Court Opinion

ID: 9862653
Source: CourtListenerOpinion
Date Created: 2023-09-25 01:40:22.051005+00
Date Added: 2024-06-11T11:38:43.991053
License: Public Domain

HANDLER, J.,
dissenting.
The central issue in this appeal focuses on the scope of the authority of the Commissioner of the Department of Insurance to modify the statutory flex-rate formula for determining premium-rate increases that insurance carriers can obtain without prior departmental approval. The flex-rate formula is prescribed by N.J.S.A. 17:29A-44. The Court acknowledges that the Commissioner does have the authority to modify part of the *385formula — the rates can be changed if he determines that the increases in the Consumer Price Index (CPI) component of the formula will produce excessive rate levels. Ante at 378, 609 A.2d at 1243. However, it holds that in modifying the formula, the Commissioner may modify only the CPI component; the Commissioner may not alter the second part of the formula, which authorizes a flat, three-percent increase.
The critical statutory text that deals expressly with the Commissioner’s power to modify the formula does not confine that authority to the CPI component of the formula. N.J.S.A. 17:29A-44(d) provides that “if, at any time, the Commissioner believes that an increase in either or both of the published indices will produce rate levels which are excessive, he may modify the statewide average rate change which may be used pursuant to this section.” (emphasis added).
That the terms of the statute do not restrict departmental change of the flex-rate formula to the CPI component or insulate the flat-percentage component of the formula from any change is rather clear. What may be changed is the “statewide average rate.” The Court reaches its conclusion that any change must be limited to the CPI component not so much from the language of the statute as from its perception of the statute’s legislative history and its understanding of the legislative purpose. Ante at 378, 609 A.2d at 1243.
The history of this statutory provision is relatively scant. One sentence in the legislative material surrounding the passage of N.J.S.A. 17:29A-44 states that “if the Commissioner believes that the published [CPI] indices would produce rate levels which are excessive, he may modify the Statewide average rate change provided by the indices.” Statement to Assembly, No. 3702 (Oct. 20, 1988), In my opinion, nothing in the language of that statement indicates an intent or purpose to limit the Commissioner’s ability to modify the statutory formula only to one component of that formula. The statute, confirmed by that legislative history, simply requires the Commissioner to *386evaluate in the context of the entire formula whether increases in the CPI components will cause the overall formula to produce excessive rate levels. If the Commissioner makes such a determination, the legislative statement and the statute itself both clearly indicate that the Commissioner may modify the statewide average rate change calculated pursuant to the formula. The statewide average rate change based on the formula derives from both the CPI component and the three-percent component. Neither the statute nor the legislative history contains any qualifying language that would tend to limit the Commissioner’s discretion to modify the statewide average rate by changing only one element of the statutory formula. Rather, the manner in which the formula is to be modified is left entirely to the sound discretion of the Commissioner.
To explain that the Commissioner can modify the statewide average rate only by changing the CPI component of the formula the Court hypothesizes a legislative history that suggests that the flex-rates are virtually an absolute right and therefore not subject to any modification. The Commissioner’s position, says the Court,
fails to take into account the goals that the Legislature had intended to achieve when enacting the flex-rate provisions. As noted, flex-rating is part of a broad mosaic of continual change in the automobile-insurance rating systems. We cannot help but believe that to return, in essence, to a system of pre-filing will undermine those incentives to depopulate the JUA and the efforts to promote competition in the industry. [Ante at 377, 609 A.2d at 1242.]
The Court acknowledges that excessive rates may occur if no modification of the three percent is permitted. Indeed, it seems to recognize that “the use of flex rate will inevitably produce excessive profits for the industry.” Id. at 377, 609 A.2d at 1242. It nevertheless insists that even though the statute addresses that contingency by empowering the Commissioner to modify the “statewide average rate,” that authority itself does not extend to the CPI component and therefore cannot be used to countermand excessiveness resulting from the flex rate. It concludes, wishfully but somewhat inconsistently, that *387excessive rates can be overcome or corrected because “the industry should start competing within itself.” Ibid.
