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decided: December 22, 1988.


Appeals from the Order of the Insurance Commissioner in the case of Pennsylvania National Organization for Women, Kathleen Baranski, Betty Jones, Betty J. Lee, Linda Martin, Linda L. Morrow, and Bridget M. Whitley v. State Farm Mutual Auto Insurance Company, Nationwide Mutual Insurance Company, Allstate Insurance Company, Liberty Mutual Fire Insurance Company, and Insurance Services Office, Inc., No. R86-9-6.


Laurie L. Williams, for petitioner; Of Counsel: Catharine A. MacKinnon, Institute for Research on Women and Gender.

Arthur Selkioff, Assistant Counsel, with him, Theodie L. Peterson, III, and Linda J. Wells, Chief Counsel, for respondent.

H. Lee Roussel, with him, Jeffrey B. Clay and Kevin J. Frederick, McNees, Wallace & Nurick, for intervenors, Nationwide Mutual Insurance Company and Allstate Insurance Company.

Jane L. Dalton, with her, James J. McCabe, Duane, Morris & Heckscher, for intervenors, State Farm Auto Insurance Company, Liberty Mutual Fire Insurance Company and Insurance Services Office, Inc.

President Judge Crumlish, Jr., and Judges Craig, MacPhail, Doyle, Barry, Colins and McGinley. Opinion by President Judge Crumlish, Jr. Judge MacPhail did not participate in the decision in this case.

Author: Crumlish

[ 122 Pa. Commw. Page 285]

The Pennsylvania National Organization for Women and six individual petitioners*fn1 seek review of the Insurance Commissioner's adjudication and order dismissing those counts of their complaint*fn2 alleging violations of (1)

[ 122 Pa. Commw. Page 286]

The Casualty and Surety Rate Regulatory Act, Act of June 11, 1947, P.L. 538, as amended, 40 P.S. §§ 1181-1199 (hereinafter the Rate Act); (2) the equal protection guarantees of the Pennsylvania*fn3 and United States Constitutions;*fn4 and (3) the Pennsylvania Equal Rights Amendment.*fn5

The gravamen of NOW's complaint is that the Commissioner ignored evidence of the automobile insurers' discriminatory practices as well as evidence of the discriminatory effect on the individual petitioners, and on women as a group, which occurs when rate structures are not based on mileage.

Before turning to its principal contentions, we will address NOW's allegation that the presiding hearing officer improperly denied its motion to correct the hearing transcript. NOW argues that it discovered significant errors in that portion of the transcript in which it offered evidence of the practicability of a per mileage rate-making methodology, which the hearing officer refused

[ 122 Pa. Commw. Page 287]

    to correct. However, after a careful review of the record, we conclude that the presiding officer did not abuse his discretion in denying NOW's motion, submitted approximately one month after the time fixed for filing briefs. 1 Pa. Code § 35.132 requires that such motions be made no later than ten days in advance of the time fixed for filing final briefs. NOW's argument that it did not discover the errors until "the need arose" to review final pages of the transcript (Petitioners' brief, pp. 68-69) is unpersuasive.

Next, we shall address NOW's contention that the Commissioner's adjudication is unsupported by the evidence.

Section 3 of the Rate Act provides in pertinent part that

(a) [d]ue consideration shall be given to . . . relevant factors within and outside this Commonwealth.

(d) Rates shall not be excessive, inadequate or unfairly discriminatory. No rate shall be held to be unfairly discriminatory unless, allowing for practical limitations, it clearly fails to reflect with reasonable accuracy the differences in expected losses and expenses.

40 P.S. § 1183(a) and (d).

In her adjudication, the Commissioner found, among others, the following facts:

22. Mileage is a relevant rating factor, i.e., there is an increase in risk of loss (accident frequency) as mileage increases.

