Foremost Insurance Co. v. Ingram

MORRIS, Judge. Petitioner contends that the trial court erred in affirming the Commissioner’s order after determining that the order’s findings of fact do not support its conclusions of law. We are constrained to agree. G.S. 58-131.3A, which is the basis for this action, is codified in Chapter 58 of the General Statutes under Article 13, entitled “Fire Insurance Rating Bureau.” The provisions of Article 13, which encompasses G.S. 58-125 through G.S. 58-131.9, are appropriate in determining the standards applicable to the order of the Commissioner. G.S. 58-126 states that: “The provisions of this Article shall apply to insurance against loss to property located in this State, or to any valuable interest therein, by fire, lightning, windstorm, explosion, theft of or physical damage to motor vehicles, and all other kinds of insurance which fire insurance companies are authorized to write in this State. ...” (Emphasis supplied.) G.S. 58-131.5 sets out the necessity for notice and a hearing before the Commissioner makes any rule, regulation or order under Article 13. G.S. 58-131.8 provides that any review of any order made by the Commissioner in accordance with the provisions of Article 13 shall be to the Superior Court of Wake County pursuant to G.S. 58-9.3, which states in pertinent part: “(a) Any order or decision made, issued or executed by the Commissioner . . . shall be subject to review in the Superior Court of Wake County on petition by any person aggrieved . . . (b) The Commissioner shall within 30 days . . . prepare and file with the Clerk of the Superior Court of Wake County a complete transcript of the record of the hearing, if any, had before him, and a true copy of the order or decision duly certified. The order or decision of the Com [747] missioner if supported by substantial evidence shall be presumed to be correct and proper.” (Emphasis supplied.) In In re Filing by Automobile Rate Office, 278 N.C. 302, 180 S.E. 2d 155 (1971), Lake, J., in a dissenting opinion, summarized the procedure set forth in G.S. 58-9.3. “The reviewing court is charged by G.S. 58-9.3 (b) with the duty of reviewing findings of fact made by the Commissioner. . . . The statute states that the order of the Commissioner ‘if supported by substantial evidence’ shall be presumed to be correct. Obviously, the statute contemplates that the reviewing Court is to determine whether there is substantial evidence in the record to support the Commissioner’s findings of fact which are essential to his ultimate finding that the rates are excessive or inadequate, reasonable or unreasonable.” (Emphasis supplied.) 278 N.C., at 323-24, 180 S.E. 2d at 169. Thus, it is incumbent upon the Commissioner to support any order pursuant to Article 13 by substantial evidence found in the record of the hearing. If the order does not meet the substantial evidence test, it will not withstand judicial review. State ex rel. Commissioner of Insurance v. Automobile Rate Administrative Office, 287 N.C. 192, 214 S.E. 2d 98 (1975); State ex rel. Commissioner of Insurance v. Automobile Rate Administrative Office, 24 N.C. App. 223, 210 S.E. 2d 441 (1974), cert. denied, 286 N.C. 412, 211 S.E. 2d 801 (1975). We have examined the essential findings of fact in the Commissioner’s order of 31 October 1975 and conclude that they are not supported by substantial evidence and do not support the conclusions of law. Findings 1, 2, 3, 4 and 7 list general facts and do not purport to substantiate the conclusions of law. Finding of fact 5, which states that a minority of insurance companies in North Carolina presently allow mobile home tie-down credits, provides no basis for setting such a credit. Finding of fact 6, in effect, shifts the burden of proof from the Rating Bureau to petitioner. This clearly is not the law. The Rating Bureau is the movant in a proceeding such as this and the burden is upon it to establish that the proposed rate is fair and reasonable. In re Filing by Fire Ins. Rating Bureau, 275 N.C. 15, 165 S.E. 2d 207 (1969). Finding of fact 8, which declares that the portion of the premium charged for windstorm damage is indivisible and cannot be separately obtained, is con [748] trary to the evidence presented at the hearing. The testimony given on this point by petitioner was to the effect that windstorm losses could be and in fact were segregated from other losses by petitioner. Therefore, we agree with the judgment of the Superior Court that the respondent’s findings of fact do not support its conclusions of law. Yet respondent contends that no findings of fact were necessary because G.S. 58-131.3A “authorized and directed” the Commissioner to implement a discount and that this “direction” constitutes a legislative determination which petitioner may not challenge. We disagree. While the language of the statute directs the implementation of some discount of not less than ten percent, the precise amount of the discount was not set forth. We believe the General Assembly intended that the size of the discount be determined only after compliance with the procedures and standards contained in Article 13 of Chapter 58. G.S. 58-126. Therefore, the substantial evidence requirement of G.S. 58-9.3 must be met, regardless of the amount of the discount determined by the Commissioner. Since this requirement was not complied with, the order of the Commissioner cannot stand. A final question is presented with regard to construction of G.S. 58-131.3A, which authorizes a discount of not less than ten percent from the insurance premium ‘‘otherwise applicable” when the mobile home is tied down in accordance with the North Carolina State Building Code standards or any other standard “approved by the Commissioner and which affords no less protection from windstorm damage.” Petitioner contends that this language permits a reduction in only that part of the premium associated with windstorm losses. Respondent, on the other hand, argues that the statute authorizes a discount of not less than ten percent of the entire premium rather than just the windstorm-related portion. We agree with the petitioner’s construction of the statute and hold that G.S. 58-131.3A is concerned solely with discounts as to wind-related losses. It is a tenet of the insurance industry that mobile home premiums are set by examining past losses and thereby projecting future expenditures. These losses are caused by many factors, including fire, theft, flood, and wind. Obviously, tie-downs cannot eliminate losses from all such causes, and, according to testimony given at the hearing, they do not prevent the [749] majority of damage caused by wind. G.S. 58-131.3A specifically addresses itself to “windstorm damage” and discounts from premiums “otherwise applicable.” No discount is authorized for other precautions, such as fireproofing or waterproofing, and no other cause of damage is mentioned in the statute. The clear purpose of the statute is to prevent windstorm damage by giving an incentive to those owners who anchor their mobile homes. Accordingly, we believe the legislature intended a discount only as to the portion of the premium relating to the windstorm losses. This interpretation of the statute is reinforced by the fact that the Commissioner is authorized to order a discount of any amount so long as it is “not less than ten percent.” Certainly the legislature did not intend to give the Commissioner the power to discount what could be a substantial percentage of the entire premium based on what would otherwise be a relatively small windstorm savings to the industry. We also take note of the fact that Mr. Aycock testified that the Rating Bureau’s executive committee assumed that the statute directed a credit to the premium charged for wind-related risks and that the Bureau recommended a discount of the entire premium only because it was without sufficient data to divide the premium into its component parts. Foremost’s evidence at the hearing spoke directly to the problem of segregating the windstorm losses, and no contradictory evidence was introduced. Therefore, we believe, and so hold, that the Commissioner should have incorporated this into his order and that the discount should relate only to the portion of the premium related to windstorm damage. The judgment of the court is reversed and the order of the Commissioner is vacated. Judge Clark concurs. Judge Vaughn dissents.