PACIFIC FIRE RATING BUREAU, Arizona Association of Insurance Agents, and G. A. Bushnell, as Director of Insurance of the State of Arizona, Appellants,
INSURANCE COMPANY OF NORTH AMERICA, Indemnity Insurance Company of North America, Philadelphia Insurance Company, and Fire Insurance Exchange, a reciprocal or interinsurance exchange, Appellees.
[83 Ariz. 370] Snell & Wilmer, Phoenix, and Bert W. Levit and Robert Minge Brown, San Francisco, Cal., for appellant Pacific Fire Rating Bureau.
Snell & Wilmer, Phoenix, for appellant Arizona Ass'n of Ins. Agents.
Robert Morrison, Atty. Gen., and Edward W. Hughes, Sp. Asst. Atty. Gen., for appellant G. A. Bushnell as Director of Ins. for the State.
Long & Levit, San Francisco, Cal., McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, Cal., of counsel, for appellants.
Evans, Kitchel & Jenckes, Phoenix, and W. Perry Epes, Philadelphia, Pa., for appellees Insurance Co. of North America, Indemnity Ins. Co. of North America, and Philadelphia Ins. Co., Pillsbury, Madison & Sutro, San Francisco, Cal., and William H. Rehnquist, Phoenix, of counsel.
[83 Ariz. 371] Fennemore, Craig, Allen & McClennen, Philip E. von Ammon, Phoenix, for appellee Fire Ins. Exchange.
Arthur C. Mertz, Stephen I. Martin, Chicago, Ill., and Gust, Rosenfeld, Divelbess & Robinette, Phoeniz, amicus curiae, for National Ass'n of Independent Insurers.
UDALL, Chief Justice.
The sole question presented by this appeal is whether the trial court erred in granting judgment on the pleadings, i. e., in holding as a matter of law, that Rule VII promulgated by the Pacific Fire Rating Bureau and approved by the Director of Insurance pursuant to the provisions of A.R.S. § 20-363, was invalid.
Appeals from the Director's approval of the rule were consolidated in the trial court and appellees here will be referred to as 'appellees' or 'North America Companies'; appellant Pacific Fire Rating Bureau as 'P.F.R.B.' and appellant Director of Insurance of the State of Arizona as 'the Director'.
P.F.R.B. is an association of insurers engaged in making uniform insurance rates for its members and subscribers in Arizona, Nevada, Utah, California, Montana and Alaska. These rates cover substantially all of the fire and other kinds of property insurance written by North America Companies. This parent company, and its subsidiaries (referred to here as North America Companies), are large scale casualty, surety, property and marine insurers, authorized to do business in this and other states. The insurance transacted by such companies constitutes a substantial part of the total insurance of such nature transacted in the United States and is exceeded in volume by only a very few other insurance groups.
The decision in United States v. South-Eastern Underwriters Ass'n, 1944, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, overruled the many prior Supreme Court cases holding that insurance was not commerce in the constitutional sense. Thereafter Congress passed the McCarran-Ferguson Act (Public Law 15, 1945; 15 U.S.C.A. §§ 1011-1015), which in effect returned the regulation of insurance to the states. Because the federal antitrust laws were, by Public Law 15, made inapplicable to insurance only to the extent that the business was regulated by state law, each state proceeded to enact a rate law. Most of these, including Arizona's (A.R.S. Title 20, Ch. 2, art. 4; section 20-341 et seq.), were modeled after a bill drafted by an industry committee with the approval of the National Association of Insurance Commissioners (NAIC); the model bill is known
as the All-Industry law. It is the meaning of section 20-363, subds. A and B of such Act that is disputed here. That section states:
[83 Ariz. 372] 'A. Subject to rules and regulations which have been approved by the director as reasonable, each rating organization shall permit any insurer, not a member, to be a subscriber to its rating services for any kind of vehicle, casualty and surety insurance or subdivision thereof, or for any kind of property and marine insurance or subdivision or class of risk or part or combination thereof, for which it is authorized to act as a rating organization. Notice of proposed changes in the rules and regulations shall be given to subscribers.
'B. Each rating organization shall furnish its rating services without discrimination to its members and subscribers.' (Emphasis supplied.)
December 7, 1953, North America Companies notified P.F.R.B. of termination of their subscribership to the rating services of such Bureau for the so-called 'dwelling classes'. At the same time said companies filed independently with the Director, rates, rules and from for these classes. The notice of termination stated that North America Companies desired to retain subscribership for the remaining services of P.F.R.B.
Subsequent thereto, after determining its by-laws and constitution would not allow P.F.R.B to take disciplinary measures against North America Companies for said action, P.F.R.B. amended its constitution. This rule was then filed with and approved by the Director as reasonable under the provisions of A.R.S. § 20-363. Pertinent portions of this rule are as follows:
'Whereas, (1) it has become increasingly apparent that unlimited right of partial subscribership to the services of the Bureau is incompatible with the best interests and requirements of a substantial majority of the insurance companies who utilize Bureau services, and if continued will impair the Bureau's ability to continue to furnish a full rating service at reasonable cost to its members and subscribers.
'Resolved, (1) It is in the best interests of the Bureau and the substantial majority of its members and subscribers that partial subscribership to Bureau services be reasonable limited, as hereinafter provided, in order that the Bureau may continue to provide and furnish a complete rating and examination ...