Insurance Commissioner v. Allstate Insurance

Barnes, J., delivered the opinion of the Court. In the two appeals, No. 205, September Term, 1972, Insurance Commissioner of Maryland et al. v. Allstate ⁴³⁰ Insurance Company and No. 212, September Term, 1972, Insurance Commissioner of Maryland v. Aetna Casualty and Surety Company, the same statute, Code (1972 Repl. Vol.) Art. 48A, § 234A, as amended and rewritten by Chapter 789 of the Laws of 1971, is to be construed and the same points of law are to be considered. Both appeals were argued on the same day.

We have concluded that we may decide both cases in one opinion after giving the facts in each case. No. 205, September Term, 1972, Insurance Commissioner of Maryland et al. v. Allstate Insurance Company In No. 205, the Insurance Commissioner of Maryland (Commissioner) had received a complaint from James L. Pierce, an insured under an automobile policy issued by Allstate Insurance Company (Allstate), to the effect that Allstate intended to refuse to renew his automobile policy on November 23, 1971, the anniversary date of the policy. The Commissioner by letter dated November 3, 1971, ordered Allstate to continue the policy in effect until a hearing could be held to determine the appropriateness of Allstate’s contemplated action under Art. 48A, § 234A (a). This hearing was held in the Insurance Division on December 9, 1971, before Eugene A. Graham, the Hearing Officer designated by the Commissioner (Hearing Officer).

The testimony before the Hearing Officer indicated that the automobile covered by the policy was not only driven by James L. Pierce but also by his wife, Mary Verdell Pierce. We quote from the Commissioner’s Order of January 5, 1972, in regard to the testimony before the Hearing Officer: “Mr. Kenneth J. Higgins, Underwriting Manager of the Roanoke, Virginia Regional Office of Allstate Insurance Company, stated that the decision to discontinue the coverages was based on two violations and seven claims. There were two vehicles and three operators. ⁴³¹ “The violations were: “April 3, 1967—James Louis Pierce—Speeding—$10 fine. “March 16, 1968—Mary Verdell Pierce— Reckless Driving. “The accidents were as follows: “At 5:20 p.m., August 31, 1967, Mrs. Pierce was driving and her vehicle was hit in rear. Medical payments of $136.13 were paid.

There were no other payments or recoveries. “At 7:10 p.m., March 16, 1968, Mrs. Pierce was driving and hit the claimant’s parked car. A summons was issued to the third party for illegal parking. The company paid Collision $94.36 and Property Damage $331.02. There was no subrogation. “At 2:15 a.m., March 24, 1968, Mrs. Pierce was a passenger in her own car.

The driver was making a turn when the vehicle was hit in the rear. The company paid $216.09 Collision and three medical payment claims of $275.75; $312.00 and $50.00. The Collision payment was recovered through subrogation. “At 1:30 p.m., September 29, 1968, Mrs. Pierce hit a parked car. There was a Property Damage claim of $126.50.

No Collision paid. “At 9:30 p.m., the Pierce’s automobile was struck by a hit and run driver. There was a Collision claim of $123.38. “On October 30, 1970, Mrs. Pierce was making a left turn on St. George Avenue. A car hit the insured’s front right fender. The road was wet and it was raining.

The police were called, but there is no record of citation on Mrs. Pierce’s motor vehicle record for this accident. A collision claim of $90.55 was paid and a Property Damage claim of $539.90. “On December 16, 1970, the insured’s vehicle ⁴³² was struck by a hit and run driver. The other driver was apprehended by the police. A Collision payment of $51.95 was made.

There was no subrogation. “Mr. Higgins stated that the record indicated that the company could expect a continued pattern of more accidents in the future and possibly of a more serious nature. He felt that it would not be profitable for the company to insure the Pierces’ for an additional five (5) years.” The Commissioner indicated in the Order of January 5, 1972, that “[u]pon the foregoing findings of fact,” Allstate was in violation of Art. 48A, § 234A (a) in that it “arbitrarily, capriciously or for unfairly discriminatory reasons” issued a notice of intent not to renew the coverages in the policy. The Order further stated: “With three operators and two vehicles, the possibility of claims would exceed those for one operator with one vehicle. The at fault accidents involved Mrs. Pierce who was a newly licensed operator.” Allstate was ordered to renew the coverages in the Pierce policy.

