Paul W. Lightner v. Michael D. Riley, W.Va. Insurance Commissioner , 233 W. Va. 573 ( 2014 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2014 Term
_______________ FILED
June 4, 2014
released at 3:00 p.m.
No. 12-0566 RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
PAUL W. LIGHTNER,
Plaintiff Below, Petitioner
v.
MICHAEL D. RILEY, WEST VIRGINIA INSURANCE COMMISSIONER;
CITIFINANCIAL, INC. and TRITON INSURANCE COMPANY,
Defendants Below, Respondents
____________________________________________________________
Appeal from the Circuit Court of Kanawha County
The Honorable Paul Zakaib, Jr., Judge
Civil Action No. 10-AA-76
AFFIRMED
____________________________________________________________
Submitted: January 15, 2014
Filed: June 4, 2014
Christopher J. Regan, Esq. Jeffrey M. Wakefield, Esq.
James G. Bordas, Jr., Esq. Thomas V. Flaherty, Esq.
Jason E. Causey, Esq. Flaherty Sensabaugh Bonasso PLLC
Bordas & Bordas, PLLC Charleston, West Virginia
Wheeling, West Virginia Counsel for Respondents CitiFinancial, Inc.
and Triton Insurance Company
Jonathan Bridges, Esq.
Pro Hac Vice Andrew R. Pauley, Esq.
Susman Godfrey LLP Offices of the West Virginia Insurance
Dallas, Texas Commissioner
Counsel for the Petitioner Charleston, West Virginia
Counsel for the Respondent West Virginia
Insurance Commissioner
The Opinion of the Court was delivered PER CURIAM.
ii
SYLLABUS BY THE COURT
1. “In providing for a cause of action that permits the recovery of
excess charges included in a consumer credit transaction pursuant to the provisions of
West Virginia Code § 46A–3–109 (1998) (Repl.Vol.2006) and § 46A–5–101 (1996)
(Repl.Vol.2006), the Legislature did not authorize the circuit courts to invade the
jurisdiction of the Insurance Commissioner and conduct a reexamination of insurance
rates previously approved by the Commissioner.” Syllabus Point 2, State ex rel.
CitiFinancial v. Madden, 223 W. Va. 229, 672 S.E.2d 365 (2008).
2. “Any challenge to an approved insurance rate by an aggrieved
person or organization should be raised pursuant to the provisions of West Virginia Code
§ 33–20–5(d) (1967) (Repl.Vol.2006) in a proceeding before the Insurance
Commissioner.” Syllabus Point 3, State ex rel. CitiFinancial v. Madden, 223 W. Va. 229,
672 S.E.2d 365 (2008).
3. “The presumption of statutory compliance for approved insurance
rates set forth in West Virginia Code § 33–6–30(c) (2002) (Repl.Vol.2006) may only be
rebutted in a proceeding before the Insurance Commissioner.” Syllabus Point 4, State ex
rel. CitiFinancial v. Madden, 223 W. Va. 229, 672 S.E.2d 365 (2008).
4. “On appeal of an administrative order from a circuit court, this Court
is bound by the statutory standards contained in W. Va. Code § 29A–5–4[ (g) ] and
i
reviews questions of law presented de novo; findings of fact by the administrative officer
are accorded deference unless the reviewing court believes the findings to be clearly
wrong.” Syllabus Point 1, Muscatell v. Cline, 196 W.Va. 588, 474 S.E.2d 518 (1996).
5. “A cardinal rule of statutory construction is that significance and
effect must, if possible, be given to every section, clause, word or part of the statute.”
Syllabus Point 3, Meadows v. Wal-Mart Stores, Inc., 207 W.Va. 203, 537 S.E.2d 676
(1999).
6. “Applicable standards for procedural due process, outside the
criminal area, may depend upon the particular circumstances of a given case. However,
there are certain fundamental principles in regard to procedural due process embodied in
Article III, Section 10 of the West Virginia Constitution, which are: First, the more
valuable the right sought to be deprived, the more safeguards will be interposed. Second,
due process must generally be given before the deprivation occurs unless a compelling
public policy dictates otherwise. Third, a temporary deprivation of rights may not require
as large a measure of procedural due process protection as a permanent deprivation.”
