Amwest Surety Insurance v. Wilson (11 Cal. 4th 1243, 1995)

Opinion

GEORGE, J.

In 1988, the voters approved Proposition 103, an initiative measure entitled the Insurance Rate Reduction and Reform Act. Among other provisions affecting certain types of insurance, Proposition 103 imposed a rate rollback and required that any subsequent rate increase, prior to its use, be approved by the Insurance Commissioner. Section 8(b) of Proposition 103 provides: “The provisions of this act shall not be amended by the Legislature except to further its purposes . . . .” (Stats. 1988, p. A-290.)

In 1990, the Legislature enacted Insurance Code section 1861.135, which exempts surety insurance from the rate rollback and rate approval provisions of Proposition 103. For the reasons that follow, we hold that section 1861.135 is invalid because it does not further the purposes of Proposition 103.

We also hold that the decision of the Court of Appeal in this case did not satisfy the requirement of article VI, section 14, of the California Constitution that decisions of the Supreme Court and the Courts of Appeal be in writing “with reasons stated,” because the opinion announcing the judgment reflects the views of only the authoring justice. The only other justice who concurred in the judgment simply “concurred in the result,” and did not state her reasons for doing so.

I

On November 8, 1988, the voters enacted the initiative measure designated Proposition 103 that, among other provisions, added article 10, entitled Reduction and Control of Insurance Rates, to chapter 9 of part 2, division 1, of the Insurance Code. (§ 1861.01 et seq.) The provisions of chapter 9 “apply to all insurance on risks or on operations in this state,” with the exception of certain specified types of insurance. (§ 1851.) As discussed more fully below, surety insurance is not included among the exceptions specified in section 1851 and, therefore, is regulated by chapter 9. In adding article 10 to chapter 9, Proposition 103 provided to the same effect: “This article shall apply to all insurance on risks or on operations in this state, except those listed in Section 1851.” (§ 1861.13.)

Section 1861.01, subdivision (a), of article 10 imposes a rollback of the rates (for all insurance regulated by chapter 9) to at least 20 percent less than the rate in effect one year prior to the enactment of Proposition 103. Subdivision (b) of section 1861.01 provides that, during the first year following the enactment of Proposition 103, these reduced rates could be increased only if the Insurance Commissioner found, after a hearing, that the insurer was “substantially threatened with insolvency.” Subdivision (c) of section 1861.01 provides that, commencing one year after the enactment of Proposition 103, “insurance rates subject to this chapter must be approved by the commissioner prior to their use.”

Section 1861.05, also enacted by Proposition 103, provides in subdivision (a): “No rate shall be approved or remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of this chapter.” Subdivision (b) of section 1861.05 requires an insurer that desires to change a rate to file “a complete rate application with the commissioner.” The remainder of section 1861.05 describes the information that a rate application must include and the procedures for ruling upon such applications.

Section 8(b) of Proposition 103, which is not codified, states; “The provisions of this act shall not be amended by the Legislature except to further its purposes by a statute passed in each house by roll call vote entered in the journal, two-thirds of the membership concurring, or by a statute that becomes effective only when approved by the electorate.” (Stats. 1988, p. A-290.)

On November 9, 1988, the day after Proposition 103 was enacted, Am-west Surety Insurance Company (Amwest) filed in superior court the present action against the Governor, the Attorney General, the Insurance Commissioner, and the State Board of Equalization, challenging the validity of Proposition 103 as applied to surety insurance and seeking a writ of mandate or an injunction.

On May 4, 1989, in Calfarm. Ins. Co. v. Deukmejian, supra, 48 Cal.3d 805, 815, we held unconstitutional section 1861.01, subdivision (b), which had precluded the commissioner from approving a rate increase before November 8, 1989, unless the insurer was substantially threatened with insolvency. We also held unconstitutional another section enacted by Proposition 103 that is not here at issue. Additionally, we held that the invalid sections were severable from the remainder of Proposition 103 and that, with those invalid sections severed, the remainder of Proposition 103 was facially valid.

