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Santomenno v. Allmerica Financial Corp.

January 15, 2008


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, L-2533-04.

Per curiam.


Argued November 26, 2007

Before Judges Lintner and Alvarez.

In 2004 plaintiffs, Rocco Santomenno, and his wife, Wanda DiPaola, filed a complaint alleging that the Hanover Insurance Company (defendant),*fn1 had incorrectly applied its tier rating plan in calculating their automobile insurance premium. They contend that because they had been policy holders with defendant for more years than credited to them, they are entitled to a lower rate. Defendant contends that its tier rating plan requires continuous, non-interrupted years of coverage with it, and is inapplicable to plaintiffs.

Before filing suit, plaintiffs turned to the Department of Banking and Insurance (DOBI), whose ombudsman, after investigation, concluded that defendant acted "in accordance with the rules and regulations of the State of New Jersey." Plaintiffs continued their coverage with defendant and thereafter filed the proposed class action in the Law Division. Defendant subsequently filed a motion for summary judgment while plaintiffs cross-moved for class certification. Defendant's motion was granted as the judge found plaintiffs' claims were barred by the filed rate doctrine. This appeal followed. We affirm.

The filed rate, or as it is sometimes called, filed tariff doctrine, "is a product of the deference which courts give to the ratemaking and regulatory processes of administrative bodies." Richardson v. Standard Guar. Ins. Co., 371 N.J. Super. 449, 459-60 (App. Div. 2004). This "doctrine 'forbids a regulated entity [from] charg[ing] rates . . . other than those properly filed with the appropriate . . . regulatory authority.'" Weinberg v. Sprint Corp., 173 N.J. 233, 242 (2002)) (quoting Fax Telecommunicaciones, Inc. v. AT&T, 138 F.3d 479, 488 (2d Cir. 1998)). In other words, it serves "to 'preserve the regulating agency's authority to determine the reasonableness of rates' and to insure that the regulated entity 'charge[s] only those rates that the agency has approved or been made aware of as the law may require.'" Richardson, supra, 371 N.J. Super. at 458-60 (quoting H.J. Inc. v. Nw. Bell Tel. Co., 954 F.2d 485, 488 (8th Cir.), cert. denied, 504 U.S. 957, 112 S.Ct. 2306, 119 L.Ed. 2d 228 (1992)) (alteration in original).

Every automobile insurer must file with DOBI its rating system for calculating premiums. N.J.S.A. 17:29A-6. Only approved rates can be charged. N.J.S.A. 17:29A-6; N.J.S.A. 17:29A-15. Insurers are permitted to adopt rating systems, whereby they create tiers, or categories, calculated on the risk characteristics of drivers. N.J.A.C. 11:3-19A.1 to -19A.2; see N.J.A.C. 11:3-19A.5. The system has to be revenue neutral, i.e., overall revenue to the insurer from all policy holders must remain the same. N.J.A.C. 11:3-16A.9. The tier system operates generally by charging drivers associated with higher risk factors higher premiums, while those with lower risk factors are assessed lower premiums. See N.J.A.C. 11:3-19A.3(c) (explaining that "insurers shall demonstrate that the expected losses between the tiers will vary in accordance with the risk characteristics.") Insurers that adopt a tier rating system must file a rating plan with DOBI along with the underwriting rules applicable to each rate level. N.J.S.A. 17:29A-46.1 to -46.2. The underwriting rules must also be approved. N.J.S.A. 17:29A-46.2(b); N.J.A.C. 11:3-19A.3(a).

In this case, the disputed language, drafted by defendant, states: "[n]amed [i]nsureds with Hanover for [ten] years or more" receive minus six scoring points, those insured for "at least [five] years but less than [ten] years" receive minus four scoring points, those insured for "at least [two] years but less than [five] years" receive minus two scoring points, and those insured with another insurance company for the requisite periods of time listed above receive half the scoring points of their Hanover counterparts. Plaintiffs were insured by defendant from 1995 through 1997, as well as from 2000 through 2004. Defendant calculated plaintiffs' premium solely on the continuous coverage from 2000 onward and excluded the years 1995 through 1997.

In March 1998, defendant submitted its entire rate plan along with supporting actuarial data to DOBI. It was approved in December 1998. The submission included data supporting defendant's "continuous years with Hanover" factor, demonstrating that long time policyholders have lower "loss ratios" than those who are policyholders for shorter periods of time. Defendant has no data about insureds who had Hanover Insurance, switched to another company, and then switched back. Defendant also provided data to the effect that new policy holders as a group had a higher loss ratio than current policy holders.

The filed rate doctrine, as the motion judge concluded, requires dismissal of plaintiff's complaint. The doctrine prohibits a regulated entity from charging rates other than those filed with the overseeing agency. Weinberg, supra, 173 N.J. at 242 (quoting Fax Telecommunicaciones, supra, 138 F.3d at 488). Customers of the regulated entity are presumed to have knowledge of the filed rate. Ibid. (quoting Fax Telecommunicaciones, supra, 138 F.3d at 489). The doctrine bars relief "where the damage claims are premised on state contract principles, consumer fraud, or other bases on which plaintiffs seek to enforce a rate other than the filed rate." Id. at 243. In other words, the consumer is considered not to have suffered an ascertainable loss so long as the charge is in conformance with the filed rate.

Plaintiffs concede in their reply brief that the filed rate doctrine precludes them from judicial relief that would afford them a more favorable premium rate on their automobile insurance policy than that set forth in the filed rate. But they maintain that their claim only relates to an ambiguity in language, which should be construed in favor of the consumer, and that it would not therefore vary from the filed rate.

As the trial court found, the only actuarial information filed with DOBI as to the "years with Hanover" factor supports defendant's construction of coverage as meaning uninterrupted and continuous years. It did not include costs of initiating new policies in the interrupted coverage scenario. In fact, the interpretation urged by plaintiffs runs counter to the actuarial data, as new policyholders have a higher loss ratio than existing policyholders. If we were to construe the asserted ambiguity as urged by plaintiff, we would be interfering with the filed rate as adopted by DOBI.

In this case the manner in which premiums are calculated was approved by DOBI after it reviewed and approved the underwriting rules supported by actuarial data. Once defendant established that the filed rate is being charged, plaintiffs are presumed to know it, are presumed to have understood it, and are bound by it. The filed rate doctrine precludes plaintiffs' proposed interpretation of the relevant language because it is at variance with the filed rate. The doctrine requires a reading of the language to mean continuous, uninterrupted ...

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