STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FORTUNE INSURANCE COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 94-2002

) DEPARTMENT OF INSURANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on August 2, 1994, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Harold H. Catlin, Esquire

Holly M. Gillespie, Esquire Saalfield, Catlin & Coulson, P.A.

225 Water Street, Suite 1000 Jacksonville, Florida 32202-4458

For Respondent: James B. Redner, Senior Attorney

Department of Insurance Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-0333

STATEMENT OF THE ISSUES

Whether the Department has the authority pursuant to Section 627.062(2)(g), Florida Statutes, to disapprove Petitioner's Custom Homeowners' rates currently in effect throughout the State of Florida as "inadequate" in Zones I, II and III, and as "excessive" in Zone IV.

If so, are Petitioner's Custom Homeowners' rates currently in effect throughout the State of Florida "inadequate" in Zones I, II and III, and "excessive" in Zone IV.

PRELIMINARY STATEMENT

By letter dated March 8, 1994 Respondent notified Petitioner that it had found certain of Petitioner's rates to be "excessive" and certain of Petitioner's rates to be "inadequate." This action was taken pursuant to Section 627.062(2)(g), Florida Statutes. On or about March 21, 1994 Petitioner mailed a Petition for Formal Hearing Pursuant to Fla. Stat. s 120.57(1) to Respondent contesting Respondent's proposed action.

On April 13, 1994, the petition was filed with the Division of Administrative Hearings. The petition was designated case number 94-2002 and was assigned to the undersigned. A final hearing was scheduled for August 2, 1994, by Notice of Hearing entered May 5, 1994.

At the final hearing the parties stipulated to certain facts. To the extent relevant, those facts have been accepted in this Recommended Order.

Official recognition of Section 627.0651, Florida Statutes, was taken.

Petitioner presented the testimony of Kenneth Ritzenthaler, Peter Scourtis and Robert Lindquist. Mr. Lindquist was accepted as an expert in actuarial science. Nine exhibits were offered by Petitioner and were accepted into evidence to the extent determined to be relevant.

Respondent presented the testimony of Kenneth Ritzenthaler, who was accepted as an expert in actuarial science. Respondent's exhibits 1-4 were accepted into evidence.

No transcript of the final hearing was ordered by the parties.

On August 12, 1994 the parties filed proposed recommended orders containing proposed findings of fact. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.

FINDINGS OF FACT

1. The Parties.

   
   

   1. Petitioner, Fortune Insurance Company (hereinafter referred to as "Fortune"), possesses a certificate of authority to conduct insurance business in Florida. Fortune engages in the business of writing homeowners insurance throughout Florida.

      
      

   2. Fortune's business offices are located in Jacksonville, Florida.

      
      

   3. Respondent, the Florida Department of Insurance (hereinafter referred to as the "Department"), is an agency of the State of Florida charged with the responsibility for, among other things, regulating rates charged for homeowners insurance in Florida.

      
      

2. Fortune's Current Rates.

   
   

   1. In 1985 Fortune sought approval of homeowners insurance rates to be charged by it in four geographic zones it has divided Florida into. See Petitioner's exhibit 7. Fortune did not make any material misrepresentation in its filing. (Stipulated Fact). Nor was there any material error in Fortune's filing. (Stipulated Fact).

   2. The Department reviewed and approved Fortune's Custom Homeowners Program, "HO-8", insurance rates in January of 1986. (Stipulated Fact). The Department approved the following rates:

      
      

      a. Zone I: $387.00

      1. Zone II: $389.00

      2. Zone III: $332.00

      3. Zone IV: $655.00

         
         

   3. Zone IV includes, among other counties, all of the counties in the northern portion of Florida, including the Panhandle.

      
      

   4. No modification of Fortune's HO-8 rates was requested by Fortune between January of 1986 and June of 1993.

      
      

3. Fortune's 1993 Request for a Rate Increase.

   
   

   1. On or about June 11, 1993 Fortune filed Petitioner's exhibit 1 with the Department requesting approval on an increase in rates pursuant to Section 627.062(2)(a)1., Florida Statutes. (Stipulated Fact).

      
      

   2. Fortune sought approval from the Department for an HO-8 rate increase for Zone I (to $443.00), Zone II (to $445.00) and Zone III (to $380.00).

      
      

   3. No HO-8 rate increase was requested by Fortune for Zone IV.

      
      

   4. Fortune suggested in the June 11, 1993 rate increase request (hereinafter referred to as the "1993 Request"), that it was requesting a statewide increase of 14.5 percent. The statewide increase sought actually amounted to a 12.9 percent increase.

      
      

   5. The parties communicated about the 1993 Request through the remainder of 1993. (Stipulated Fact).

      
      

   6. On January 25, 1994, the Department provided Petitioners exhibit 2 to Fortune proposing base rates for all four zones of Fortune's Custom Homeowners Program. (Stipulated Fact). The Department proposed to accept a statewide increase of 8.9 percent. This weighted average for the four zones included increases for Zones I, II and III and a decrease of approximately 49.9 percent for Zone IV.

      
      

   7. Fortune disagreed with the Department's determination. Therefore, Fortune withdrew the 1993 Request by letter dated February 18, 1994. (Stipulated Fact). Petitioner's exhibit 3.

      
      

   8. By letter dated March 7, 1994 the Department accepted the withdrawal of the 1993 Request. (Stipulated Fact). The Department informed Fortune that the withdrawal was "equivalent to the filing never having been submitted." Petitioner's exhibit 4.

      
      

4. The Department's Notice to Fortune that Fortune's Rates are Excessive and/or Inadequate and Fortune's Response.

   
   

   1. Based upon the Department's review of the 1993 Request, the Department concluded that Fortune's HO-8 rates for Zones I, II and III were inadequate and that Fortune's HO-8 rate for Zone IV was excessive.

   2. By letter dated March 8, 1994, the Department informed Fortune, in part, of the following:

      
      

      You are hereby notified that pursuant to the provision of Section [627.062(2)(g)] the Department has reviewed the current rates, rating schedule, and rating manual for your Custom Homeowners Program and finds on a preliminary basis that certain rates are excessive and certain rates are inadequate.

      
      

      (Stipulated Fact). Petitioner's exhibit 5.

      
      

   3. The Department also informed Fortune in the March 8, 1994 letter that it would be given the opportunity to prove to the Department that "your current rates are not excessive, inadequate or unfairly discriminatory."