On August 24, 1990, the Governor signed into law Assembly Bill No. 3798, 1989-1990 Regular Session, which passed by unanimous vote of both houses of the Legislature. That bill added section 1861.135 to article 10, exempting surety insurance from the rate rollback and rate approval requirements of sections 1861.01 and 1861.05, and providing instead that rates for surety insurance “may be used immediately upon filing with the commissioner.”

In December, 1990, Voter Revolt, the organization that drafted Proposition 103 and campaigned for its passage, successfully sought to intervene in the present case in order to assert that newly enacted section 1861.135 was invalid because it did not further the purposes of Proposition 103 as required by section 8(b) of that initiative. The superior court subsequently ruled that section 1861.135 is valid. Voters Revolt and the Insurance Commissioner appealed.

The Court of Appeal was divided on this issue. The opinion announcing the judgment, authored by Justice Hinz, relied upon article II, section 10, subdivision (c), of the California Constitution, which provides that the Legislature may not amend or repeal an initiative statute without voter approval “unless the initiative statute permits amendment or repeal without their approval.” Justice Hinz observed that sectipn 8(b) of Proposition 103 permits legislative amendments that further the purposes of the initiative, but concluded section 1861.135 was invalid because it did not further the purposes of Proposition 103. Justice Kitching indicated she “concurred in the result.” Justice Croskey dissented.

II

Article II, section 10, subdivision (c), of the California Constitution states: “The Legislature . . . may amend or repeal an initiative statute by another statute that becomes effective only when approved by the electors unless the initiative statute permits amendment or repeal without their approval.” Section 8(b) of Proposition 103 permits such amendments without voter approval, but only “to further [the initiative’s] purposes.”

The parties agree that “[u]nder article II, section 10, subdivision (c) [of the California Constitution], the voters have the power to decide whether or not the Legislature can amend or repeal initiative statutes. This power is absolute and includes the power to enable legislative amendment subject to conditions attached by the voters. (See Franchise Tax Bd. v. Cory (1978) 80 Cal.App.3d 772, 776-777 [145 Cal.Rptr. 819].)” (California Common Cause v. Fair Political Practices Com. (1990) 221 Cal.App.3d 647, 652 [269 Cal.Rptr. 873], italics in original; Huening v. Eu (1991) 231 Cal.App.3d 766, 779 [282 Cal.Rptr. 664].) As the parties acknowledge, it follows that the validity of section 1861.135 depends upon whether it furthers the purposes of Proposition 103. The parties disagree, however, as to whether section 1861.135 furthers the purposes of Proposition 103, and what standard of review we should employ in deciding this question.

Amwest, relying upon the rule that “a strong presumption of constitutionality supports the Legislature’s acts” (California Housing Finance Agency v. Patitucci (1978) 22 Cal.3d 171, 175 [148 Cal.Rptr. 875, 583 P.2d 729]), argues that we should adopt a deferential standard of review in determining whether the enactment of section 1861.135 furthers the purposes of Proposition 103. Voters Revolt contends that determining whether the amendment furthers the purposes of Proposition 103 is simply a question of statutory interpretation that this court should consider de novo. It appears that the issue posed by these contentions is one of first impression.

It is common for an initiative measure to include a provision authorizing the Legislature to amend the initiative without voter approval only if the amendment furthers the purpose of the initiative (see, e.g., Kopp v. Fair Pol. Practices Com. (1995) 11 Cal.4th 607, 662 [47 Cal.Rptr.2d 108, 905 P.2d 1248]; Huening v. Eu, supra, 231 Cal.App.3d 766, 771-772, 779, fn. 4; Franchise Tax Bd. v. Cory (1978), 80 Cal.App.3d 772, 774 [145 Cal.Rptr. 819]), but only one published decision has interpreted such language. (In re Nose (1924) 195 Cal. 91 [231 P. 561].)