Syllabus Point 2, North v. Board of Regents, 160 W.Va. 248, 233 S.E.2d 411 (1977).
ii
Per Curiam:
This case is before the Court upon the appeal of Paul W. Lightner,
Petitioner, from a March 26, 2012, order of the Circuit Court of Kanawha County
affirming the decision of the West Virginia Insurance Commissioner (“Insurance
Commissioner”), which found that the rates charged by Respondents, CitiFinancial and
Triton Insurance Company, were reasonable. Herein, Lightner alleges that the circuit
court erred in upholding the order of the Insurance Commissioner because it refused
Lightner a hearing in violation of both State ex rel. CitiFinancial v. Madden, 223 W. Va.
229, 672 S.E.2d 365 (2008), and express statutory language requiring such a hearing, and
because the Commissioner denied Lightner other due process rights as well.
Additionally, Lightner asserts that the circuit court’s order shows a clear error of law, is
clearly wrong, and was arbitrary and capricious because it presumed, unrebuttably, that
the approved insurance rates were reasonable. Conversely, Respondent Insurance
Commissioner1 contends that the circuit court did not err in upholding its order denying a
hearing because an administrative hearing would serve no useful purpose and Lightner
did not have an automatic right to a hearing. Respondents CitiFinancial and Triton assert
1
When the instant appeal was originally filed, Jane L. Cline, was the appointed Insurance
Commissioner. She subsequently retired on June 30, 2011. Michael D. Riley was
appointed as Acting Insurance Commissioner on July 1, 2011, and subsequently named
Insurance Commissioner on January 9, 2012. Therefore, pursuant to Rule 41(c) of the
West Virginia Rules of Appellate Procedure, Michael Riley, in his official capacity as
Insurance Commissioner, has been substituted as a party in this appeal. He will be
referred to as the Insurance Commissioner throughout the Opinion although many of the
actions were taken by his predecessor, Ms. Cline.
1
that the circuit court properly concluded that the Insurance Commission’s handling of the
rate issues raised in Lightner’s complaint met statutory, regulatory and constitutional
standards. As set forth more fully below, we affirm the circuit court’s order.
I.
FACTUAL AND PROCEDURAL BACKGROUND
This is the second time this case has been before this Court. This matter
originated in the Circuit Court of Marshall County, West Virginia in 2002 when
CitiFinancial instituted a civil action against Mr. Lightner following his default on a
$6,500 loan. Lightner filed an amended counterclaim in January 2004 alleging that
CitiFinancial violated the finance charge provisions of the West Virginia Consumer
Credit Protection Act, W. Va. Code § 46A-3-109 and § 46A-5-101 by charging
unreasonable and excessive amounts for credit insurance for two other loans Lightner
obtained from CitiFinancial in 2001. In October 2006, Lightner sought to expand his
claim for unreasonable and excessive credit insurance charges into a class action to
include additional individuals who obtained loans from CitiFinancial over a fourteen-year
period.
The nature of the underlying dispute and the procedural history of this
matter while it was pending in the Circuit Court of Marshall County are set forth in detail
in State ex rel. CitiFinancial v. Madden, 223 W. Va. 229, 672 S.E.2d 365 (2009),
wherein CitiFinancial filed a writ of prohibition to prevent the circuit court from
2
enforcing its denial of CitiFinancial’s motion for partial summary judgment.
CitiFinancial sought a dismissal of the claims pending against it, or alternatively, sought
a stay of the underlying matter until the Insurance Commissioner made a determination
regarding whether any of the credit insurance charges assessed by CitiFinancial against
Lightner were either excessive or unreasonable. This Court granted CitiFinancial’s writ
of prohibition and found in syllabus point 2 that,
[i]n providing for a cause of action that permits the recovery
of excess charges included in a consumer credit transaction
pursuant to the provisions of West Virginia Code § 46A–3–
109 (1998) (Repl.Vol.2006) and § 46A–5–101 (1996)
(Repl.Vol.2006), the Legislature did not authorize the circuit
courts to invade the jurisdiction of the Insurance
Commissioner and conduct a reexamination of insurance rates
previously approved by the Commissioner.
Id., syl. pt. 2. In syllabus point 3, we held that,
[a]ny challenge to an approved insurance rate by an aggrieved
person or organization should be raised pursuant to the
provisions of West Virginia Code § 33–20–5(d) (1967)
(Repl.Vol.2006) in a proceeding before the Insurance
Commissioner.
Id., syl. pt. 3. Finally, in syllabus point 4, this Court stated that “[t]he presumption of
statutory compliance for approved insurance rates set forth in West Virginia Code § 33–
6–30(c) (2002) (Repl. Vol. 2006) may only be rebutted in a proceeding before the
Insurance Commissioner.” Id., syl. pt. 4.2
2
The portion of the circuit court’s May 12, 2008, order certifying a class action was
subsequently vacated by the circuit court following this Court’s opinion in Madden, 223
W. Va. 229, 672 S.E.2d 365, and all remaining claims were stayed pending notification
(continued . . .)
