People's Insurance Counsel Division v. Allstate Insurance

CHARLES E. MOYLAN, JR. (Retired, Specially Assigned), J. In this challenge to a decision of the Maryland Insurance Administration (“MIA”), the appellant is the People’s Insurance Counsel Division (“Division”). The Division is an entity of recent vintage, only having been created by the Maryland General Assembly during its Special Session in December of 2004. It is a subdivision within the Office of the Attorney General charged with a very special purpose.

That purpose is to “evaluate each medical professional liability insurance and homeowner’s insurance matter pending before the [Maryland Insurance] Commissioner to determine whether the interests of insurance consumers are affected.” Maryland Code, State Government Article, § 6-306. With several differences not here pertinent, the relation of the Division to the MIA is closely analogous to the relation of the Office of People’s Counsel to the Public Service Commission. People’s Insurance Counsel Division v. Allstate Insurance Company, 408 Md. 336, 349-68 , 969 A.2d 971 (2009). The core problem in this case is that the Division sought to impose on the appellees, Allstate Insurance Company and Allstate Indemnity Company (collectively “Allstate”), a two- ⁵ pronged set of conditions or restrictions devised by the General Assembly, beginning in 1970, essentially to combat discriminatory practices in underwriting of racial, ethnic, religious, gender and other familiar varieties.

The flaw in the Division’s effort is that it seeks to apply those conditions or restrictions to what was a fundamentally business decision of Allstate that did not remotely involve any of the traditional or historic discriminations. A final threshold observation about this appeal is that the type of risk here being examined, the risk of catastrophic wind damage associated with hurricanes, is a phenomenon so completely and fundamentally dissimilar to the only types of risk heretofore dealt with in the caselaw that the case becomes one of truly first impression. Procedural History On December 4, 2006, Allstate advised the MIA that it intended to cease writing new property insurance policies in “certain catastrophe-prone areas” in Maryland effective January 1, 2007. Allstate believed that certain coastal areas bordering the Atlantic Ocean and the Chesapeake Bay presented an unusually high risk of loss in the event of a catastrophic hurricane.

As a result, it decided that it was no longer in Allstate’s best economic interest to continue to write new property insurance policies in those areas. After an “extensive six month review,” this filing of its intent to stop writing new property insurance, submitted pursuant to Maryland Code (1995, 2006 RepLVol.), § 19-107 of the Insurance Article (“I.A.”), was approved by the Maryland Insurance Commissioner (“the Commissioner”) on May 31, 2007. The MIA concluded that the designation of the geographic areas within which Allstate would no longer issue new policies had “an objective basis and [was] neither arbitrary nor unreasonable.” The very next day, the Division requested a hearing before the MIA regarding Allstate’s filing. The Division’s request was granted, and a hearing was held on December 13 and 14, 2007.

By an order issued February 2, 2008, Associate Deputy ⁶ Commissioner Thomas Paul Raimondi determined that the Division had standing to request the hearing, that Allstate had the burden of persuasion, and that Allstate had sufficiently demonstrated that its filing satisfied I.A, §§ 19-107 and 27-501. 1 The Division filed a petition for judicial review of the Commissioner’s order in the Circuit Court for Baltimore City. Allstate moved to dismiss the petition, arguing that the Division lacked statutory authority to petition for judicial review. The circuit court agreed, and dismissed the petition for lack of standing on July 15, 2008. The Court of Appeals reversed the circuit court’s order, holding that the Division had standing to seek judicial review, and remanded the case for further proceedings.

Allstate Insurance Company, 408 Md. 336 , 969 A.2d 971 . On remand, a hearing was held before Judge Sylvester B. Cox in the Circuit Court for Baltimore City on the Division’s petition for judicial review on September 24, 2009. Judge Cox, by order filed October 9, 2009, denied the Division’s petition, and affirmed the Commissioner’s final order. The Division filed a timely appeal to this Court on November 4, 2009.

The Contentions On appeal to this Court, the Division raises the following questions for our determination: 1. Did Allstate’s proposed decision violate § 19-107 because its designation of a certain geographic area was arbitrary and unreasonable?; and 2. Did Allstate’s proposed decision violate § 27-501 because 1) it failed to provide any statistical data showing the probability of a catastrophic hurricane, and 2) it ⁷ failed to provide any statistical data showing that its rating plan then in effect was not sufficient to cover losses in the event of a catastrophic hurricane? Standard of Review Although the appeal to us is technically from the Circuit Court for Baltimore City, we are actually reviewing the decision of the Commissioner.