      
      

   4. The Department also informed Fortune in the March 8, 1994 letter that Section 627.062, Florida Statutes, provides that Fortune "shall, within sixty days of the date of this Notice, file with the Department all information which you believe proves the reasonableness, adequacy and fairness of your current rates."

      
      

   5. The Department also informed Fortune in the March 8, 1994 letter that it had the right to request a hearing pursuant to Chapter 120, Florida Statutes.

      
      

   6. The Department closed the March 8, 1994 letter with the following:

      
      

      If you request a hearing but intend to submit additional information within the allotted

      60-day period you may request that the transmittal of your hearing request be delayed until the Department has had an opportunity to review the additional information submitted.

      
      

   7. Fortune did not provide additional information to the Department within sixty days of the Department's March 8, 1994 letter.

      
      

   8. On or about March 21, 1994 Fortune mailed a petition to the Department requesting a formal administrative hearing pursuant to Section 120.57, Florida Statutes.

      
      

   9. Prior to the March 8, 1994 letter from the Department, Fortune had provided all relevant information it had concerning its rates to the Department. Fortune, through Mr. Scourtis, verbally informed the Department that Fortune had no further information to support its rates. The evidence failed to prove that, between March 8, 1994 and March 21, 1994 when Fortune mailed its request for formal administrative hearing, Fortune had any other information concerning its rates which it had not provided the Department.

      
      

   10. The evidence also failed to prove that after March 21, 1994, when Fortune's request for formal hearing was mailed, the Department unsuccessfully attempted to obtain any information from Fortune through discovery.

       
       

5. The Department's Review of Fortune's Rates.

1. In determining whether Fortune's rates were inadequate or excessive, the Department first determined that a "credibility ballast" equal to the annual trend factor, or 4 percent, was generally accepted and reasonable actuarial technique. Fortune failed to prove that the use of a "credibility ballast" of 4 percent was not reasonable.

   
   

2. The Department next determined that a "credibility factor" of 24.94 percent, the credibility factor Fortune had used in its 1993 Request, was generally accepted and reasonable actuarial technique. Fortune failed to prove that the use of a "credibility factor" of 24.94 percent was not reasonable.

   
   

3. Based upon the foregoing, and using a catastrophic load factor of 1.141, the Department determined that the overall statewide indication for Fortune was the need to increase it's rates by 6.7 percent.

   
   

4. Fortune had used the 1.141 catastrophic load factor in the 1993 Request. The Department agreed, and the evidence proved, that a catastrophic load factor of 1.357 is actuarially acceptable and reasonable. Using a 1.357 catastrophic load factor results in an increase of 9.1 percent. The evidence failed to prove that this conclusion is unreasonable.

   
   

5. The Department next determined the relativity between the rates sought for the zones by Fortune to determine how to allocate the overall statewide rate increase indicator. The base rate sought for Zone I ($443.00) was used as the base. The base rate sought for Zone III was .86 of the base rate in Zone I ($380.00/$443.00) and it was concluded that this relativity was reasonable. The evidence failed to prove that this conclusion was unreasonable.

   
   

6. The relativity between Zone I and Zone II was determined to be unreasonable because the rate sought for Zone II ($445.00) was greater than that of Zone I ($445.00/$443.00 or 1.01). The Department concluded that the relativity of Zone II should have been between Zones I and III. Therefore, the relativity of Zone II was changed to .94 by reducing the rate sought by Fortune in its 1993 Request from $445.00 to $400.00 ($400.00/$443.00 or .94). The evidence failed to prove that this conclusion was unreasonable.

   
   

7. The relativity between Zone I and Zone IV was also determined to be unreasonable: $655.00 rate for Zone IV divided by the rate sought for Zone I of

   $443.00 or a relativity of 1.48. This relativity was determined to be unreasonable and was reduced to .77, which placed it below Zones I, II and III. The evidence failed to prove that this conclusion was unreasonable.

   
   

8. Having determined the relativity of the Zones, the Department determined the appropriate rate for Zone I based upon its determination of the overall statewide rate increase indicator. Except for the fact that the Department should have based this final calculation on a catastrophic load factor of 1.357 and not 1.141, resulting in an overall statewide rate increase indicator of 9.1 instead of the 8.9 indicator utilized by the Department, the evidence failed to prove that the Department's calculation of the rates for the four zones based upon the relativities determined by the Department was unreasonable.

   
   

   1. Fortune's Zone I, II and III Rates.

      
      

9. The parties agreed that the rates for Zones I, II and III are inadequate. The only disagreement of the parties involved the extent of the

   inadequacy. Fortune argued that the inadequacy of its rates for Zones I, II and III is greater than that determined by the Department.

   
   

10. Fortune failed to prove that the Department's determination of the extent of the inadequacy of the rates for Zones I, II and III was incorrect except to the extent that the Department used a catastrophic load factor of

    1.141 instead of 1.357. The correct overall statewide rate increase indicator to be utilized in determining the extent of inadequacy of the Zones I, II and III rates should be 9.1 instead of 8.9.

    
    

    1. Fortune's Zone IV Rate.

    
    

11. The Department determined that Fortune's Zone IV rate was excessive.

    
    

12. Fortune failed to prove that the Department's determination that the Zone IV rate is excessive is incorrect except to the extent that the Department used a catastrophic load factor of 1.141 instead of 1.357. The correct overall statewide rate increase indicator to be utilized in determining the extent of excessiveness of the Zone IV rate should be 9.1 instead of 8.9.

    
    

    CONCLUSIONS OF LAW

    
    

    1. Jurisdiction.

       
       

13. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Sections 120.57(1), Florida Statutes (1993).

    
    

    1. Burden of Proof.

       
       

14. Section 627.062(2)(g), Florida Statutes (1993), provides that, where the Department determines that an insurer's rates are excessive, inadequate or unfairly discriminatory, "the insurer or rating organization shall carry the burden of proof by a preponderance of the evidence to show that the rate is not excessive, inadequate, or unfairly discriminatory."

    
    

15. The burden of proof in this proceeding was, therefore, on Fortune. Fortune was required to meet its burden of proof by the preponderance of the evidence.

    
    

    1. Rate Standards and the Procedures for Establishing Rates Pursuant to Section 627.062, Florida Statutes.

       
       

16. Section 627.062, Florida Statutes, establishes "rate standards" and the procedures to be followed to determine that insurance rates governed by Chapter 627, Florida Statutes, are consistent with those standards.