In re Nose, supra, 195 Cal. 91, arose from a prosecution for conspiracy to violate the former Alien Land Law, an initiative measure providing, as enacted, that only aliens who were eligible to citizenship could “ ‘acquire, possess, enjoy[] and transfer real property, or any interest therein, in this state ....’” (Id. at p. 94, italics omitted; see Porterfield v. Webb (1924) 195 Cal. 71, 76-77 [231 P. 554] [decided the same day as In re Nose].) That initiative measure also provided: “ ‘The legislature may amend this act in furtherance of its purpose and to facilitate its operation.’ ” (Porterfield v. Webb, supra, 195 Cal. 71, 77.)

The Legislature proceeded to amend the Alien Land Act in several respects, including the addition of language to the section prohibiting ineligible aliens from owning or occupying real property. As amended, the statute provided that ineligible aliens could not “ ‘acquire, possess, enjoy, use, cultivate, occupy and transfer real property, or any interest therein, in this state, and have in whole or in part the beneficial use thereof. . . .’”(In re Nose, supra, 195 Cal. 91, 94, italics in original.) This court; with minimal discussion, concluded that these amendments were valid because they “in nowise enlarge upon the intent of the act but are in furtherance of its purpose and do in fact facilitate its operation.” (Id. at p. 93.) It appears that this court in In re Nose considered the issue of whether the amendment furthered the purpose of the initiative to be a matter of statutory construction, but the discussion of the issue in that case is so brief that it is difficult to draw a firm conclusion.

Although no other published case has addressed the precise issue before us, some general propositions are well established. “The determination of whether a particular program serves a public purpose is generally vested in the Legislature. [Citation.]” (California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575, 583 [131 Cal.Rptr. 361, 551 P.2d 1193].) “ [Legislative findings, while not binding on the courts, are given great weight and will be upheld unless they are found to be unreasonable and arbitrary. [Citations.]” (Ibid.) But we also must enforce the provisions of our Constitution and “may not lightly disregard or blink at. . . a clear constitutional mandate.” (Id. at p. 591.) “In considering the constitutionality of a legislative act we presume its validity, resolving all doubts in favor of the Act. Unless conflict with a provision of the state or federal Constitution is clear and unquestionable, we must uphold the Act. [Citations.]” (Id. at p. 594.)

In California Housing Finance Agency v. Patitucci, supra, 22 Cal.3d 171, cited by Amwest, we considered the scope of article XXXIV, section 1, of the California Constitution, which requires voter approval at local elections before a “low rent housing project" may be developed, constructed or acquired by a state public body. The Legislature sought to definé the scope of article XXXIV by enacting a statute that states that a “low rent housing project” shall not include a privately owned development that is subject to ad valorem property taxes and in which less than half the units are made available to persons of low income. We deferred “to the Legislature’s interpretation of article XXXIV,” noting that “ ‘ “[w]hen the Constitution has a doubtful or obscure meaning or is capable of various interpretations, the construction placed thereon by the Legislature is of very persuasive significance.” ’ [Citations.]” (22 Cal.3d at p. 175.)

In the present case, however, the construction of article II, section 10, subdivision (c), of the California Constitution is not disputed. The parties agree that the Legislature has the authority to amend Proposition 103 without voter approval, but only to further the purposes of the initiative. In enacting section 1861.135, the Legislature did not purport to interpret the Constitution, but only to amend the statutory provisions enacted by Proposition 103. The issue before us is whether the Legislature exceeded its authority. The “rule of deference to legislative interpretation” of the California Constitution, therefore, has no application in the present case. We do, however, apply the general rule that “a strong presumption of constitutionality supports the Legislature’s acts. [Citations.]” (California Housing Finance Agency v. Patitucci, supra, 22 Cal.3d 171, 175.)

Amwest also relies upon the rule according deference to the Legislature’s determination that an urgency measure is “ ‘necessary for the immediate preservation of the public peace, health or safety . . . .’ ” (Davis v. County of Los Angeles (1938) 12 Cal.2d 412, 418 [84 P.2d 1034].) Generally, statutes enacted by the Legislature do not take effect on the date they are enacted. One effect of this delay is to allow the electors an opportunity to exercise the power of referendum to approve or reject such statutes in whole or in part. (Cal. Const., art. II, §§ 9, 10, & art. IV, § 8, subd. (c).) California Constitution, article IV, section 8, subdivision (c)(3), provides, as an exception to the general rule, that “urgency statutes shall go into effect immediately upon their enactment.” Subdivision (d) states, in part: “Urgency statutes are those necessary for immediate preservation of the public peace, health, or safety. A statement of facts constituting the necessity shall be set forth in one section of the bill.” (Cal. Const., art. IV, § 8, subd. (d).)