We look not at the circuit court, but through the circuit court. Bayly Crossing, LLC v. Consumer Protection Division, 417 Md. 128, 136-37 , 9 A.3d 4 (2010). In reviewing the decisions of the Commissioner, this Court has an austerely limited role. “Ordinarily, a final order of the Commissioner must be upheld on judicial review if it is legally correct and reasonably supported by the evidentiary record.” Insurance Commissioner v. Engelman, 345 Md. 402, 411 , 692 A.2d 474 (1997). In reviewing the Commissioner’s decision, our role is confined to “determining if there is substantial evidence in the record as a whole to support the agency’s findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law.” United Parcel Service, Inc. v. People’s Counsel, 336 Md. 569, 577 , 650 A.2d 226 (1994). “In applying the substantial evidence test, we have emphasized that a ‘court should [not] substitute its judgment for the expertise of those persons who constitute the administrative agency from which the appeal is taken.’ ” Our obligation is “to ‘review the agency’s decision in the light most favorable to the agency,’ since their decisions are prim,a facie correct and carry with them the presumption of validity. ” “Even with regard to some legal issues, a degree of deference should often be accorded the position of the administrative agency.

Thus, an administrative agency’s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts.” We are under no constraint, ⁸ however, “to affirm an agency decision premised solely upon an erroneous conclusion of law.” Grasslands Plantation, Inc. v. Frizz-King Enterprises, LLC, 410 Md. 191, 203-04 , 978 A.2d 622 (2009) (citations omitted; emphasis supplied). On this appeal, the Division, incidentally, does not challenge any of the Commissioner’s factual findings. Section 19-107(a) The Division’s first contention is that Allstate’s decision to discontinue writing new property insurance in certain catastrophe-prone areas of Maryland was in violation of Insurance Article, § 19-107. Section 19-107(a) provides: (a) In general. — An insurer may not refuse to issue or renew a contract of motor vehicle insurance, property insurance, or casualty insurance solely because the subject of the risk or the applicants or insured’s address is located in a certain geographic area of the State unless: (1) at least 60 days before the refusal, the insurer has filed with the Commissioner a written statement designating the geographic area; and (2) the designation has an objective basis and is not arbitrary or unreasonable.

(Emphasis supplied). Phrased affirmatively, that section therefore provides that Allstate “may ... refuse to issue ... a contract of ... property insurance or casualty insurance solely because the subject of the risk ... is located in a certain geographic area” so long as it satisfies preconditions (1) and (2). With respect to Allstate’s satisfaction of precondition (1) there is no dispute. It filed with the Commissioner a written statement designating the geographic area within which it would no longer write property insurance more than 60 days before it began to implement its intended policy.

The only dispute with respect to § 19-107(a) is whether Allstate’s designation of the geographic area in which it intended to discontinue writing prop ⁹ erty insurance had an “objective basis” and was not “arbitrary or unreasonable” within the contemplation of subsection (a)(2). “The Insurance Code is basically the product of a comprehensive revision enacted by Ch. 553 of the Acts of 1963.” Muhl v. Magan, 313 Md. 462, 465 , 545 A.2d 1321 (1988). In the 1996 recodification of the insurance laws, what became § 19-107(a) was taken directly from what had been Article 48A, § 61A. That earlier section had been enacted by Chapter 927, Section 1, of the Acts of 1965 and in its original form provided simply: No insurer shall decline to issue or renew contracts of motor vehicle insurance solely on account of the geographic area within this State wherein is located the subject of the risk or the applicant’s or insured’s address, unless such insurer not less than sixty (60) days previously shall have filed with the Commissioner a written statement designating such geographic area, which statement shall be an open filing with the Commissioner as a matter of public record. (Emphasis supplied).

That appears to have been a legislative effort to prohibit, or at least to inhibit, the practices of some insurance companies to “red line” areas in which the companies would not write motor vehicle insurance on the basis of racial demographics. In that original manifestation, the section applied only to motor vehicle insurance and it did not prohibit discriminatory practices generally. It was only in 1970 that the Legislature undertook to curb discriminatory practices in insurance underwriting. Section 61A was amended by Chapter 746 of the Acts of 1973, at which time it took essentially its present form.

