IN THE SUPREME COURT OF TEXAS
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9552;═══
No. 05-0016
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Mid-Century =
Insurance=20
Company of Texas and Texas Farmers Insurance =
Company,=20
Petitioners,
v.
Shefqet Ademaj, Respondent
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52;══════════=
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552;═
On Petition for Review from =
the
Court of Appeals for the Twelfth =
District of=20
Texas
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Argued October 17,=20
2006
Justice O=92Neill, concurring, =
joined by=20
Justice Medina
=20
I agree with the Court that Mid-Century and Texas Farmers =
Insurance=20
Companies (collectively, =93Mid-Century=94) lawfully recouped the =
Automobile Theft=20
Prevention Authority (ATPA) fee from their policyholders. But the Court =
rests=20
that conclusion on a construction of Insurance Code article 21.35B that =
could=20
permit rate-regulated insurers to collect the items enumerated therein =
in=20
addition to their filed rates in a manner that threatens to undermine =
the=20
Legislature=92s efforts to create a fair and competitive rate system. =
Accordingly,=20
I concur in the Court=92s judgment, but cannot join its opinion.
=20
The Court concludes that section (a) of article 21.35B of the =
Insurance=20
Code provides independent authorization for insurers to charge =
policyholders for=20
the enumerated items =97 policy fees, taxes, service fees, and other =
specified=20
charges. A careful reading of the =
entirety of=20
article 21.35B belies that construction. Section (a) of article 21.35B=20
provides:
(a) No=20
payment may be solicited or collected by an insurer . . . in =
connection with=20
an application for insurance or the issuance of a policy other than: =
(1) premiums;
(2) taxes;
(3)=20
finance charges;
(4) policy fees;
(5) agent fees;
(6) service fees, including charges for costs described =
under=20
Article 21.35A of this code;
(7) inspection fees; or
(8) membership dues in a sponsoring organization.
Tex. Ins. =
Code art. 21.35B(a) (current version at Tex. Ins. Code =A7 =
550.001(a)) (emphasis=20
added). Section (d) of article 21.35B provides for criminal penalties =
for a=20
violation of the statute. Read in conjunction with this penalty =
provision, the=20
language I have emphasized suggests that section (a)=92s purpose was not =
to=20
authorize collection of the listed items but to prohibit =
the=20
collection of any other charges. See =
Bridgestone/Firestone,=20
Inc. v. Glyn-Jones, 878 S.W.2d 132, 133=20
(Tex. 1994)=20
(stating =93[o]nly in the context of the =
remainder of=20
the statute can the true meaning of a single provision be made =
clear=94). I=20
would hold that insurers may charge their policyholders for the items =
listed=20
only if the charge has been included in their filed rates under =
article=20
5.101 or otherwise authorized by the Legislature or by the Commissioner =
of=20
Insurance exercising his or her delegated authority. See Tex. Ins. =
Code art. 5.101. This reading is consistent with =
that of=20
the Commissioner in Service Life & Casualty Insurance Co. v. =
Montemayor. Response to Petition for Review at =
4,=20
Service Life & Cas.=20
Ins. Co. v. Montemayor, No. 04-0897 =
(Tex. June 21, =
2004).=20
(=93This section is not, however, blanket=20
authorization for all insurers to charge policyholders for =
every=20
item listed.=94).
=20
Whether =93premium=94 is a component of rate, as the court of =
appeals held,=20
202 S.W.3d 176, 182, or rate is a component of =93premium,=94 as the =
Court holds=20
today, no one would argue that insurers may collect premiums that have =
not been=20
authorized by the Commissioner, even though premiums are a charge =
enumerated in=20
section (a) of article 21.35B. And other language in article 21.35B =
strongly=20
indicates that section (a) does not independently authorize imposition =
of the=20
listed charges. =93Membership dues in a sponsoring organization=94 is an =
item listed=20
under section (a)(8), yet section (c) =
provides that =93an=20
insurer may require that membership dues in its sponsoring organization =
be paid=20
as a condition for issuance or renewal of an insurance policy.=94 If, as =
the Court=20
holds, section (a) authorizes insurers to charge the enumerated items, =
then=20
section (c) is a nullity. We have often held that courts should avoid =
construing=20
statutes in a manner that will render language meaningless. Kerrville =
State=20
Hosp. v. Fernandez, 28 S.W.3d 1, 8 (Tex.=20
2000) (citing City of LaPorte v. =
Barfield, 898=20
S.W.2d 288, 292 (Tex. 1995); =
Chevron Corp.=20
v. Redmon, 745 S.W.2d 314, 316 =
(Tex. =
1987)).
