CONANT v. DEPARTMENT OF INSURANCE FINANCIAL INSTITUTIONS AND PROFESSIONAL

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Missouri Court of Appeals,Western District.

James F. CONANT, M.D. and Missouri Doctors Mutual Insurance Company, Appellants–Respondents, v. DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS AND PROFESSIONAL Registration, John M. Huff, Director of Department of Insurance, Financial Institutions and Professional Registration, and Frederick G. Heese, Chief Financial Examiner and Director of the Division of Insurance CompanyRegulation of the Department of Insurance, Financial Institutions and Professional Registration, Respondents–Appellants.

Nos. WD 76008, WD 76050.

Decided: March 11, 2014

Before Division Three: ANTHONY REX GABBERT, P.J., LISA WHITE HARDWICK, THOMAS H. NEWTON, JJ. Ronald R. Holliger, Tamara A. Kopp, Jeremiah Morgan, Jefferson City, for Respondents–Appellants. Audrey Hanson McIntosh, Jefferson City, for Appellants–Respondents.

James F. Conant, M.D. and Missouri Doctors Mutual Insurance Company (MoDocs collectively) appeal the circuit court's judgment granting the Department of Insurance (Department1 ) summary judgment on Counts II and III of MoDocs' three-count Amended Petition.2 MoDocs asserts three points on appeal. First, MoDocs asserts that the circuit court erred in granting summary judgment because it misinterpreted and misapplied Section 374.205, RSMo 2000,3 in determining that the Director's findings, conclusions, order and examination report was not a final administrative decision subject to review and did not create a justiciable controversy because Section 374.205.3(4) specifically states that “any such order” from the Director “shall be a final administrative order and may be appealed pursuant to § 536.150 RSMO.” Second, MoDocs contends that the court erred in granting summary judgment and misinterpreted and misapplied Section 536.150 in finding that, since the Director's report required no corrective action, there was also no review under Section 536.150, because this section provides for the review of any noncontested case where there is no other provision for review and the Director's findings, conclusions, order and examination report directly and adversely impacted MoDocs by failing to follow state law and regulations and by restating the financial condition of MoDocs as to the reserves and surplus as regards policyholders. Third, MoDocs contends that the circuit court erred in granting summary judgment pursuant to Section 536.021 because the Department and Director required MoDocs to set reserves and provide documentation in a manner and method not outlined by Missouri law or regulations and statements of general applicability as to the manner and method of the setting of reserves and the documentation required must be promulgated into rules under Section 536.021.

The Department cross-appeals. The Department contends that the circuit court erred in requiring that the examiner's verified report be physically revised with the Director's modifications and corrections, and argues that Missouri law does not contemplate such a change to a verified report. For the reasons which follow, we reverse and remand the circuit court's judgment as to MoDocs' appeal, and affirm the court's judgment on the Department's cross-appeal.

MoDocs is a Missouri not-for-profit insurance corporation, organized and existing under Chapter 383 RSMo. MoDocs is a mutual benefit corporation owned and operated by physician members-insureds that provides medical malpractice insurance to its members and is licensed in the state of Missouri. The Department is a state agency with authority to regulate certain insurance companies in the state of Missouri. Pursuant to Section 374.205.1(1), the Director of the Department is required to conduct a financial examination of every insurer licensed in Missouri at least once every five years, but may conduct an examination as often as the Director in his or her sole discretion deems appropriate. Every company from whom information is sought is required to provide the examiners timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents and any or all computer or other recordings relating to the property, assets, business and affairs of the company being examined. § 374.205.2(2). When making an examination, the Director may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the cost of which is borne directly by the company which is the subject of the examination. § 374.205.2(4).

On or about November 15, 2010, the Director commenced an examination of MoDocs for the time period covering January 1, 2007, through December 31, 2009. Pursuant to Section 374.205.3(2), a verified written report of the examination was completed and filed with the Department. MoDocs filed a response to the report, as authorized by statute, contending that critical aspects of the examination were not in compliance with the National Association of Insurance Commissioners' Financial Condition Examiner's Handbook and detailing how MoDocs believed the Examiner's calculations and ultimate conclusions regarding MoDocs' surpluses and reserves were in violation of the law.

