Genworth Life Ins. Co. v. N.H. Dep't of Ins.

174 N.H. 78

260 A.3d 838

GENWORTH LIFE INSURANCE COMPANY

v.NEW HAMPSHIRE DEPARTMENT OF INSURANCE

No. 2019-0727

Supreme Court of New Hampshire.

Argued: November 19, 2020

Opinion Issued: February 17, 2021

Cook, Little, Rosenblatt & Manson, p.l.l.c., of Manchester (Arnold Rosenblatt and Kathleen M. Mahan on the brief), and Saul Ewing LLP, of Philadelphia, Pennsylvania (Paul M. Hummer and Sean T. O'Neill on the brief, and Mr. Hummer orally), for the plaintiff.

Gordon J. MacDonald, attorney general (Samuel R.V. Garland, assistant attorney general, and Anthony J. Galdieri, senior assistant attorney general, on the brief, and Mr. Garland orally), for the defendant.

DONOVAN, J.

The plaintiff, Genworth Life Insurance Company, challenges amended regulations promulgated by the New Hampshire Department of Insurance (Department) retroactively limiting rate increases for long-term care insurance (LTCI) policies. The plaintiff is an insurer that provides LTCI to over 6,000 New Hampshire residents. It appeals orders of the Superior Court (Tucker, J.) dismissing its claim that the regulations violate the contract clauses of the State and Federal Constitutions, and entering summary judgment for the Department with respect to the plaintiff's claims that the regulations are ultra vires and violate the takings clauses of the State and Federal Constitutions. Because we conclude that the regulations are ultra vires, and, therefore, invalid, we reverse and remand.

I. Facts

The record supports the following facts. The Long-Term Care Insurance Act governs LTCI policies issued in New Hampshire. See RSA ch. 415-D (2015). LTCI policies cover costs associated with long-term care, such as nursing homes and assisted living. The LTCI Act requires the Insurance Commissioner to "issue reasonable rules to promote premium adequacy and to protect the policyholder in the event of substantial rate increases, and to establish minimum standards for marketing practices, agent compensation, agent testing, penalties and reporting practices." RSA 415-D:12. As relevant here, the purpose of the LTCI Act is "to promote the public interest, to promote the availability of [LTCI] policies, ... and to facilitate flexibility and innovation in the development of [LTCI] coverage." RSA 415-D:1.

In 2004, the Commissioner issued regulations governing premium rate schedule increases for LTCI policies. Previously, the regulations governing LTCI policies imposed a minimum anticipated loss-ratio standard of 60 percent, meaning that for every dollar an insurer anticipated receiving in premiums, it was expected to spend no less than 60 cents on claims. The regulations permitted insurers to increase premium rates provided that the increases did not cause the policies to fall below the loss-ratio standard. By contrast, the 2004 regulations required insurers to obtain the Commissioner's approval before increasing premium rates. See N.H. Admin. R., Ins 3601.19(b)(5) (2004). To obtain approval, insurers had to satisfy more stringent loss-ratio standards and certify that requested increases were actuarially justified. See N.H. Admin. R., Ins 3601.19(b)-(c) (2004). The 2004 regulations applied only to LTCI policies issued on or after the regulations’ effective date. See N.H. Admin. R., Ins 3601.19(a) (2004).

In 2014, the Commissioner proposed several amendments to the rate-increase regulations (Amended Regulations). The Amended Regulations, which became effective in 2015, allow insurers to increase rates once every three years, subject to the Commissioner's approval.¹ See N.H. Admin. R., Ins 3601.19(b)(5), (d) (2015). The Amended Regulations also slightly alter the loss-ratio and actuarial-certification requirements from the 2004 regulations. See N.H. Admin. R., Ins 3601.19(b)-(c) (2015). Most notably, however, the Amended Regulations cap the maximum percentage rate increases for LTCI policies based upon the attained age of the policyholders. See N.H. Admin. R., Ins 3601.19(f) (2015). According to Table 3601.1 in the Amended Regulations, insurers may obtain larger percentage rate increases for policyholders with lower attained ages, and smaller increases for policyholders with higher attained ages. Id. The Amended Regulations provide that the Commissioner "shall not approve" any requested increase that exceeds the caps. Id. Unlike the 2004 regulations, the Amended Regulations apply to rate increases on all LTCI policies, including those issued before the amendments. See N.H. Admin. R., Ins 3601.19(a) (2015).

