In a case that potentially raises substantial constitutional issues regarding rate-setting with respect to auto body repair labor rates, the Rhode Island Supreme Court granted petitions for a writ of certiorari filed by the Property Casualty Insurers' Association of America ("PCI") and the Department of Business Regulation ("DBR") on October 9, 2008. PCI and DBR asked the Court to hear their appeal from a decision by the Superior Court that construes R.I. Gen. Laws Section 27-29-4.4 as requiring insurers to use the results of a statutorily-mandated auto body labor rate survey as the sole basis for determining their prevailing auto body labor rates. The legislation was passed in 2006, and directs "[e]very insurance carrier authorized to sell motor vehicle liability insurance in the state [to] conduct an auto body repair labor rate." As mandated by the statute, the Department of Business Regulation promulgated regulations prescribing what must be included in the questionnaires sent to auto body shops and the reports that must be filed by insurers detailing the results of their surveys. The DBR construed the statute to require insurers to describe the formula or manner in which the insurer calculated or determined the prevailing labor rate it pays to auto body repair facilities. In addition, DBR established an applicability threshold that exempts insurers who are authorized to sell policies but write little or no auto body insurance in the state. The DBR's implementing regulation did not direct insurers to pay labor rates based solely on the questionnaire responses of the auto body shops.
Soon after the DBR issued its implementing regulation, the Auto Body Association of Rhode Island ("ABARI") sought a declaratory judgment from the agency construing the statute to require insurers to set their prevailing labor rates based solely on the results of the mandated survey. When DBR refused to grant this relief, ABARI appealed the agency's decision to superior court. The superior court reversed the agency's decision, reasoning that the statute was clear and, therefore, the agency's interpretation was not entitled to deference. The superior court issued an order requiring that the results of the survey be used as the sole basis for setting prevailing labor rates. And, even though ABARI had not challenged the applicability threshold adopted by DBR, the court struck that down, ruling that every authorized insurer must conduct the survey regardless of whether it has actually issued any private passenger liability insurance policies in the state.
Because Rhode Island law does not provide an appeal as of right from a superior court decision reviewing an agency determination, PCI and DBR petitioned the Supreme Court to hear the case, arguing that the superior court's decision is contrary to the language of the statute and failed to give adequate deference to the DBR's interpretation. They also challenged the court's ruling on the applicability threshold as a sua sponte ruling that had not been raised by the parties. The Supreme Court quickly granted certiorari. A briefing schedule likely will be set by the Court within the next month or two.
Edwards Angell Palmer & Dodge filed two amicus briefs urging the Supreme Court to grant the petitions, one on behalf of Amica Mutual Insurance Company and the other on behalf of Providence Mutual Insurance Company. An amicus brief was also filed by the American Insurance Association and the National Association of Mutual Insurance Companies. The amici pointed out that the construction adopted by the superior court raises substantial constitutional concerns because the decision effectively grants rate-making authority to Rhode Island's auto body repair shops without the requisite government oversight.