Pursuant to Section 374.205.3(3)(a), the Director ultimately entered an order adopting the examination report with modifications and corrections. Thereafter, MoDocs filed a petition, followed by an amended petition, for review of the uncontested administrative decision and for declaratory judgment and injunctive relief. In Count I of its amended petition, MoDocs alleged that, although the Director had specifically modified, corrected and changed the final examination report in his order, the report had not been completely modified and corrected and the Department intended to publicly release the unchanged remainder of the report in violation of Section 374.205.4.

In Count II of its amended petition, MoDocs alleged that the Director's order and final examination report failed to comply with the National Association of Insurance Commissioners' Financial Condition Examiners' Handbook as required by Section 374.205.1, failed to comply with the Statutory Accounting Principles stated and relied upon by the Department, and applied additional unknown standards and accounting principles that have not been adopted by Missouri statute or Missouri regulations. MoDocs contended that the Director had no authority to restate MoDocs' financial condition in its order after determining that MoDocs had violated no law, regulation or prior order of the Director.

In Count III of its amended petition, MoDocs alleged that, as MoDocs had complied with Missouri statutes and regulations regarding its financial condition, the final examination report and order of the Director restating MoDocs' financial condition with regard to its reserves and surpluses was incorrect, unlawful, unreasonable, arbitrary, capricious and an abuse of discretion.

Along with denying the substantive allegations in MoDocs' petition, the Department moved for summary judgment on the grounds that the “court lacked jurisdiction over the subject matter” of MoDocs' claims because the Director's order did not affect or determine MoDocs' rights, duties, or privileges. The court ultimately granted summary judgment with regard to Counts II and III, concluding that it had no authority to review the decision of the Department that MoDocs challenged because the order issued by the Director of the Department was not a final administrative decision subject to review under Section 374.205, and MoDocs had no independent recourse pursuant to Section 536.150, because the order of the Director determined no legal rights, duties or privileges of MoDocs. Nevertheless, with regard to MoDocs' allegation in Count II that the Department had applied standards not adopted by Missouri statute or regulations, the court, in a subsequent judgment adopting its previous order, found that the Department's “action did not implicate a ‘rule.’ “ Additionally, while the court dismissed CountI of the amended petition, the court nevertheless ordered that the Director could only release the examination report in a form reflecting the modifications and corrections adopted by the Director and could not release the original examination report with the modifications and corrections listed separately. MoDocs appeals the court's grants of summary judgment. The Department cross-appeals and contests the court's order that the examination report only be released with physical modifications.

In MoDocs' first point on appeal, MoDocs contends that the court erred in granting summary judgment to the Department on the grounds that the Director's findings, conclusions, order and examination report was not a final administrative decision subject to review under Section 374.205 because Section 374.205.3(4) specifically states that any such order from the Director shall be a final administrative order and may be appealed pursuant to Section 536.150. MoDocs contends that the court erred in concluding that only an order issued by the Director requiring the company to take action is reviewable pursuant to Section 374.205 and, because the Director's order did not require MoDocs to take any action, the Director's order is not reviewable. We agree with MoDocs that Section 374.205 authorizes review of the Director's order.

