NU Online News Service, May 13, 3:59 p.m. EDT
The Michigan State Supreme Court in October will hear arguments over a regulation that would ban insurers' use of credit information as a factor in determining premiums.
A court challenge to the rule has been winding its way through the state's court system since 2005.
The Office of Financial and Insurance Regulation (OFIR) said it promulgated rules banning the use of insurance credit scoring in 2005, and the insurance industry is contesting them.
Neil Alldredge, vice president of state and regulatory affairs for the National Association of Mutual Insurance Companies, said the district court agreed with the industry that the OFIR did not have the authority to issue its regulation because existing law allows insurance scoring and governs its use.
The court issued an injunction against the OFIR, preventing it from moving forward with its regulation.
The decision was appealed, and while the ultimate effect of the Court of Appeals decision was to overturn the district court's ruling, Mr. Alldredge said the court's three justices essentially reached a three-way split on the issue.
One justice agreed with the OFIR, and one agreed with the industry, Mr. Alldredge explained, but a third justice determined the issue should never have been heard by the district court because the OFIR never actually disapproved a rate filing under its new rule.
Both sides appealed to the state Supreme Court. The industry is looking to overturn the Court of Appeals decision, and the OFIR said it is specifically asking the court to rule that its insurance credit scoring rules are valid.
As an added wrinkle, Mr. Alldredge said in January, Michigan Governor Jennifer Granholm called for a rate freeze, and subsequently, the OFIR denied seven rate filings that used insurance scoring.
He said the industry took that case back to court, arguing that the district court injunction against the OFIR is still in force until the case is disposed of. The court, Mr. Alldredge said, agreed the OFIR does not have the authority to decline rates based on credit scoring because the case is under appeal at the Supreme Court.
Jeffrey Junkas, spokesman for the American Insurance Association (AIA), said the first set of briefs for the case are due in July. AIA, he noted, is one of four named organizations from which the court has requested an amicus brief.
The other organizations are the Insurance and Indemnity Law Section of the State Bar of Michigan, the Michigan Consumer Federation, and the National Consumer Law Center.
Mr. Junkas said he is not yet prepared to discuss what AIA will say in its amicus brief.
Mr. Alldredge said he anticipates the national trades will file amicus briefs, either individually or jointly.
Ann Weber, vice president, regional manager and counsel for the Property Casualty Insurers Association of America (PCI), said her association will confer with its members to see what action it will take.
She added she is glad the Supreme Court is addressing the issues. "Things have been in a state of flux for quite some time," Ms. Weber said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.