In a scathing opinion that sides with insurers on nearly all points of fact and law, Barry County Court Judge James Fisher declared illegal a rule set banning insurance scoring and reducing base rates.
“The Commissioner clearly lacks any authority” under Michigan law to ban insurance scoring, Fisher wrote in the six-page opinion. He wrote that since rating plans utilizing credit scores “satisfy the requirements of the Insurance Code and cannot be banned, this rule is illegal and invalid and its enforcement should be enjoined.”
On the base rate reduction, Fisher wrote that the commissioner, Linda Watters, “has no authority to order a reduction in rates without finding them to be excessive.” He noted that such a finding was dependent on a departmental finding of an uncompetitive market, and that a recently released report from the Michigan Office of Financial and Insurance Services concluded just the opposite.
“The OFIS rules,” Fisher wrote, “are illegal because they attempt to rewrite the Insurance Code through administrative rulemaking. The Commissioner’s rulemaking authority is limited to effectuating the purposes of the Code and executing and enforcing it.”
The lawsuit, brought by the Insurance Institute of Michigan and Hastings Mutual Insurance Co. in the company’s home county, sought a temporary injunction against the rule set which was to be effective June 1. Now business will go on as usual, unless the commissioner is able to win on appeal.
“This decision will further delay Michigan consumers from receiving fairness in home and auto insurance,” Watters said in a statement. “I will appeal this decision to the Michigan Court of Appeals, which I hope will recognize the legality and necessity of reducing base rates and eliminating insurance credit scoring.”
OFIS spokesman Andy Schor said the decision was disappointing but not surprising. “He took as fact the absolute link between insurance credit scores and risks and we don’t see it that way,” Schor said. He added that suits brought against the state are usually filed in Ingham County, the home county of state capital Lansing. He charged that insurers hand-picked a sympathetic, Republican-appointed judge in Hastings Mutual’s base of operations.
IIM Executive Director Pete Kuhnmuench responded, “When you don’t have the legal arguments, you resort to political reasons to explain a decision that didn’t go your way.” Kuhnmuench said that “given the strength of the ruling, we’re reasonably confident it will be upheld. I don’t know on what basis the ruling would be reversed.”
Watters and Gov. Jennifer Granholm, a Democrat, pursued the administrative route once the Republican-led legislature made it clear that an outright ban on insurers’ use of credit was not on the table.