“This [c]ourt's standard of review for a circuit court's grant of summary judgment is de novo.” American Federation of Teachers v. Ledbetter, 387 S.W.3d 360, 368 (Mo. banc 2012). Summary judgment is warranted when the moving party proves that “there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Rule 74.04(c)(6). We note, however, that the circuit court granted summary judgment on two stated grounds in its June 27, 2012 order which was incorporated into its December 10, 2012 judgment. First, that it had no authority to review the petition because the Director's decision was not a final administrative decision subject to review under Section 374.205. Second, because MoDocs lacked standing for independent review pursuant to Section 536.150 because the Director's order does not determine the legal rights, duties or privileges of MoDocs. If warranted on either of these grounds, dismissal of the petition, and not summary judgment, would have been the appropriate action by the court. Because summary judgment is inherently a merits-based disposition, we have held that even if a standing argument is raised in a motion for summary judgment, the court must still enter dismissal as opposed to summary judgment.4 Borges v. Missouri Public Entity Risk Management Fund, 358 S.W.3d 177, 183 (Mo.App.2012). Regardless, our review here is the same, as we also review the propriety of dismissal of a petition de novo. Estate of Austin, In re, 389 S.W.3d 168, 171 (Mo. banc 2013).

The main issue before us is one of statutory interpretation. Statutory interpretation is a question of law reviewed de novo. Hervey v. Dept. of Corrections, 379 S.W.3d 156, 163 (Mo. banc 2012). “[T]he primary rule of statutory interpretation is to give effect to legislative intent as reflected in the plain language of the statute.” Akins v. Director of Revenue, 303 S.W.3d 563, 565 (Mo. banc 2010). We look “beyond the plain meaning of the statute only when the language is ambiguous or would lead to an absurd or illogical result.” Id. “No portion of a statute is read in isolation, but rather is read in context to the entire statute, harmonizing all provisions.” Utility Service Co., Inc. v. Department of Labor and Indus. Relations, 331 S.W.3d 654, 658 (Mo. banc 2011).

Section 374.205 governs the procedure by which the Director of Insurance conducts examinations of insurance companies. With regard to the completed examination, Section 374.205.3(1) provides, in relevant part:

(3) Within thirty days of the end of the period allowed for the receipt of written submissions or rebuttals, the director shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers and either initiate legal action or enter an order:

(a) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the director, the director may order the company to take any action the director considers necessary and appropriate to cure such violation;

(b) Rejecting the examination report ․;

(c) Calling for an investigatory hearing ․; or

(d) Calling for such regulatory action as the director deems appropriate ․

(4) All orders entered pursuant to paragraph (a) of subdivision (3) of this subsection shall be accompanied by findings and conclusions resulting from the director's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals. Any such order shall be considered a final administrative decision and may be appealed pursuant to section 536.150 and shall be served upon the company by certified mail, together with a copy of the adopted examination report․

We find the plain language of the statute unambiguous. The statute plainly states that all orders entered pursuant to paragraph (a) of subdivision (3) “shall be considered a final administrative decision and may be appealed pursuant to section 536.150.” The statute does not state, as the Department contends, that only orders entered pursuant to Section 374.205.3(3)(a) that require company action are final and appealable.

The Department argues that because “order” is used in Section 374.205.3(3)(a) only when indicating “if the examination report reveals that the company is operating in violation of any law, regulation or prior order of the director, the director may order the company to take any action the director considers necessary and appropriate to cure such violation,” then the reference to “[a]ny such order shall be a final administrative decision and may be appealed” can only reference orders that require action. (Emphasis added).

First, we disagree that this is the only place within the statute where the word “order” is found. The Department ignores that immediately preceding the sentence that defines appealable orders the statute states: “All orders entered pursuant to paragraph (a) of subdivision (3) of this subsection shall be accompanied by findings and conclusions resulting from the director's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals.” (Emphasis added.) Immediately thereafter begins the sentence, “[a]ny such order․” Thus, “[a]ny such order” clearly applies to all orders entered pursuant to paragraph (a) of subdivision (3). One such order authorized to be entered pursuant to paragraph (a) of subdivision (3) is an order “[a]dopting the examination report as filed or with modification or corrections.”

The Department disagrees and argues that to conclude that an order adopting the examination report as filed or with modification or corrections is reviewable renders the statute superfluous since Section 374.205.3(4) requires the order subject to review be served “together with a copy of the adopted examination report.” The Department states that “[i]f the ‘adopted report’ was the order contemplated as subject to appeal, then there would be no need to distinguish between the two.” Yet, the Department's argument supposes that the ‘adopted report’ is an order in and of itself. It is not. This is particularly evident when considering that Section 374.205.3(4) also requires that all orders entered pursuant to (3)(a) be accompanied by findings and conclusions resulting from the Director's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals. Even here, the Director's order did not consist merely of a report, but additionally consisted of approximately ten pages of “Findings, Conclusions, and Order.”