In Davis v. County of Los Angeles, supra, 12 Cal.2d 412, 422, we adopted the rule that a declaration of urgency by the Legislature will not be declared invalid “unless it ‘appears clearly and affirmatively from the legislature’s statement of facts that a public necessity does not exist.’ [Citations.]” “If there is any doubt as to whether the facts do or do not state a case of immediate necessity, that doubt should be resolved in favor of the legislative declaration . . . .” (Id. at pp. 422-423.) The reason for this rule is that the question whether such necessity exists is one of fact to be determined by the Legislature. (Id. at pp. 420-421.)

In Davis v. County of Los Angeles, supra, 12 Cal.2d 412, however, this court utilized a different standard of review to determine whether the urgency legislation at issue comported with the further limitation upon the authority of the Legislature imposed by the predecessor to California Constitution, article IV, section 8, subdivision (d), which stated then, as does the current provision: “An urgency statute may not create or abolish any office or change the salary, term, or duties of any office, or grant any franchise or special privilege, or create any vested right or interest.” Although this court accorded great deference to the Legislature’s factual determination that urgency legislation was necessary, we went on to consider, as a question of law, whether the urgency measure at issue “create[d] any office or change[d] the salary or duties of any officer, or create[d] any vested right or interest.” (12 Cal.2d at p. 423.) In addressing this issue, we simply examined the provisions of the statute and determined that they were not of the type forbidden in urgency legislation. (Id. at pp. 423-425.) We earlier had utilized the same approach in Stockburger v. Jordan (1938) 10 Cal.2d 636, 642-643 [76 P.2d 674]. (See also People v. Robertson (1982) 33 Cal.3d 21, 46-47 [188 Cal.Rptr. 77, 655 P.2d 279]; Flournoy v. Priest (1971) 5 Cal.3d 350, 354-355 [95 Cal.Rptr. 793, 486 P.2d 689].)

Bishop v. City of San Jose (1969) 1 Cal.3d 56 [81 Cal.Rptr. 465, 460 P.2d 137] involved application of the rule that the authority of the Legislature to enact laws governing “home rule charter cities” is limited to “matters which are of statewide concern.” (Id. at p. 61; Cal. Const., art. XI, § 5.) We held: “In exercising the judicial function of deciding whether a matter is a municipal affair or of statewide concern, the courts will of course give great weight to the purpose of the Legislature in enacting general laws which disclose an intent to preempt the field to the exclusion of local regulation [citation], and it may well occur that in some cases the factors which influenced the Legislature to adopt the general laws may likewise lead the courts to the conclusion that the matter is of statewide rather than merely local concern. However, the fact, standing alone, that the Legislature has attempted to deal with a particular subject on a statewide basis is not determinative of the issue as between state and municipal affairs, nor does it impair the constitutional authority of a home rule city or county to enact and enforce its own regulations to the exclusion of general laws if the subject is held by the courts to be a municipal affair rather than of statewide concern; stated otherwise, the Legislature is empowered neither to determine what constitutes a municipal affair nor to change such an affair into a matter of statewide concern.” (Bishop v. City of San Jose, supra, 1 Cal.3d 56, 63, fn. omitted; DeVita v. County of Napa (1995) 9 Cal.4th 763, 783 [38 Cal.Rptr.2d 699, 889 P.2d 1019]; Johnson v. Bradley (1992) 4 Cal.4th 389, 405 [14 Cal.Rptr.2d 470, 841 P.2d 990]; Burden v. Snowden (1992) 2 Cal.4th 556, 566 [7 Cal.Rptr.2d 531, 828 P.2d 672].)

