Citations
- 434 So. 2d 908
Full opinion text
LARRY G. SMITH, Judge.
The Department appeals the final order of a hearing officer of the Division of Administrative Hearings, in a rule challenge proceeding, declaring its Rule 4-43.03 to be an invalid exercise of delegated legislative authority. Section 120.56(1), Florida Statutes (1979). The Department also appeals the hearing officer’s determination that the statement of economic impact prepared by the Department was not an explicit statement delineating the short and long-term economic consequences of the rule, thus invalidating the rule. Rule 120.-54(2)(c), Florida Statutes (1979). The majority adopts the findings, reasoning and conclusions of the hearing officer on the first point and approves the result. A majority disapproves the hearing officer’s ruling on the second point.
In January, 1978, Dade County petitioned the Department to adopt two rules, one prohibiting the continued use of age, sex, marital status, and scholastic achievement as automobile insurance rating factors and the other prohibiting the use of arbitrary territorial boundaries as a factor. After a study, the Department promulgated two rules, Rule 4r-43.03 and Rule 443.04, Florida Administrative Code. Only Rule 4-43.03 is involved in this appeal.
The insurance companies (whose premium rates are formulated using sex, marital status or scholastic achievement, or some combination thereof) challenged the validity of the rule on the following grounds: (1) the rule extends, modifies, conflicts with or enlarges upon the requirements of the Florida Insurance Code and thus exceeds the Department’s rule-making authority; (2) the economic impact statement prepared by the Department in promulgation of the rule is inadequate; (3) the rule is arbitrary and capricious; and (4) the Department did not comply with the procedural requirements of Chapter 120, Florida Statutes. Because the hearing officer determined the first two grounds were dispositive of this controversy, his order does not deal with the last two grounds.
Upon examination of the statutes relied upon by the Department as specific authority for Rule 4-43.03, we have concluded, as did the hearing officer, that these statutes do not authorize the prohibition of the use of sex, marital status, and scholastic achievement as rating factors. The first statute cited in the rule, Section 624.308(1), Florida Statutes (1979), is simply a general grant of authority to the Department to adopt reasonable rules necessary for the implementation of the Insurance Code with the further proviso that such rules as are promulgated by the Department may not extend, modify, or conflict with any law of this state or reasonable implications thereof. As the hearing officer aptly noted, this is nothing more than a statement of what has always been the common law of the state. Department of Labor and Employment Security, Division of Labor v. Florida Homebuilders Assn., 417 So.2d 746 (Fla. 1st DCA 1982); State, Department of Health and Rehabilitative Services v. McTigue, 387 So.2d 454 (Fla. 1st DCA 1980); Dept. of Health and Rehabilitative Services v. Florida Psychiatric Society, 382 So.2d 1280 (Fla. 1st DCA 1980); Seitz v. Duval County School Board, 366 So.2d 119, 121 (Fla. 1st DCA 1979); State, Department of Transportation v. Pan American Construction Co., 338 So.2d 1291, 1293 (Fla. 1st DCA 1976); DeThorne v. Beck, 280 So.2d 448, 449 (Fla. 4th DCA 1973); and Florida Growers Coop Transport v. Department of Revenue, 273 So.2d 142, 144 (Fla. 1st DCA 1973).
The next statute cited in the rule provides more guidance. Section 626.9611, Florida Statutes (1979), provides in part that in promulgating rules identifying specific practices which are prohibited by Section 626.9541, Florida Statutes (1979) (which defines unfair methods of competition and unfair or deceptive acts or practices and is part of the Unfair Insurance Trade Practices Act) the Department may not enact a rule which shall enlarge upon or extend the provisions of Section 626.9541.
At the heart of this controversy is section 626.9541(15)(h), Florida Statutes (1979), one of the laws being implemented by Rule 4 — 43.03, which provides as follows:
(h) No insurer shall, with respect to premiums charged for automobile insurance, unfairly discriminate solely on the basis of age, sex, marital status, or scholastic achievement.
In enacting this statute the legislature obviously intended to permit discrimination based on sex, marital status, and scholastic achievement so long as this discrimination is not unfair or based solely on these factors. Yet the Department, by promulgating Rule 4-43.03, imposed a total prohibition against the use of sex, marital status or scholastic achievement in the formulation of premiums or rate classifications. The legislative history of Section 626.-9541(15)(h) irrefutably shows that the legislature expressly considered, but rejected, provisions which would prohibit the use of these factors as unfairly discriminatory. This provides strong evidence that the legislature did not intend, by enactment of Section 626.9541(15)(h), to completely prohibit the use of these factors. This history provides strong support for the hearing officer’s determination that the Department’s contrary construction of the statute in Rule 4-43.03 is unauthorized. Mayo v. American Agricultural Chemical Company, 101 Fla. 279, 133 So. 885 (1931). As the Supreme Court stated in State ex rel. Finlayson v. Amos, 76 Fla. 26, 79 So. 433 (1918):
There is no authority for a department of the government charged with the execution of a law, to restore a provision which the legislature strikes from the act when in progress of its passage. Whatever the legislature does within its constitutional authority, no other department of the government may change, modify, alter, or amend.
Thus we agree with the hearing officer’s determination that Rule 4 — 43.03 extends, modifies and conflicts with Section 626.-9541(15)(h), and is therefore invalid under Section 120.54(2)(c).
Nevertheless, the Department urges that the rule does not conflict with the statute because the use of sex, marital status, and scholastic achievement in the formulation of premium rates necessarily unfairly discriminates solely on the basis of those criteria. Hence, the Department contends that in promulgating Rule 4-43.03, it implemented Section 627.031(l)(a), Florida Statutes (1979), which provides that it is the purpose of the Insurance Code to “... promote the public welfare by regulating insurance rates ... to the end that they shall not be ... unfairly discriminatory....” The Department also maintains that it implemented Section 627.062(1), Florida Statutes (1979), which provides: “The rates for all classes of insurance to which the provisions of this part are applicable shall not be ... unfairly discriminatory.”