    
    

17. Section 627.062(1), Florida Statutes, establishes the following general standard:

    
    

    1. The rates for all classes of insurance to which the provisions of this part are

       applicable shall not be excessive, inadequate, or unfairly discriminatory.

       
       

18. The Legislature has evidenced its intent that insurers establish and, when necessary, change their rates pursuant to procedures set out in Section

    627.062, Florida Statutes. In particular, Sections 627.062(2)(a)1. and 2., Florida Statutes, constitute the procedures which must be followed by insurers to establish rates and to make any changes thereto.

    
    

19. The two procedures to be used by insurers to establish or change rates are designated the "file and use" procedure, Section 627.062(2)(a)1., Florida Statutes, and the "use and file" procedure, Section 627.062(2)(a)2., Florida Statutes.

    
    

20. The "file and use" procedure entails the following:

    
    

    1. The insurer files its request for approval of a rate or rate change at least 60 days prior to the effective date of the rate or change;

    2. The rate or rate change is not put into effect during the Department's review;

    3. The Department must finalize its review or "disapprove" the rate within 60 days after receipt of the filing.

    
    

21. If the Department fails to disapprove a rate filing or finalize its review of a file and use request within 60 days of the filing, the rate is "deemed approved".

    
    

22. The "use and file" procedure entails the following:

    
    

    1. The insurer begins using a rate or a changed rate;

    2. Within no more than 30 days after the effective date of instituting the rate or rate change, the insurer must file a request for approval of the rate or change;

    3. The Department must either approve or disapprove the rate or rate change. No time limitation is placed on the Department;

    4. If the Department disapproves a rate or rate change, the insurer may be required to refund or credit any part of the rate collected which is above the amount of the rate that was actuarially justified. Section 627.062(2)(h), Florida Statutes.

    
    

23. Once an insurer establishes rates pursuant to Section 627.062(2)(a), Florida Statutes, those rates are generally effective until the insurer obtains approval from the Department to modify the rates.

    
    

    1. The Department's Authority to "Disapprove" Rates.

       
       

24. The Department is authorized by Section 627.062(2)(g), Florida Statutes, to disapprove any rate or rate change sought by an insurer if the rate or change is determined to be "excessive, inadequate, or unfairly discriminatory".

    
    

25. The Legislature has also granted the Department the authority in Section 627.062(2)(g), Florida Statutes, to review established rates of insurers "at any time". Section 627.062(2)(g), Florida Statutes, provides, in part:

    If the department finds on a preliminary basis that a rate may be excessive, inadequate, or unfairly discriminatory, the department shall initiate proceedings to disapprove the rate and shall so notify the insured. . . .

    
    

26. If the Department determines that existing rates are "inadequate" or are "unfairly discriminatory" there is no limitation on the Department's authority pursuant to Section 627.062(2)(g), Florida Statutes, to disapprove such a rate.

    
    

27. The Department's authority to modify an insurer's existing rates because they are determined to be "excessive" is, however, limited by Section 627.062(2)(g), Florida Statutes:

    
    

    . . . . However, the department may not disapprove as excessive any rate for which it has given final approval or which has been deemed approved for a period of 1 year after the effective date of the filing unless the department finds that a material misrepresentation or material error was made by

    the insurer or was contained in the filing.

    
    

28. If the Department makes a preliminary determination that an insurer's existing rates are excessive, inadequate or unfairly discriminatory, the Department is required to inform the insurer. Section 627.062(2)(g), Florida Statutes, requires that the insurer take the following action upon such notification:

    
    

    . . . the insurer or rating organization shall, within 60 days, file with the department all information which, in the belief of the insurer or organization, proves the reasonableness,

    adequacy, and fairness of the rate or rate change.

    
    

29. Section 627.062(2)(g), Florida Statutes, does not specifically prohibit an insurer from requesting a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes, to challenge the Department's preliminary decision pursuant to Section 627.062(2)(g), Florida Statutes. Section 627.062(2)(g), Florida Statutes, also does not provide that an insurer must first file information to prove the reasonableness, adequacy, and fairness of its rates before requesting a formal hearing.

    
    

    1. General Nature of this Proceeding.

       
       

30. This action was instituted by the Department pursuant to the authority granted it in Section 627.062(2)(g), Florida Statutes, to review and disapprove existing rates "at any time".

    
    

31. This action was instituted because the Department determined that Fortune's existing rates in Zones I, II and III were "inadequate" and that its existing rate in Zone IV was "excessive."

    
    

32. This proceeding is not an action for the approval of a modification of Fortune's rates pursuant to Section 627.062(2)1. or 2., Florida Statutes.

33. Fortune withdrew the 1993 Request and the Department accepted the withdrawal and informed Fortune that the withdrawal was "equivalent to the filing never having been submitted."

    
    

34. Fortune's 1993 Request was only relevant to this proceeding as "history" and to the extent that information provided to the Department as part of the aborted 1993 Request by Fortune was utilized by the Department in deciding to disapprove Fortune's existing rates.

    
    

    1. The Department's Authority to Disapprove Rates as "Excessive".

       
       

35. There is no limitation on the Department's authority to disapprove an insurer's existing rates if the Department believes that those rates are "inadequate." There is, however, a limitation on the Department's authority to disapprove an insurer's existing rates if the Department believes those rates are "excessive."

    
    

36. Section 627.062(2)(g), Florida Statutes, specifically provides that the Department, absent a showing that there was a material misrepresentation or a material error made by an insurer in obtaining approval of a rate, may NOT disapprove any rate as "excessive" if one of the following circumstances apply:

    
    

    1. The insurer has obtained "final approval" of the rate from the Department; or

    2. The insurer's rate was "deemed approved".

    
    

37. The limitation on disapproving a rate as "excessive" if it was "deemed approved" only applies for a period of one year after the rate is deemed approved.

    
    

38. As written in Section 627.062(2)(g), Florida Statutes, the language "for a period of 1 year after the effective date of the filing" does not modify the language "rate for which it has given final approval "

    
    

39. When Section 627.062, Florida Statutes, is considered in its entirety, applying the "1 year" language to rates for which final approval was given by the Department makes no sense. A rate that is given final approval of the Department is a rate that the Department should have fully considered and determined to be NOT excessive. Unless there was a material misrepresentation made, or a material error committed, by the insurer when the rate was being reviewed, the insurer should be able to charge the finally approved rate without concern for whether the Department will subsequently determine that the rate is excessive. The Department has not disputed these conclusions. The Department suggests by its position, however, that there is some reason to limit the time during which the insurer should be allowed to rely on the Department's final approval. The only reasonable reason for imposing a limitation on the amount of time that a rate determined by the Department to NOT be excessive may not be challenged as excessive is if it can reasonably be expected that over time the rate may become excessive. The evidence in this case failed to prove that it is probable that a rate that is not excessive on one day will become excessive in the future. Such a possibility does not seem likely. Therefore, it is doubtful that the Legislature had any reason to limit the time during which the Department was prohibited from finding a rate excessive after it has reviewed the rate and given final approval thereto.