The coverage of the section was expanded so as to include property and casualty insurance as well as motor vehicle insurance. The section was also amended to provide that the “designated geographic area” in which the insurer would “decline to issue or renew contracts of ... insurance” must have “an objective basis and shall not be arbitrary or unreasonable.” ¹⁰ What clearly emerges is that within the contemplation of § 19-107, the “arbitrary or unreasonable” test is not to be applied to the fiscal wisdom or business acumen of the insurance company in discontinuing to write or renew insurance but only to its “designated geographic area.” It is simply the mapping function that must have an objective basis and must not be arbitrary or unreasonable. That particular concern is not with “what,” but with “where.” An Objective Basis For the Designation Of a Catastrophe-Prone Geographic Area Allstate timely filed with the MIA its intention to stop writing new property insurance in what it had determined to be a catastrophe-prone area of Maryland. This “catastrophe-prone” region, designated by Allstate as Hurricane Bands 4, 5, and 6, consisted of Calvert, St. Mary’s, Somerset, Talbot, Wicomico, and Worcester Counties, as well as portions of Anne Arundel, Charles, Dorchester, Prince George’s, and Queen Anne’s Counties.

Allstate Insurance Company, 408 Md. at 340 n. 3, 969 A.2d 971 . According to Alstate, its decision to stop writing new policies in Bands 4, 5, and 6 was based on its significant market share in those bands, and its projections of losses that would result in the event of a catastrophic storm striking Maryland 2 Alstate, which claims to own 12.7% of the market statewide, and 13.0% in Bands 4, 5, and 6, made the “business judgment that further growth at this time could jeopardize [the company’s] anticipated long term strength.” According to Alstate, controlling its exposure by not writing new property insurance in Bands 4, 5, and 6 is an action “designed to help keep our commitments to our existing customers, and is being implemented so as to minimize any disruption to the market.” ¹¹ Allstate’s belief that Bands 4, 5 and 6 are especially vulnerable to substantial losses resulting from wind-storm damage was based on information produced by a computer-generated model provided by a catastrophe modeling service, Applied Insurance Research, Inc. (“AIR”). At the December 2007 hearing before the circuit court, counsel for Allstate explained how the AIR Hurricane Model V7.0 (the “AIR model”) operated: [W]hat AIR did, Your Honor, is they were provided Allstate’s actual property information from Maryland. They actually got the hard data from December 31, 2004, that Allstate had with respect to all of our homeowners, where they were located, how much insurance they had, et cetera on the properties.

That’s all loaded into the AIR model. ... What it did, in order to get down to the zip codes, statistical level, generated the next year 100,000 times. That is, it’s doing simulations of the next year, 100,000 times. And what they do in order to do that is they look at the last 100 years of meteorological data to try to come up with a probability of various hurricane strikes. ...

The modeling specifically revealed four hurricanes making landfall in Worcester County, Maryland. Two more hurricanes making landfall in Virginia and another making landfall in Delaware and those hurricanes would cause losses in Maryland alone at $500 million dollars, under the findings of fact by the Insurance Commissioner. 3 (Emphasis supplied). Counsel for Allstate next explained how Allstate used the statistics generated by the AIR model: ¹² [W]hat happened here after the Applied Insurance Research Model completed its work, Allstate looked at the data that came out of this modeling and examined it zip code by zip code. And what Allstate came up with was what was called — they were referred to throughout much of the [Commissioner’s] decision, ADRs, which are Average Damage Ratios and those were constructed, Your Honor, based on the five percent of the most severe storms.

Because the question Allstate was trying to address was catastrophic risk, all storms were not considered. Only the five — top five percent of [the] most severe storms. (Emphasis supplied). Using the data output representing the worst five percent of simulated storms, damage ratios were calculated for every zip code in Maryland.