“Unfairly discriminatory” is not defined in the Code. However, Section 627.0651, Florida Statutes (1979) (also implemented, according to the Department, in its promulgation of Rule 4r-43.03), provides several standards to be applied by the Department in making a determination as to whether a rate is unfairly discriminatory. In particular, Section 627.0651(6) provides:
(6) One rate • shall be deemed unfairly discriminatory in relation to another in the same class if it clearly fails to reflect equitably the difference in expected losses and expenses, (emphasis supplied)
It is the Department’s contention that “unfairly discriminatory” and “equitably” are not technical terms of art and should be given their common ordinary meaning. Giving these words their common ordinary meaning, the Department urges, a rating factor will be deemed unfairly discriminatory and inequitable unless it has a causal connection to expected losses. Thus the Department reasons that since sex, marital status and scholastic achievement have no direct or indirect causal connection to a person’s driving habits they are necessarily unfairly discriminatory and inequitable rating factors. The Department further reasons that these rating factors are always unfairly discriminatory because their use results in the misclassification of a large number of individuals who share the distinguishing feature of the group (e.g. male sex) but do not share the “average” driving characteristics of the group.
On the other hand, the insurance companies contend that “unfairly discriminatory” and “equitable” are technical words, with a particular meaning in the insurance industry, and that Section 626.9541(15)(h) must be construed with this meaning in mind. United States v. Cuomo, 525 F.2d 1285, 1291 (5th Cir.1976). Reading Section 627.0651(6) in pari materia with the other standards contained in Section 627.0651(3) through (8), the insurance companies urge that the word “equitably” (used in Section 627.0651(6)), means “accurately” in the actuarial sense. The hearing officer agreed, finding that the most equitable classification factors are those that are the most actuarially sound. In making this finding, the hearing officer relied upon the testimony of the Department’s own Chief Actuary and Director of the Division of Rating. The hearing officer further found that the classification factors of sex, marital status and scholastic achievement, in light of the present state of the art in the industry, enhanced the actuarial soundness of a rate classification for automobile insurance. Thus, as the hearing officer concluded, the Department has not established that the use of the criteria prohibited by Rule 4-43.03 necessarily results in unfair discrimination.
We find it highly significant that in presenting its argument on this point the Department has changed its own interpretation of the word “equitably,” as used in Section 627.0651(6), as well as its interpretation of the phrase “unfairly discriminatory,” relevant to this proceeding. Historically, the Department has measured the equi-tableness of a rating factor by its predictive accuracy. Further, until the enactment of the challenged rule, the Department interpreted the insurance code and Section 626.-9541(15)(h) as permitting rate classification plans using sex, marital status and scholastic achievement criteria in their formulation.
We also attach great significance to the finding of the hearing officer that the Department did not offer evidence or testimony sufficient to establish that factual changes of any nature have occurred, or that the Department has become aware of new factual information, which would support a deviation from their historic interpretation of the Florida Insurance Code. The Department has not challenged this finding. Instead, the Department urges that we should accept the rule because the record contains competent substantial evidence in support of the rule. Agrico Chemical Company v. State, Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978). This argument ignores the fact that Rule 4-43.03 facially conflicts with Section 626.9541(15)(h). The question in this case is not the arbitrariness or capriciousness of the rule as it was in Agrico; the wisdom of the rule is not before us. Our concern is with the existence of statutory authority for Rule 4 — 43.03, or its absence. Department of Health and Rehabilitative Services v. Florida Psychiatric Society, Inc., 382 So.2d 1280 (Fla. 1st DCA 1980).
Turning again to the statutes, we note that when the legislature enacted Section 626.9541(15)(h), it also reenacted Section 627.0651(3) through (8); which correspond with the Department’s settled interpretation that rates “reflect equitably the difference in expected losses” if the rates reflect those differences as accurately as possible. Thus, by implication, the legislature approved the interpretation that rates based upon sex, marital status or scholastic achievement are unfair only if those rating factors are found to be actuarially unsound. State ex rel. Szabo Food Services, Inc. v. Dickinson, 286 So.2d 529, 531 (Fla.1973). As previously stated, the evidence below overwhelmingly shows these factors are actuarially sound. We conclude, therefore, that even under the alternate theory advanced by the Department, the statutes do not authorize a blanket prohibition against use of these factors.
With respect to the economic impact statement prepared by the Department, I would differ with my colleagues, Chief Judge Robert Smith and Judge Joanos, and would approve the hearing officer’s findings that:
10. The elimination of the subject criteria by the Rule will require insurance companies writing automobile insurance in Florida to devise and file new rate classification plans. Such action on the part of the insurance companies will cause them to incur expenses, possibly substantial in nature. The Economic Impact Statement contains no estimate of, nor reflects any inquiry into, the expense to the industry or individual insurance companies of devising new rate classification plans for use in Florida.
11. In Paragraph 1 of the Economic Impact Statement it is estimated that the cost to the Department of implementing the Rule will be approximately $6,000.00. The evidence establishes that this estimate, at best, reflects only the cost to the Department of the adoption process. It is not intended to reflect any cost to the Department of the actual implementation of the Rule. It is reasonable to assume that because of the Rule there will be a significant increase in the number of rate filings with the Department which the Department will be required to review. The Economic Impact Statement reflects no assessment of any kind, of this potential cost to the Department.
12. There is a class of individuals in Florida presently receiving the benefit of discounted premiums through “good student discounts” offered by one or more insurance companies. This class of individuals will be adversely affected by the Rule in that they may no longer receive the discount they are now receiving. No estimate of this cost to that class of individuals is reflected in the Economic Impact Statement and, in fact, no such estimate was made. Further, the testimony establishes that there was no reason why such an estimate could not have been included in the Economic Impact Statement ....
I would find that the economic impact statement is not the analysis of the estimated cost consequences of the proposed rule envisioned by the legislature, and is therefore inadequate. Westchester General Hospital v. State Department of Health and Rehabilitative Services, 417 So.2d 261 (Fla. 1st DCA 1982); Cf. Florida-Texas Freight Inc. v. Hawkins, 379 So.2d 944 (Fla.1979).
Accordingly, the order of the hearing officer is AFFIRMED.