In Martin v. Riley (1942) 20 Cal.2d 28 [123 P.2d 488] we considered whether urgency legislation that reorganized the State Guard during World War II was invalid because it changed the salary, term, or duties of officers of the State Guard. This court considered the provisions of the statute and concluded, as a matter of law, that the urgency legislation did not “changef] the duties of any officer within the meaning of the Constitution.” (Id. at p. 38.)

The urgency legislation at issue in Martin v. Riley was enacted during an extraordinary session of the Legislature convened by the Governor. This court considered an argument that the resulting legislation was invalid because it did not fall within the subjects the Legislature was convened to consider. In rejecting the foregoing contention, this court stated: “The duty of the Legislature in special session to confine itself to the subject matter of the call is of course mandatory. It has no power to legislate on any subject not specified in the proclamation. [Citations.]” (Martin v. Riley, supra, 20 Cal.2d 28, 39.) We then cited with approval the following language: “ ‘Legislative power, except where the constitution has imposed limits upon it, is practically absolute; and where limitations upon it are imposed they are to be strictly construed, and are not to be given effect as against the general power of the legislature, unless such limitations clearly inhibit the act in question.’ ” (Ibid.) We concluded: “Inasmuch as the presumptions are in favor of the constitutionality of the act, it will be held to be constitutional if by any reasonable construction of the language of the proclamation it can be said that the subject of legislation is embraced therein. [Citations.]” (Id. at p. 40.) Applying this standard, we compared the evident purposes for which the Legislature was called into special session with the provisions of the resulting legislation and concluded that the legislation was valid. A similar standard of review applies in the present case.

Pursuant to article II, section 10, subdivision (c), of the California Constitution, the Legislature lacks the authority to amend Proposition 103 except to further the purposes of the initiative. Such a limitation upon the power of the Legislature must be strictly construed, but it also must be given the effect the voters intended it to have. Adoption of the standard of review proposed by Amwest might well have the ironic and unfortunate consequence of causing the drafters of future initiatives to hesitate to grant even a limited authority to the Legislature to amend those initiatives. As the Commissioner and Voter Revolt have pointed out, article II, section 10, subdivision (c), prohibits the Legislature from amending an initiative without voter approval unless the initiative grants the Legislature such authority. In the absence of effective judicial review, drafters of future initiatives might well feel compelled to withhold such legislative authority completely, lest even the most limited grant of authority to amend be used by the Legislature to curtail the scope of the initiative. As a result, the Legislature would be prohibited from making even minor, technical alterations to an initiative to correct drafting errors or facilitate the initiative’s operation in changed circumstances. Such a result would diminish both the initiative process and the legislative process. Accordingly, starting with the presumption that the Legislature acted within its authority, wé shall uphold the validity of section 1861.135 if, by any reasonable construction, it can be said that the statute furthers the purposes of Proposition 103.

Ill

Amwest and its supporting amicus curiae, Surety Company of the Pacific, argue that in determining the purposes of Proposition 103, we are limited to the express statement of purpose included in the initiative which, in general terms, identifies such laudable goals as protecting consumers, encouraging a competitive insurance market, and ensuring that insurance rates are fair and affordable. We are aware of no case that holds that we are so constrained. To the contrary, in construing a constitutional amendment enacted by initiative, we observed: “Where, as here, a constitutional amendment is subject to varying interpretations, evidence of its purpose may be drawn from many sources, including the historical context of the amendment, and the ballot arguments favoring the measure. [Citations.]” (California Housing Finance Agency v. Patitucci, supra, 22 Cal.3d 171, 177.)

In Fay v. District Court of Appeal (1927) 200 Cal. 522 [254 P. 896] we noted that the express purpose of the constitutional amendment creating the Judicial Council “was that of ‘simplifying and improving the administration of justice,’ ‘the expedition of business[,]’[] the adoption or amendment of ‘rules of practice and procedure for the several courts,’ and the making and receiving of reports ‘respecting the condition and manner of disposal of judicial business.’” (Id. at p. 527.) In determining the purposes of the amendment, however, we did not limit our view to these general statements appearing in the amendment. Instead, we “examine[d] this amendment as a whole” and concluded that its “two main purposes” were to “create a judicial council” and “to invest the chief justice of the state, acting ex officio as chairman of the judicial council, with certain powers and functions.” (Id. at p. 537.) In the same manner, in discerning the purposes of Proposition 103, we are guided by, but are not limited to, the general statement of purpose found in the initiative.