The damage ratios represented the degree of damage a zip code could expect in the event of a catastrophic storm, as compared to the rest of the state. “The higher the damage ratio, the higher the potential damage an area is likely to sustain in the event of a hurricane.” Those damage ratios were then used to divide the state into “Hurricane Bands.” Allstate banded zip codes with like damage ratios together, and separated those zip codes with dissimilar damage ratios. 4 It then calculated the average modeled hurricane losses for a $300,000 home by band, and the loss per $1,000 of coverage for the average home in the respective bands as compared to the whole state, referred to by Allstate as the “damage ratio relativity.” Allstate submitted these statistics, as featured below, to the MIA: Average Hurricane Allstate Average Loss Predicted for Damage Ratio Homeowners Band Damage Ratio $300,000 Home Relativity ¹³ Band 1 N/A N/A N/A Band 2 0.202 $60.60 0.65 Band 3 0.275 $82.50 0.88 Band 4 0.442 $132.60 1.42 Band 5 2.323 $696.90 7.47 Band 6 4.155 $1,246.50 13.36 Grand Total 0.311 $93.30 1.00 The “damage ratio relativity” column indicates that approximately 1.4 times more damage is expected in Band 4 as compared to the whole state, 7.5 times more in Band 5, and 13.4 times more in Band 6. Allstate contended that those statistics were “compelling evidence of the potential for substantial catastrophic loss in Maryland,” and believed that “actions [were] necessary to responsibly control our exposure.” The Division also takes umbrage at the fact that “Allstate’s geographic restrictions are not just along the coast — they extend far inland from the Atlantic Ocean, in some cases 60 miles or more. No other insurance company imposes such restrictions beyond 1 mile from the Atlantic Ocean.” The Division would have the Commissioner put on geographic blinders. To be 60 miles away from the Atlantic Ocean is beside the point if one is nonetheless on the eastern or western littoral of the lower Chesapeake Bay or along the wide estuarial mouth of the Potomac River.

The essential north-south axis of the Chesapeake Bay is in parallel alignment with the paths of hurricanes veering north along the Atlantic coast. The width of the Bay’s mouth and its lower reaches make them, in time of storm, almost open sea. Whereas Puget Sound may be shielded from the open Pacific by the Olympic Mountains and San Francisco Bay can hide behind the Santa Cruz Range, the Delmarva Peninsula offers the Chesapeake Bay no such topographical jetty or windbreak. Its negligible elevation above sea level and its pencil-thin tip offer little more protection than a sand bar.

A hurricane coming directly up the Bay or across Northampton ¹⁴ or Accomack Counties, Virginia, would have nothing to stop it until it hits southern Maryland or the coastline of the Eastern Shore. If other insurers have not yet recognized this, Allstate has. With respect to § 19 — 107(a), Commissioner Raimondi, with ample support in the evidence, expressly found: [W]hen an insurer intends to refuse to issue or renew particular risks based upon the applicant’s place of residency, Ins. § 19-107 requires that the insurer file a “geographic designation, ” or a map, in which the geographic area in which business mil be refused is defined. Section 19-107 is concerned with the manner in which the map has been drawn and is designed to ensure that the insurer’s mapping has an objective and factual basis.

It is undisputed that Allstate filed a written designation of the geographic [area] where new coverage would cease to be written more than 60 days before the date of filing. This meets the requirement [of] Ins. § 19 — 107(a)(1). It is likewise undisputed that Allstate’s designation has an “objective basis”, as required by Ins. § 19-107(a)-(2). See PICD’s Proposed of Law, Conclusion of Law # 5.

Allstate’s designation has an “objective basis” because it is externally verifiable by zip code and hurricane band and is not subject to an insurer’s perceptions, feelings, or intentions. See State Dep’t of Assessments & Taxation v. Md.Nat’l Capital Park & Planning Comm’n, 348 Md. 2, 13-14 [ 702 A.2d 690 ] (1997). Whether a particular insured will be affected by Allstate’s § 19-107 filing can be verified by determining if the property is located within or outside of the zip codes identified by Allstate as part of Bands 4-6. The final hurdle for Allstate with respect to § 19-107 is whether its geographic designation meets the statutory requirement that it not be “arbitrary or unreasonable. ” The Commissioner previously has defined the word “arbitrary” to mean: “... subject to individual judgment or discretion, and made without adequate determination of principle.” ¹⁵ See Berkshire Life Ins.

Co. v. Maryland Insurance Administration, 142 Md.App. 628, 671 [ 791 A.2d 942 ] (2002). Blacks Law Dictionary, Sixth Edition, defines “arbitrary” similarly as: “including something done ‘[without adequate determining principle,’ ‘nonrational’ and ‘[w]illful and unreasoning action without consideration and regard for facts and circumstances presented’ ...,” quoted in Hurl v. Board of Educ. of Howard Co., 107 Md.App. 286, 306 [ 667 A.2d 970 ] (1995). With those definitions in mind, I conclude that Allstate’s geographic designation of Hurricane Bands 1-6 had adequate factual support and, therefore, was not arbitrary or unreasonable. Allstate’s hurricane bands were developed based on objective and reasonable factors, including modeled hurricane loss data, proximity to water and geographic contiguity.

