Porter v. North Carolina Department of Insurance

MORRIS, Chief Judge. Plaintiff initiated his challenge to the validity of the rule promulgated by the Department of Insurance by filing suit for declaratory judgment in the Superior Court of Wake County. The Department of Insurance contends that the plaintiff was not en *379 titled to seek relief in the superior court by declaratory judgment because inter alia plaintiff failed to exhaust his available administrative remedies as provided in the North Carolina Administrative Procedure Act, G.S. 150A-1 et seq. The Department of Insurance issued the rule in controversy pursuant to its alleged statutory authority as provided in G.S. 66-46, which simply provides: “The Commissioner shall have the right to make any rules or regulations necessary to enforce the provisions of this Article and may approve schedules of fees and methods of collecting the same, or make any other rule or regulation necessary to secure the proper conduct of the business referred to in this Article [regulating the collection of accounts].” The rule enacted by the defendant is a “rule” within the meaning of the Administrative Procedure Act, G.S. 150A-10 which provides in pertinent part: A “ ‘rule’ means each agency regulation, standard or statement of general applicability that implements or prescribes law or policy, or describes the organization, procedure, or practice requirements of any agency.” It is fundamental that a prerequisite to judicial review is generally the exhaustion of available administrative remedies. Greyhound Corp. v. Utilities Com., 229 N.C. 31, 47 S.E. 2d 473 (1948). Similarly, the settled law in this State provides that when the legislature has established an effective administrative remedy, it is exclusive. Lloyd v. Bahh, 296 N.C. 416, 251 S.E. 2d 843 (1979); King v. Baldwin, 276 N.C. 316, 172 S.E. 2d 12 (1970); Wake County Hospital v. Industrial Comm., 8 N.C. App. 259, 174 S.E. 2d 292 (1970). The defendant is correct in its position that plaintiff has failed to follow and exhaust the available administrative procedures provided as a means of challenging the applicability and validity of administrative rules. Plaintiff has two available avenues of administrative review of the Commission’s action. First, G.S. 150A-16 establishes an administrative procedure entitling plaintiff to seek relief by petitioning the commission for an amendment or repeal of the rule. If he is unsuccessful at that stage of the proceedings, plaintiff would then be entitled to seek judicial review under G.S. 150A-43 et seq. Second, plain *380 tiff may seek a declaratory ruling under G.S. 150A-17 which would provide the agency with an opportunity to reconsider the validity of the rule or its applicability to the plaintiff. That ruling of the Commission is then entitled to judicial review under G.S. 150A-43 et seq. Plaintiff, however, seeks to bypass these statutory procedures and obtain relief directly in the superior court by way of a declaratory judgment. As was noted in our recent decision in High Rock Lake Ass’n. v. Environmental Management Commission, 39 N.C. App. 699, 252 S.E. 2d 109, (1979), the Administrative Procedure Act does not preclude entirely the possibility of judicial review by use of the declaratory judgment. G.S. 150A-43 provides in part: “Nothing in this Chapter shall prevent any person from invoking any judicial remedy available to him under the law to test the validity of any administrative action not made reviewable under this Article.” However, the administrative action in question would clearly be subject to judicial review if plaintiff had followed the appropriate procedures. Thus, G.S. 150A-43 is not authority for allowing plaintiff to bypass the Administrative Procedure Act. We note that the trial court never determined whether plaintiff was in violation of the rule in question and recognized that the defendant had not considered its applicability since the first letter was withdrawn. Nevertheless, the trial court decreed that the Department of Insurance was without authority to issue the rule because, in the words of the court, “11 NCAC 13.0221(13) is not necessary to enforce the provisions of Article 9, Chapter 64, North Carolina General Statutes, and . . . defendant is without statutory authority to prescribe it.” The foregoing is an indication of the problems faced when courts interfere in administrative matters before the agency has been afforded an opportunity to reach a concrete decision. See High Rock Lake Ass’n v. Environmental Management Commission, supra. Had plaintiff availed himself of the appropriate procedures for the administrative review of rules, the defendant may have been persuaded that plaintiffs conduct was not proscribed by the rule, or he may have been successful in persuading defendant to amend or repeal its own rule. By enacting the provisions for administrative reivew of rules, the legislature wisely determined that the agency itself *381 should have the first opportunity to review the propriety and applicability of its own rules. So long as the statutory procedures provide an effective means of review of the agency action, the courts will require parties to exhaust their administrative remedies. See Lloyd v. Babb, supra; see generally 2 Cooper, State Administrative Law 579 (1965). The trial court had no jurisdiction to determine the matters before it. Therefore, the judgment of the trial court is Reversed. Judges MARTIN (Harry C.) and CARLTON concur.