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No. 137400, 137407
| Insurance Institute of Michigan, et al., |
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Peter H. Ellsworth |
Plaintiffs-Appellees, |
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| and |
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| Michigan Insurance Coalition and Citizens Insurance |
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Lori McAllister |
| Company of America, |
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Intervening Plaintiffs-Appellees, |
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| v |
(Appeal from Ct of Appeals) |
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(Barry - Fisher, J.) |
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| Commissioner, Financial & Insurance Services, |
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Christopher L. Kerr |
| Department of Labor & Economic Growth, |
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Defendant-Appellant. |
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| ------------------------------------------------------------ |
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| Insurance Institute of Michigan, et al., |
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Plaintiffs-Appellants, |
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| and |
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| Michigan Insurance Coalition and Citizens Insurance |
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| Company of America, |
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Intervening Plaintiffs-Appellants, |
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| v |
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| Commissioner, Financial & Insurance Services, |
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| Department of Labor & Economic Growth, |
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Defendant-Appellee. |
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| __________________________________________ |
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Click to view briefs in Adobe format:
137400 - Plaintiffs-Appellees' Brief on Appeal>>
137400 - Defendant-Appellant's Brief on Appeal>>
137400 - Defendant-Appellant's Reply Brief>>
137407 - Plaintiffs-Appellants' Brief on Appeal>>
137407 - Intervening Plaintiffs-Appellants' Reply Brief>>
137407 - Defendant-Appellee's Reply Brief>>
Consumer Data Industry Association's Amicus Curiae Brief>>
Insurance and Indemnity Law Section of the State Bar of Michigan's Amicus Curiae Brief>>
Michigan Association of Home Builders' Amicus Curiae Brief>>
Michigan Association of Realtors' Amicus Curiae Brief>>
Michigan Chamber of Commerce's Amicus Curiae Brief>>
Property Casualty Insurers Association of America, American Insurance Association, and National
Association of Mutual Insurance Companies' Amici Curiae Brief>>
Background
Insurance scoring – the practice of using consumer credit report scores in establishing personal insurance rates – is the subject of administrative rules promulgated by the state’s Insurance Commissioner in 2005. The Commissioner formally adopted the rules, which basically prohibit insurance scoring, after the Office of Regulatory Reform certified the rules as legal. The legislature’s Joint Committee on Administrative Rules objected to the rules, but the legislature did not act to prohibit their implementation. The rules were filed with the Secretary of State.
On March 29, 2005, Insurance Institute of Michigan, Hastings Mutual Insurance Co., Farm Bureau General Insurance Co. of Michigan, Frankenmuth Casualty Insurance Co., and Farm Bureau customers Walter Stafford, Jr. and Michael Flohr, filed suit in circuit court, seeking declaratory and injunctive relief. The Michigan Insurance Coalition and Citizens Insurance Co. of America intervened in the lawsuit. The plaintiffs and intervening plaintiffs alleged, among other things, that the rules would mean that discounts in premiums based on insurance scores would be eliminated; that insurance companies would have to make “sweeping changes” in their insurance policy rating plans and alterations in their base rate structures; and that customers such as Stafford and Flohr would see increases in their premiums under the rules. The plaintiffs asserted that insurance scoring had been used to calculate premiums in Michigan since 1997, that there is a strong correlation between insurance scores and risk of loss, and that the rules would require insurers to charge higher premiums to customers who present lower risk of loss, violating a basic premise of the Insurance Code.
The circuit court held that the administrative rules were illegal, invalid, and unenforceable; the court permanently enjoined the Insurance Commissioner from enforcing them. But the Court of Appeals vacated the circuit court order in a split published opinion. The panel could not agree on a rationale; each judge signed a separate opinion. Two judges concluded that the order must be vacated: one judge would have held that the circuit court erred in failing to base its decision on the administrative record, in accepting additional evidence, and in some of its conclusions on the merits. The other judge concluded that the circuit court erred in permitting the plaintiffs to maintain an original action, and she did not reach the merits. The third judge dissented, concluding that an original action was appropriate and that any error in the circuit court’s creation of its own record was harmless. On the merits, the third judge agreed with the circuit court that the rules are illegal and invalid. All parties appeal.
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