhammer.
To reach his conclusion that it is unfair to classify young women differently than young men, he seized upon the words “unfairly discriminatory”, as used in the Rate Act2, and determined that they mean something new and different than they meant when the Act was written, and which, *591until he changed their meaning, were settled words of art and precision.
“Unfairly discriminatory” are large words and may seem upon their face to warrant altering regulations to fit any doctrine of fairness conceived by a Commissioner. The fact is, however, that they were not addressed to conscience at large, but were confined to a specific area and a specific purpose. Their specific purpose was the maintenance of actuarial soundness in insurance rates; that is to maintain a reasonable relationship between a proposed rate for a particular class and the risk posed by members of that class. The Commissioner was not empowered to classify, he was directed to assure that a proffered premium for a class reflected sound actuarial components. The issue here is not his authority to supervise the construction of a class, but his authority to deny a classification based not on actuarial soundness, but rather upon his social philosophy.
“Unfairly discriminatory” has a settled and precise meaning in and for the industry it was designed to regulate. Here, a little history validates a volume of logic. The logic is contained in the Statutory Construction Act:3 plain words must be accepted for their plain meaning; technical words and phrases which have acquired a peculiar or precise meaning are construed as understood and meant for the field for which they were designed.
In this case, the logic of considering “unfairly discriminatory” as words of precise, technical meaning is validated by the history that gave them rise. The Rate Act’s passage was precipitated by a United States Supreme Court decision which held that the insurance industry was subject to federal antitrust laws. United States v. South-Eastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944). In response to South-Eastern, Congress passed the McCarran-Ferguson Act,4 allowing the states to pre-empt the field and relieve insurance companies from *592federal antitrust enforcement. See Panhandle Eastern Pipe Line Co. v. Public Service Comm., 332 U.S. 507, 68 S.Ct. 190, 92 L.Ed. 128 (1947). The Act, based on a model act designed by the National Association of Insurance Commissioners, was passed to shield insurers against antitrust enforcement under the Robinson-Patman Act5 which was partly aimed at inhibiting unfair price differences. It is evident that the “unfairly discriminatory” language was intended to specifically prohibit variations in rates which have no relationship to the insurers’ costs or risks of loss. It was not intended to promote broad social policy concerns. See Pennsylvania Insurance Department v. Philadelphia, 196 Pa.Super. 221, 227, 173 A.2d 811, 820 (1961); see generally, 5 Couch on Insurance § 30:49 at 564 (1960).
The logic is further indicated in looking at cases where proposed rates have been found to be unfairly discriminatory. For instance, in Physicians Mutual Insurance Co. v. Denenberg, 15 Pa.Cmwlth.Ct. 509, 515, 327 A.2d 415, 418 (1974), the Commonwealth Court affirmed the Commissioner’s finding of unfair discrimination concerning a one dollar flat charge added on to every initial premium since it “is applied to all policies regardless of the risk insured”. In another case, the Insurance Commissioner rejected a rate filing which rewarded a young insured who gained good grades in school because “the good student discount bears scarcely any valid relationship to the driving hazard; it is unfairly discriminatory within the meaning of the Act.” Adjudication order of David O. Maxwell (April 6, 1968).
This interpretation of “unfairly discriminatory” is also evident in examining cases from other jurisdictions involving statutes analogous to our own Rate Act. In a case very similar to this one, a Louisiana court reversed an Insurance Commissioner’s conclusion that a rating plan using sex and age was unfairly discriminatory. “[Classifications based on age and sex are not unreasonable, and, although there is discrimination against the good, young driver, it is not *593unfair or unreasonable.” Insurance Services Office v. Commissioner of Insurance, 381 So.2d 515 (La.Ct.App. 1979), writ of review denied, 382 So.2d 1391 (La.1979). The Florida Insurance Commissioner’s effort to bar the use of sex, marital status and scholastic achievement as automobile insurance rating factors was also thwarted. State of Florida, Department of Insurance v. Insurance Services Office, 434 So.2d 908 (Fla.App.Dist.1983), pet. for rev. denied, 444 So.2d 416 (Fla.1984). The court held the use of the factors not to be unfairly discriminatory. Indeed, the use of those factors “enhanced the actuarial soundness of a rate classification for automobile insurance.” Id. at 912-913. Further, the court found the attempted regulation to be an invalid exercise of delegated legislative authority. State of Florida, supra, at 911-12. See also, Thompson v. IDS Life Insurance Co., 274 Or. 649, 549 P.2d 510 (1976); see generally Austin, The Insurance Classification Controversy, 131 U.Pa.L.Rev. 517 (1983).
