Prime Rate Premium Finance Corp. v. Maryland Insurance Administration

MATRICCIANI, Judge. Appellant Prime Rate Premium Finance Corporation, Inc. (“Prime Rate”) appeals from the decision of the Circuit Court for Baltimore City affirming the Insurance Commissioner’s Final Order in favor of the appellee Maryland Insurance Administration (“MIA”) and disapproving Prime Rate’s revised premium finance agreement. The appellant presents one question for our review: I. Did the Commissioner err by affirming MIA’s disapproval action and concluding that the provision contained in paragraph 16 of Prime Rate’s proposed premium finance ⁵⁸⁹ agreement violates Md.Code (1996, 2006 Repl. Vol.), § 23-405 of the Insurance Article (“IA”)?

FACTS Prime Rate is a premium finance company 1 registered to do business in Maryland with the MIA. On October 25, 2007, Prime Rate submitted a revised premium finance agreement to the MIA for approval. Paragraph sixteen of the proposed agreement read, in pertinent part: “the ABOVE NAMED insured ... (16) [ajgrees that any refunds may be applied against any prior debts owed [Prime Rate].” On November 8, 2007, the MIA advised Prime Rate that a number of provisions of the agreement would have to be revised or eliminated in order for the agreement to be approved.

The MIA requested that paragraph sixteen be deleted in its entirety because the language allowing Prime Rate to withhold from the refund the amounts of “any prior debts” contravened the mandatory language of IA § 23-405(b). This section provides that the premium finance company “shall refund to the insured the amount of unearned premium that exceeds any amount due under the premium finance agreement.” The parties were able to resolve all issues with regard to the proposed agreement except for paragraph sixteen. On May 16, 2008, the MIA disapproved the proposed agreement. On June 16, 2008, Prime Rate requested a hearing pursuant to IA § 2-210.

On August 26, 2008, the Insurance Commissioner held a hearing on the denial of the proposed agreement. Prime Rate did not present any testimony. The MIA offered, without ⁵⁹⁰ objection, the testimony of Associate Commissioner P. Randi Johnson, who explained the basis for the MIA’s denial and also stated that the MIA has uniformly and consistently taken the position that the proposed revision is inconsistent with IA § 23-405. On September 10, 2008, the Commissioner issued a Final Order and statement of reasons in support of the order and upheld the MIA’s rejection of the proposed agreement.

The Commissioner found that the refund contemplated by IA § 23^05 is mandatory and that the statute would be “weakened considerably” if the premium finance company could “reduce (potentially to zero) the refund to collect a debt arising under some other and separate financing agreement.” To conclude, the Commissioner found that “the General Assembly’s intent in § 23-405(6)(l) is unambiguous, and the MIA was obliged to honor that intent.” On January 22, 2009, the Circuit Court for Baltimore City affirmed the MIA Final Order. The appellant has timely appealed. DISCUSSION I. Prime Rate contends that the MIA rejected its proposed agreement based upon an erroneous interpretation of IA § 23-405(b)(l). Prime Rate argues that the MIA and the Commissioner inserted limitations into § 23-405 that do not exist.

Prime Rate argues that the General Assembly expressly prohibited the use of set offs by insurance companies in IA § 23-405(e) and, therefore, by implication § 23-405(b) should not include a similar exclusion. 2 Prime Rate argues that the MIA and Commissioner’s interpretation of IA § 23-405(b)(l) means that Prime Rate must return premiums to the insured even though Prime Rate cited at least two examples of situations in which a premium finance company may be compelled ⁵⁹¹ to pay an insured’s premium to a third party. Prime Rate also argues that the Commissioner’s Final Order shows that the Commissioner relied upon facts that were not in the record. Judicial review of an administrative decision is narrow. United Parcel v. People’s Counsel, 336 Md. 569, 576 , 650 A.2d 226 (1994).

We must determine if the administrative decision is premised upon an erroneous conclusion of law. Id. at 577 , 650 A.2d 226 . The reviewing court should ordinarily respect the agency’s expertise and give weight to its interpretation of a statute that it administers. Christopher v. Montgomery County HHS, 381 Md. 188, 198 , 849 A.2d 46 (2004).

When the words of a statute are clear and unambiguous, according to their commonly understood meaning, our inquiry ordinarily ends. Fister v. Allstate Life Ins. Co., 366 Md. 201, 212 , 783 A.2d 194 (2001). Canons of construction are “no more than rules of thumb that help courts determine the meaning of legislation” and we must “presume that a legislature says in a statute what it means and means in a statute what it says there.” Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-54 , 112 S.Ct. 1146 , 117 L.Ed.2d 391 (1992).

Therefore, only when a term is reasonably susceptible to more than one meaning do we consider extrinsic evidence in order to ascertain its meaning. Fister, 366 Md. at 216 , 783 A.2d 194 . The relevant statutory excerpt from the Insurance Article is the following: § 23-405. Return of Premium after cancellation (b) Insurer responsible for unearned premiums.— (1) After the insurer returns to the premium finance company any gross unearned premiums that are due under the insurance contract, the premium finance company shall refund to the insured the amount of unearned premium that exceeds any amount due under the premium finance agreement. ⁵⁹² (2) A premium finance company need not make a refund to the insured if the amount of the refund would be less than $5.

The dispute in this case is about the precise meaning of “the premium finance company shall refund to the insured the amount of unearned premium that exceeds any amount due under the premium finance agreement.” IA § 23-405(b)(l). The Insurance Commissioner concluded in his Final Order that “the return to the insured of unearned premium in excess of any amount due under the [as in singular and present] premium finance agreement is required.” The Court of Appeals has held that “the use of the word ‘shall’ in a statutory provision indicates that the provision is mandatory and that no discretion was intended.” Resnick v. Board of Supervisors of Elections, 244 Md. 55, 62 , 222 A.2d 385 (1966). Thus, the sole issue we must address is whether “the premium finance agreement” can be read in such a manner so that it incorporates debts associated with other agreements between the premium finance company and the insured. 3 Although there is no definition section of the statute, if we presume, as we must, that the legislature means what it says, then “the premium finance agreement” must refer to a single agreement. As the Commissioner pointed out in his Final Order, allowing paragraph sixteen to be included in the agreement would permit Prime Rate the contractual right to set off or reduce the amount of any refund to the insured by the amount of an asserted prior debt owed by the insured to Prime Rate.

We fail to see how, based on the plain language of the statute, the legislature could have intended this result. We are being asked essentially to rewrite the statute so as to achieve, from the perspective of Prime Rate, a fair result for both the premium finance company and the insured. Regardless of whether, as Prime Rate asserts, the offset provision ⁵⁹³ may provide an “amicable settlement of corresponding ...