23. Women drive fewer miles than men, on average, and have fewer automobile accidents.

24. The severity of automobile accidents is not related to mileage.

25. Risk of loss is not directly proportional to miles driven, e.g., vehicles driven 20,000

[ 122 Pa. Commw. Page 288]

    miles are not involved in twice as many accidents as vehicles driven 10,000 miles, and do not incur twice the losses.

26. Risk of loss is affected not only by mileage, but also by road, traffic, and weather conditions, and by the skill and care of the driver.

NOW maintains that these findings directly conflict with the insurers' actual practices of using gender-based rates in some instances,*fn6 that they ignore the evidence presented by NOW and that they cannot be sustained in the face of contradictory actuarial data. NOW argues that the Commissioner's finding of no proportionality between risk of loss and miles driven is contradicted by the weight of the evidence. We disagree.

While NOW's documentary evidence showed some relationship between mileage and accident rates, it showed little to establish any quantitative correlation between these two factors or between mileage and loss experience. Of course, it is for the Commissioner to assess the weight of the evidence. She concluded that NOW's statistical data was flawed because it consisted of government data not compiled for insurance purposes*fn7 and included all drivers (uninsured, commercial and otherwise) which would tend to alter the results. Further, she found that this data was presented without benefit of explanation by any expert with statistical or rate-making experience.

[ 122 Pa. Commw. Page 289]

On the other hand, the intervenor insurance companies presented expert testimony showing that the data NOW offered was less predictive of loss experience than NOW contends. (Notes of Testimony, 5/21/87, pp. 958-959.) Moreover, these insurance companies presented ample evidence of lack of proportionality between loss costs and mileage. Mavis A. Walters, Senior Vice President of intervenor Insurance Services Office, Inc., testified that neither auto accident involvement statistics nor mileage is proportional to the frequency of insurers' claims. N.T., 5/21/87, pp. 1573-75, 1580-1581. Indeed, exhibit D-43, which was Insurance Services Office's compilation of portions of the government data NOW offered, established no direct correlation between mileage and accident frequency. It was shown that a slight increase in annual mileage led to a decline in accident frequency. In light of the evidence presented by the intervenor insurance companies,*fn8 we cannot say that the Commissioner's findings are without support in the record. As has been said:

'Insurance rate making is a technical, complicated and involved procedure carried on by trained men. It is not an exact science. Judgment based upon a thorough knowledge of the problem must be applied. Courts cannot abdicate their duty to examine the evidence and the adjudication, and to interpret and apply the law, but they must recognize the value of the judgment of an Insurance

[ 122 Pa. Commw. Page 290]

Commissioner who is specializing in the field of insurance and the efficacy of an adjudication supported by evidence of experts who devoted a lifetime of service to rate making.'

Nationwide Mutual Insurance Co. v. Denenberg, 15 Pa. Commonwealth Ct. 24, 31, 324 A.2d 878, 881 (1974).

NOW also contends that the Commissioner's adjudication is in error because "due consideration" to mileage as a factor was not given in her adjudication, in contravention of the Rate Act. It argues that, although the Commissioner found mileage to be a relevant factor and that women drive only half as much as men on average, the zero to twenty percent rate discounts given by insurance companies as merit factors do not adequately consider mileage as a factor.

However, the evidence which NOW itself put forth established that there is no constant relationship between accident and mileage exposure.*fn9 Moreover, the Commissioner found that the costs of implementing a mileage based rate-making structure are not warranted by the speculative benefits of such a system.

NOW maintains that it did not have the burden to demonstrate how or at what cost mileage-based rates could be implemented. Nonetheless, it did provide in rebuttal testimony proposals for such a system.*fn10 The Commissioner found the data required was neither currently available nor verifiable.

We agree with the Commissioner that, given the uncertainties and costs of mileage-based rates, by providing for certain discounts in their merit factor rating, the intervenor insurance companies have given all the consideration that is due to mileage as a factor.