In this case, Hartford presented evidence showing that there was a direct relationship between the higher rate charged to young men and the risk young men pose on the highway. Undisputed statistical evidence revealed that young males are more likely to be involved in automobile accidents than similarly situated female drivers. For example, in the 25-29 age group, there were 7.28 accidents per one hundred licensed male drivers in Pennsylvania compared to only 2.96 accidents per one hundred licensed females. (Pennsylvania Insurance Commission Hearing [hereinafter ICH] at 40-41.) The average loss for insured vehicles also evidences the disparity: In the 17-20 age group, unmarried females experience an average loss of $195, while similarly situated males show an average loss of $2556 (ICH at 43.) Given these facts, the use of gender in classifying insurance rates was actuarially sound and not unfair or unreasonable.
*594Indeed, to exclude the use of gender in the classification of automobile insurance rates violates the intended definition of “unfairly discriminatory” and the intent of subsection 3(d); and unfairly treats as alike those who are, at least on the highways, demonstratively different. This will translate into excessive rates for young women and inadequate rates for young men who, according to actuaries, pose a far greater insurance risk.7 Nevertheless, the Commissioner, without regard to the actuarial soundness of the proposed filings, rejected the filings based on his perception of public policy. In so doing the Commissioner abused his discretion, venturing beyond the power granted to him by the Legislature in the Rate Act.
An administrator can only act within the boundaries set by the Legislature. Pennsylvania Human Relations Commission v. Mars Community Boys Baseball Association, 488 Pa. 102, 104, 410 A.2d 1246, 1247 (1980) (Opinion in support of affirmance); Pennsylvania Human Relations Commission v. St. Joe Minerals Corporation, 476 Pa. 302, 310, 382 A.2d 731, 736 (1978); Green v. Milk Control Commission, 340 Pa. 1, 3, 16 A.2d 9 (1940), cert. denied, 312 U.S. 708, 61 S.Ct. 826, 85 L.Ed. 1140 (1941). (“The principle guiding to decision is this: The power and authority to be exercised by administrative commissions must be conferred by legislative language clear and unmistakable. A doubtful power does not exist____ They should act within the strict and exact limits defined.”) An administrator may not create his own jurisdiction by insisting that those he regulates subscribe to his view of what public policy requires. Western Pennsylvania Water Co. v. Pennsylvania Public Utility Commission, 471 Pa. 347, 353, 370 A.2d 337, 340 (1977); Drexelbrook Associates v. Pennsylvania Public Utility Commission, 418 Pa. 430, 212 *595A.2d 237 (1965). Thus, the Legislature sets the “basic policy choices which serve as standards to guide and restrain the exercise of discretion,” Tosto v. Pennsylvania Nursing Home Loan Agency, 460 Pa. 1, 11, 331 A.2d 198, 202-203 (1975); Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 212, 346 A.2d 269, 291 (1975), and the administrator must act within those restraints.
Here, the Legislature acted appropriately with regard to the Rate Act, and its grant of discretion and authority to the Insurance Commissioner. The basic policy behind the Act was set: that there must be a reasonable relationship between proposed insurance rates for a particular class and the risk posed by members of that class.
Our Legislature set adequate standards to guide and restrain the Commissioner. The vice here was that the Insurance Commissioner freed himself of the restraints and strayed far beyond his statutory authority, broadly construing the language of the Act, allowing him to impose his own interpretation of the Commonwealth’s public policy onto the insurance rate filing system.
In this regard, it is significant that the Legislature, following the passage of the Equal Rights Amendment in 1971, had the opportunity on two occasions to outlaw the usage of gender-based classifications in insurance rates but specifically chose not to do so. In 1974, the Legislature revised the Unfair Insurance Practices Act,8 prohibiting discrimination based on sex. But the prohibition did not extend to the setting of rates “if made or promulgated in accordance with the appropriate rate regulatory act.” 40 P.S. § 1171.5(a)(7)(iii). The 1974, No-Fault Act also prohibited discrimination on the basis of sex, but specifically exempted rate promulgation from that prohibition.9
*596Nevertheless, the majority endorses the Commissioner’s overextension of his authority, allowing any unelected executive official the green light to interpret specific statutory language broadly and act, like a lone conscience, impressing his own theory of public policy upon the Commonwealth. Thus, with the majority’s holding, the vital lines that separate the three spheres of government become ever more illusive.