3
Subsequently, on or about September 29, 2009, Lightner filed a consumer
complaint before the Insurance Commissioner against CitiFinancial and Triton.3 The
Complaint was filed on behalf of himself and other policyholders and challenged the
rates for certain insurance products known as credit property insurance4 and credit
involuntary unemployment insurance.5 The Complaint alleged that historically low loss
ratios incurred by Triton as opposed to projections and filings were indicative of
excessive rates and therefore in violation of the Insurance Code.6 The Complaint also
by Lightner of the results of the administrative proceeding before the Insurance
Commissioner.
3
The Consumer Complaint named CitiFinancial and Triton as Respondents because
Triton was the insurer that issued the applicable policies for credit property and credit
involuntary unemployment insurance sold by CitiFinancial.
4
Credit personal property insurance is defined as
a policy, endorsement, rider, binder, certificate or other
instrument or evidence of insurance written in connection
with a credit transaction that: a. Covers perils to the goods
purchased through a credit transaction or used as collateral for
a credit transaction and that concerns a creditor’s interest in
the purchased goods or pledged collateral either in whole or
in part; or b. Covers perils to goods purchased in connection
with an open-end credit transaction.
W.Va. Code St. R. § 114-61-2.6 (2003).
5
Involuntary unemployment insurance is generally defined as insurance covering a loss
associated with inability to pay a debt subject to loss of employment involuntarily.
6
Lightner asserted that as a minimum benchmark, both the regulations and industry
standards currently require credit insurance rates to result in 50% or greater loss ratios, at
(continued . . .)
4
asserted that Triton was not forthcoming with relevant information provided in filings
made to the Commissioner which should, in turn, cause the filings to be rejected.
Lightner requested a hearing pursuant to W.Va. Code § 33-2-13 (1957), W.Va. Code §
33-20-5(d) (1967), and W.Va. C.S.R. § 114-13-1, et seq. (2003). Lightner also sought an
order from the Commissioner withdrawing approval for the rate filings of Triton over a
period of fourteen years.
By letter dated November 13, 2009, the Commissioner advised that he
wanted to investigate the issues raised in the Complaint for a ninety day period after
which the Commissioner would make the following decisions: (1) whether to appoint a
hearing examiner to hear issues in the matter; (2) whether to intervene in the matter;
and/or (3) whether to take a final position on potentially denying a hearing in the matter
on the substantive issues.
The Commissioner then undertook an investigation and analysis of not only
Lightner’s allegations, but all of Triton’s rate filings in West Virginia, pursuant to W.Va.
Code § 33-2-3a (2007) and W.Va. Code § 33-2-9 (2006). During the Commissioner’s
a minimum, while 60% is a more commonly used benchmark. See 114 C.S.R. § 61-6.2
(credit property 60%); NAIC Model Laws, Regulations & Guidelines §§ 365-1-7 (credit
property 60%); § 370-1-8 (credit involuntary unemployment 60%). Lightner maintains
that CitiFinancial’s internally reported loss ratios on its West Virginia credit property
averaged 25.6% annually for the period 1994-2006, and its credit involuntary
unemployment averaged 15.8% annually for the same period.
5
investigation, a data call was requested from Triton which resulted in the production of
thousands of documents. During the course of the investigation, the Commissioner and
representatives of Triton had discussions concerning the information supplied and the
impact of the information on the Commissioner’s investigation. Lightner was likewise
afforded the opportunity to provide additional information and argument in support of his
position. In support of his allegations, Lightner supplied reports from insurance
departments in California and Arizona concerning credit property and unemployment
insurance and submitted a slide presentation entitled “Summary of the Evidence.”7
Lightner also supplied a letter from the Texas Insurance Commissioner dated May 17,
1999, disapproving the rates charged by Triton of $5.40 per $100 as “excessive because it
is unreasonably high in relation to the prospective loss experience and because it includes
an excessive margin for profit and contingencies.” Lightner also submitted an e-mail to
the Commissioner indicating that he was unable to find a benchmark or minimum loss
ratio for credit property or credit unemployment insurance in the State of Texas.