In my opinion, an unconstrained reading of the statute, a reasonable interpretation of its legislative history, and a broad understanding of its purposes confirm the correctness of the State’s position. The legislation, when proposed, was discussed at some length before the Senate Labor, Industry and Professions Committee. If one of the Legislature’s goals in enacting that bill was to set a minimum three-percent flex-rate increase, or to place the three-percent increase beyond the reach of the Commissioner’s ability to modify under N.J.S.A. 17:29A-44d, that that proposal did not explicitly enter into any of the discussions seems odd.
Comments in the legislative history concerning limiting the Commissioner’s discretion appear to relate more to the determination to eliminate the Commissioner’s discretion in setting the initial maximum flex-rate increase than to his ability to modify it below three percent to prevent excessively high rates. Indeed, during the entire hearing only one reference to the reason for setting the flex rate at three percentage points over the CPI surfaced. That reference was made by Commissioner Merin, who stated that the flex rate was set at three percentage points above the relevant CPI components because the drafters felt that the three percent would offset “the tendency of the factors involved in auto insurance to outpace the CPI.” Testimony of Commissioner Merin, Public Hearing at 17. That testimony would seem to indicate that the three percent was not intended to be separate from the Consumer Price Index, but rather was intended to assure that the flex-rate increases would more effectively match the true increase in the cost of doing business. It does not follow that when the flex-rate increases exceed the true increases in the cost of doing business and, in fact result in excessive rates, they would be immune from adjustment.
*388The Court seems to have accepted the contention of the insurance industry that a flex-rate increase of three percentage points, standing alone, will never produce an excessive rate level, even though it seems to recognize that it will produce excessive profits. Ante at 377, 609 A.2d at 1242. It may well be that even without the increases in the CPI components of the formula, an increase of three percent by itself would still produce an excessive rate level. If it does, nothing in the statute or its history insulates that excessive rate from departmental scrutiny and change. Further, the statute as a whole reflects a concern with protecting the consumer from excessive rates. See, e.g., N.J.S.A. 17:29A-4 (insurers may not set rates which are “unreasonably high or inadequate for the safety or soundness of the insurer”); N.J.S.A. 17:29A-5.6 to 5.16 (defining excess profits over three year period and requiring excess profits be refunded to policyholders by the insurer); N.J.S.A. 17:29A-7 (empowering Commissioner to order modification of a filed rating-system if he determines it will produce unreasonably high or inadequately low rates); N.J.S.A. 17:29A-9 (giving anyone affected by a rate a right to a hearing before insurer on application to reduce rate, and then Commissioner if application is denied); and N.J.S.A. 17:29A-14 (requiring Commissioner to disapprove submitted changes in property and casualty lines that produce rates that are “unreasonable, inadequate, or unfairly discriminatory”).
The Court, I submit, fails to appreciate that whether the automatic rate based on the three-percent standard is an excessive one is a highly technical matter calling for the application of the Commissioner’s special expertise. We have explained the complexities and intricacies of the Reform Act, which provides the context for the Commissioner’s authority to modify the flex rate. See State Farm Mut. Auto. Ins. Co. v. State, 124 N.J. 32, 590 A.2d 191 (1991). The statutory scheme assures the Commissioner broad powers to achieve the competing goals of the Reform Act. Ibid.; see In re: Twin City Fire Ins. Co., 129 N.J. 389, 609 A.2d 1248 (1992). The statute, in my opinion, *389leaves to the expertise of the Commissioner and his staff the determination of whether adjustment of the increases produced by the CPI component, the three percentage point component, or both components, is necessary to ensure that the formula does not produce an excessive rate level. Deference should be given to the expertise of the Commissioner and his staff in this regard. Abbott v. Burke, 100 N.J. 269, 301, 495 A.2d 376 (1985); Bergen Pines Hosp. v. Department of Human Servs., 96 N.J. 456, 474, 476 A.2d 784 (1984); Emmer v. Merin, 233 N.J.Super. 568, 581, 559 A.2d 845 (App.Div.1989).
I would reverse the judgment below.
For affirmance in part; for reversal in part — Chief Justice WILENTZ, and Justices CLIFFORD, POLLOCK, O’HERN, GARIBALDI and STEIN — 6.
For reversal — Justice HANDLER — 1.