Through its use of the hurricane models, Allstate developed ADRs at a zip code level.22 The higher the ADR, the higher the potential damage the area in the band is likely to sustain in the event of a catastrophic storm. Zip codes were grouped into hurricane bands based on an analysis of variance in damage ratio data in order to create the most efficient alignment of hurricane bands. Based on input from the MIA, Allstate amended its filing to move four zip codes from Band 4 to Band 3, which was supported by Allstate’s analysis of the Average Damage Ratios (“ADRs”) and the within and between variances. Relying on the raw data, Allstate refused to move 17 zip codes out of Band 4 and into Band 3, because the change was not supported based on analysis of the Average Damage Ratios and the between and within variance analysis.

This further demonstrates that Allstate’s grouping of zip codes into hurricane bands was guided by the data, and was therefore reasonable and supported by facts. Because Allstate’s geographic designation was based upon an objective and reasonable fact based grouping of zip codes with the highest ADRs together into hurricane bands, I ¹⁶ conclude that Allstate has complied with the requirements of Ins. § 19-107. 22 Previous modeling had always been county based, but improvements in the modeling process enabled Allstate to be more precise in grouping geographic areas with similar risk bands. (Emphasis supplied). We hold that there was substantial evidence to support the Commissioner’s findings and his rulings.

With respect to § 19-107(a), there was no error. Section 27-501(a) The Division’s second contention is that Allstate’s decision to discontinue writing new property insurance in certain catastrophe-prone areas of Maryland was in violation of Insurance Article, § 27-501(a). Section 27-501(a) provides: (1) An insurer or insurance producer may not cancel or refuse to underwrite or renew a particular insurance risk or class of risk for a reason based wholly or partly on race, color, creed, sex, or blindness of an applicant or policyholder or for any arbitrary, capricious, or unfairly discriminatory reason. (2) Except as provided in this section, an insurer or insurance producer may not cancel or refuse to underwrite or renew a particular insurance risk or class of risk except by the application of standards that are reasonably related to the insurer’s economic and business purposes.

(Emphasis supplied). As it was with § 19-107(a), the satisfaction of subsection (a)(1) poses no problem. The Division never suggested that Allstate’s projected action involved any of the traditionally prohibited discriminatory practices. The contention focuses exclusively on subsection (a)(2).

There is no dispute as to what the words of (a)(2) say. There is a critical dispute as to how broadly the words of (a)(2) were ever meant to apply. The legislative history of § 27-501(a) is the indispensable starting point for any intelligent analysis. ¹⁷ In the recodification that produced the present Insurance Article, what is now § 27-501(a) was taken, without any substantive change, from what had been Article 48A, § 234A. Section 234A, in turn, had been enacted by Chapter 417 of the Acts of 1970 and was aimed at prohibiting a broad range of discriminatory practices.

As first enacted, § 234A(a) “made it unlawful for an insurer ... to cancel or refuse to underwrite or renew a particular insurance risk or class of risks for any arbitrary, capricious, unfair or discriminatory reason based in whole or in part upon the race, creed, color, religion, national origin or place of residency of any applicant or policy-holder.” Within a year, § 234A(a) was rewritten by Chapter 789 of the Acts of 1971. “Sex” was added to the catalogue of prohibited discriminatory criteria; “any arbitrary, capricious, or unfairly discriminatory reason” became an independent catchall criterion; and “religion, national origin or place of residency” were relegated to implicit membership in the latter catch-all category. “Blindness” has since been added to the list of forbidden criteria. The first case to interpret the new section was Insurance Commissioner v. Allstate Insurance Company, 268 Md. 428 , 302 A.2d 200 (1973). Judge Barnes summed up the purpose of the new legislation, 268 Md. at 442 , 302 A.2d 200 : It is clear to us that the principal thrust of this legislation was directed toward any action of an insurer in failing to underwrite or renew a particular risk or class of risk for any reason based in whole or in part upon race, color, creed or sex of an applicant or policyholder for any arbitrary, capricious or unfairly discriminatory reason like those specifically mentioned, including, but not restricted to, religion, national origin, place of residency or other similar irrelevant considerations. In short, the General Assembly intended to broaden the scope of “arbitrary, capricious, or unfairly discriminatory reason, ” but within the frame of reference of the specifically mentioned “reasons.” (Emphasis supplied).

