Ruling: Insurance Commissioner shouldn't be second-guessed by courts

CHARLESTON – Insurance rates are the province of the Insurance Commissioner and the reasonableness of such rates should not be second-guessed by circuit courts or jurors, according to a recent ruling of the state’s high court.

On June 6, Justice Allen H. Loughry delivered the opinion of the unanimous court in the case of West Virginia Employers’ Mutual Insurance Company d/b/a Brickstreet Mutual Insurance Company and Michael D. Riley, West Virginia Insurance Commissioner v. The Bunch Company.

Justice Menis E. Ketchum disqualified himself and Judge Russell M. Clawges, Jr. sat in by temporary assignment.

At issue in this case was an assertion by the Bunch Company, the plaintiff in the lawsuit, that the premium it paid to BrickStreet for a Workers’ Compensation insurance policy included an agent commission that should not have been included in the premium.

BrickStreet directly wrote and issued the insurance policy at issue, and Bunch asserted it should not have been charged the same premium as is charged on “agent written business.”

Bunch Company filed a class action complaint in the Circuit Court of Cabell County on Oct. 15, 2007. BrickStreet, denying it charged any insured an expense for an agent commission, argued that Bunch was barred by the “filed rate doctrine” and that its exclusive remedy lay with the Commissioner of Insurance.

Judge John L. Cummings disagreed with BrickStreet and decided that BrickStreet had wrongfully charged Bunch a commission as part of its premium without incurring a specific agent-related expense.

Shortly after Judge Cummings issued his ruling, the state Supreme Court issued a decision in State ex rel. Citifinancial v. Madden that recognized the Legislature’s “clear disapproval of judicial intrusion into issues of insurance race setting.”

In light of the Citifinancial ruling, both parties sought relief in other circuit courts and administratively through the Insurance Commissioner. A later ruling by the Circuit Court of Kanawha County was appealed to the state’s high court.

“Addressing the circuit court’s conclusions of law in turn, we first examine the ruling that the Commissioner erred by allowing BrickStreet to charge Bunch a commission when no correlative actual expense had been incurred,” Loughry wrote.

“In making this ruling, the trial court demonstrated two fundamental misconceptions with regard to the schematics of insurance law. First, in looking at the legislative rule that addresses what charges may be included in an insurance premium, the trial court wrongly interpreted the term ‘expense’ as necessarily expenses that BrickStreet ‘ha[d] actually incurred.’ Second, the circuit court wholly disregarded the prospective nature of insurance rate setting.

“At any rate, it is not up to this Court to identify the component charges that can be included in an insurance premium. That decision has been left to the Commissioner. And the Commissioner, upon its review of the consumer complaint filed by Bunch, found no basis for disturbing the presumption that the approved rates were valid.

“[T]he trial court neglected to regard this Court’s admonition in Citifinancial that ‘the uniformity of regulation that the Legislature has established by delegating all matters involving rate making and rate filings to the Commissioner is certain to be infringed if circuit courts or jurors are permitted to second guess the reasonableness of rates previously approved by the Commissioner.’

“Based on the foregoing, we reverse the decision of the Circuit Court of Kanawha County and remand this matter for purposes of entering an order reinstating the July 9, 2010, ruling of the Insurance Commissioner.”