JOANOS, J., CONCURS with the opinion of LARRY G. SMITH, J., except as to the insufficiency of the economic impact statement. On the sufficiency of the economic impact statement he CONCURS with ROBERT P. SMITH, Jr., C.J., who otherwise DISSENTS WITH AN OPINION.
. Rule 4-43.03 Unfair Discrimination in Private Passenger Motor Vehicle Insurance Rates— Based on Sex, Marital Status and Scholastic Achievement.
(1) No insurer authorized to engage in the business of insurance in the State of Florida shall establish classifications or premium rates for any policy, contract or certificate of private passenger motor vehicle insurance based upon the sex, marital status or scholastic achievement of the person or persons insured.
(2) This rule shall become effective on March 1, 1980.
.Noticeably, the use of age as a rating factor was not prohibited in Rule 4-43.03, as the Department found a strong correlation between age classifications and loss experience resulting from vehicle accidents. Further, no workable alternative to age as a primary risk assessment factor was suggested, and without that, it was concluded that elimination of age as a rating variable would lead only to greater inequities. Interestingly, the Department has also not come forth with verified alternatives to sex, marital status and scholastic achievement, although these have proven reliability as rating factors. Yet use of these factors seems to have been forbidden in large part because they are “socially unacceptable.” Florida’s Automobile Insurance Rate Classification System: Report To The Insurance Commissioner And The Commissioner’s Orders and Findings.
. Rule 4-43.04 prohibits insurers from establishing premium rates based upon arbitrary territorial boundaries which are unfairly discriminatory. This rule was not challenged in this proceeding and therefore will not be addressed.
. Rule 4 — 43.03 refers to rulemaking authority of the Department under Sections 624.308(1) and 626.9611, Florida Statutes (1979); and as the laws being implemented Sections 626.-9541(15)(h), 627.031(1)(a), 627.062(1), and 627.-0651, Florida Statutes (1979).
. Senate Bill 1181, which amended Section 626.9541(15) by adding paragraph (h) was passed by voice vote of the Senate on May 18, 1977, 1977 Senate Journal 438. A previously proposed amendment read: “Rates for any class based solely on age, sex, school grades, education or lack of driver education shall be deemed unfairly discriminatory.” This was considered but rejected in the Senate Commerce Committee on May 10, 1977.
CS/SB 1181 travelled to the House of Representatives, where the House struck the entire Senate Bill and substituted another version which contained no anti-discrimination provision. 1977 House Journal 918-926. On June 1, 1977, the House considered an amendment which would have prohibited rate differentials based on age but this amendment failed. 1977 House Journal 959. However, an amendment prohibiting rate differentials based on dissolution of marriage or separation passed. 1977 House Journal 960.
A conference committee appointed to resolve the differences between the House and Senate versions of CS/SB 1181 ultimately settled on the language in the Senate Bill which is identical to the language presently contained in Section 626.9541(15)(h). 1977 Senate Journal 857, 862, and 1977 House Journal 1229, 1234. The House and Senate approved the conference committee report and Section 626.9541 (15)(h) ultimately became the law of this state. 1977 Senate Journal 871; 1977 House Journal 1243; and 1977 Florida Laws, Ch. 77-468.
. Here, somewhat paradoxically, by urging a construction of these terms based upon their common, ordinary meanings, the Department disavows the utilization of any special “agency expertise” in its interpretation of the statute. This mitigates, if it does not entirely eliminate, the rule calling upon the court to accord “great deference” to the agency’s interpretation of the statute. See Sans Souci v. Div. of Fla. Land Sales and Condominiums, Department of Business Regulation, 421 So.2d 623 (Fla. 1st DCA 1982); State Department of Health and Rehabilitative Services v. Framat Realty, 407 So.2d 238 (Fla. 1st DCA 1981).
. We note that a similar argument was recently made to a Louisiana Court of Appeals, in a proceeding which found the Louisiana Insurance Commissioner seeking to prohibit rate classifications based ón age and sex, and was rejected. Insurance Services Office v. Commissioner of Insurance, 381 So.2d 515 (La.Ct. of App.1979).
.The Department does not dispute this finding and has in fact admitted that within some groups (all policyholders 25 years of age and under, in a similar usage category) the subgroup consisting of all females has a lower actual or expected loss experience than the subgroup consisting of all males, and that a subgroup consisting of all married policyholders also has a lower actual or expected loss experience than the subgroup consisting of all unmarried policyholders. Further, there was testimony that there are differences in expected loss experience between those who qualify for scholastic achievement discount and those who do not.
. Section 626.9541(15)(h) became effective September 1, 1977.
. Quoted language is from Section 627.-0651(6), Florida Statutes. See also, particularly, the language of Section 627.0651(7), (8).
. The hearing officer’s final order contains the conclusion that the economic impact statement prepared by the Department does not delineate the short and long term consequences of the proposed rule. Although Section 120.54(2)(a), Florida Statutes (1977) required the hearing officer to consider the short and long term economic consequences of a proposed rule, it was amended in 1978, eliminating this requirement. Nevertheless, it is clear from a reading of the hearing officer’s order that he correctly applied the criteria contained in the newly amended Section 120.54(2)(a), Florida Statutes (1979) in making his determination that the proposed rule’s economic impact statement was inadequate. Thus, in my view, the hearing officer’s passing reference to the short and long term economic effects of the proposed rule was inconsequential. Further, I would point out that the Department has not raised this as error nor challenged the hearing officer’s conclusion concerning the economic impact statement on this basis.
JOANOS, Judge,
concurring specially.
I concur in Judge L. Smith’s affirmation of the determination by the hearing officer of the Division of Administrative Hearings that Rule 4-43.03, Florida Administrative Code, is an invalid exercise of delegated legislative authority for the reasons expressed in his opinion. However, I disagree with Judge L. Smith in his position that the economic impact statement is inadequate. On this point, I agree with Chief Judge Robert Smith’s reasoning and view that the impact statement is sufficient. Because of this, I concur specially in the result that the hearing officer be affirmed as to the declaration that Rule 4 — 43.03 is invalid.
ROBERT P. SMITH, Jr., Chief Judge,
dissenting.