In 2016, the plaintiff sought declaratory and injunctive relief against the Department, challenging the validity of the rate-increase caps imposed by the Amended Regulations. Specifically, the plaintiff argued that the Amended Regulations are invalid because they are ultra vires, meaning that they exceed the Commissioner's statutory authority under RSA 415-D:12, which mandates the Commissioner to issue reasonable rules to promote premium adequacy, to protect policyholders in the event of substantial rate increases, and to establish minimum standards for marketing practices, agent compensation, agent testing, penalties and reporting practices. See RSA 415-D:12. The plaintiff also argued that the Amended Regulations violate the contract and takings clauses of the State and Federal Constitutions. See U.S. CONST. art. I, § 10, cl. 1, amend. V ; N.H. CONST. pt. I, arts. 12, 23. On the Department's motion, the trial court dismissed the contract clause claim. Both parties then moved for summary judgment on the remaining ultra vires and takings claims. The trial court granted summary judgment to the Department on both claims. The plaintiff then filed a motion for reconsideration, which the trial court denied. This appeal followed.

II. Analysis

On appeal, the plaintiff argues that we should reverse and remand the trial court's decisions because the Amended Regulations: (1) substantially impair its contractual rights in violation of the contract clauses of the State and Federal Constitutions; (2) deprive insurers of reasonable rates of return in violation of the takings clauses of the State and Federal Constitutions; and (3) exceed the Commissioner's mandate under RSA 415-D:12 to issue reasonable regulations to promote premium adequacy and to protect policyholders in the event of substantial rate increases. Because we decide constitutional questions only when necessary, State v. Brouillette, 166 N.H. 487, 489, 98 A.3d 1131 (2014), we first address the plaintiff's ultra vires argument.

When reviewing a trial court's rulings on cross-motions for summary judgment, we consider the evidence in the light most favorable to each party in its capacity as the nonmoving party. Langevin v. Travco Ins. Co., 170 N.H. 660, 663, 184 A.3d 80 (2018). If our review of the evidence discloses no genuine issue of material fact, and if the moving party is entitled to judgment as a matter of law, we will affirm the grant of summary judgment. Id. We review the trial court's application of the law to the facts de novo. Id.

As relevant here, the plaintiff argued to the trial court that the Amended Regulations exceed the Commissioner's statutory mandate because: (1) they subvert, rather than promote, premium adequacy; and (2) they prevent substantial rate increases, rather than protect policyholders in the event of substantial rate increases. The trial court rejected these arguments, noting that, regardless of whether the Amended Regulations "prove harmful to [the plaintiff's] effort to realize a reasonable return," the LTCI Act nevertheless "permits ‘reasonable rules’ promoting premium adequacy while protecting the policyholder." The trial court further concluded that the Amended Regulations did not exceed the Commissioner's mandate under RSA 415-D:12 because they permit substantial rate increases, but cap rate increases in certain circumstances "in order to protect the policyholder from the consequences of a more sizable one." Accordingly, the trial court ruled in the Department's favor on the plaintiff's ultra vires claim.

On appeal, the plaintiff reprises the arguments that it made to the trial court. As explained below, we agree with the plaintiff that the Amended Regulations exceed the Commissioner's mandate under RSA 415-D:12 because they are not reasonable rules that either promote premium adequacy or protect policyholders in the event of substantial rate increases.

An administrative regulation exceeds an agency's authority when it contradicts the terms of the governing statute. Appeal of Wilson, 161 N.H. 659, 662, 20 A.3d 1006 (2011). Although the legislature may delegate to administrative agencies the power to make rules necessary for the proper execution of the law, an agency's authority "is designed only to permit the [agency] to fill in the details to effectuate the purpose of the statute." Id. (quotation omitted). "Thus, administrative rules may not add to, detract from, or modify the statute which they are intended to implement." Id. (quotation omitted).

Resolving the plaintiff's ultra vires argument requires that we interpret the language of RSA 415-D:12. We recognize, as the Department argues, that "it is well established in our case law that an interpretation of a statute by the agency charged with its administration is entitled to deference." Appeal of Town of Seabrook, 163 N.H. 635, 644, 44 A.3d 518 (2012) ; see N.H. Resident Ltd. Partners of Lyme Timber Co. v. N.H. Dep't of Revenue Admin., 162 N.H. 98, 101, 27 A.3d 829 (2011) (stating that an administrative regulation adopted by an agency pursuant to a statute is "prima facie evidence of the proper interpretation of the ... statute" (quotation omitted)). However, the deference afforded is not absolute. Appeal of Town of Seabrook, 163 N.H. at 644, 44 A.3d 518. We are the final arbiter of the legislature's intent as expressed in the words of the statute considered as a whole. Id. We will not defer to an agency's statutory interpretation if it...