Second, while the Department argues that “there is one, and only one, reference to an ‘order’ specifically in the applicable provision,” and, therefore, the plain language of the statute requires that the statute can only be referencing orders to take action, the Department's reading ignores relevant portions of the statute. This interpretation ignores that under Section 374.205.3(3) the Director may enter various orders including: (a) an order adopting the examination report as filed or with modification or corrections, or an order requiring the company to take action; (b) an order rejecting the examination report; (c) an order calling for an investigatory hearing; and (d) an order calling for regulatory action. However, while the Director is authorized to enter any of the aforementioned orders, only orders pursuant to (a) are final and appealable. Read in context, Section 374.205.3(4) clarifies that only orders made pursuant to (a), and not (b), (c), or (d), are final and appealable orders.

Additionally, Section 374.205.3(5) states:

Upon the adoption of the examination report pursuant to paragraph (a) of subdivision (3) of this subsection, the director shall continue to hold the content of the examination report as private and confidential information for a period of ten days except to the extent provided in this subdivision. Thereafter, the director may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication․

This provision makes no distinction between the types of orders in which an examination report is adopted for a court to be able to stay publication. The provision merely references adoption of the report under paragraph (a) of subdivision (3). Under the Department's interpretation, such a stay would only be possible for adopted examinations that are accompanied with an order for action. This provision makes no such distinction and is consistent with Section 374.205.3(4)'s provision for review of all orders entered pursuant to paragraph (a) of subdivision (3).

The Department also argues that “[a]ll insurance companies are subject to examination, and the output is an examination report ․ [s]imply being subject to administrative examination and a subsequent report, with no requirement to comply or take action, is not the denial of some legal right or entitlement to a privilege.” The Department characterizes the issue in this case as whether or not MoDocs has a legal right to not be subject to an examination report and the opinion of the Director. The Department compares the order issued by the Director in this case to an attorney general opinion—executive in nature and merely advisory—creating no justiciable rights that would allow for review under Section 536.150.

Here, we need not delve into the specific legal rights, duties or privileges that the Department's actions and/or the Director's order may have created under Section 536.150, because our legislature has provided specific review of the issue before us in Section 374.205.3(4). Where our legislature provides specifically for judicial review of a particular administrative agency's actions, Chapter 536 is not applicable.5 Ladd v. Missouri Bd. of Probation and Parole, 299 S.W.3d 33, 37 (Mo.App.2009). We note, however, that the issue here is not, as the Department characterizes, whether MoDocs has a legal right to avoid an examination report and Di rector's opinion. No party disputes the Department's right to conduct an examination and the Director's right to issue an order. Put another way, the Department espouses that the Department may avoid statutory mandates in the conduct of examinations, or the Director can abuse its discretion in an order regarding examinations, without ramification, as long as the Director does not ultimately order a company to take action. Such a conclusion would render Section 374.205.2(1), which requires that “[i]n conducting the examination, the examiner shall observe those guidelines and procedures set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners,” toothless.

We conclude, therefore, that Section 374.205.3(4) authorizes review of the Director's order and consequently grants MoDocs standing to appeal as the subject company of the Director's order.6 Point one is granted and we reverse and remand the court's judgment for consideration of the merits of MoDocs' petition.

As Point One is dispositive as to Point Two, we need not address Point Two. In MoDocs' third point on appeal, MoDocs contends that the circuit court erred in granting summary judgment pursuant to Section 536.021 because the Department and Director required MoDocs to set reserves and provide documentation in a manner and method not outlined by Missouri law or regulations and statements of general applicability as to the manner and method of the setting of reserves and the documentation required must be promulgated into rules under Section 536.021.