In my opinion Rule 4-43.03 permissibly exercises the responsibility placed in the Department of Insurance by chapters 626 and 627, Florida Statutes (1979), to interpret and then implement the “unfair discrimination” prohibition expressed in section 626.9541(15)(h). The economic impact statement accompanying the rule is also adequate, and any defect in it is formal only, not impairing either “the fairness of the proceedings or the correctness of the action.” Secs. 120.54(2)(a), 120.68(8), Fla. Stat. (1979). I therefore would reverse the hearing officer’s order invalidating this rule.
We have said many times that a prime goal of the Administrative Procedure Act of 1974 is “to encourage agencies of the executive branch to interpret statutes in their regulatory care deliberately, decisively, prospectively, and after consideration of comments from the general public and affected parties — that is, to interpret their statutes by rulemaking.” State Department of Health and Rehabilitative Services v. Framat Realty, Inc., 407 So.2d 288, 241 (Fla. 1st DCA 1981). The incentives for rulemaking were described at length in McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977) and are illustrated repeatedly by decisions since.
Rulemaking is therefore particularly favored as agency action. Correspondingly, our decisions firmly require a high degree of deference toward that kind of agency action, both in its function of selecting a permissible interpretation of the empowering statute and in its function of deciding how the statute so interpreted shall be implemented.
Though adjudication has other functions, notably determining particular facts, adjudication and rulemaking share those two essentially policymaking functions: first to determine which of several permissible conceptual interpretations of a statute is most consonant with the statutory purpose; then to determine and announce within the range afforded by the statute so interpreted, how and to what extent the statute shall be carried out in practical affairs.
Sometimes our analysis of agency action tends to blur together or telescope these two functions, so that they appear as one. Especially is that likely when the subject is a rule and the occasion is a challenge. For a rule speaks generally, briefly and prospectively, in style much like a statute. Though it of course is not a statute, and is dependent for its life upon a statute, the very appearance of a rule may provoke a certain skeptical eye, as though viewing an expression that pretends to have, though it cannot have, the stature and independence of legislation.
When the rule is thus suspect, we are apt to telescope its two distinct functions— choosing a permissible conceptual interpretation of the statute, then determining how far that practically shall be implemented— in concluding that the rule is beyond the statute. This error commonly attributes to the rulemaker a claim his rule does not make, that the final implementing command of the rule was inexorably intended by the legislature. Had the legislature so intended, the mispremised rebuttal goes, the legislature would have said so. What the rebuttal overlooks is the delegatory nature of much regulatory legislation and the progressively deductive method of rulemak-ing.
Here, Rule 4-43.08 represents, though characteristically of a rule it does not articulate as would an agency order, a permissible choice from among permissible conceptual interpretations of section 626.-9541(15)(h).
The permissible interpretations of § 626.9S41(15)(h)
By chapter 77-468, the Florida Insurance and Tort Reform Act of 1977, the legislature comprehensively enacted, reenacted, revised and reorganized numerous statutes pertaining to those subjects. Section 19 of the act added to section 626.9541(15), Florida Statutes (1976 Supp.) the new subsection (h) on which this controversy is centered:
(h) No insurer shall, with respect to premiums charged for automobile insurance, unfairly discriminate solely on the basis of age, sex, marital status or scholastic achievement.
Section 626.9541(15)(h), Fla.Stat. (1977) through (1981).
The words of subsection (h), like those of so many regulatory statutes, are susceptible of being interpreted, systematically and true to the statutory words, in several permissible ways. Because the key words— “unfairly discriminate solely” — are designedly general, the choice of interpretation is neither obvious nor self-executing. Refinement and exposition of the meaning^) within the words, by someone, is required. This case largely has to do with whom that someone is, whether the Insurance Commissioner and the Department of Insurance, or one of the hearing officers of the Division of Administrative Hearings, or three of the judges of this court.
The permissible interpretations of subsection (h) appear to fall into two major groups, depending on the effect to be given the word “unfairly.” The first major group would read “unfairly” as descriptive not restrictive, that is, as declaring “unfair” per se every discrimination solely based on “age, sex, marital status or scholastic achievement.” Nothing in the words themselves prevents that choice of meaning for “unfairly,” and disreputable connotations in the word “discriminate” add legitimacy to this choice of meaning for “unfairly”: any discrimination based solely on those characteristics “unfairly discriminate[s].” Within this major category are at least four alternative applications of subsection (h) as a whole:
First, reading “unfairly” as descriptive of the prohibited discrimination, not restrictive of its definition, one may legitimately read the remaining words in subsection (h) as emphasizing “solely” in a literal sense, so that unfair discrimination consists only of discrimination based “solely” on one of the characteristics that are listed with a final disjunctive “or.” Thus, discrimination based solely on “age” or any other single characteristic listed would be deemed unfair and forbidden, but discrimination based collectively on two or more or all of those factors would not be unfair. In combination, one might argue, two or more of the listed characteristics ameliorate the unfair discrimination that is based “solely” on one of them.
Second, again reading “unfairly” as descriptive not restrictive, one may choose a different course, interpreting subsection (h) as prohibiting discrimination based “solely” on one or more of the four listed characteristics, singly or in any combination.
Third and Fourth, still reading “unfairly” as before, one might regard the phrase “unfairly discriminates solely on the basis of” as addressing, in practical terms, insurance rates and premiums that are fixed “solely on the basis of” the listed characteristics, either [one alone, as in First] or [one or more, as in Second]. This view would regard an insurance premium as “unfairly discriminatory” only if it were wholly determined by [one] [one or more] of the listed characteristics, not if it were determined also by other unlisted factors known to ratemaking, such as miles traveled [by the principal insured automobile] [by all owned automobiles] [by the principal driver] or the geographic region where the automobile is [garaged] [principally driven].
The other major category of alternative interpretations would regard the word “unfairly” as restricting or further defining the prohibited discrimination, not merely descriptive of discrimination otherwise defined in subsection (h). By these views the term “unfairly” invokes other considerations, outside subsection (h) itself, that contribute to identifying the discrimination proscribed. In this category, adding to the range of choices, are:
Fifth, the statute may be read as proscribing only those discriminations that “unfairly,” in some technical sense peculiar to insurance protocols, employ the listed characteristics as described First above.