In order to determine the purposes of Proposition 103, it is helpful to review briefly the manner in which rates of insurance were regulated prior to the passage of the initiative.

In 1944, the United States Supreme Court held that the commerce clause grants Congress the power to regulate insurance transactions conducted across state lines and that such transactions are subject to the provisions of the Sherman Antitrust Act. (U.S. v. Underwriters Assn. (1944) 322 U.S. 533 [88 L.Ed. 1440, 64 S.Ct. 1162].) Chief Justice Stone observed in dissent that “the immediate and only practical effect of the decision . . . is to withdraw from the states, in large measure, the regulation of insurance and to confer it on the national government, which has adopted no legislative policy and evolved no scheme of regulation with respect to the business of insurance.” (Id. at pp. 580-581 [88 L.Ed. at p. 1473] (dis. opn. of Stone, C. J.).)

“The impact of the court’s decision was almost immediately restricted through the enactment of the McCarran-Ferguson Act, which declared that the business of insurance should continue to be ‘subject to the laws of the several States which relate to the regulation or taxation of such business.’ However, the act also provided that federal regulatory legislation would be ‘applicable to the business of insurance to the extent that such business is not regulated by State law.' ” (Keeton & Widiss, Insurance Law, supra, § 8.1(a), pp. 931-932, fns. omitted, italics in original.)

“Promptly after the McCarran-Ferguson Act was adopted, state insurance commissioners and industry representatives joined forces in a nationwide movement which sought the enactment in every state of legislation that would satisfy the requirements for state regulation established by the McCarran-Ferguson Act and thereby exempt insurers from federal regulatory legislation.” (Keeton & Widiss, supra, § 8.1(a), p. 932.) In 1946, a model act was drafted. (1 Cal. Insurance Law & Practice (1995) § 6A.03[3], p. 6A-15.) “[B]y 1950 rate regulatory legislation had been adopted in every state.” (Keeton & Widiss, supra, § 8.1(a), p. 932, fn. omitted.) Most of these laws adopted the basic standard of the model act that no rate shall be “excessive, inadequate, or unfairly discriminatory.” (1 Cal. Insurance Law & Practice, supra, § 6A.03[3], p. 6A-16.)

California enacted the McBride-Grunsky Insurance Regulatory Act of 1947 which added chapter 9 to part 2, division 1, of the Insurance Code. (§ 1850 et seq.) Employing language from the model act, the McBrideGrunsky Act stated that one purpose of chapter 9 was to regulate the rates of most types of insurance “to the end that they shall not be excessive, inadequate or unfairly discriminatory.” (Former § 1850, enacted by Stats. 1947, ch. 805, § 1, p. 1896.) The Legislature emphasized, however, that this goal was to be achieved through open competition in the insurance market rather than by state regulation: “It is the express intent of this chapter to permit and encourage competition between insurers on a sound financial basis and nothing in this chapter is intended to give the Commissioner power to fix and determine a rate level by classification or otherwise.” (Ibid.)

This reliance upon competition between insurance companies to control rates also was reflected in former section 1852, which declared that “[rjates shall not be excessive or. inadequate, as herein defined, nor shall they be unfairly discriminatory,” but further provided: “No rate shall be held to be excessive unless (1) such rate is unreasonably high for the insurance provided and (2) a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.” (Stats. 1947, ch. 805, § 1, pp. 1897-1898.) Section 1851 then stated, as it does now, that chapter 9 applies “to all insurance on risks or on operations in this State,” except for specified types of insurance. Surety insurance was not exempted from the ambit of chapter 9. To the contrary, section 1850.4, then as now, defines “casualty insurance” to include surety insurance.

The provisions of chapter 9 described above remained essentially unchanged until the passage of Proposition 103.

That initiative declared: “Enormous increases in the cost of insurance have made it both unaffordable and unavailable to millions of Californians. [