40. Where a rate is not reviewed by the Department and, therefore, is deemed approved, it is possible that the rate may in fact be excessive. Because the excessive rate has been deemed approved because the Department has not acted within the time prescribed by the Legislature, the insurer should be allowed to rely on the rate for some reasonable period of time without fear that the Department will simply disapprove the excessive rate pursuant to Section 627.062(2)(g), Florida Statutes. Because the Department has not conducted a full review of the rate, the insurer should not, however, be allowed to rely upon the rate for an unlimited period of time. It is for this reason that the Legislature limited the period of time during which the Department may not disapprove a rate that was deemed approved to a period of one year thereafter.

    
    

41. The evidence in this case proved that the Department gave "final approval" to the rates charged by Fortune in Zone IV in 1986. Therefore, the rates charged by Fortune in Zone IV cannot be disapproved as "excessive" by the Department unless there was a "material misrepresentation or material error" made by Fortune. The Department stipulated that there was no such "material misrepresentation or material error".

    
    

42. The rates charged by Fortune in Zone IV were not "deemed approved". Therefore, the limitation on the Department's authority to disapprove a rate as "excessive" where the rate was "deemed approved" have no application to this matter.

    
    

43. Based upon the foregoing, the Department lacks the authority to disapprove Fortune's rate charged in Zone IV as "excessive".

    
    

    1. The Department's Authority to Disapprove Rates as "Inadequate".

       
       

44. There is no limitation on the Department's authority to disapprove Fortune's existing rates in Zones I, II and III as "inadequate".

    
    

45. Fortune's rates must be modified to eliminate any inadequacy determined by the Department unless Fortune carries its burden of proof by a preponderance of the evidence to "show that the rate is not . . . inadequate . .

    . ." Section 627.062(2)(g), Florida Statutes.

    
    

46. The issue with regard to the inadequacy of Fortune's rates, therefore, is whether Fortune has proved that its rates for Zones I, II and III are "not inadequate." This issue does not require, nor does Section 627.062(2)(g), Florida Statutes, allow, a determination of whether Fortune's rates for Zones I, II and III are more inadequate than the Department has determined.

    
    

47. To allow Fortune to seek a greater increase in the rates for Zones I, II and III in this proceeding would, in effect, allow Fortune to obtain a rate increase without following the procedures contemplated in Section 627.062(2)(a), Florida Statutes, established by the Legislature for obtaining approval of rates and rate changes.

    
    

48. Based upon the foregoing, it is concluded that Fortune's rates for Zones I, II, and III are inadequate as determined by the Department utilizing a catastrophic load factor of 1.357 instead of 1.141.

    
    

    1. The Department's Motion in Limine.

49. The Department argued during the final hearing that the evidence presented in this proceeding by Fortune should be limited to information provided to the Department prior to and, within 60 days after, the Department's notification of March 8, 1994 that the Department was disapproving Fortune's rates. The Department's argument is rejected and the Department's motion in limine is denied.

    
    

50. Section 627.062(2)(g), Florida Statutes, does provide that the insurer "shall" provide information to justify its rates within 60 days after notification of a preliminary disapproval of rates by the Department. While Fortune did not provide any new information to the Department, the evidence proved that Fortune had provided all relevant information it had prior to the notification and that it did not have any new information to provide to the Department between the time that the Department notified Fortune of the disapproval and the filing of the petition instituting this case.

    
    

51. Once a petition seeking a formal administrative hearing has been filed and the parties assume an adversarial position, it would be unreasonable to expect an insurer to continue to provide information to the Department except through the discovery process. The Department seems to have recognized the reasonableness of this conclusion. In its notice to Fortune, Petitioner's exhibit 5, the Department informed Fortune:

    
    

    If you request a hearing but intend to submit additional information within the allotted

    60-day period you may request that the transmittal of your hearing request be delayed until the department has had an opportunity to review the additional information submitted.

    
    

    This notice implies that the decision to submit additional information is optional if a formal hearing is requested.

    
    

52. Once Fortune filed its petition for formal hearing the Department could have requested Fortune to provide any additional relevant information it intended to offer at the final hearing through discovery. The evidence failed to prove that Fortune unsuccessfully attempted to obtain any information which it attempted to exclude from the hearing. The Department has failed to show how it will be prejudiced by allowing Fortune to present all relevant evidence in this proceeding.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Department of Insurance

dismissing that portion of its notice of March 8, 1994 to Fortune Insurance Company disapproving its Custom Homeowners Program rates for Zone IV as excessive. It is further

RECOMMENDED that the Final Order find that Fortune's Custom Homeowners Program rates for Zones I, II and III are inadequate as determined by the Department utilizing a catastrophic load factor of 1.357 (see Respondent's exhibit 1). It is further

RECOMMENDED that the Final Order dismiss Fortune's request that its Custom Homeowners Program rates for Zones I, II and III be determined to be inadequate in an amount in excess of the Department's determination of inadequacy utilizing a catastrophic load factor of 1.357 (see Respondent's exhibit 1).

DONE and ORDERED this 8th day of September, 1994, in Tallahassee, Florida.

LARRY J. SARTIN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1994.

APPENDIX

The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

Fortune's Proposed Findings of Fact Stipulated Facts:

1. Hereby accepted.

2. See 16.

3. Hereby accepted. Whether the Department accepts "a number of expense factors" is not relevant. The evidence failed to prove that any expense factors of Insurer Services Office should have been accepted in this proceeding.

4. Not relevant.

5. These proposed findings of fact are generally correct. They are only relevant, however, to the extent that they support Mr. Ritzenthaler's expertise or to the extent that they may impact the weight to be given to Mr. Ritzenthaler's testimony.

16-18 Not relevant.

19 Accepted in 28. 20-26 Not relevant.

1. Accepted in 28-29 and 33.

2. See 29 and 33.

3. Not supported by the weight of the evidence.

4. Not relevant.

5. Accepted in 24.

6. Accepted in 23.

33-35 Although generally correct, the evidence failed to prove that these factors cause the rates in Fortune's zones I, II or III to be more inadequate than found in this Recommended Order.