Sixth, again reading the statute as proscribing only those discriminations that are “unfair” by technical insurance protocols, one may interpret the statute as aimed against only those “unfair” discriminations that employ the listed factors as described Second above.
Seventh and Eighth, still reading “unfairly” as referring only to technical insurance protocols, one may interpret subsection (h) as addressing only those discriminatory rates and premiums that are fixed as described Third or Fourth above.
Ninth, reading “unfairly” as restricting or further defining the prohibited discrimination, not merely descriptive of it, one may treat the term “unfairly” as calling upon general normative standards [independent of] [in addition to] technical insurance protocols. So elaborating “unfairly discriminate,” one again might restrictively interpret “solely” as in First above.
Tenth, reading “unfairly” as in Ninth, one may read “solely” as in Second.
Eleventh and Twelfth, reading “unfairly” as in Ninth, one may interpret the balance of subsection (h) as in Third or Fourth.
These alternative interpretations of subsection (h), and the gradations between them, may be arrayed as follows:
California’s Justice Traynor said it well: “Rare are the statutes that rest in peace beyond the range of controversy. Large problems of interpretation inevitably arise. Plain words, like plain people, are not always so plain as they seem.”
The Department’s interpretation of subsection (h)
The Department’s conceptual interpretation of subsection (h), evidenced by the rule itself, is as stated Tenth above. Again, the words of the statute:
(h) No insurer shall, with respect to premiums charged for automobile insurance, unfairly discriminate solely on the basis of age, sex, marital status or scholastic achievement.
The rule reflects the Department’s view that “unfairly” further restricts or defines the discrimination aimed at, and is not merely descriptive of discrimination otherwise defined in subsection (h). Evidence of this, the rule does not list “age” among the classifications to be avoided in ratemaking. Had the Department considered “unfairly” merely a descriptive term, the Department could not have considered itself free to omit “age” from the rule’s list of proscribed classifications. Indeed, had the Department so interpreted “unfairly,” it is not clear why a rule would have been thought necessary at all, for the other interpretative problems are not nearly so substantial, and could easily have been resolved through adjudication.
The rule further reflects an interpretation of “solely” in subsection (h) as referring to discrimination based “solely” on any one or more of the four listed characteristics, as stated Second and subsumed in Tenth.
Finally, as stated Tenth, the Department’s interpretation of “fairly” invokes both technical insurance protocols, relating to actuarial and predictive accuracy, and general normative standards of what is fair. In its rulemaking, the Department used these two fairness standards harmoniously and conservatively, as calling on the Department to scrutinize more closely, by “fairness” standards normatively conceived, the actuarial or predictive accuracy of classifications based on age, gender, marital status and scholarship. Thus, in a noncon-stitutional but nonetheless very real sense, subsection (h) was interpreted as having designated the specified classifications as suspect. The legislative omission of, say, “miles driven,” was not accidental, though we can imagine that discrimination based on that factor can also be done unfairly. Thus, as in constitutional equal protection analysis that is familiar to courts, which also is essentially a “fairness” inquiry, subsection (h) was interpreted as requiring the Department to be assured that discrimination based solely on the stated characteristics is “fair” in the sense of closely predicting the accident-proneness of those prejudiced by falling into one of those classifications.
Again the Department’s omission of “age” from the rule’s list of prohibited classifications speaks worlds: the rulemaking process simply convinced the Department that discrimination based on age closely predicts, satisfactorily at least for now, the accident-proneness of those so classified.
Though such elucidation is unnecessary in rulemaking, the Department’s promulgating document confirms at some length this analysis of the statute and the rule. Excerpts from Florida’s Automobile Insurance Rate Classification. System: Report to the Insurance Commissioner and The Commissioner’s Orders and Findings, dated October 1, 1979, are set out in the Appendix to this dissenting opinion.
In my opinion, therefore, the Department predicates its rule on an entirely permissible interpretation of subsection (h). On that subject, that should end the inquiry. The controlling decisions are quite clear:
In Jax Liquors, Inc. v. Division of Alcoholic Beverages and Tobacco, 388 So.2d 1306 (Fla. 1st DCA 1980), this court rejected a rule-challenge asserting, among other things, that the rule “exercises regulatory powers not granted the Division by the Tied House Evil statute,” saying that “[t]he evidence submitted by appellant to the hearing officer does not show that Rule 7A-4.13 is without a rational relationship to the Tied House Evil statute.” 388 So.2d at 1307, 1308. The court declared that “appellant has assumed a heavy burden of proof in its attack upon the Rule,” noting that it was not a case of “policymaking by case-by-case adjudication,” nor an appeal from section 120.54 rulemaking proceedings “in which the agency’s duty is to supply a full and fair opportunity for affected persons to attack or comment on the proposed rule by debate and appropriate evidence, and our duty is to assure that the agency has done so.” 388 So.2d at 1307.
In ABC Liquors, Inc. v. Department of Business Regulation, 397 So.2d 696, 697 (Fla. 1st DCA 1981), this court stated that “APA processes thus lend added strength to the principle stated by the Supreme Court in King v. Seamon, 59 So.2d 859, 861 (Fla.1952)”:
The contemporaneous construction placed upon a statute by the officials charged with the duty of executing it should not be disregarded or overturned by this court except for the most cogent reasons, and unless clearly erroneous.
In State Department of Health and Rehabilitative Services v. Framat Realty, Inc., 407 So.2d 238, 241-2 (Fla. 1st DCA 1981), the court reversed a DOAH hearing officer’s order invalidating a rule as beyond the agency’s statutory authority, saying:
Whether the Department’s interpretation of section 381.272(7) is the only possible interpretation of the statute, or the most desirable one, we need not say. It is within the range of permissible interpretations of the statute, and that interpretation has acquired legitimacy through rulemaking processes in which those challenging the rule fully participated or had an opportunity to participate.... We have repeatedly found that other APA processes press the executive inexorably toward rulemaking....