7
A 2002 report from the Rate Specialist Bureau of the California Department of
Insurance concluded that the rate level for credit property insurance could be “reduced by
87.30%. This would result in the consumer saving $34 million per year in overcharged
premiums, if the presumptive 60% loss ratio standard is imposed.” As for credit
unemployment insurance, the California Department of Insurance found that the rates
could be “reduced by 87.47%. This would mean a saving of $116.5 million per year, if
the presumptive 60% loss ratio standard is imposed.” Arizona likewise issued a data call
of Triton and other insurers and found in a 2003 report that CitiFinancial’s credit property
rate of $2.30 per $100, which Lightner alleges was more than four times the indicated
rate that the Department recommended to produce a loss ratio approximating the
minimum standard of 50%.
6
The Commissioner also retained the services of an independent actuary,
Hause Actuarial Solutions, Inc., to review the filings of Triton. The actuary was asked to
comment on whether the filings were complete and whether the loss ratio, expense and
profit components of the rate were reasonable and typical for the coverages provided. It
issued a report dated March 29, 2010, finding that the premium components were “very
much in line with similar filings, by this insurer and other insurers providing [involuntary
unemployment] and [credit property] in states where the rate is not specified by law or
regulation.”
Following the Commissioner’s investigation and consideration of
Lightner’s Complaint, the Commissioner filed an order on April 5, 2010, denying
Lightner’s request for a hearing. The Commissioner made the following findings of fact:
(1) during the period contained in the Complainant’s administrative complaint, Triton did
not write credit property or credit involuntary unemployment insurance wherein any rule
was in effect concerning benchmark minimum loss ratio standards for writing either
product in the State of West Virginia; (2) both parties were able to provide relevant
information, data or other comment concerning their respective positions as a part of the
Commissioner fulfilling his duties under W.Va. Code § 33-20-5(c) (1967); (3) no duty
[is] placed upon insurers offering insurance as referenced in the Complaint to re-file rates
once approved where there is no change in circumstances of the original filing; (4) rates
filed by insurance companies in other states are neither necessary relevant nor dispositive
as to what a rate should be in West Virginia; and (5) historically low loss ratios in
7
relation to what is filed as anticipated loss ratios with the Commissioner concerning
credit property and/or credit involuntary unemployment insurance do not by themselves
constitute an excessive rate violation in that claim ratios have been known to fluctuate
widely from company to company, state to state, and year to year.
The Commissioner also made the following conclusions of law: (1) that
Triton did comply with W.Va. Code § 33-20-3 (2006) in its filings and that Triton’s rate
filings did not violate W.Va. Code § 33-20-3; (2) that there “is no factual dispute as
concerning the filing and approval of the rates and forms of Triton Insurance Company”
and that the rates charged by Triton were reasonable in relation to the benefits provided;8
and (3) that a hearing upon the administrative complaint would serve no useful purpose
and, therefore, the request for a hearing was denied.
On May 5, 2010, Lightner filed a petition appealing the Commissioner’s
April 5, 2010, order pursuant to W.Va. Code § 29A-5-4(a) (1998) and W.Va. Code § 33-
2-14 (1957) in the Circuit Court of Kanawha County. In his petition, Lightner requested
that the circuit court conduct a hearing, permit discovery, take evidence, hear argument
and rule on the issues presented. Lightner contended that the Commissioner erroneously
concluded that Lightner was not entitled to a hearing in connection with the claims in his
8
The Commissioner’s Order details each of the five filings made by Triton during the
time periods at issue in this case, finding that the filings were reasonably complete and
typical for this type of product filing.
8
consumer complaint; that the Commissioner erroneously concluded that the Insurance
Code permits him to deny a hearing to an aggrieved individual who demands one; that
the Commissioner failed to require Triton to provide Lightner with all “pertinent
information” concerning the rates at issue as required by the Insurance Code; and that the
Commissioner erroneously found that Triton’s credit property and credit involuntary
employment insurance charges were not excessive and were reasonable in relation to the
benefits provided.
CitiFinancial and Triton responded to the petition on September 22, 2010,
maintaining that Triton’s rates were thoroughly reviewed and analyzed in full compliance
with statutory and regulatory requirements; that Lightner has no automatic right to a
formal hearing before the Commissioner; that Lightner’s claim of unreasonable rates was
the subject of a proceeding which met statutory and constitutional requirements; and that
Lightner is not entitled to present evidence or conduct discovery.
The Insurance Commissioner responded to Lightner’s petition contending
that Lightner was not entitled to a hearing as a matter of right; that no definitive
benchmark was or is in place with respect to what loss ratios should be for credit property
and involuntary unemployment insurance; that the Commissioner fulfilled his statutory
duties concerning the consumer complaint; that the model rules of the National
Association of Insurance Commissioners are neither binding nor persuasive; and that
9
Lightner had more than ample opportunity to present his claims in multiple forums over a
number of years.