1. Not relevant.

2. Conclusion of law. 38-39 Hereby accepted.

40-45 Although these proposed findings correctly summarize some of Mr. Linquist's testimony, that testimony did not prove that Fortune's rates are more inadequate or not excessive.

46 These proposed findings of fact are generally correct. They are only relevant, however, to the extent that they support Mr. Lindquist's expertise or to the extent that they may impact the weight to be given to Mr. Lindquist's testimony.

47-48 Not supported by the weight of the evidence. The Department's Proposed Findings of Fact

1. Accepted in 1.

2. Accepted in 5. See 6.

3. Accepted in 7-8.

4. Accepted in 9-11.

5-10 These proposed findings of fact are generally correct.

They are only relevant, however, to the extent that they support Mr. Ritzenthaler's expertise or to the extent that they may impact the weight to be given to Mr. Ritzenthaler's testimony.

11 See 26.

12 See 27-28.

13 The first paragraph is not relevant. See 29-31. The first two sentences of the second paragraph are not relevant. See 32 with regard to the rest of the second paragraph.

14-15 See 29 and 33.

1. Accepted in 13-14.

2. Accepted in 17, 19 and 22. But see 23-24.

3. Not relevant. Summary of testimony or lack thereof.

4. See 26.

20-23 These proposed findings are largely accurate recitals of Mr. Lindquist's opinions. See 22, 24-25, 29 and 33

1. Accepted in 29-30 and 33.

2. Not relevant.

COPIES FURNISHED:

Harold H. Catlin, Esquire Holly M. Gillespie, Esquire 1000 First Union Tower

225 Water Street

Jacksonville, Florida 32202-4458

James B. Redner Senior Attorney

Department of Insurance Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-0333

Tom Gallagher

State Treasurer and Insurance Commissioner

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Bill O'Neil General Counsel

Department of Insurance The Capitol, PL-11

Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

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AGENCY FINAL ORDER

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OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF: Case No. 07187-93-C FORTUNE INSURANCE COMPANY DOAH Case No. 94-2002

/

FINAL ORDER

This cause came before the undersigned Treasurer and Insurance Commissioner of tbe State of Florida, acting in this capacity as Insurance Commissioner, for consideration and final agency action. On March 8, 1994, a Notice pursuant to section 627.062(2)(g), F.S. was sent notifying the Petitioner of the Department's intent to disapprove filed homeowners rates as both inadequate and excessive in different rating zones. The Petitioner timely filed a request for a formal proceeding pursuant to section 120.57(1), Florida Statutes. Pursuant to notice, the matter was heard before Larry J. Sartin, Hearing Officer, Division of Administrative Hearings, on August 2, 1994.

After consideration of the evidence, argument and testimony presented at hearing, and subsequent written submissions by the parties, the hearing officer issued his Recommended Order (Attached as Exhibit "A"). The hearing officer recommended that the Department enter a Final Order dismissing that portion of the Notice seeking to disapprove the Petitioner's homeowner's rates in Zone IV, finding the homeowner's rates to be inadequate in Zones I, II and III and dismissing the Petitioner's request that homeowners rates in Zones I, II, and III be determined inadequate in excess of the Department's determination of inadequacy utilizing a catastrophic load factor of 1.357. Timely exceptions to the Recommended Order were filed by the Department.

RULINGS ON THE DEPARTMENT'S EXCEPTIONS TO CONCLUSIONS OF LAW

The Department excepts to the hearing officer's Conclusions of Law numbered

61 through 68. The hearing officer concluded that section 627.062(2)(g), F.S. did not allow the Department to "disapprove" a previously approved rate at any time, unless there was a material misrepresentation or material error was made by the insurer or was contained in the filing. The hearing officer's construction of section 627.062(2)(g) F.S. would effectively preclude the Department from ever, to the end of time, disapproving an excessive rate which had been previously affirmatively approved by the Department. Also, this construction of the statute emasculates the clear authority of the Department to: "at any time review a rate, rating manual, or rate change; the pertinent records of the insurer; and market conditions" see 627.062(2)(g) F.S. This legislative authority clearly recognizes that market conditions and records of the insurer may change over time and consequently impact on whether a rate approved long ago has now become excessive due to changed market conditions and information maintained by the insurer. The Department correctly noted that a change in the insurer's composition of risks, a decrease in expense ratios, a

better than expected experience profile or a change in domestic or international laws may all impact on whether an insurer's rates are excessive.

The Department also correctly points out that the plain meaning of the limiting language is to allow an insurer a one year period wherein it could rely on an approved rate, whether given final approval or deemed approved. The absence of a comma or semicolon after "final approval" and before "or which has been deemed approved for a period of one year after the effective date of the filing. . ." further indicates from a grammatical construction of the sentence that the one year limitation was intended to apply to both "final approval" and "deemed approved". Likewise, the construction rendered by the hearing officer would absolutely negate the clear legislative intent to allow the Department to "at any time" review a rate to determine whether it is excessive.

A statute should be read in such a manner to give effect to the legislative intent. The purpose and intent of a legislative act should be construed so as to fairly and liberally accomplish the beneficial purpose for which it was adopted. In construing a statute, all intendments are favored towards its validity rather than applying a rule of strictness which defeats and makes meaningless fundamentals of Legislative power. Hanson v. State 56 So.2d 129 (Fla. 1952)

Also instructive in determining the intent of the Legislature is section 627.031(2), F.S. which reads:

627.031 Purposes of this part; interpretation.

1. It is the purpose of this part to protect policyholders and the public against the adverse effects of excessive, inadequate, or unfairly discriminatory insurance rates, and to authorize the department to regulate such rates. If at any time the department has reason to believe any such rate is excessive, inadequate, or unfairly discriminatory under the law, it is directed to take the necessary action to cause such rate to comply with the laws of this state.

It does not appear that the hearing officer considered this legislative mandate when he determined that a rate which has been given "final approval" could never be reviewed and determined to be excessive unless the department finds that a material misrepresentation or material error was made by the insurer or was contained in the filing. Accordingly, the hearing officer's construction greatly restricts and defeats the clear legislative purpose of section 627.062(2)(g), F.S. which allows the department to review a rate "at any time".