When as here an agency has responded to rulemaking incentives and has allowed affected parties to help shape the rules they know will regulate them in the future, the judiciary must not, and we shall not, overly restrict the range of an agency’s interpretative powers. Permissible interpretations of a statute must and will be sustained, though other interpretations are possible and may even seem preferable according to some views. If the rule binds too tightly to suit them, the appellee developers have their proper remedy in the representative and politically responsive branches, the legislative or executive, but not in the judiciary, nor in Section 120.56 rule challenge proceedings before a hearing officer.
In Department of Administration, et a1. v. Nelson, 424 So.2d 852, 858 (Fla. 1st DCA 1982), this court reversed a hearing officer’s order invalidating an agency rule as being beyond its legislative authority, and reiterated the principle “that when the agency committed with statutory authority to implement a statute has construed the statute in a permissible way under APA disciplines, that interpretation will be sustained though another interpretation may be possible. When the agency so interprets the statute through rulemaking, the presumption of correctness is stronger.”
The Department’s implementation of subsection (h) as so interpreted.
The second function of rulemaking, beyond interpreting the empowering statute conceptually, is to implement that statutory concept giving it practical and predictable effect. Obviously, the most sensitive decision to be made by the Department concerning the implementation of subsection (h), construed as Tenth above, was that of determining whether suspect classifications based on age, gender, marital status or scholarship, as distinguished from non-suspect classifications based directly on driver experience and propensities, pass close scrutiny for actuarial or predictive accuracy.
Determining where the line is to be drawn between fair and unfair actuarial predictions based on the enumerated factors is essentially a matter of agency policy, carrying into effect the legislature’s “fairness” standard against the suspect classes named in subsection (h). In APA terms the Department was entitled to choose between rulemaking or adjudication of particular cases in formulating its policy within the bounds of subsection (h) permissibly interpreted. McDonald, supra. Obviously, the Department decided that adjudication on individual and successive rate applications would be time-consuming for all, expensive for the state and for the industry, repetitive, and wanting in predictability. Obviously, too, if the controlling term “fairness” was to be left unimplemented until a number of adjudications fleshed out a definitive meaning, the statute already spoke sufficiently for that, and there was no need for rulemaking.
Thus, responsively to rulemaking incentives generally, and to practical incentives in the making and approving of automobile insurance rates, the Department embarked upon rulemaking proceedings characterized by Insurance Commissioner Gunter as “one of the most exhaustive studies of the automobile insurance rate classification system undertaken in recent years, certainly in this state.” App., 930. The promulgating document, Florida’s Automobile Insurance Rate Classification System, App. infra, abundantly documents the rulemaking study and its conclusions.
We are not informed, and it is unnecessary that we be satisfied, whether it might have been desirable for the Department to prescribe by rule some quantitatively verifiable threshold of accident-prone predictability — if there is such a thing — that would differentiate “fair” from “unfair” discrimination based on gender, marital status, and scholarship. See App., 934. It is plain enough from the rule and from the promulgating document that the Department found, as the legislature suspected, that all four of the specified classifications are “proxy” (App., 937) or “surrogate” (App., 937) classifications at best, and that three of the four, excluding “age,” too readily attribute accident-proneness to many persons caught in those classifications. App., 937-8. The overbroad classifications are used, the Department found, mainly because they are convenient to an industry in whose collective interest it is to continue their accustomed ways. App., 935.
Therefore, as a matter of policy within the constraints of subsection (h), permissibly interpreted, the rule characterizes all discriminations based on the three proxy factors as unfair actuarially. This policy judgment was required by subsection (h), was verified by rulemaking proceedings, was announced by the rule, and is now settled beyond legitimate dispute by the hearing officer or by this court. It is not our concern whether the Department might have adopted an intelligible rule permitting a little bit of discrimination based on those factors, or a moderate amount, or a whole lot, rather than none at all. The choice of implementing policy under subsection (h), permissibly interpreted, was wholly the Department’s.
This the decisions make clear:
In State Department of Agriculture and Consumer Services v. Denmark, 366 So.2d 469, 470 (Fla. 4th DCA 1979), the district court noted that “it would be an endless, and nigh impossible, task for the legislature itself to see to each and every necessary regulation which is formulated to implement and administer the laws passed. Therein lies the purpose and authority of the legislature and the executive.” The court sustained a Department of Agriculture rule quarantining horses for a certain disease that legislation had found a threat to Florida’s equine industry. It was contended that the rule-administered test “does not show the presence of [the disease] but merely the presence of antibodies in the bloodstream.” 366 So.2d at 469. Finding no “clear showing ... that the rules and regulations promulgated under the statutes were arbitrary or unreasonable or not consistent with the mandate of the legislature,” the court reversed a circuit court order invalidating the rule. 366 So.2d at 471.
In Florida Canners Association v. State of Florida, Department of Citrus, 371 So.2d 503 (Fla. 2d DCA 1979), the court considered and rejected a challenge to a Department of Citrus rule requiring the printed word “Florida” or the equivalent certification mark on processed grapefruit products packed in retail containers in Florida. The court characterized the challengers’ argument “that there is not competent substantial evidence in the record” supporting the rule as “amount[ing] to an attack on the wisdom of the rule.” 371 So.2d at 519:
They argue that there is no proof that the rule will accomplish the legislative objective. Further, they point to testimony of their advertising expert that designation of Florida origin on grapefruit products is undesirable and may have an adverse effect on sales.
But, obviously, there can be no guarantee of results in any decision on a matter of advertising. An exercise of police power will not be struck down because a law or regulation is unwise, improper, or out of harmony with a particular school of thought. [Citation omitted]. We feel that the evidence in the record as to the anticipated increase in competition from non-Florida grapefruit is sufficient to justify Respondent’s decision to require that Florida grapefruit products be identified in the marketplace. The wisdom of that decision is not a matter of judicial concern.