The Commissioner did not rest solely on the “unfairly discriminatory” prohibition. He also relied on language in subsection (a) of the Rate Act. That subsection sets out various factors to be considered in setting rates, such as past and prospective loss experience, physical hazards, expenses and “all other relevant factors within and outside this Commonwealth”. The Commissioner interpreted the latter language as allowing him to examine public policy considerations, specifically the Pennsylvania Equal Rights Amendment, Pa.Const. Art. I, § 28, which provides:
Equality of rights under the law shall not be denied or abridged in the Commonwealth of Pennsylvania because of the sex of the individual.
The Commissioner correctly concluded that he could not premise his adjudication solely on the Equal Rights Amendment, since the regulation of insurance rates fails to constitute sufficient state action. Before it is implicated, our Equal Rights Amendment, like the 14th Amendment of the United States Constitution, requires that the state be somehow involved in the denial or abridgement of rights. Neither provision seeks to regulate private conduct.
In Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974), the United States Supreme *597Court found no state action in the Pennsylvania Public Utility Commission’s mere approval of a utility’s general tariff application. “The mere fact that a business is subject to state regulation does not itself convert its action into that of the state.” Id., at 350, 95 S.Ct. at 453. The Supreme Court very recently repeated that language in Blum v. Yaretsky, 457 U.S. 991, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982). In Murphy v. Harleysville Mutual Insurance Co., 282 Pa.Super. 244, 422 A.2d 1097 (1980) cert. denied, 454 U.S. 896, 102 S.Ct. 395, 70 L.Ed.2d 211 (1981), the Superior Court found that the Commonwealth’s regulation of insurance rates was insufficient state action to implicate the Equal Protection Clause of the 14th Amendment or the Equal Rights Amendment. In Broderick v. Associated Hospital Service of Philadelphia, 536 F.2d 1, 5 (3d Cir. 1976), the third circuit held that the mere fact that insurance companies contracts and rates are approved by the state “does not transform what is essentially private action into state action” and thus the plaintiffs’ § 1983 action was appropriately dismissed. See also, Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972); Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961); Civil Rights Cases, 109 U.S. 3, 3 S.Ct. 18, 27 L.Ed. 835 (1883); Adler v. Montefiore Hospital Association, 453 Pa. 60, 68-69, 311 A.2d 634, 639 (1973) cert. denied, 414 U.S. 1131, 94 S.Ct. 870, 38 L.Ed.2d 755 (1974) (“We recognize at the outset that the Fourteenth Amendment of the Constitution of the United States applies to ‘state action’ and not to private conduct.”); Jackson v. Associated Hospital Service, 414 F.Supp. 315 (E.D.Pa.1976) affd without opinion 549 F.2d 795 (3d Cir.1977), cert. denied, 434 U.S. 832, 98 S.Ct. 117, 54 L.Ed.2d 93 (1977) (That the Pennsylvania Insurance Commissioner statutorily regulated Blue Cross and Blue Shield contract rates did not transform those rates into state action.). Note, State Action After Jackson v. Metropolitan Edison Co.: Analytical Framework for a Restrictive Doctrine, 81 Dick.L.Rev. 315 (1977). While the above mentioned cases were decided under the 14th Amendment of the United States Constitu*598tion, the analogy is a close one. The Pennsylvania Equal Rights Amendment protects rights “under the law,” as does the 14th Amendment.
The Insurance Commissioner’s regulation of the rates of private insurance companies for private customers does not constitute state action. Thus, there was an insufficient predicate to trigger the ERA,10 or to permit the Commissioner the freedom to bar gender based classifications in setting insurance rates based on the ERA.11
*599Further, the Commissioner erred in looking to the ERA under subsection (a) of the Rate Act. Under the statutory construction principle of ejusdem generis, the consideration of “all other relevant factors” is limited to factors similar to the ones specifically listed in subsection (a), i.e., expenses, losses and hazards; and does not extend to public policy considerations. See Statutory Construction Act, 1 Pa.C.S. § 1903(b); Pennsylvania Industries for the Blind and Handicapped v. Larson, 496 Pa. 1, 5, 436 A.2d 122, 123 (1981); Butler Fair and Agricultural Association v. Butler School District, 389 Pa. 169, 178, 132 A.2d 214, 219 (1957).
Since the public policy concerns which were considered by the Commissioner were substantially different than the pure actuarial factors listed in subsection (a), I would hold that the Commissioner erred in construing the phrase “all other relevant factors” to permit him to impose his view of public policy onto Hartford’s rate filing based on the ERA.
Believing that the Commissioner strayed beyond his statutory authority in finding that the use of gender based classifications in insurance rates was unfairly discriminatory, I would reverse the Commonwealth Court order.
ZAPPALA, J., joins in this dissenting opinion.