The decision in that case overturned two rulings by the Insurance Commissioner that the determinations by two in ¹⁸ surance companies not to renew automobile insurance had been arbitrary and capricious and were, therefore, in violation of § 234A. The holding of the Court of Appeals was that the “arbitrary and capricious” language was restricted to the types of discrimination spelled out in the section and did not confer any right on the Commissioner to monitor in any broader way the decision of an insurer not to renew policies. The Commissioner, in short, could not challenge established underwriting criteria on grounds other than that they violated traditional discrimination factors. In both Nos. 205 and 212, there was no evidence either before the Commissioner or the Baltimore City Court on appeal of any arbitrary, capricious, or unfairly discriminatory reason applied by either Allstate or Aetna in declining to renew the respective policies, based upon race, color, creed or sex of the policyholders or any similar reason.

The evidence established that each insurer made its decision not to renew upon its established underwriting criteria and for no other reason. The facts in each case abundantly established this and there was no evidence to the contrary. 268 Md. at 443-44 , 302 A.2d 200 (emphasis supplied). Government Employees Insurance Company (“GEICO") v. Insurance Commissioner, 273 Md. 467 , 330 A.2d 653 (1975), was also a case in which the Insurance Commissioner had ruled that two insurance companies had failed to “justify” their decisions not to renew automobile insurance for two motorists. The circuit court affirmed the Insurance Commissioner but the Court of Appeals reversed, holding that the insurance companies had no such obligation under the then controlling law to “justify” their decisions.

Judge Levine’s opinion for the Court of Appeals emphasized that substantive burdens on the business decisions of the insurers can only come from legislative action and may not be devised by either the Insurance Commissioner or by the courts. Nothing in § 240AA ... permits the Commissioner to substitute his underwriting judgment for that of the insurer. Similarly, it is not for the courts to decide whether a driver is a good or poor risk; nor may the courts formulate ¹⁹ criteria for the Commissioner to follow in considering whether the action proposed by an insurer is “justified.” Such measures ... must come from the Legislature. We have clearly indicated that they can originate neither judicially nor administratively. 273 Md. at 483-84 , 330 A.2d 653 (emphasis supplied).

In direct response to the 1973 Allstate decision, the General Assembly had amended § 234A once again. By Chapter 752 of the Acts of 1974, the Legislature, immediately after the words proscribing traditional or historic discriminations, added the provision: ... No insurer, agent or broker may cancel or refuse to underwrite or renew a particular insurance risk or class of risk except by the application of standards which are reasonably related to the insurer’s economic and business purposes. (Emphasis supplied).

The GEICO opinion was handed down six months after the 1974 amendment took effect on July 1, 1974, but had no occasion to apply it because the critical decisions being reviewed in the GEICO case had been made before the 1974 amendment took effect. GEICO, therefore, does not help us in interpreting the impact of the 1974 amendment to § 234A. Within months, however, the interpretation of the 1974 amendment that GEICO failed to provide was provided by St. Paul Fire & Marine Insurance Co. v. Insurance Commissioner, 275 Md. 130 , 339 A.2d 291 (1975). This interpretation is critical because the appeal now before us turns exclusively on the question of whether Allstate’s business decision to discontinue writing new property insurance in a broad swathe of catastrophe-prone areas is or is not in violation of § 27-501(a)(2), taken directly from former Art. 48A, § 234A(a) as amended by Chapter 752 of the Acts of 1974.

We shall hold that Allstate’s decision is not in violation of § 27-501(a)(2) for two separate reasons. In the first place, we hold that § 27-501(a)(2) does not apply to this broad-ranging policy decision by Allstate that did not involve any of the ²⁰ traditionally prohibited forms of discrimination. We also hold, alternatively, that even if § 27-501(a)(2) were, arguendo, deemed to apply, Allstate’s decision would not in any event have constituted a violation of that section. The Threshold Of Section 27-501(a)(2)’s Applicability The decision of the Court of Appeals in St Paul Fire & Marine Insurance Company v. Insurance Commissioner is, in our judgment, completely dispositive of the present appeal.