In Polk v. School Board of Polk County, 373 So.2d 960, 962 (Fla. 2d DCA 1979), the court rejected a rule-challenge to rulemak-ing action by a county school board restructuring high school attendance zones. The court stated:
Appellant argues first that there was no competent substantial evidence to support the school board’s adoption of the superintendent’s plan. Actually, there was no evidence at all in a judicial sense, because the determination of school boundaries was a quasi-legislative decision and those who presented their views at the public hearing did so in the context of a town meeting. Judicial review of quasi-legislative action is more limited than that of quasi-judicial action. Broward County v. Administration Commission, 321 So.2d 605 (Fla. 1st DCA 1975). The agency rule-making function involves the exercise of discretion, and absent a flagrant abuse of that discretion a court may not substitute its judgment for that of the agency. Section 120.68(12), Florida Statutes (Supp.1978); Citizens of Florida v. Mayo, 357 So.2d 731 (Fla.1978).
In Bowling v. Department of Insurance, 394 So.2d 165, 174 (Fla. 1st DCA 1981), this court compared the presumption of validity attending an agency rule with the deference to be accorded agency adjudication:
If the matter in issue were one of Department policy, a Department rule would be well-nigh conclusive, and a poli-cymaking order based on an adequate record foundation in this case would command great deference.
In Florida Commission on Human Relations v. Human Development Center, 413 So.2d 1251, 1253-54 (Fla. 1st DCA 1982), this court reversed a hearing officer’s order invalidating a rule as beyond the agency’s statutory powers. Referring to the “long road” traveled in that controversy, the court stated:
Along the way, the issue sub judice was before the Commission which concluded that it had the power to issue investigative subpoenas. Its conclusion is persuasive and entitled to great weight by this Court. Specifically, the statutory implementing proposals having made their way through the rule-making process, in which those challenging the rule fully participated or had an opportunity to participate, strengthens the case for judicial deference.. . .
... Where lawful rule-making authority is clearly conferred or fairly implied, and is consistent with the general statutory duties of the agency, a wide discretion is accorded it in the exercise of such authority. [citations omitted.]
In Moncrief v. State Commissioner of Insurance, 415 So.2d 785, 790 (Fla. 1st DCA 1982), this court stated, when reviewing agency adjudication:
[T]his is a case in which policy-making by rules is preferable to orders. This is so because the Department seeks to establish an industry-wide policy requiring bondsmen to maintain offices open to the public during certain specified hours. As the matter in issue is one of Department policy, a Department rule would be well-nigh conclusive.
In Cortese v. The School Board of Palm Beach County, 425 So.2d 554, 557-558 (Fla. 4th DCA 1982], the court upheld rulemaking by the board and explicitly endorsed the standard for review stated by the second district court of appeal in Polk, supra, that “[t]he agency rule-making function involves the exercise of discretion, and absent a flagrant abuse of that discretion a court may not substitute its judgment for that of the agency.”
The court wrongly preempts the Department’s rule and substitutes its own: the status quo ante
These proceedings seem to me flawed by rather serious misconceptions of the roles of hearing officer and court in rule-challenge proceedings. These were not proceedings for an agency order expounding policy satisfactorily on a record foundation of evidence. The rule itself and its antecedent proceedings are fully equivalent to that. This, therefore, should have been a simple matter of determining whether subsection (h) may permissibly be conceived as calling for the Department’s closer scrutiny on “fairness” grounds of the specified classifications, to verify their claimed accuracy in predicting accident-proneness. If the statute bears that as a permissible interpretation, then a rule proscribing further reliance on those classifications must be said to have concluded that they do not stand that closer scrutiny and that, being over-broad, they unfairly discriminate in the way forbidden by the statute. A policy decision of that sort, being reasonably related to the statute as permissibly construed, should readily be sustained under the authorities cited above.
Instead, we have here something else entirely, which gives no presumptive effect either to the rule as an act of delegated discretion, nor to the antecedent rulemak-ing proceedings in which the Department informed its discretion. What we have here is a seven-day evidentiary trial, presided over by a DOAH hearing officer and evaluated later by a court, on an assumed factual issue of whether discriminations based on gender, marital status and scholarship operate satisfactorily to predict accident-proneness. The hearing officer’s order, expounding his conclusion contrary to the Department’s rule, looks for all the world like a recommended order in section 120.57 proceedings. The only difference I can discern is that, because this rule-challenge was not an adjudicatory proceeding ending in an agency order, the Department had no opportunity by a final order to accept or reject, for stated policy considerations, the hearing officer’s recommended order. §§ 120.56(5), 120.59, Fla.Stat. (1979). McDonald,, supra.
So attuned are we both, hearing officer and court, to the adjudicatory mode of deci-sionmaking characteristic of the judiciary, that we seem not to acknowledge that rule-making is the preferred mode of decision-making by the executive. Apparently finding our prior decisions on the subject unpersuasive, the court joins the hearing officer in treating the issue essentially as one of pure fact or as one of pure law.
Thus the Department determines by its rule that all classifications based on gender, marital status and scholarship unfairly discriminate by standards fairly implied in subsection (h). To this the hearing officer replies, as though the burden were upon the Department to prove this factually to the hearing officer:
The facts proven in this cause do not support such an argument. It is not necessary to determine the validity of the present rate classification plans of Petitioners to determine from the facts presented in this ease and set forth above, that partial use of sex, marital status, and scholastic achievement as criteria in the formulation of private passenger automobile insurance premium rates can enhance the predictive accuracy of a rate classification plan and thus enhance the equitability of premiums. Thus it has been established that the use of the criteria prohibited by the Rule does not necessarily result in unfair discrimination. (Emphasis added.)
The court similarly deals with the issue as though the ultimate issue were one of fact to be resolved by the hearing officer and, as so resolved, to be honored by the reviewing court. The court goes so far as to escalate the hearing officer’s finding, “partial use of [the designated classifications] ... can enhance the predictive accuracy,” to something more decisive:
The hearing officer further found that the classification factors of sex, marital status and scholastic achievement, in light of the present state of the art in the industry, enhanced the actuarial soundness of a rate classification .... (supra, pp. 912,913, emphasis added.)
The court also joins the hearing officer in concluding that the Department failed to carry the burden of proof cast upon it: “Thus, as the hearing officer concluded, the Department has not established that the use of the criteria prohibited by Rule 4~43.-03 necessarily results in unfair discrimination.” Supra, p. 913, emphasis added.