. Insurance rate classification inherently envisions some discrimination. In this uneven world, some urban areas generate more occasion for accident. Persons living in them by choice or necessity bear higher premiums. The ideal classification would be homogeneous, practical and objective, so the factors would be beyond manipulation.

. Act of June 11, 1947, P.L. 538 § 1, 40 P.S. § 1181, et seq.

. Act of December 6, 1972, P.L. 1339, No. 290, § 3, 1 Pa.C.S. § 1901 et seq.

. Act of March 9, 1945, c. 20, 59 Stat. 33, 15 U.S.C. § 1011 et seq.

. Act of October 15, 1914, c. 323, § 2, 38 Stat. 730, 15 U.S.C. § 13 et

. "Average Loss per Insured Vehicle — Bodily Injury, Property Damage, Comprehensive and Collision Combined — Countrywide,” Insurance Services Office.

. At a hearing, Hartford produced evidence showing that an end to the use of gender in setting auto insurance rates would result in a sizable increase in insurance rates paid by females and a decrease in rates for men. In the 25-29 age group, for example, the rate for unmarried females would jump 36% while the rate for unmarried males would decrease by 19%.

. Act of July 22, 1974, P.L. 589, No. 205, § 1 et seq. 40 P.S. § 1171.1 et seq.

. Pennsylvania No-Fault Motor Vehicle Insurance Act, Act of July 19, 1974, P.L. 489, No. 176, Art. V, § 502, 40 P.S. § 1009.502. The No-Fault Act was repealed by the Legislature this year and was replaced with the Motor Vehicle Financial Responsibility Law which *596does not contain an anti-discrimination section. Act of February 12, 1984, P.L. —, No. 11, § 8.
We note also that the Commissioner adjudicated this case in the face of an Insurance Commission regulation which prohibits insurers from denying benefits or coverage on the basis of sex, but specifically, “does not prohibit insurers from differentiating in premium rates between sexes where there is sound actuarial justification.” 31 Pa. Code § 145.1 (1977).

. I also note that .the few authorities to consider the issue have all determined that state action is required to trigger the ERA. United States Jaycees v. Massachusetts Commission Against Discrimination, 391 Mass. 594, 609, n. 9, 463 N.E.2d 1151, 1160, n. 9 (1984) ("To be sure, the constitutional provision prohibition of discrimination based on sex expressed in art. 1 of the Declaration of Rights [the Massachusetts ERA] is directed at state action.”); MacLean v. First Northwest Industries of America, 24 Wash.App. 161, 600 P.2d 1027 (1979), rev'd. on other grounds, 96 Wash.2d 338, 635 P.2d 683 (1981), citing Darrin v. Gould, 85 Wash.2d 859, 540 P.2d 882 (1975); Junior Football Association of Orange v. Gaudet, 546 S.W.2d 70, 71 (Tex.Civ.App.1976); Note, 14 Duq.L.Rev. 101, 105 (1975); Brown, Emerson, Falk and Freedman, The Equal Rights Amendment: A Constitutional Basis for Equal Rights for Women, 80 Yale L.J. 871, 905 (1971).

. I note also that the majority quickly dismissed the consequential question of whether the ERA is self-executing. I would hold that, like the 14th Amendment of the United States Constitution, our ERA requires effectuating legislation to enable the Insurance Commissioner to bar gender based classifications in insurance rates. Rather than enacting such implementing legislation, the Legislature on two occasions since the enactment of the ERA has specifically allowed the use of gender based classifications in insurance rates.
See Pennsylvania Human Relations Commission v. Mars Community Boys Baseball Association, 488 Pa. 102, 410 A.2d 1246 (1980) (Opinion in support of affirmance per Justice, now Chief Justice Nix): Without a specific grant of power under the Pennsylvania Human Relations Act, Act of October 27, 1955, P.L. 744, 43 P.S. § 953 or under the ERA, the Human Relations Commission could not take steps to end gender discrimination in public accommodations. The Human Relations Commission had the power to investigate and pass upon "unlawful discriminatory practices,” 43 P.S. § 957(f), but, until 1978, was only given the power to remedy discrimination in places of public accommodation on the basis of “race, color, religious creed, ancestry or national origin," not gender. 43 P.S. § 953. And while the ERA was in effect at the time the Human Relations Commission sought to act, the Legislature failed to enact implementing legislation until 1978. Act of October 4, 1978, P.L. 909, No. 173, § 1, 1 Pa.C.S. § 2301. Thus, the Human Relations Commission lacked the power prior to 1978 to *599fight gender based discrimination. Likewise, the Insurance Commissioner lacked the power to ban gender based classifications in insurance rates under the Rate Act or under the ERA.