=20
Finally, the Court=92s construction of article 21.35B is =
inconsistent with=20
the comprehensive scheme the Legislature has created to regulate =
automobile=20
insurance rates. In setting the benchmark rate, the Commissioner may =
consider a=20
number of factors. Tex. Ins. Code=20
art. 5.101, =A7 3(c). In =
the version=20
of the statute that the parties agree applies here, those factors =
include all=20
costs and expenses of operation, like taxes and the ATPA fee, =
=93excluding only=20
those expenses that are disallowed under Subsection (o)=94 of =
section 3 of=20
article 5.101. Tex. Ins. Code=20
art. 5.101, =A7 3(c)(4) =
(emphasis=20
added). Excluded expenses include certain administrative expenses =
exceeding 110%=20
of the industry median, lobbying expenses, certain advertising expenses, =
judgments or fines for bad-faith insurance practices, civil or criminal=20
penalties or fines, contributions to social, religious, political, or =
fraternal=20
organizations, fees paid to advisory groups, and =93any unreasonably =
incurred=20
expenses, as determined by the commissioner.=94 Tex. Ins. =
Code art. 5.101,=20
=A7 3(o). The Court=92s interpretation of article 21.35B would =
allow insurers=20
to recoup expenses disallowed under subsection (o), because the Court =
concludes=20
the Commissioner has discretion to include or exclude any expenses in =
the=20
article 5.101 rate, including the ATPA fee, =
based on=20
the permissive statutory language =93may give consideration to.=94 =
See Tex. Ins. =
Code art. 5.101,=20
=A7 3(c). That interpretation, however, is clearly flawed, as it =
renders=20
the words =93excluding only=94 in section 3(c)(4)=20
meaningless. Kerrville State Hosp., 28 S.W.3d at 8. If the Commissioner can exclude =
only=20
the specified expenses, it suggests that he must consider other=20
appropriate expenses. Moreover, in setting the =
benchmark rate=20
upon which individual insurers=92 rates are based, the Commissioner is =
to =93produce=20
rates that are just, reasonable, adequate and not excessive for the =
risks to=20
which they apply, and not confiscatory.=94 Tex. Ins. =
Code art. 5.101, =A7 =
3(b)(2). By definition, a rate that would not =
compensate an=20
insurer for reasonable expenses like the ATPA charge imposed upon =
insurers under=20
article 4413(37) would not be adequate. Am. Alliance Ins. Co. v. Bd. =
of Ins.=20
Comm=92rs, 126 S.W.2d 741, 742 (Tex. =
Civ. App.=97Austin 1939, writ ref=92d)=20
(holding statute that imposed tax on insurers that could not be included =
in rate=20
or passed on to policy holders was unconstitutional).
=20
More importantly, the Court=92s decision today would allow =
insurers to=20
circumvent the restrictions on rates that article 5.101 imposes by =
simply=20
characterizing charges as =93policy fees.=94 The Court summarily =
dismisses that=20
notion, reasoning that =93[a]ny insurer =
choosing to=20
charge the fee to policyholders both within and outside of the article =
5.101=20
rate would be charging double that which the commissioner permits and, =
as is the=20
case for any type of impermissible double charging, would be subject to=20
administrative penalties.=94 ___ S.W.3d at =
___. But under=20
the Court=92s reading of article 21.35B, the Commissioner would have no =
legal=20
ground to require remedial action absent double charging. If an insurer =
imposed=20
a =93policy fee=94 to recover expenses barred under article 5.101, =A7 =
3(o), the=20
insurer would be acting under the =93affirmative source of . . . =
authority to=20
solicit and collect payments=94 afforded by article 21.35B. ___=20
S.W.3d at ___.
II.
=20
While I disagree with the Court=92s interpretation of article =
21.35B, I=20
nevertheless conclude that Mid-Century was entitled to rely on Rule =
5.205 and=20
pass on the ATPA fee directly to its policyholders. 28 Tex. Admin. =
Code =A7 5.205=20
(1992). I agree with Mid-Century and the Court that =
the=20
flat ATPA fee simply does not neatly fit within the flexible rating =
program.=20
Because the fee is imposed on a per-vehicle basis, spreading it among =
lines of=20
coverage through the flexible rating program would mean that consumers =
who=20
purchased all lines would pay a greater portion of the ATPA fee than =
those who=20
bought only the minimum liability limits, resulting in a discriminatory =
rate.=20
See AT&T v. Cent. Office Tel. Inc., 524 U.S. =
214, 223=20
(1998) (recognizing that rates are discriminatory when similarly =
situated=20
customers pay different fees for the same services). By empowering =
insurers to=20
pass on the ATPA fee to policyholders in Rule 5.205, the Commissioner =
assured=20
that consumers would not pay discriminatory rates, while protecting =
insurers=92=20
constitutional right to recoup expenses. See id.; Am. =
Alliance=20
Ins. Co., 126 S.W.2d at 742.
=20
The crux of Ademaj=92s complaint is =
that=20
Mid-Century violated the filed-rate doctrine by failing to include the =
ATPA fee=20
in its rate filing with the Commissioner. See AT&T, 524=20
U.S. at 222 (noting that, =
under the=20
filed-rate doctrine, the rate a regulated carrier has filed is the only =
lawful=20
charge). But to the extent the doctrine applies in this context, its =
purposes=20
have been served. The filed-rate doctrine assures, first, that the=20
reasonableness of regulated rates is determined solely by the =
appropriate=20
regulatory authority. See Mincron=20
SBC Corp. v. Worldcom, Inc., 994 S.W.2d =
785, 789=20
(Tex. App.=97Houston [1st Dist.] 1999, no pet.) (citing Keogh v. Chi. & Nw.=20
Ry. Co., 260 U.S. =
156, 161-64=20
(1922)). Second, the doctrine assures that rates imposed on consumers =
are=20
nondiscriminatory. Id. Both of these purposes =
have been=20
satisfied in this instance. Here, Rule 5.205 was adopted by the =
Commissioner in=20
his rate-regulatory capacity under several provisions of the Insurance =
Code,=20
including article 5.101 and article 5.98. And, as I have said, the rule =
establishes=20
a mechanism to provide for nondiscriminatory rates while protecting =
insurers=92=20
constitutional rights. While the rule may allow insurers to charge =
policyholders=20
$1 more than 30% above the benchmark rate, in my view the rule =
harmonizes the=20
objectives underlying the ATPA and article 5.101, and therefore provided =
the=20
insurers a valid basis for the pass-through charge. See R.R. Comm=92n of Tex. v. Lone Star=20
Gas Co., 844 S.W.2d 679, 685 (Tex. 1992). =
Consequently,=20
I concur in the Court=92s judgment, but I do not join its opinion.
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___________________________________
=20
=20
=20
=20
=20
=20
Harriet O=92Neill
=20
=20
=20
=20
=20
=20
Justice
OPINION=20
DELIVERED: November 30, 2007