In an opinion released yesterday, the Massachusetts Supreme Judicial Court affirmed the state insurance commissioner’s approval of proposed increases in property and casualty insurance rates. Ruling against the state Attorney General, the Court upheld the discretionary power of the Massachusetts Commissioner of Insurance to approve rate increases that exceed statutory maximums based on consideration of predicted hurricane loss effects and the cost of catastrophic risk reinsurance.

The case, Attorney General v. Commissioner of Insurance, No. SJC-09966 (Mass. Jan. 3, 2008), involves 2005 rate filings proposed by the Massachusetts Property Insurance Underwriting Association (MPIUA) that exceed the maximum rate increase caps for territories in which the MPUIA enjoys large market share, as set forth under Mass. G.L. c. 175C, § 5 (b). Relying on § 5 (c) of the same statute, which permits consideration of “predicted hurricane losses” and “the cost of catastrophic reinsurance” in setting rates “notwithstanding” the rate caps under § 5 (b), the commissioner approved the MPIUA’s rate proposal. The Massachusetts Attorney General appealed the commissioner’s decision.

Focusing on the term “notwithstanding,” the Court rejected arguments by the Attorney General that the purpose of § 5 (b) “was merely to direct the commissioner to consider hurricane losses and the cost of reinsurance when approving MPIUA’s rates,” subject to the rate increase cap set forth under § 5 (c). Instead, the Court affirmed the commissioner’s authority “to override the rate cap when consideration of the ‘predicted hurricane losses and the costs of catastrophe reinsurance’ require it” under § 5 (b).

By reinforcing the power of the Commissioner to approve insurance rate increases and decreases over the objection of the Attorney General, the decision may indicate how similar disputes concerning areas of insurance, such as workers' compensation and automobile, may be decided. A full copy of the decision is available here.