The construction of statute by the agency responsible for its administration is entitled to great weight and should not be overturned unless clearly erroneous. Shell Harbor Group v. Department of Business Regulation, 487 So.2d 1141 (Fla 1st DCA 1986); Gay v. Canada Dry Bottling Co., 59 So.2d 788, 790 (Fla. 1952); Department of Revenue v. First Union National Bank of Florida, 513 So.2d 114 (Fla. 1987); Daniel v. Florida State Turnpike AuthoritY, 213 So.2d 585 (Fla. 1968); and Escambia county v. Trans Pac, 584 So.2d 603 (Fla. 1st DCA 1991).

In conclusion, the hearing officer's legal conclusions, as opposed to factual determinations, do not come to an agency with presumption of correctness, consequently an agency is free to disagree with a hearing officer's conclusions of law and may substitute its own. Bustillo v. Department of Professional Regulation, 561 So.2d 610 (Fla. 3d DCA. 1990); Seiss v. Department of Health and Rehabilitative Services, 468 So.2d 478 (Fla. 2d DCA 1985); Harloff

1. City of Sarasota, 575 So.2d 1324 (Fla. 1st DCA 1986); Alles v. Department of Professional Regulation, 423 So.2d 624 (Fla. 5th DCA. 1982).

   
   

   Accordingly, the Department's exceptions to Conclusions of Law 61-68 are accepted and the Conclusions of Law numbered 61-68 are therefore rejected. The following Conclusions of Law are substituted for those of the hearing officer in this Final Order.

   
   

   SUPPLEMENTAL CONCLUSIONS OF LAW

   
   

   1. Section 627.062(2)(g), F.S. reads in parts as follows:

      
      

      (g) The department may at any time review a rate, rating schedule, rating manual, or rate change; the pertinent records of the insurer; and market conditions. . . However, the department may not disapprove as excessive any rate for which it has given final approval or which has been deemed approved for a period of 1 year after the effective date of the filing unless the department finds that a material misrepresentation or material error was made by the insurer or was contained in the filing. . . .

      
      

   2. Section 627.031(2), F.S. reads as follows:

      
      

      (2) It is the purpose of this part to protect policyholders and the public against the adverse effects of excessive, inadequate, or unfairly discriminatory insurance rates, and to authorize the department to regulate such rates. If at any time, the department has reason to believe any such rate is excessive, inadequate, or unfairly discriminatory under the law, it is directed to take the necessary action to cause such rate to comply with the laws of this state.

      
      

   3. A fair reading of the two relevant statutes in pari materia, evidences a clear legislative purpose to protect policyholders from excessive, inadequate and unfairly discriminatory insurance rates. The limiting language in section 627.062(2)(g), F.S. provides a year period in which an insurer may rely on rates which have been approved, either by final approval or having been deemed approved. This construction best implements the legislative purpose of protecting policyholders from excessive rates. Also, in the case at bar, the rates were last reviewed and approved in 1986. The record evidence as determined by the hearing officer clearly shows that under accepted actuarial analysis the homeowner's rates in Zone IV of Fortune Insurance Company are excessive. Accordingly, section 627.062(2)(g), F.S. requires that these rates be disapproved.

RULING ON DEPARTMENT'S EXCEPTION TO RECOMMENDATION

For the reasons set forth in response to the rulings on the Department's exceptions to Conclusions of Law 61-68 and based on the Supplemental Conclusions of Law herein, this exception is accepted and the hearing officer's recommendation to dismiss that portion of the March 8, 1994 Notice, finding on a preliminary basis, that Fortune Insurance Company's Custom Homeowners Program rates in Zone IV to be excessive, is rejected.

Upon careful consideration of the record, and being fully advised in the premises, it is ORDERED:

1. The hearing officer's Findings of Fact are adopted in full.

   
   

2. The hearing officer's Conclusions of Law, except as modified herein, are adopted in full.

   
   

3. The hearing officer's recommendation that the portion of the March 8, 1994 Notice disapproving on a preliminary basis, Fortune Insurance Company's Custom Homeowners Program rates in Zone IV to be excessive be dismissed is rejected, however the remainder of his recommendations are accepted, and ACCORDINGLY:

   
   

   1. The Custom Homeowners Program rates in Zone IV are DISAPPROVED and shall be reduced by the amount determined by the Department to be reasonable and actuarially justified by the hearing officer.

      
      

   2. The Custom Homeowners Program rates for Zones I, II and III are inadequate, as determined by the Department utilizing a catastrophic load factor of 1.357.

      
      

   3. Fortune Insurance Company's request that its Custom Homeowners Program rates for I, II and III be determined to be inadequate in an amount in excess of the Department's determination of inadequacy utilizing a catastrophic load factor of 1.357 is DISMISSED.

Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a Notice of appeal with the General Counsel, acting as Agency Clerk, 612 Larson Building, Tallahassee, Florida 32399-0300 and a copy of the same and filing fee, with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order.

DONE AND ORDERED this 6th day of December, 1994.

TOM GALLAGHER

Treasurer and Insurance Commissioner

COPIES FURNISHED:

LARRY J. SARTIN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

HAROLD H. CATLIN, Esquire HOLLY M. GILLESPIE, Esquire

1000 First Union Tower

225 Water Street

Jacksonville, Florida 32202-4458

JAMES B. REDNER, Esquire

Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0333

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DISTRICT COURT OPINION

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IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

FORTUNE INSURANCE COMPANY, NOT FINAL UNTIL TIME EXPIRES

FILE MOTION FOR REHEARING AND

Appellant, DISPOSITION THEREOF IF FILED.

v. CASE NO. 95-9

DOAH CASE NO. 94-2002

DEPARTMENT OF INSURANCE,

Appellee.

/ Opinion filed December 8, 1995.

An appeal from a final administrative order of the Department of Insurance.

Harold H. Catlin and Holly J. McCorkle of Saalfied, Catlin & Coulson, P.A., Jacksonville, for Appellant.

James B. Redner, Department of Insurance, Tallahassee, for Appellee.

SMITH, SENIOR JUDGE.

Fortune Insurance Company (hereafter "Fortune") appeals from a final order of the Department of Insurance (hereafter "Department"). The Department ruled that it has the authority, under Section 627.062(2)(q), Florida Statutes, to review and disapprove an insurer's rate as excessive at any time after the expiration of a period of one year following final approval by the Department, without necessity for a finding that a material misrepresentation or material error was made by the insurer in its rate filing. We Affirm.

