Insurers Cannot Challenge Administrative Rules Concerning Rate Filing Arbitration Because Statute Authorizing Arbitration No Longer Exists

INSURERS CANNOT CHALLENGE ADMINISTRATIVE RULES CONCERNING RATE FILING ARBITRATION BECAUSE STATUTE AUTHORIZING ARBITRATION NO LONGER EXISTS

In an opinion filed yesterday, the First District Court of Appeal overruled an administrative law judge’s decision that Florida Administrative Code Rule 69O-170.105(1)(d), concerning the costs, expenses, and fees of rate filing arbitration, was an invalid exercise of delegated legislative authority. 

Former section 627.062(6), Fla. Stat., permitted an insurer to request arbitration of a rate filing once the Florida Office of Insurance Regulation made its final decision with regard to the rate filing in lieu of demanding a hearing under Florida’s Administrative Procedure Act.  Section 627.062(6), Fla. Stat., was amended in 2008 to no longer provide an insurer with the option to request arbitration of a rate filing.

In June 2009, Service Insurance Company instituted a rule challenge with regard to Rule 69O-170.105(1)(d), Fla. Admin. Code, arguing that the Florida Department of Financial Services and the Florida Financial Services Commission’s adoption of Rule 69O-170.105(1)(d), Fla. Admin. Code, was an invalid exercise of delegated legislative authority.  Section 120.56(3)(a), Fla. Stat., provides that “[a] substantially affected person may seek an administrative determination of the validity of an existing rule at any time during the existence of the rule.”

The First District Court of Appeal held that the amendment to Section 627.062(6), Fla. Stat., which removed the insurer’s option to seek arbitration of a rate filing, in effect caused Rule 69O-170.105(1)(d), Fla. Admin. Code, to automatically expire.  Section 120.536(1), Fla. Stat., provides that a grant of rulemaking authority and a specific law to be implemented is required for an agency to adopt a rule and that an agency may only adopt rules that implement or interpret the specific powers and duties granted by the enabling statute.  Once the rule’s enabling statute is repealed, the rule itself automatically expires.  Canal Ins. Co. v. Cont’l Cas. Co., 489 So. 2d 136, 138 (Fla. 2d DCA 1986).  As a result, Service Insurance Company cannot pursue its action with regard to Rule 69O-170.105(1)(d), Fla. Admin. Code, because section 120.56(3)(a) of the Administrative Procedure Act requires that the rule exist.  Other rules concerning the arbitration of rate filings have not been administratively repealed and this conclusion would appear to apply to these rules as well.

This opinion is not final until the time in which to file a motion for rehearing has expired.  Service Insurance Company has fifteen (15) days from the date the opinion was issued or within such other time set by the court to file a motion for rehearing.  Colodny Fass will continue to monitor the status of this case.   

Should you have any questions or comments, please contact Colodny Fass.