Court Opinion

ID: 7811372
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:13:14.255521+00
Date Added: 2024-06-11T16:30:28.836651
License: Public Domain

McCulloch, C. J., (dissenting). It seems manifest to me that the framers of the statute under consideration meant that the Insurance Commissioner should “compile the figure's showing the results of the business for the five years next preceding” by obtaining the same from the annual reports of statements required under another statute. Crawford & Moses’ Digest, § 5979. The two statutes, taken in the order in which they should be considered with reference to the question before us, are as follows: “Every insurance company, including* individuals, •partnerships, joint-stock associations and corporations, conducting any branch of insurance business in this State, must transmit to the Insurance Commissioner and State Fire Marshal a statement of its condition and business for the year ending on the preceding thirty-first day of December, which statement shall be rendered on the first day of January following, or within sixty days thereafter, except that foreign companies shall transmit their statement of business other than that done in the United States prior to the following first day of July, which statements must be in form, and state the particulars required by the blanks prescribed by the Insurance Commissioner and State Fire Marshal.” Crawford & Moses’ Digest, § 5979. ‘ ‘ The Insurance Commissioner shall, each year after the filing with him of the reports of the various fire insurance companies doing- business in this State, as required by law, compile the figures showing the results of the business for the five years next preceding the year in which the tabulation is made. If it appears that for such five-year period the stock fire insurance companies doing business in this State have made an aggregate underwriting profit in excess of five per cent., the Insurance Commissioner shall have the power to order such reduction in rates as will reduce the underwriting profits on business thereafter done to five per cent. Any reduction ordered by the Insurance Commissioner shall be effective on all policies written after issuance of such order and may, with the approval of the Insurance Commissioner, be applied to such class or classes of risks as the fire insurer, the rating- bureau or bureaus may select. Any action of the Insurance Commissioner in this connection shall be subject to -summary court review as provided in § 5968.” Id. § 5969. ■ If it was not the intention for the figures to be taken from the annual statement, there was no reason for referring to those statements, and the reference shows clearly, I think, that the intention was for the compilation and tabulation to be taken from the annual statements. Other information might become necessary in order to. complete the compilation, but the annual statements were intended to be the basis. The statute provides that the “statements must be in form, and state the particulars required by the blanks prescribed by the Insurance Commissioner.” Now, the undisputed record is that the Insurance Commissioner lias always prescribed the form which has been adopted by the association known as the ‘ ‘ Convention of Insurance Commissioners,” and the form was commonly designated as the ‘ ‘ Convention Annual Blank. ’ ’ This form has been used exclusively up to this date, and the framers of the statute (§ 5969) are presumed to have taken cognizance of that fact in adopting the language which they used. They had in mind that the Commissioner would, in fixing rates of insurance, act upon the figures set forth in the statement made on the Convention Annual Blank. Now, it is undisputed that the form did not show or call for a statement of the net earned premiums in this-State, but, on the contrary, it called only for net premiums received. It did not call for nor contain a statement of incurred losses, but called for losses paid. Schedule 5, referred to in the opinion of the majority, was not a part of the Convention Blank, and was never used in any annual statement. So tlie Commissioner concluded — correctly, I think — that his duty was to base the rate of premiums for the succeeding year on what the annual reports showed — net premiums received and losses actually paid. If it were otherwise intended, it would be necessary for the Commissioner to obtain from the companies additional information as to unearned premiums to be credited at the end of the five-year period and as to earned premiums to be charged in the beginning of that period which had been received during* the prior years. The Commissioner would also have to obtain additional information as to the differences between losses paid and incurred losses. It should be borne in mind that the statute under consideration contemplates, not a single instance of rate-fixing, but a continuing plan or scheme for fixing insurance rates year after year, based on earned profits during the preceding five-year period. The statute does not require absolute accuracy in ascertaining the earned profits for the preceding period, an approximation being all that could be hoped for in the adoption of a general plan for the ascertainment of values or profits. The Insurance Commissioner was clothed with authority, and a certain discretion was vested in him, to adopt details which would work out approximately accurate results — not for a single period, but from year to year. In the first place, the Commissioner was authorized to determine and prescribe the form of blank to be used and the substance of the statements to be made therein. He was next directed by the later statute to ascertain from these annual statements the nearest obtainable approximation of the profits derived from the insurance business in Arkansas during the preceding five-year period and to fix the rates based upon those profits. Whatever difference there may be shown between the plan adopted by the Commissioner and that insisted upon by the insurance companies concerning the rates to be fixed for the particular year now under review, I cannot conceive that it would make any substantial difference in the future which of the plans should be adopted, for, if the rate is to be readjusted each year, any losses in profit during one period will be shown in the next period and the rate correspondingly increased or reduced. If, in fixing the rate for a given year, the unearned premiums at the end of the preceding- five-year period must be deducted, then it follows, as before stated, that the premiums earned at the beginning of that period which were received during the preceding period-must also be charged in determining the amount of net profits. So it is with the difference between the plan for accepting incurred losses as the basis of profits, rather than losses paid. The difference between the two will necessarily be developed in the next period, so, after all, it will be broad as it is long. Certainly the plan adopted by the -Commissioner is commendable in the fact that it is definite and the facts are more definitely and reliably ascertainable than under the plan proposed by the companies. It seems to me that the most that is involved in the present lawsuit is that the companies are seeking to dictate the method of ascertaining profits, for the reason that it suits them in this particular emergency to claim credit for unearned premiums rather than permit the Commissioner to prescribe the plan, as the statute directs. The question for us to determine in passing upon the validity of the plan adopted by the Commissioner is, not whether it'has proved inaccurate in a single instance, but whether it is a reasonable plan which will work out approximately correct results from period to period. I cannot agree with the court that there is anything at all in the evidence in this case which tends to show that the term “underwriting profits” has a fixed and definite meaning established by general custom. All that the evidence shows is that there is, and has been for a long time, a prevailing custom with insurance companies of ascertaining their profits 'by deducting unearned premiums. This is not a definition of the term, but merely a customary method of ascertaining the results. It is not a. fixed definition which the lawmakers are presumed to have had in mind when when they enacted the statute, for it is obvious from the language of the statute that it was meant to vest in the Commissioner the power and discretion to adopt a plan for ascertaining what profits have been earned from time to time in fixing the rates for the ensuing year. I also dissent from that part of the opinion of the majority holding that profits earned by companies which have withdrawn from the State prior to the end of the stated period should be considered in fixing the schedule of rates. The statute, as I have already shown, contemplates that the figures should be compiled from the annual reports made by the companies doing business in this State, and if they have withdrawn from the State there are no annual reports made by them from which the figures can be compiled. I agree with the majority in holding that the companies are not entitled to credit for the amount of income and excess-profit taxes nor for allowances for what is termed ‘ ‘ conflagration hazard. ’ ’ Mr. Justice Humphreys concurs in this dissent.