Following briefing by the parties and oral argument, on March 26, 2012,
the Circuit Court entered its order affirming the Insurance Commissioner’s order denying
Lightner’s request for a hearing. The circuit court found that the Commissioner’s
handling of the issues raised in Lightner’s consumer complaint was appropriate and that
there was nothing in the record to support the contention that the Commissioner violated
or acted in excess of statutory authority.
II.
STANDARD OF REVIEW
This case involves an appeal of an administrative order. Our standard for
reviewing an administrative appeal is the same as that applied to the circuit court, which
is controlled by the provisions of W.Va. Code, § 29A–5–4(g) (1998).9 As we held in
syllabus point one of Muscatell v. Cline, 196 W.Va. 588, 474 S.E.2d 518 (1996):
9
West Virginia Code § 29A-5-4(g) provides,
The court may affirm the order or decision of the agency or
remand the case for further proceedings. It shall reverse,
vacate or modify the order or decision of the agency if the
substantial rights of the petitioner or petitioners have been
prejudiced because the administrative findings, inferences,
conclusions, decision or order are:
(continued . . .)
10
On appeal of an administrative order from a circuit court, this
Court is bound by the statutory standards contained in W. Va.
Code § 29A–5–4[ (g) ] and reviews questions of law
presented de novo; findings of fact by the administrative
officer are accorded deference unless the reviewing court
believes the findings to be clearly wrong.
196 W.Va. at 590, 474 S.E.2d at 520.
With these standards in mind, we proceed to consider whether the circuit
court committed error in affirming the decision of the Insurance Commissioner.
III.
ANALYSIS
First, Lightner alleges that the circuit court erred in upholding the Insurance
Commissioner’s order because the Insurance Commissioner refused Lightner a hearing in
(1) In violation of constitutional or statutory provisions; or
(2) In excess of the statutory authority or jurisdiction of the
agency; or
(3) Made upon unlawful procedures; or
(4) Affected by other error of law; or
(5) Clearly wrong in view of the reliable, probative and
substantial evidence on the whole record; or
(6) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion.
W.Va. Code § 29A–5–4(g).
11
violation of both State ex rel. CitiFinancial v. Madden, 223 W. Va. 229, 672 S.E.2d 365,
and express statutory language requiring such a hearing. Specifically, Lightner argues
that he was entitled to a hearing under W. Va. Code § 33-2-13. This statute provides, in
pertinent part, that the Commissioner
shall hold hearings when required by the provisions of this
chapter or upon a written demand therefore by a person
aggrieved by any act or failure to act by the commissioner or
by any rule, regulation or order of the commissioner.
...
The commissioner shall allow any person directly affected by
the hearing to appear in person and by counsel, to be present
during the giving of all evidence, to have a reasonable
opportunity to inspect all documentary evidence, to examine
witnesses and present relevant evidence, and to have
subpoenas issued by the commissioner to compel attendance
of witnesses and production of evidence on his behalf.
W. Va. Code § 33-2-13.
Lightner also contends that the Commissioner ignored his rights under W.
Va. Code § 33-20-9 to obtain all pertinent information from CitiFinancial regarding the
rates at issue, and disregarded all of the publically available CitiFinancial data presented
by Lightner. Lightner maintains that the Commissioner offers no data or evidence of his
own in support of his conclusion that the CitiFinancial rates are reasonable in relation to
the benefits provided, and that the circuit court’s order adds nothing to the findings of the
Commissioner.
12
Conversely, CitiFinancial and Triton assert that the standard of review
compels affirmance of the circuit court and Commissioner’s order, as the circuit court
properly concluded that the Commissioner’s handling of the rate issues raised in the
complaint met statutory, regulatory, and constitutional standards. They maintain that the
Commissioner conducted a ninety-day investigation, which produced thousands of pages
of documents and data, obtained documents from Lightner, and obtained an independent
actuarial opinion. The Commissioner echoes the Respondent insurance companies’
arguments, maintaining that the circuit court did not err in upholding its order denying a
hearing on the grounds that it would serve no useful purpose and finding that the rates
charged by Triton were reasonable. After a thorough review of the record before us, we
agree with the Respondents’ contentions and find that the circuit court’s order should be
affirmed.