Allstate filed a timely notice of appeal to the Baltimore City Court from the Order of January 5, 1972, on January 21, 1972, followed by a petition in accordance with Maryland Rule B2 e setting forth its grounds of appeal. Thereafter, on April 17, 1972, the appeal came before the Baltimore City Court (Harris, J.) for a de novo hearing as provided in Art. 48A, § 40 (4). Mr. Higgins, the underwriting manager of the Roanoke, Virginia Regional Office of Allstate, gave substantially the same evidence he gave before the Hearing Officer and also stated: “During the period of the policy, in April of 1969, the underwriter reviewed these losses. Actually, the underwriting department reviews all accidents that occur.

The policy was reviewed ⁴³³ and, at that time, two underwriters agreed that we should look at this policy prior to renewal. Prior to renewal, in August of 1971, two other underwriters reviewed all of the accidents and violations that occurred under the policy and made a decision that this was in excess of what we would normally expect in a policy, and we were deciding as to renewing for a five year period and we believed that it was not to be to the Company’s advantage. We therefore issued a non-renewal notice and we did not renew the policy. $ # * “An underwriter is a risk selection man from the standpoint of evaluating the premium that is available to us and desirable from the standpoint of past accidents, violations of the use of an automobile, the various drivers of an automobile and he makes a decision as to whether or not the Company can properly insure this particular risk. * * * “The underwriter does review practically all changes that occur in the policy of continued profitability. In a situation such as Mr. Pierce, he reviews the claims that do occur, he evaluates them from the standpoint of profitability, and if he judges that we cannot expect the risk to be profitable from what has happened in the past, he does make the judgment in writing as part of the file.

He thereafter refers this to another underwriter—another experienced underwriter, and the second underwriter must agree with that original decision. If he does not, it is referred to a third underwriter. In any event, it is two that agree to the decision not to renew or not to issue a particular policy. * * * ⁴³⁴ “In this particular case it was actually reviewed twice. It was reviewed in 1969 by two underwriters who, at that time, decided it was more than the average number of accidents which had occurred and they recommended that another review be made prior to renewal.

At that time two additional underwriters reviewed the case prior to renewal and their decision was non-renewal. * * * “The policy of the Company, in a decision like this, it would be an excessive number of accidents. We are trying to insure the average exposure and company policy dictates that when the exposure goes beyond the average—goes beyond the norm, the risk will not be continued.” He further testified that these accidents exceeded the norm and that Allstate only issued a five-year policy in Maryland which had a significant bearing on its decision not to renew the policy. He also stated that throughout the five-year period of the Pierce policy, the premiums paid amounted to $1,210.30 whereas Allstate paid in excess of $2,000 during that period. Judge Harris in his carefully considered opinion filed June 5, 1972, concluded that there was no evidence whatever to indicate that Allstate’s decision not to renew the policy was based upon “ ‘race, color, creed or ,sex.’ ” He further found that Allstate’s decision was based upon their substantial losses from the policy and was not “ ‘arbitrary, capricious, or unfairly discriminatory.’ ” He stated that the Commissioner’s decision was unsupported by competent, material and substantial evidence in view of the entire record as submitted and was, itself, “ ‘arbitrary and capricious.’ ” The Order of the Commissioner was reversed and on June 6, 1972, judgment absolute in favor of Allstate for costs was entered.