The facts, which are not in dispute, so far as they pertain to this appeal are as follows. Fortune, an insurance company authorized to conduct an insurance business in Florida, engages in the business of writing homeowners' insurance throughout Florida. In 1985, Fortune sought approval of homeowners' insurance rates to be charged by Fortune in four geographic zones. In January of 1986, the Department approved Fortune's homeowners rates in all four zones. Fortune requested no rate modification between January, 1986 and June 11, 1993, on which date Fortune filed a request for approval of an increase in rates within Zones I, II and III, pursuant to section 627.062(2)(a)1, Florida Statutes. Fortune did not seek a rate increase in Zone IV. On January 25, 1994, the Department furnished to Fortune a proposed base rate for all four zones. Based upon its review, the Department found Fortune's requested rates for Zones I, II and III were inadequate, and that the rates for Zone IV were excessive. Fortune disagreed with the Department's determination and withdrew its 1993 request for approval by letter dated February 18, 1994. By letter dated March 7, 1994, the Department accepted the withdrawal of the 1993 request and informed Fortune that the withdrawal was "equivalent to the filing never having been submitted."

However, by letter dated March 8, 1994, the Department notified Fortune that it had reviewed Fortune's current rates, and that the Department had found on a preliminary basis that certain of Fortune's rates were excessive and certain rates were Inadequate. The Department also gave notice of its intention to initiate proceedings to disapprove the rates.

At Fortune's request, a formal administrative hearing was held pursuant to Chapter 120, Florida Statutes. At the conclusion of the hearing the hearing officer issued his recommended order finding that the rates in Zones I, II, and III were inadequate, and that a final order should be entered accordingly. The hearing officer further found that the rate in Zone IV was excessive. However, the hearing officer concluded, as a matter of law, that the Department had no authority under Section 627.062(2)(g) to require a decrease based upon "excessiveness."

The Department filed exceptions to the recommended order with respect to certain of the hearing officer's conclusions of law. Thereafter the Department, acting through the Insurance Commissioner of the State, issued a final order in which it approved the hearing officer's finding of fact, but rejected the hearing officer's conclusion of law with respect to disapproval of Fortune's rates in Zone IV as excessive. Instead, the Department concluded that Section

627.062 (2)(g), properly construed, authorized the Department to review and disapprove a rate as excessive where the rate had been approved either by "final approval," or after the rate had been "deemed approved."

Section 627.062 (2)(g) provides in pertinent part as follows:

The department may at any time review a rate, rating schedule, rating manual, or rate change; the pertinent records of the insurer; and market conditions. If the department finds on a preli- minary basis that a rate may be excessive, inadequate, or unfairly discriminatory, the department shall initiate proceedings to disapprove the rate and shall so notify the insurer. However, the department may not disapprove as excessive any rate for which

it has given final approval or which has been deemed approved for a period of 1 year after the effective date of the filing unless the department finds that a material misrepresent- ation or material error was made by the insurer or was contained in the filing. ...

(Emphasis added.)

The hearing officer interpreted this statute as precluding the Department from disapproving a rate as excessive, absent a material misrresntation or error in the insurer's filing, if the rate has been given "final approval" by the Department. However, as to the Department's authority to find excessive any rate "deemed approved," the hearing officer found that the language of Section 627.062(2)(g) precluded such disapproval by the Department only for a period of one year from the effective date of filing, after which the Department could disapprove a rate as excessive.. In keeping with the foregoing analysis, the hearing officer found that since Fortune's 1986 rate for Zone IV had been given final approval, the Department had no authority to declare the rate excessive.

The Department's final order agreed with the hearing officer's construction of the statute so far as his recommended order dealt with rates "deemed approved." The Department disagreed, however, with the hearing officer's conclusion as to the Department's authority to disapprove as excessive a rate given "final approval." The Department concluded that under a proper interpretation, taking into account the entire language of Section 627.062(2)(g), as well as related statutory provisions, the Department had authority to also disapprove rates as excessive even though approved under the "final approval" provision, the only limitation on such authority being the same as for rates "deemed approved"; that is, after a rate has been given "final approval," the Department may not declare the rate excessive until after the expiration of a one-year period from the insurer's filing date, unless the Department also finds a material misrepresentation or error in the insurer's filing.

On appeal, Fortune contends that both the hearing officer and the Department erred in their interpretation of the statute's prohibition against disapproval as excessive a rate "deemed approved." Under Fortune's view, the language "for a period of one year after the effective date of filing, merely provides a one year window within which the Department may disapprove as excessive a rate "deemed approved, after which the Department's authority ceases, unless the Department also finds a material misrepresentation or error in the insurer's filing. 1/ As to rates which have received "final approval," Fortune urges that the hearing officer was correct in finding that the

Department has no authority to disapprove such a ratc as excessive, absent a inaterial misrepresentation or error in the filing.

We begin our analysis by noting the appropriate standard of review. It is a well-settled principle that the interpretation of a statute by the agency responsible for its enforcement is entitled to great weight, and will not be overturned unless clearly erroneous. Dep't of Envtl. Reg. v. Goldring 477 So.2d

532 (Fla. 1985); Shell Harbor Group. Inc. v. Dep't of Bus. Reg., 487 So.2d 1141 (Fla. 1st DCA 1986); Escambia County v. Trans Pac, 584 So.2d 603 (Fla. 1st DCA 1991). It is also well-settled that a hearing officer's legal conclusions, as opposed to factual determinations, are not clothed with a presumption of correctness and thus, an agency is free to substitute its own conclusions of law for those of the hearing officer. Harloff v. City of Sarasota, 575 So.2d 13-24 (Fla. 2d DCA 1991); Bustillo v. Dep't of Prof. Reg., 561 So.2d 610 (Fla. 3rd DCA 1990)

As above noted, the Department has interpreted section 627.062(2)(g) as authorizing its review and disapproval of an insurer's rate as excessive at any time, subject only to the limitation that after a rate has been given final approval or a rate has been deemed approved, a rate cannot be disapproved as excessive until the expiration of one year after the insurer's rate filing.

This construction by the Department appears to be a reasonable one, well within the legislative intent as reflected by related statutory provisions setting out the purposes sought to be accomplished by the law and the guidelines to be followed by the Department in carrying out its rate-governing authority.