Challenges to an existing approved rate of insurance are addressed in
W.Va. Code § 33-20-5(d). The statute provides:
(d) Any person or organization aggrieved with respect to any
filing which is in effect may demand a hearing thereon. If,
after such hearing, the Commissioner finds that the filing
does not meet the requirements of this article, he shall issue
an order specifying in what respects he finds that such filing
fails to meet the requirements of this article, in stating when,
within a reasonable period thereafter, such filing shall be
deemed no longer affective. Said order shall not affect any
contract or policy made or issued prior to the expiration of the
period set forth in said order.
13
This statute does not specifically state that a hearing shall be provided with
respect to any filing in effect. While Lightner cites to W.Va. Code § 33-2-13 as
conferring an absolute right to a hearing, that statute must be read in conjunction with
other statutes and regulations relating to hearings. West Virginia Code § 33-20-5(d) and
W.Va. Code § 33-2-13 are not the only statutes which address whether the Commissioner
is required to provide a hearing. W.Va. Code § 33-2-14, one of the statutes upon which
Lightner relied in filing his petition for appeal in the Circuit Court, specifically provides
that “[an appeal from the Commissioner shall be taken from an order entered after a
hearing or an order refusing a hearing.” (emphasis supplied). “A cardinal rule of
statutory construction is that significance and effect must, if possible, be given to every
section, clause, word or part of the statute.” Syl. Pt. 3, Meadows v. Wal-Mart Stores, Inc.,
207 W.Va. 203, 537 S.E.2d 676 (1999) (quoting Syl. Pt. 2, T. Weston v. Mineral City,
219 W.Va. 564, 638 S.E.2d 167 (2008)). “Each word of a statute should be given some
effect and a statute should be construed in accordance with the import of its language.”
Syl. Pt. 6, in part, State ex rel. Cohen v Mansion, 175 W.Va. 525, 336 S.E.2d 171 (1984).
Most importantly, a court may not interpret a statute such that the result is to make the
statute meaningless since one of the basic principles of statutory construction is that the
Legislature will not enact a meaningless statute. See State ex rel. Hardesty v. Aracoma–
Chief Logan No. 4523, Veterans of Foreign Wars, 147 W.Va. 645, 129 S.E.2d 921
(1963).
14
Lightner’s interpretation of the statutory scheme, which would require a
hearing anytime a demand is made, would create the unwieldy result that all aggrieved
persons are entitled to a formal hearing by the mere filing of any complaint and making a
demand. It would also render the language of the Insurance Code appeal statute, W.Va.
Code § 33-2-14, meaningless to the extent that it provides that a right of appeal exists as
to any order in which the Commissioner refuses a hearing.
It is also significant that the right of the Commissioner to determine
whether a hearing will serve a useful purpose is also embedded in the legislative Rules
promulgated by the Commissioner pursuant to statutory authority. W.Va. Code St. R. §
114-13-3 states:
3.3. Hearing on written demand.
When the commissioner is presented with a demand for a
hearing as described in subsections 3.1 and 3.2 of this section,
he or she shall conduct a hearing within forty-five (45) days
of receipt by him or her of such written demand, unless
postponed to a later date by mutual agreement. However, if
the commissioner shall determine that the hearing demanded:
a. Would involve an exercise of authority in excess of that
available to him or her under law; or
b. Would serve no useful purpose, the commissioner shall,
within forty-five (45) days of receipt of such demand, enter
an order refusing to grant the hearing as requested,
incorporating therein his or her reasons for such refusal.
Appeal may be taken from such order as provided in W. Va.
Code § 33-2-14.
15
Lightner’s argument that the circuit court order conflicts with this Court’s
holding in CitiFinancial Inc. v. Madden is also incorrect. In Madden, we did not hold
that a formal hearing was unquestionably available. Rather, we found that the process
found in West Virginia Code § 33-20-5(d) had to be utilized by any aggrieved person. As
stated in Syllabus Point 3 in Madden, “[a]ny challenges to an approved insurance rate by
an aggrieved person or organization should be raised pursuant to the provisions of W.Va.
Code § 33-20-5(d) (1967) (Repl.Vol.2006) in a proceeding before the Insurance
Commissioner.” This Court did not indicate that a formal hearing was necessary.
More recently, in West Virginia Employers’ Mutual Insurance Company v.
The Bunch Company, 231 W. Va. 321, 745 S.E.2d 212 (2013), a similar case regarding
the issue of whether a grievant should have been provided the opportunity to have a
hearing before the Insurance Commissioner, this Court specifically recognized that “the
Commissioner has the authority pursuant to legislative rule to refuse a request for a
hearing upon the determination that a hearing ‘[w]ould serve no useful purpose.’ 114
C.S.R. § 13-3.3.b.” Id., 231 W. Va. at 333, 745 S.E.2d at 224.