It is, indeed, the only appellate opinion to deal with a situation comparable to the one before us. The rest of the caselaw, dealing as it does with decisions to cancel the coverage of an individual motorist because of a bad driving record, or not to renew the coverage of a doctor because of an untruthful application, bears such a strained and attenuated relationship (if any) to what is before us as to be essentially totally useless. We are dealing here, by contrast, with an across-the-board decision by Allstate to discontinue underwriting all new property damage policies in all or in significant parts of eleven of Maryland’s twenty-three counties. We are not dealing with Allstate’s appraisal of the driving record of an individual motorist.

The two diametrically different situations are simply not comparable, and it would take a Procrustean effort to attempt to squeeze the broad-ranging analysis called for in this case into the Lilliputian framework of analysis employed in all of the cases other than St Paul Fire & Marine. The St Paul Fire & Marine situation was comparable in scope to the situation before us. Just as Allstate in the present case became increasingly aware of the financial losses it might be facing in catastrophe-prone areas, St. Paul Fire & Marine, as Judge Levine explained, became increasingly aware of the risks involved in medical malpractice coverage. With the advent of specialization and greater complexity in the practice of medicine have come increasing demands upon the insurance companies handling medical malpractice insurance.

Claims adjusters and defense attorneys in this field must now possess a specialized expertise. Not ²¹ surprisingly, therefore, these circumstances, together with other developments in medical malpractice litigation, have increased the underwriting risk of this form of coverage, and have reduced the national market to some 12 insurance companies. 275 Md. at 133 , 339 A.2d 291 (emphasis supplied). We see no meaningful distinction between the total termination of a type of coverage in the St. Paul Fire & Marine case and the broad curtailment of writing new coverage within the three hurricane bands in the present case. The rationale of Judge Levine’s opinion would apply as surely to § 27-501(a)(2) in the present case as it applied to the 1974 amendment to former § 234A in that case.

The thrust of the opinion is that the new language supplements the old language and is not a free-standing criterion. Faced with past losses and the threat of increasing future losses, St. Paul Fire & Marine announced that “it would cease writing physicians and surgeons professional liability [coverage] in Maryland by January 1, 1975.” Id. at 134, 339 A.2d 291 . A protesting physician brought the matter before the Commissioner, who ruled that the company “had not met its burden of persuasion to demonstrate that the ... refusal to underwrite or renew [was] justified” under § 234A. Id. at 135, 339 A.2d 291 .

The Insurance Commissioner in St. Paul Fire & Marine made precisely the type of applicability ruling which the Division now urges upon us as one properly falling within the purview of the Insurance Commissioner. Judge Levine, 275 Md. at 134-35 , 339 A.2d 291 , summarized the Commissioner’s ruling, which the Court of Appeals then vacated as one based upon an inapplicable statutory provision. The commissioner ruled that § 234A, as amended by chapter 752 of the Laws of 1974, was applicable, and that the company had not met its burden of persuasion to “demonstrate that the .. . refusal to underwrite or renew [was] justified.... In so ruling, the commissioner observed: “The statute in question specifically limits the action of an insurer (or agent or broker) in making what is termed ²² ‘underwriting decisions’ (refusal to write a risk or class of risk in the first instance, ...), in three distinct areas.

These include: “3. Underwriting decisions not based on ‘standards which are reasonably related to the insurer’s economic and business purposes.’ ” He then found that the company had violated standards “2” and “3”[J The Circuit Court for Baltimore City affirmed the Commissioner. Before the Court of Appeals, St. Paul Fire & Marine advanced three contentions. 1) Section 2SJpA does not apply because the company has made a general business decision not to underwrite an entire category of insurance, rather than a specific decision involving only a “particular insurance risk or class of risk. ” 2) The company has met its burden of persuasion of showing its decision to have been by the application of standards which are reasonably related to its economic and business purposes. 3) That § 234A is unconstitutional. Id. at 135-36, 339 A.2d 291 (emphasis supplied).

Significantly, the Court of Appeals never addressed the latter two contentions because it held, at the threshold, that the statutory provision in question was not even applicable to the type of broad-based business decision made by the insurer. Since we agree that the statute is inapplicable to this case, it is unnecessary for us to decide the remaining two points. Id. at 136 , 339 A.2d 291 (emphasis supplied). The subject was thus applicability and not satisfaction.

