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  3. Form Matters: Appeals Court Rejects Insurer’s Rate Increase Because of Submission Error

The Massachusetts Appeals Court has again reminded litigants of the necessity of following procedures in administrative (make that all) matters.  In Genworth Life Ins. Co v. Commissioner of Insurance, No. 18-P-55 (June 3, 2019), the Appeals Court rejected Genworth’s appeal of the trial court’s summary judgment against Genworth on the basis that Genworth “had not followed the proper procedure to secure approval for proposed rate increases for long-term care insurance.”

In a bulletin released in 2008 (2008-08 bulletin), the commissioner announced that all filings by insurance carriers doing business in Massachusetts must be made using the Division of Insurance’s (division) system for electronic rate and form filing (SERFF)

Though Genworth filed its request for rate increases through SERFF, it amended its filings through SERFF to change the requested rate increase, but never made any filing through SERFF that sought a specific deadline for the implementation of its requested rate increases.  After some negotiations and significant delay in the approval process, Genworth sent letters to the commissioner through e-mail and Federal Express, but not through SERFF.  The letters cited G. L. c. 175, § 108, which, Genworth argued, in combination with G. L. c. 175, § 193F, constituted a so-called “deemer provision” whereby Genworth’s requested rate increase was “deemed approved” when the commissioner did not explicitly disapprove the increase within thirty days.

But the instructions to the Commissioner’s 2008-08 bulletin state explicitly, under the section titled “Deemer Provision,” that “[t]his section does not apply . . . to any filings that are effective on approval.”  The Appeals Court deferred to this interpretation, noting that “[w]e review questions of statutory interpretation de novo. . . . [However, w]e give substantial deference to a reasonable interpretation of a statute by the administrative agency charged with its administration enforcement.” Further, “an administrative agency may use sub-regulatory guidance to ‘fill in the details or clear up an ambiguity of an established policy’ without resort to formal rulemaking as long as it does not contradict its enabling statute or preexisting regulations.’”

The Appeals Court applied these precedents noting that the 2008-08 bulletin mandating the use of SERFF “did not conflict in any way with the relevant statutes but, rather, provided a method to implement them — a method with which Genworth clearly was familiar, having filed its 2012 rate increase proposal through SERFF.”

The lesson here—one the appellate courts frequently teach—is that strict compliance with statutory or other procedural requirements can be essential.