This transformation of a rule-challenge proceeding into a conventional evidentiary trial runs precisely opposite to healthy forces in chapter 120 that press agencies toward rulemaking and away from case-by-case adjudication. With respect to “ultimate facts ... infused by policy considerations for which the agency has special responsibility,” we have repeatedly said that requiring proof of policy in 120.57 proceedings for an agency order “creates agency incentives for rulemaking, which as far as it goes displaces proof and debate of policy in 120.57 proceedings .... ” McDonald, 346 So.2d at 583; Anheuser-Busch, 393 So.2d at 1183 (emphasis added). In McDonald the ultimate factual issue, which was “infused by policy considerations for which the agency has special responsibility,” pertained to the bank’s “reasonable promise of success” and the skill of its proposed management, as described in the statute; in Anheuser-Busch that policy-ladened factual issue was whether manufacturers’ bar spending tended, in the same way as do gifts and rebates, to build favoritism among retailers, which was the statutory target. Many other examples could be given from decided cases. Here, plainly, the policy-ladened issue of ultimate fact is whether all prevailing dis-criminations based on gender, marital status and scholarship are fair, or many of them are, or some of them are, or none of them are. Choosing the degree of “unfairness” in predictive accuracy to be tolerated under the statute is ladened with policy considerations, and on that question the rule is well-nigh conclusive.
The inappropriateness of this evidentiary trial, and more so of the findings that resulted from it, is further illustrated by section 120.56(5), which regarding rule-challenges states that “[fjailure to proceed” in the manner provided by section 120.57 for rule challenges “shall not constitute failure to exhaust administrative remedies.” In other words, this court and others are authorized to entertain appeals directly from rulemaking, challenging the rule as beyond the delegated power of the statute, without need for evidentiary hearings or for a hearing officer’s order. E.g., Polk v. School Board of Polk County, supra; Florida Canners Association v. State of Florida, Department of Citrus, supra. See also Postal Colony v. Askew, 348 So.2d 338, 339 (Fla. 1st DCA 1977); Willis, supra, 344 So.2d at 592.
It seems inconceivable to me that the scope and method of rulemaking review should depend on the challenger’s strategic choice to appeal from rulemaking or to challenge first before a hearing officer. Doubtless there will be cases in which evidence illumines the issues, e.g., Postal Colony, supra, 348 So.2d at 339, but in no case should the hearing officer and court be seduced into attempting to separate and verify, through evidence, factual predicates in the policy choice represented by the rule.
Because the decisive question in this controversy is one of “ultimate facts ... infused by policy considerations for which the agency has special responsibility,” McDonald, 346 So.2d at 579, neither may the decisive question be put as one of pure law. The court does put it so, however, alternatively to its factual inquiry; and by various interpretative devices common to adjudicative method the court undertakes to show, as a matter of law, that the legislature intended by subsection (h) to preserve in insurance ratemaking some kind or some degree of discrimination based on the stated classifications. This purpose, the court considers, is contradicted by Rule 4-43.03.
I shall argue that the interpretative devices serve very poorly in this instance to isolate the exclusive meaning attributed by my colleagues, as a matter of law, to subsection (h). But preliminarily it must be said that the decisive issue is not one of pure law. For if it were, surely the same insight that declares the question one of law would also permit the court to instruct the Department on the subsidiary principles that, as a matter of law, differentiate fair and unfair discrimination. Obviously, invalidating this rule does not end the Department’s day-to-day responsibility to enforce subsection (h). That the court does not instruct upon the hidden but decisive subsidiary principles of subsection (h), differentiating fair from unfair discrimination, I take as proof that the statute does not as a matter of law yield those subsidiary principles, that more refined test of what is fair and unfair. The decisive question, therefore, remains a question of judgment; and unless (as I fear) the court now judges all such discriminations to be fair “in light of the present state of the art in the industry,” supra, p. 912, then the court evidently has reserved to itself the no less intrusive, but surely more burdensome, responsibility to make that judgment call on individual rate applications. But that, no more obviously than implementing the statutory standard through rulemaking, is the Department’s responsibility.
Our Framat and Nelson decisions teach that the only pertinent question of pure law in such a case as this, aside from procedural questions not here present, is whether the rule is predicated on a permissible interpretation of the statutory words. I have suggested that the range of permissible interpretations includes First through Twelfth above, and certainly includes Tenth, the interpretation by which the Department employed normative standards of “fairness” to sharpen its scrutiny into the claimed predictive accuracy of the suspect classifications.
Without particularly addressing this possible interpretation of subsection (h), which preserves the rule, the hearing officer and the court find the rule based on another interpretation, an illegitimate one beyond the range of the statute fairly read. In this, I respectfully suggest, two oversimplifications are indulged. The first is that the legislature expressed in subsection (h) but one possible conceptual scheme, that some kind or degree of the referenced discrimination is disapproved, but some also is approved and must necessarily survive. The second oversimplification addresses not the statute but the rule, and attributes to the rule, quite erroneously, an authenticating claim that its “blanket prohibition” of certain discrimination is but a paraphrase of the statute.
Thus the hearing officer states:
The Florida Insurance Code does not prohibit all rate classifications or premiums based upon sex, marital status or scholastic achievement, but rather only those that are solely based on those factors that unfairly discriminate.
Comparing the statute ... to the Rule in question, they clearly conflict. Rule 4-43.03 ... is a blanket prohibition....
And the court echoes:
In enacting [subsection (h)] the legislature obviously intended to permit discrimination based on sex, marital status, and scholastic achievement so long as this discrimination is not unfair or based solely on these factors. Yet the Department, by promulgating Rule 4-43.03, imposed a total prohibition.... Supra, p. 911.
Neither of these suppositions is correct. Given the range of permissible interpretations arising from the words themselves, there is no evidence in the words that all 160 legislators held a common purpose to approve and perpetuate some kind or degree of the referenced discrimination. It is also incorrect to say, by contrast, that the Department interpreted this same general language as a “total prohibition.” The Department’s interpretation is Tenth above, not Second.
Even if one were to concede, as I do not, that the one correct interpr