Department of Insurance v. Insurance Services Office

Florida’s Department of Insurance (the department) (defendant) promulgated a rule prohibiting the continued use of sex, marital status, and scholastic achievement (the rating factors) in setting insurance rates. A group of insurance companies (plaintiffs) who used the rating factors to accurately predict losses and set their rates challenged the rule before an administrative-hearing officer, arguing that the department had exceeded its authority due to the rule’s attempted modification of a provision of the Florida Insurance Code (the code). This provision prohibited unfair discrimination by insurers based solely on sex, marital status, scholastic achievement, or age. The department argued that the rule did not conflict with the code provision because the rule fulfilled the code’s purpose of regulating insurance rates to ensure rates were not unfairly discriminatory, which, based on a separate Florida statute, meant equitable rates. The department further contended that the terms unfairly discriminatory and equitable should be given their ordinary meanings and thus that use of the factors was necessarily inequitable because the rating factors were not causally connected to an individual’s driving habits. The insurance companies, however, argued that the terms were terms of art that should be given their technical meanings—namely, that the term equitable meant actuarily accurate—and therefore that the rating factors were equitable as long as they predicted losses and expenses as accurately as possible. The department did not provide evidence sufficient to demonstrate that the rating factors did not accurately predict losses and expenses. The hearing officer agreed with the insurance companies, and the department appealed.