In rejecting the argument that the 1974 amendment to § 234A(a) had created a new and broad substantive power in the Commissioner to oversee the business soundness of deci ²³ sions affecting coverage generally, Judge Levine’s opinion stressed that the amendment did not create an independent section in the Insurance Code but only added a provision to § 234A(a) which was historically an anti-discrimination measure. The new provision was not a free-standing or autonomous measure but simply an incremental addition to a preexisting measure. In terms of who was covered by the new amendment, the opinion pointed out that the words “risk or class of risk” in the new language replicated precisely the words “risk or class of risk” in the original anti-discrimination measure. Judge Levine summarized the insurer’s position.

In pressing its argument that § 23IA is inapplicable, the company maintains that the statute is aimed at individual underwriting decisions involving “a particular risk or class of risk, ” not at general policy decisions, made at the highest corporate level, affecting a compete line of insurance such as medical malpractice coverage. Thus, the company contends that the words “risk or class of risk,” within the contemplation of § 23IA actually mean “person or class of persons. ” ... As the company sees it, therefore, it is free to determine which line of insurance it will offer, but once it elects to underwrite a category or line of insurance, the statute requires that it not discriminate, without justification, between persons or classes of persons. Id. at 138, 339 A.2d 291 (emphasis supplied).

The Commission, on the other hand, was contending for a much broader reading of the 1974 amendment, essentially the same contention now being made by the Division in the present case. The commissioner, on the other hand, ... argues that the company cannot refuse to underwrite medical malpractice insurance in this state without showing the decision to be based on “standards which are reasonably related to the insurer’s economic and business purposes.” Id. at 138-39 , 339 A.2d 291 . The Court of Appeals concluded that although the amendment broadened and enhanced the protection being given to ²⁴ certain persons and classes of person, it did not enlarge the ranks of the special group being protected. The Court accepted the company’s position.

The language of the first sentence of § 234A itself suggests that “risk,” as used in that section, was intended to mean person or applicant. Clearly, then, the evil aimed at by the statute is discrimination against individuals or classes of individual. When the Legislature added a new standard to § 234A in the 1974 amendment, it did so by inserting the identical language, “particular insurance risk or class of risk,” immediately following the prior enactment. This must be regarded as a manifestation of intent that this phrase, as used in the amendment, should have the same meaning that it already had in the original statute.

Section 2SIA, therefore, although now containing broader substantive standards, continues to be aimed at discrimination against individuals or classes of individuals. Id. at 140, 339 A.2d 291 (emphasis supplied). What is now § 27-501(a)(2) is simply the second step in a two-step anti-discrimination process. If an action by an insurer would appear presumptively to violate § 27-501(a)(l), it is not enough for the insurer merely to disclaim a discriminatory purpose.

The insurer, pursuant to § 27-501(a)(2), then bears the burden of establishing that its decision is “reasonably related to the insurer’s economic and business purposes” rather than serving a discriminatory purpose. In GEICO v. Insurance Commissioner, 273 Md. at 483 , 330 A.2d 653 , Judge Levine explained the supplementary or auxiliary role of the new provision added by the 1974 amendment. A necessary implication of the provision that a non-renewal not be “for any arbitrary, capricious or unfairly discriminatory reason,” as those words are used in § 234A, is that a reason actually exists. We think, therefore, that no insurer refusing to renew a policy can avoid running afoul of ²⁵ §§ 23IpA and 240AA, if the stated reasons for the proposed action are not actual and true.

(Emphasis supplied). Step Two in this process does not exist except in conjunction with Step One. If, as the Court of Appeals held, the new 1974 statutory language was inapplicable there, it is inapplicable here. In the present case, no distinction is being made by Allstate between individuals or classes of individuals within Hurricane Bands 4, 5, and 6.

The consequential inapplicability of § 27-501(a) in this case is indistinguishable from the inapplicability of Art. 48A, § 234A(a) in St. Paul Fire & Marine. In light of the evident purposes of § 234.A, the words “particular insurance risk or class of risk” mean that the statute applies to decisions aimed at individual persons or classes of persons, but not to decisions, such as the one here, which concern an entire line of insurance. In short, an insurer may determine independently of § 234A whether it will underwrite a given line of insurance, but once it elects to do so, it must insure