From this judgment, the Commissioner filed a timely appeal to this Court. ⁴³⁵ No. 212, September Term, 1972, Insurance Commissioner of Maryland v. Aetna Comity and Surety Company The Commissioner received a complaint from James Buchanan, a resident of Baltimore City, that Aetna Casualty and Surety Company (Aetna) had notified him that it would not renew his automobile liability policy. By its letter of January 12, 1972, Aetna replied to Mr. Buchanan’s request to give reasons for its refusal to renew, as follows: “The police report concerning your accident of 6- 5-71 indicates that you struck the claimant in the rear and left the scene of the accident and that you were apprehended ten blocks away by police. In addition, you refused to take a breathelizer test but were subsequently charged with driving while intoxicated. “A copy of your Motor Vehicle record dated 7- 2-71 shows a violation of 6-5-71 in which you were convicted of ‘driving ability impaired,’ and fined $300.00. This was in conjunction with the accident of 6-5-71. “It is our feeling that the information contained in the police report regarding this accident precludes our continuing coverage under your policy, subsequent appeals regarding the conviction notwithstanding. “It is for this reason that we have chosen not to renew your policy.” After a hearing before Eugene A. Graham, the Commissioner’s Hearing Officer, on April 6, 1972, the Commissioner concluded that Aetna had acted arbitrarily and capriciously under Art. 48A, § 234A and directed Aetna to renew the Buchanan policy.

Aetna duly perfected an appeal from the Commissioner’s Order to this effect to the Baltimore City Court (Prendergast, J.). Judge Prendergast in his helpful and careful oral ⁴³⁶ opinion accurately summarized the testimony before the Hearing Officer, as follows: “. . . on June 5 of 1971, Mr. Buchanan had left his place of employment, Triangle Chrysler Automobile Agency, and had stopped at a tavern, I believe located on Bonaparte Avenue, not far away. He remained there from one P.M. until 4:50, just ten minutes short of four hours. He had nothing to eat, but admitted having three drinks of whiskey with water.

It was not long after that that he was proceeding along 25th Street when he ran into the rear of a standing automobile being operated by Mr. Lloyd Allen. His only explanation for this collision is that his reactions were simply not quick enough, or good enough, to enable him to see an automobile in full view standing in front of him. Following the accident, he knew that the police were being called to the scene, nevertheless, he left the scene, and was apprehended, I believe four blocks away. It was shown that he had been charged with four very serious violations of the motor vehicle code: operating while under the influence of liquor, leaving the scene of an accident, driving while his ability to drive was impaired, and negligent driving.

It was shown that he was tried on these cases before Judge Robert Gerstung in the District Court, and found guilty on one of the charges, namely, driving while his ability to drive was impaired. He was fined $300,00 and costs. He took an appeal from that decision, and according to him, the decision was reversed in the Criminal Court and his money paid back to him.” Judge Prendergast then observed: “The hearing officer evidently concluded that since the decision of the District Court was re ⁴³⁷ versed as he was told, that Mr. Buchanan was entirely in the clear, and that it was arbitrary in not issuing the policy. I think that was a rather precipitous judgment, not entirely borne out by the evidence made in the record before him.” Lloyd Allen, whose automobile received the rear-end collision with Mr. Buchanan’s car on June 5, testified at the hearing in the Baltimore City Court.

Judge Prendergast properly summarized his testimony, as follows: I am quite impressed by the testimony of a man who knows most about it and is in my judgment unbiased in what he told the Court. That is Mr. Lloyd Allen, the victim of this accident. Mr. Allen said that on the day in question, June 5, last year, he was proceeding east along 25th Street, after attending the commencement exercises of his son. He stopped for a red light at the intersection of Harford Road and was standing still when he was hit in the rear by the automobile driven by Mr. Buchanan, as he described it sounded like a train had hit him.

Perhaps this metaphor is inspired by the fact that the scene of the accident is not far away from the Baltimore and Ohio right of way, and he may have been thinking in terms of trains at the moment. In any rate, Mr. Buchanan ordered him to take his hand off the car, refused to give him his driver’s license or registration, whereupon Mr. Allen, who says he didn’t know him at all, told him he was going to call the police. To do this, he had to go to a nearby filling station, where he put in the call. In the meanwhile, fortunately he had got the license number on Buchanan’s car; had he not done so, Mr. Buchanan might have gotten off scott free on all charges, and perhaps the Aetna would have