Matter of Northwestern Nat. Ins. Co. v. Pink

Loughran, J. This is an appeal by the Superintendent of Insurance from an order directing him to issue to the petitioner *361 a renewal of its foreign insurer’s license to do business in this State. The Insurance Law (Cons. Laws, ch. 28) provides: “ The superintendent shall issue a renewal license to any “foreign or alien insurer if he shall be satisfied, by such proof as he may require, that such an insurer is not delinquent with respect to any requirement imposed by this chapter and that its continuance in business in this state will not be hazardous or prejudicial to the best interests of the people of this state ” (§ 42, subd. 2). The Superintendent found that the petitioner had paid “ excess commissions ” to brokers who brought in its local fire insurance business. He made also this finding: “ The payment of excess commissions is an evil in the business and reacts disadvantageously to the policyholders, companies, and producers. The interests of the people of this State will be best promoted by a discontinuance of the practice.” This basis for the refusal to renew the petitioner’s license has been explained by the Superintendent in these words: “ The payment of excess commissions has been an abuse in the fire insurance business for many years. It goes back at least to 1898. Chaos in fire insurance rates followed the collapse of the ‘ Tariff Association ’ in that year. * * * Due to that chaos in 1898 a meeting was called which was attended by representatives of nearly every joint stock fire insurance company doing business in New York and which resulted in the formation of the New York Fire Insurance Exchange. Companies writing approximately ninety-eight per cent of the fire insurance premiums in the metropolitan area are members of the Exchange. The companies which are members and which write ninety-eight per cent of the business have voluntarily agreed upon a rate of commissions to be paid to brokers. The Northwestern National Insurance Company [this petitioner] is not a member, of the Exchange. * * * I might as well state we have no fault to find with the Northwestern insofar as its financial strength goes,1 or insofar as its practices go, excepting in this particular matter. * * * The company itself is financially sound and no question is raised except with regard to its practice of paying excess commissions.” In other words, the determination of the Superintendent was to this effect: No foreign or alien insurer may do the business of fire insurance in this State unless it adopts for that purpose the rate of *362 • brokerage commissions formulated by the voluntary agreement of the members of the New York Fire Insurance Exchange. We do not read the foregoing provision of the statute as an authorization to the Superintendent to construct a prohibition of that size. Rate making is a governmental process which according to the accepted classification is legislative, not judicial (Norwegian Nitrogen Products Co. v. United States, 288 U. S. 294, 318). The Legislature, of course, can limit to a reasonable extent the rates of commissions to be paid to brokers of insurance and its competency in that regard can be committed to an administrative body. But the Superintendent here disavowed any delegation to him of such power. On that point, he said: “ I believe and have frequently stated that eventually it will probably be necessary for the Legislature to give the Department some direct control over commissions for the proper policing of the business. * * * I have also stated and again repeat that in view of the fact that the Legislature has not given such direct control to the Department I do not wish to fix commissions.” There is no denying, however, that the rate of commissions declared by the members of the New York Fire Insurance Exchange was fixed with the compulsion of a law against foreign insurers, in consequence of the departmental determination of which the petitioner complains. Section 42 of the Insurance Law (supra) cannot be taken to have conferred such an equivalent of a power which the Legislature has refused to grant expressly. The regulation authorized by section 42 is obviously aimed at delinquencies or deficiencies of an individual concern. The pronouncement of general policy here attempted by the Superintendent was not justified by that section. The order should be affirmed, with costs.