[ 122 Pa. Commw. Page 291]

Our review on appeal from approved insurance rate filings, where the Commissioner is clothed with discretion in the discharge of her duties, is circumscribed. We will not interfere unless the record clearly establishes a violation of the law, an arbitrary abuse or unreasonable determination due to the absence of substantial evidence to support findings, or a violation of constitutional rights. Nagle v. Insurance Department ex rel. Sheppard, 48 Pa. Commonwealth Ct. 295, 409 A.2d 525 (1980).

We have determined there is ample evidence to support the Commissioner's findings and that the petitioners have not shown how the approved rates violate the Rate Act, either by failing to give due consideration to mileage or, "allowing for practical limitations," by failing to reflect the differences in expected losses and expenses.*fn11

We now turn to NOW's contention that the failure to implement mileage-based rates violates the United States and Pennsylvania Constitutions' guarantees of equal protection and this Commonwealth's equal rights amendment.

NOW, in essence, contends that gender neutrality in the insurers' practice of rate making does not satisfy equal protection or equal rights guarantees. It argues that the Commissioner's remedy for discrimination against women, i.e., flat rates for both sexes, is harmful in itself to women. Because the insurers' premiums do not respond to the disparity in mileage between men and women, they subsidize men's rates by overcharging women.

Preliminarily, we find no violation of the federal equal protection clause, which does not apply to private conduct, Jackson v. Metropolitan Edison Co., 419 U.S. 345

[ 122 Pa. Commw. Page 292]

(1974), such as the insurers' filing of rates in this case. Welsch v. Aetna Insurance Co., 343 Pa. Superior Ct. 169, 494 A.2d 409 (1985).*fn12 However, as our Supreme Court stated in Hartford Accident and Indemnity Co. v. Insurance Commissioner, 505 Pa. 571, 482 A.2d 542 (1984), the scope of protection afforded our Commonwealth's equal rights amendment is broader and reaches sex discrimination " under the law." Id. at 586, 482 A.2d at 549 (emphasis in original). Our Supreme Court instructs us that all state and local government entities and officials are bound by the ERA in their formulation, interpretation and enforcement of statutes, regulations and decisional law.

Nonetheless, we find that the Commissioner correctly concluded that the insurers' practice of charging a uniform rate as between men and women did not violate the ERA. Because the insurers established that there is no direct correlation between mileage and insurance costs, and the Insurance Commissioner accepted this evidence, NOW cannot prove "de facto" discrimination by insisting without some support that the insurers' rate-making practices have a discriminatory effect. As the Court stated in Hartford, "'[t]he law will not impose different benefits or burdens upon the members of a society based on the fact that they may be man or woman.'" 505 Pa. at 583, 482 A.2d at 548 (quoting Henderson v. Henderson, 458 Pa. 97, 101, 327 A.2d 60, 62 (1974)). Absent some finding based on substantial evidence that automobile insurance rates place a disproportionate burden on women by requiring them to bear more than their fair share of the accident risk

[ 122 Pa. Commw. Page 293]

    distribution, we perceive no ERA violation. "'The thrust of the [ERA] is to insure equality of rights under the law and to eliminate sex as a basis for distinction.'" Id. at 583, 482 A.2d at 548. The Commissioner found, based on the evidence and reasoning cited herein, that mileage is not an adequate basis for distinction in rates. It does not follow from this finding, albeit one contested by the petitioners, that the Commissioner's approval of those rates effectuates a gender-based distinction. Indeed, there is no reliance on gender as a rate-setting factor, merely a decision to approve rates without utilizing a factor that, at best, would arguably benefit women.

Having found substantial evidence to support the Commissioner's findings and no legal error or constitutional violation, we affirm the adjudication and order.


The order and adjudication of the Commonwealth Insurance Commissioner, at Docket No. R86-9-6 dated May 18, 1987, and February 11, 1988, is affirmed.

Petitioners' application for injunction pending review is dismissed.

Judge MacPhail did not participate in the decision in this case.



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