The statute under consideration was enacted in 1986 as a part of extensive revisions to the "Rating Law" portions of Chapter 627, Florida Statutes, particularly sections 627.011-627.381. See Chapter 160, Laws of Florida(1986). The purposes of the law are stated in section 627.-03I, as follows:

1. Purposes of this part; interpretation.

   1. The purpose of this part are:

      (a) To promote the public welfare by regulating insurance rates as herein provided to the end that they shall not be excessive, inadequate, or unfairly discriminatory;

   2. It is the purpose of this part to protect policyholders and the public against the adverse effects of excessive, inadequate, or unfairly discriminatory insurance rates, and to authorize the department to regulate such rates. If at any time the department has reason to believe any such rate is excessive, inadequate, or unfairly discriminatory under the law, it is directed to take the necessary action to cause such rate to comply with the laws of this state.

Consistent with the purposes expressed above, the first sentence of section 627.062(2)(g) provides that the Department may "at any time" review a rate. (Emphasis added.) The second sentence authorizes the Department to initiate proceedings to disapprove any rate that may be "excessive, inadequate, or unfairly discriminatory."

Of critical significance is the third sentence, which reads:

However, the department may not disapprove as excessive any rate for which it has given final approval or which has been deemed approved for a period of 1 year after the effective date of the filing unless the department finds that a material misrepresent-

ation or material error was made by the insurer or was contained in the filing.

In the light of the purposes of the rating law and the broad grant of authority to review and disapprove rates "at any time," we find no reason to interfere with the Department's interpretation, nor, for that matter could we, since we cannot say that its interpretation is clearly erroneous. In our view the Department was not bound to accept the hearing officer's conclusions that the one-year limitation on disapproval for excessiveness applies only to a rate "which has been deemed approved," and that a rate given "final approval" is not subject to disapproval for excessiveness in the absence of a material misrepresentation or error in the rate filing.

This court and others of this state have often made use of the doctrine of the last antecedent as an aid to statutory construction. See, Kirksey v. State,

433 So.2d 1236 (Fla. 1st DCA 1983)(generally, use of the disjunctive "or" in a statute indicates alternatives were intended and requires that such alternatives be treated separately; hence, language in clause following disjunctive is considered inapplicable to subject matter of preceding clause;); McKenzie Tank Lines, Inc. v. McCauley. 418 So.2d 1177 (Fla. 1st DCA 1982); Brown v. Brown,

432 So.2d 704 (Fla. 3rd DCA 1983). Apparently relying on this rule, the hearing officer found that the language "for a period of 1 year after the effective date of filing" does not modify the clause "rate for which it has given final approval."

The issue before us is not whether the statute can be construed as did the hearing officer, but rather, whether it must be so construed. we agree with the Department's view that a reading of the third sentence, in conjunction with the two preceding sentences and related statutes in Dari materia, does not require the interpretation given by the hearing officer, but to the contrary, supports the interpretation of the Department. Moreover, without suggesting that the "last antecedent" rule lacks validity or usefulness, we note that the rule itself is not absolute. The discussion found in 49 Fla Jur 2d, "Statutes," s129 is instructive:

Grammatical rules are not conclusive, how- ever, and the true meaning, if clearly ascertained, must prevail even though contrary to the apparent grammatical construction. . . .

And there are cases where, instead of applying qualifying words and phrases to their next antecedent, as strict grammatical construction might require, they are applied distributively to that part of the subject matter to which

they appear by the context most properly to relate.

To the same effect, 73 Am Jur 2d, "Statutes," 230, states, in part:

The last antecedent, within the meaning of this rule, has been regarded as the last word which can be made an antecedent without impairing the

meaning of the sentence. This rule of statutory construction, however, is not controlling or inflexible. The rule is not applicable

where a further extension or inclusion is clearly required by the intent and meaning of the context, or disclosed by the entire act.

Faced with a similar-problem of grammatical construction Mr. Justice Brandeis, writing for the court in Porto Rico Ry., Light & Power Co. v. Mor.

253 U.S. 345, 40 S. Ct. 516 (1920) , stated: "When several words are followed by a clause which is applicable as much to the first and other words as to the last, the natural construction of the language demands that the clause be read as applicable to all." 40 S. Ct. at 518.

As the above discussion indicates, the Department followed accepted usage in finding that, considering the context in which it appears, the clause "for a period of 1 year after the effective date of filing," is as much applicable to rates given "final approval" as to rates "deemed approved." 2/ In this connection it is noteworthy that the statutory provision placing a time limit upon the Department within which it must "finalize" its review, subsection 627.06(2)(a)1 (known as the "file and use" provision) is the same provision containing the "deemed approved" language. By contrast, subsection 627.062(2)(a)2 (the "use and file" provision), contains no time limit for the Department's review and approval or disapproval of rates, and does not contain a "deemed approved" provision. Thus, formal "final approval" and approval under the "deemed approved" provision simply identify the two ways in which approval may be obtained under the "file and use" procedures.

Finally, as argued by the Department, the concept embraced by the hearing officer - and urged by Fortune on appeal - that once "finally approved" a rate remains thereafter forever approved, is not only contrary to the expressed purposes of the rating law and the provision for review for excessiveness "at any time," but is also inconsistent with statutory directives enumerating factors that the Department shall consider in the reviewing process. These factors, under subsections 627.062(2)(b), 1-13, (c), (d) and (e), include among other things the insurer's loss experience; expenses; income from invested premiums; the cost of reinsurance; trend factors, including trends in actual losses; profits received in relation to the risk involved; and other relevant factors which impact on the frequency or severity of claims or upon expenses.

It is apparent, as the Department urges, that the factors involved in determining the excessiveness of rates are not constant, but are variable over a period of time. we agree with the Department's conclusion that to restrict the Department's reviewing authority as urged by Fortune would tend to limit the Department's ability to discharge its legislatively delegated duties in a manner not intended by the Legislature.

Accordingly, the order appealed is AFFIRMED. KAHN and DAY/IS JJ., CONCUR.

ENDNOTES

1/ We have stated Fortune's view as reflected by its brief. However, we note that at oral argument before this court, Fortune's counsel conceded that the "period of 1 year" language of the statute was capable of two interpretations, and that the one adopted by the hearing officer made "more sense."

2/ The present case thus appears to be an instance permitting the application of the "possible presumption," referred to by Professor Reed Dickerson, "that the word `or' is used in the inclusive sense of `A or B, or both,' unless the context affirmatively shows that it is used in the exclusive sense of `A or B, but not both.'" Dickerson, The Interpretation and Application of Statutes, p 233 (Little, Brown & Co., 1975).

Docket for Case No: 94-002002

Orders for Case No: 94-002002