established a joint underwriting association to provide for reinsuring basic property insurance without regard to "environmental hazards." Environmental hazards are defined in the Act as those conditions which might give rise to a loss but which are beyond the control of the property owner.
Regulations 71-8 and 71-13 would prohibit plaintiff, and other insurance companies doing business in the District, from taking into account, in determining whether to issue, cancel or renew insurance policies, certain underwriting considerations. Plaintiff and other insurers would be compelled to issue or continue coverage on properties deemed to be high risks under those underwriting standards.
Regulation 71-8 has been interpreted by the Superintendent of Insurance as prohibiting (except to the limited extent permitted by subsection 1(c) of the regulation) all considerations over which the insured has no control. The effect of that regulation, as interpreted by the Superintendent, is to prohibit insurance companies from taking into account for underwriting purposes the geographic location of the risk and other relevant factors, such as the incidence of arson in the area. The only exception in the regulation is where a single insurer has a concentration of liability in a particular area.
The District of Columbia Insurance Placement Facility, formed pursuant to the Insurance Placement Act, has the statutory responsibility of providing property insurance where it is not otherwise available in the normal market, as in the case of property located in high crime areas. Congress also provided that the Placement Facility, formed by all insurers writing property insurance in the District, would submit proposed rules and regulations for its operation to the Commissioner and that he could approve, disapprove, or amend those rules under certain conditions. D.C. Code § 35-1704 (Supp. IV, 1971). The Placement Facility has adopted detailed rules to implement the Insurance Placement Act. Those rules provide that the Placement Facility shall not decline a risk for neighborhood or area location or environmental hazard beyond the control of the property owner.
The District of Columbia Insurance Placement Facility began business on October 1, 1968 and losses from insurance arranged through the Facility have been ratably divided among participating insurers since that time.
The City Council's "geographic discrimination" regulation and the Placement Act both seek to regulate the same type of high risk coverage. The Council has determined that individual insurers may not, with limited exception, consider matters over which the insured has no control in making the determination of whether or not to insure. Prior to the regulation insurers did consider such factors. This expansion of risk is precisely what the Placement Act seeks to govern by apportioning such risk among all participating carriers. Regulation 71-8 would narrow the market which Congress intended all carriers to share. There is no room for local regulation where Congress has so fully dealt with the subject. Maryland and District of Columbia Rifle and Pistol Ass'n., Inc. v. Washington, supra.
Despite the Council's laudable purpose, its determination that a need exists for such regulation cannot provide authority to promulgate it when the power has been retained by Congress.
After oral argument by counsel and careful examination of plaintiff's motion for summary judgment, defendants' motion for judgment on the pleadings, and supporting points and authorities, the Court finds that:
1. There is no genuine issue as to any material fact.
2. The District of Columbia had no authority to pass Regulations 71-8 and 71-13.
3. Regulation of the insurance industry is not a valid exercise of the general and usual police power.
Accordingly, it is
adjudged that plaintiff's motion for summary judgment be and it hereby is granted, and it is further
Adjudged that defendants' motion for judgment on the pleadings be and it hereby is denied.
This Memorandum Opinion will constitute findings of fact and conclusions of law. Counsel for plaintiff will submit an appropriate order.
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