Stofer v. Motor Vehicle Casualty Co.

The state legislature passed §§ 397 and 401 of the insurance code, which together allowed the director of insurance (the director) to “promulgate such rules and regulations as may be necessary to effect uniformity in all basic policies of fire and lightning insurance . . . to the end that there be concurrency of contract where two of more companies insure the same risk.” The director was the head of an administrative agency and an executive officer. The legislature sought to prevent consumer confusion caused by different kinds of insurance contracts and contractual clauses. The insurance-code provisions described the kinds of filings that could be required and limited the director in his tools and sanctions to achieve uniformity. Under the insurance code, the director had power to make reasonable rules and regulations to effectuate uniform insurance policies. Pursuant to his rulemaking authority, the director prescribed a standard policy for fire and lightning insurance and prohibited nonconforming policies. The standard policy contained a clause that required the initiation of any action to recover on a claim within 12 months of a loss. Robert Stofer and Joseph Fox (plaintiffs), who had standard fire-insurance policies, sued Motor Vehicle Casualty Co. and other insurance companies (defendants) to recover claimed losses. The insurance companies defended themselves on the ground that the actions were untimely. The trial court found that the insurance-code sections that allowed the director to promulgate a standard policy constituted an unconstitutional delegation of power. The insurance companies appealed.