In the instant case, the complaint was unquestionably the subject of a
proceeding which resulted in the April 2010 order and the independent investigation
conducted by the Commissioner. The record reveals that the Commissioner
communicated his decision to independently investigate the issues raised in the complaint
in a letter dated November 13, 2009. In the letter, the Commissioner advised that he
16
wanted a ninety day period to investigate the issues raised in the Complaint following
which the Commissioner would decide whether to appoint a hearing examiner, whether
to intervene in the matter and/or whether to take a final position on potentially denying a
hearing in the matter on substantive issues.10 The Commissioner also requested an
10
The Commissioner’s letter discussed the unique circumstances that the case presented
and explained, in part, that
The complainants in this matter have demanded a hearing
within 45 days of filing the administrative complaint with the
Commissioner. For the reasons cited herein, we do believe
that time frame to be applicable to this matter nor binding on
the Commissioner. Some of our considerations would center
on the following: (1) the demand for a hearing cited in W. Va.
Code § 33-20-5(d) and W. Va. Code 33-2-13 are provided
generally for singular issues concerning disputes of parties
wherein the Commissioner does not generally take a position
and has not had any previous involvement. That is simply not
the case in this dispute. We are not looking at a single
isolated occurrence between two parties such as a loss on a
claim, denial of a single claim, or deprivation of a license.
The complainant’s attorney argues that over 130,000
policyholders are affected and seeks a review of over 15 years
of data. It is not reasonable to expect the Insurance
Commissioner, as an administrative body, to handle such a
large and voluminous request in 45 days when such a matter
could be involved in circuit court litigation for years at best
simply in the discovery phases. (2) While a hearing can be
demanded, West Virginia Code of State Rules 114-13-3.3(b)
allows the Commissioner to deny a hearing for serving no
useful purpose. We believe at this point to force a hearing in
such a complex and broad matter as this, would simply serve
no useful purpose. The Commissioner is charged with many
responsibilities under the Code. At times, she is a quasi-
judicial body merely holding hearings and takes no particular
position in the outcome of the dispute among parties. At
other times, she is the enforcement regulator who is directly
involved in the matter as the civil prosecutor and thereby
(continued . . .)
17
agreement by the parties to this extension of time for the Commissioner to conduct the
investigation. Lightner provided only provisional consent and insisted that any extension
of time by which a hearing could be conducted had to be conditioned upon an agreement
by the Commissioner to actually conduct a hearing. The Commissioner did not agree to
conduct a hearing and it was clear that whether a hearing would be held was an issue for
subsequent resolution.
Over the next several months, the Commissioner conducted his
investigation. He compelled Triton to produce thousands of pages of documents and data.
He also requested and received information from Lightner including allowing Lightner to
provide a “summary of the evidence” which Lightner maintains supported a conclusion
that the rates charged were unreasonable.11 The Commissioner also obtained an
independent actuarial opinion from Hause Actuarial Solutions, Inc. which reflected that
the rates were reasonable and in accord with similar filings of other insurers providing
pursues matters on the State’s behalf. This current
administrative complaint cannot simply be handled through a
consumer complaint process. This matter must be thoroughly
reviewed and investigated. The parties in this dispute cannot
simply close the inquiry by settling it. The Commissioner
having had it brought to her attention must perform her
statutory and legal duties. Therefore, the Commissioner
needs to review and investigate the matter before she acts. . . .
11
See footnote 7, supra.
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involuntary unemployment and credit property in states where the rate is not specified by
law or regulation.
Following his investigation and review of the additional submissions filed
by Lightner’s counsel, the Commissioner issued an order finding that there was no rule in
effect setting forth benchmark minimum loss ratio standards for either credit property or
involuntary unemployment insurance during the time period those products were offered.
He also concluded that the filings made by Triton were complete and approved on a
perspective basis at the time of filing; that Triton did in fact comply with the provisions
of W. Va. Code § 33-20-3 with respect to its filing; and that the rates charged by Triton
were reasonable in relation to the benefits provided.
