Opinion
Nos. 4019 and 4020
Decided May 21, 1947.
Superintendent of Insurance — Rules in conflict with statute, invalid — Agents' qualifications — Prohibiting licenses to applicants connected with automobile sales business — Rule adversely affects automobile insurers and dealers — Right to appeal — Section 154-72, General Code — Administrative rules amended, how — New rule may be challenged in entirety, when.
1. A rule adopted by the Superintendent of Insurance of Ohio, that no insurance agents' or solicitors' licenses will be issued for new applicants connected with automobile sales business, except for life insurance, is in conflict with the provisions of Section 644, General Code, defining requisite qualifications for insurance agents, and is invalid.
2. Such rule adversely affects automobile insurers and dealers, within the meaning of Section 154-72, General Code, and they may appeal from such order in the manner prescribed in such section.
3. By virtue of the provisions of Section 154-64, General Code, that no administrative rule shall be amended except by a new rule containing the entire rule as amended and repealing the rule amended, the new rule may be challenged and tested in its entirety, even though it contains provisions of the rule amended.
APPEALS: Court of Appeals for Franklin county.
Mr. J. Roth Crabbe, for appellee Motors Insurance Corporation.
Mr. Harry A. Hanna, for appellee William J. McGraw.
Mr. Hugh S. Jenkins, attorney general, Mr. Ralph Klapp, Mr. John W. Bricker and Mr. Paul R. Gingher, for appellant, Superintendent of Insurance.
Mr. Frank X. Schaut and Mr. Harold H. Gorman, for Ohio Automobile Dealers Association, amicus curiae.
These appeals on questions of law are from orders of the Common Pleas Court entered in appeals thereto and holding invalid a rule which had been approved and adopted by the Superintendent of Insurance of Ohio, effective on June 11, 1945.
Four errors are assigned:
(1) The decision of December 30, 1946, is contrary to law.
(2) The court erred in overruling appellant's motion to dismiss the appeal.
(3) The court erred in holding that it had jurisdiction to declare invalid the amended rule adopted by the Superintendent of Insurance on May 29, 1945.
(4) The court erred in holding the amended rule invalid.
The rule, as amended, provides:
"This office, as a matter of policy, will not issue insurance agents' or solicitors' licenses for new applicants falling within any of the following classifications:
"(1) Officers or employees of financial or lending institutions.
"(2) Applicants connected with the automobile sales business, except for life insurance.
"(3) Applicants who are public employees whose time is supposed to be devoted to the service of the public.
"(4) Applicants who have not passed their twenty-first birthdays, except applicants who have been honorably discharged from the armed forces of the United States and who have passed their eighteenth birthdays."
The quoted rule, supersedes a former rule of August 7, 1943, and the changes therein are indicated by italics, The first, third and fourth subdivisions of the rule are not involved in these appeals which are to be determined upon the language of the first paragraph and subdivision two.
Judge Leach in a carefully written opinion, with which we have been favored, held the rule, as it would affect the appellants, Motors Insurance Corporation and McGraw, unlawful because it is in conflict with Section 644, General Code, and relied, in the main, upon the case of Automobile Insurance Agency, Inc., v. Lloyd, 36 Ohio Law Abs., 455, 44 N.E.2d 792, wherein this court affirmed the judgment of the Common Pleas Court. The Common Pleas Court case is reported in 36 Ohio Law Abs., 448. A motion to certify the record in that case in the Court of Appeals was overruled by the Supreme Court on June 10, 1942. With that conclusion we agree.
It is further urged in the brief on behalf of the Superintendent of Insurance that the motions to dismiss the appeals should have been sustained because appellants are not persons adversely affected, under Section 154-72, General Code.
It appears in case No. 4019 that Motors Insurance Corporation is a fire insurance corporation, organized in the state of New York and presently licensed in the state of Ohio to write physical damage coverages upon automobiles. In case No. 4020 McGraw is an automobile dealer engaged in the business of selling automobiles at Bellaire, Ohio. He filed his appeal, from the order of the Superintendent of Insurance, on behalf of himself and numerous other persons connected with the automobile sales business in the state of Ohio.
Judge King, who ruled on the motions to dismiss the appeals, held that, upon the averments of their petitions, the appellants were adversely affected by the rule, under Section 154-72, General Code, and that, if it were asserted that they were not so affected, such issue could be developed factually upon the hearing of the cause. The subject matter of the motions was not again urged and the question now presented is whether, upon the undisputed facts, the appellees in this court, Motors Insurance Corporation and McGraw, are adversely affected by the rule. Manifestly they are. The superintendent could not observe the letter of the rule and accord to them or either of them the privileges assured by Section 644, General Code. They may be "suitable" persons and may qualify in all particulars as defined in such section, but prospective agents of Motors Insurance Corporation and McGraw would stand on an entirely different footing than other applicants for licenses. The insurance company has an interest not only in the appointment of its agents, who would be named directly by the company, but likewise in its solicitors, even though the latter were directly named by the agents. It is obvious that the insurance company would have concern as to the solicitors of business which it would write, although their immediate responsibility was to agents of the company.
We find no valid reason why the rule now under consideration should not be challenged in its entirety by a person adversely affected. The superintendent at the hearing restricted consideration of the amendment to subdivision four of the rule and held that there was no material change in the other three paragraphs. We do not agree that there is no such change, because the words, "or solicitors," are new and had not appeared in any prior rule. We likewise are of opinion that the rule as it affects insurance "agents" was appropriately tested in the action of the superintendent in proposing the new rule and in adopting it, because of the language of Section 154-64, General Code, that "No rule shall be amended after the effective date of this act except by a new rule which shall contain the entire rule as amended, and shall repeal the rule amended." The rule here under consideration when adopted became a new rule as of that date and could be tested in all particulars as though none of its subject matter had been incorporated in a former rule.
We have not considered other propositions convincingly presented and discussed at length in briefs of appellees and amicus curiae, which question the power of the Superintendent of Insurance to promulgate any rules whatever, urge that the rule is in violation of the state and federal constitutions and assert that it is discriminatory against applicants for first licenses.
We are satisfied that the rule is unreasonable and invalid because its effect is to deny the appellees in this court the benefit of the controlling statute, Section 644, and is in contravention of Section 154-64 (d). Section 644 defines the requisite qualifications for agents of insurance companies, which qualifications may not be modified by any rule. State, ex rel. Foster, v. Evatt, Tax Commr., 144 Ohio St. 65, 56 N.E.2d 265; State, ex rel. Kildow, v. Industrial Commission, 128 Ohio St. 573, 192 N.E. 873; Matz, Admr., v. J.L. Curtis Cartage Co., 132 Ohio St. 271, 7 N.E.2d 220.
The judgments are affirmed.
Judgments affirmed.
WISEMAN, P.J., MILLER and HORNBECK, JJ., concur.