West Virginia adopted a credit property rule dealing with benchmark loss
ratios in 2003 and adopted a rule regarding involuntary unemployment insurance only in
2011. Respondents CitiFinancial and Triton stopped writing credit property insurance
prior to those benchmarks. Thus, the applicable standard in this case is the language in
West Virginia Code § 33-20-3 (1957), which states:
All rates shall be made in accordance with the following
provisions:
(a) Due consideration shall be given to past and
prospective loss experience within and outside this state, to
catastrophe hazards, if any, to a reasonable margin for
underwriting profit and contingencies, to dividends, savings
or unabsorbed premium deposits allowed or returned by
insurers to their policyholders, members or subscribers, to
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past and prospective expenses both countrywide and those
specially applicable to this state and to all other relevant
factors within and outside this state.
(b) Rates may not be excessive, inadequate or unfairly
discriminatory.
Due to the population size of West Virginia, the competition of insurers and
premium volume, the Commissioner must not rely solely on external data in coming to
conclusions on filings. There was no benchmark under the law to ascertain reasonable
profits in this case. Lightner complains of due process violations but would have the
Insurance Commissioner take civil regulatory action against the insurance respondents
for unspecified violations where the Legislature has not spoken on these issues.12 We
12
We cannot agree with Lightner’s contentions that the proceeding before
the Insurance Commissioner lacked due process. The proceeding satisfies the due
process requirements set forth in North v. West Virginia Bd. of Regents, 160 W. Va. 248,
233 S.E.2d 411 (1977). In North, we held that
“[a]pplicable standards for procedural due process, outside
the criminal area, may depend upon the particular
circumstances of a given case. However, there are certain
fundamental principles in regard to procedural due process
embodied in Article III, Section 10 of the West Virginia
Constitution, which are: First, the more valuable the right
sought to be deprived, the more safeguards will be interposed.
Second, due process must generally be given before the
deprivation occurs unless a compelling public policy dictates
otherwise. Third, a temporary deprivation of rights may not
require as large a measure of procedural due process
protection as a permanent deprivation.”
Id., Syl. Pt. 2.
(continued . . .)
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find that the Commissioner performed due diligence and questioned the rate filings, but
he received adequate documentation and explanation from Triton prior to approving the
rates from 1994 through 2003. While Lightner cites to Insurance Commissioner decisions
in other jurisdictions in an attempt to show that Triton’s rates were unreasonable, he fails
to note that in those other states, there was a benchmark in place. Accordingly, we affirm
the circuit court’s finding that the rates charged by Triton were reasonable.
Furthermore, Lightner’s brief fails to identify any evidence that he was
prevented from presenting to the Commissioner. Lightner references two affidavits from
Michael Scruggs and Hanley Clark that support a contention that the rates were
unreasonable.13 However, neither of these affidavits was submitted or prepared until
Here, Lightner paid his premium and was provided the requisite coverage.
Additionally, where the rate has been approved there is a presumption that the policy
forms and rate structure are in full compliance with the requirements of Chapter 33 of the
West Virginia Code. W. Va. Code § 33-6-30(c) (2002). The burden of holding a hearing
to examine filings approved eighteen years ago would be great whereas the benefit to
West Virginia consumers would be minimal. Moreover, the protracted delay would create
problems with evidence and proof in a hearing. The Commissioner’s process and order
revealed the analysis, investigation, and conclusions of law in a transparent fashion and
the commissioner did not abuse his discretion.
13
Following entry of the Commissioner’s order, Lightner submitted to the circuit court
the affidavit of an expert actuary, Michael Scruggs, who opined that Triton had omitted
from consideration its loss experience on the same or similar lines of business and
distinguished that loss experience as being a “new program.” Lightner also submitted
Former Insurance Commissioner Hanley Clark’s affidavit, which states, “[i]f I had
known, during my tenure at the Office of the Insurance Commissioner, that the historical
loss ratios for the subject credit insurance lines were as set out above, I would have
disapproved the rates and required support for such rates.”
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after the entry of the Commissioner’s order. Thus, there was no way for the
Commissioner to consider those documents prior to the entry of the order.
Lightner has had ample opportunity to present his issues in multiple forums
over the years and discovery has been exchanged by all parties. Lightner provided
thousands of pages to the Commissioner’s investigation. He has clearly raised his
arguments and put forth his evidence. For all these reasons, we find that the
Commissioner’s decision that a hearing was unnecessary in this particular matter was not
an abuse of its discretion. While this Court recognized in Bunch that there are instances
involving an alleged deviation from approved rate filings where a factual dispute exists
requiring an administrative hearing to be held, this case did not present any factual
disputes warranting a hearing in this case.
IV.
CONCLUSION
Accordingly, the March 26, 2012, order of the Circuit Court of Kanawha
County is affirmed.
Affirmed.
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