On December 10, 2012, the circuit court issued a Judgment incorporating its June 27, 2012, order. Therein the court found:

To the extent that the Court's June 27, 2012 order did not expressly deal with the § 536.012.9 RSMo issue in Count II, the Court determines that the Department's action did not implicate a “rule” and as such, the Respondents are entitled to judgment as a matter of law on that specific claim as well as all of Count II.”

With regard to Count II, the Court's June 27, 2012 order stated:

Count II of the second amended petition seeks a declaratory judgment regarding the alleged conflict between Missouri law and the conclusions reached in the Director's report and order. The Director is within his statutory authority to issue his report. Because this Court has concluded, for the reasons set forth below that there is no ongoing justiciable controversy, a declaratory judgment does not lie. Respondents are entitled to judgment as a matter of law on this count.

The reasons the court set forth for there being no justiciable controversy were, primarily, that because the Director did not order any corrective action, its order was not a final administrative decision subject to review under Section 374.205.4.

We find the court's conclusion that the Department's action did not implicate a “rule” to be a determination on the merits of MoDocs' claims and inconsistent with the court's initial conclusion that summary judgment was warranted because the court had no authority to consider the claims. As the court's December 10, 2012 judgment did not retract its June 27, 2012 determination that it could not review the claim, we have no way of determining the extent to which the claim was reviewed prior to the court issuing its December 10, 2012 judgment finding that the Department's action did not implicate a “rule.” Summary judgment may only be granted where “there is no genuine dispute as to the facts and that the facts as admitted show a legal right to judgment for the movant.” Bob DeGeorge Assocs., Inc. v. Hawthorn Bank, 377 S.W.3d 592, 596 (Mo. banc 2012). The pleadings show an ongoing dispute as to whether the Department followed statutorily prescribed guidelines in conducting the examination. MoDocs maintained in its reply to the Department's Statement of Uncontroverted Material Facts that the Department acted outside of its current regulations, thereby acting without promulgating rules. The court's order gives no indication that the dispute as to the facts regarding this issue was resolved, or indication as to how much consideration was given the matter in light of its joint conclusion that it had no authority to review it. Therefore, we cannot conclude that summary judgment was proper. Point three is granted to the degree that the court had authority to review the claim and must do so on remand. We take no position on the merits of that claim.

In the Department's cross-appeal, the Department argues that the circuit court erred in requiring that the examiner's verified report be physically revised with the Director's modifications and corrections, and argues that Missouri law does not contemplate such a change to a verified report. The Department argues that, if the Director publishes the examination report pursuant to Section 374.205.3(5), the published report must be the original report submitted to the Director by the examiner with the Director's modifications and corrections published separately. We disagree. Section 374.205.3(5) states:

Upon the adoption of the examination report pursuant to paragraph (a) of subdivision (3) of this subsection, the director shall continue to hold the content of the examination report as private and confidential information for a period of ten days except to the extent provided in this subdivision. Thereafter, the director may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication․

Here, the Director issued an order adopting the examination report with modifications and corrections. The very nature of something “modified” or “corrected” is that it has undergone change. Therefore, if the report is changed by the Director and adopted only as modified or corrected, then it is this modified/corrected report that is subject to discretional disclosure. It is the Director's order, and not the original examination itself, that becomes enforceable against the company if not reversed on appeal. The Director, as head of the Department, has the final word regarding Department conclusions and the Director's order supersedes advice given to the Director by Department examiners. If a part of the original examination report is modified or corrected by the Director, only the modified or corrected version is “adopted.” Contrary to the Department's contention, the public only has an interest in those parts of the examination that are adopted by the Director. To publish the original examination report separately, without incorporating the Director's modifications and corrections, could potentially mislead the public and suggest that the original examination is entitled to some deference when, in fact, only those portions of the examination adopted by the Director are so entitled.7 Point denied.

We conclude, therefore, that the circuit court did not err in finding that the report authorized for publication pursuant to Section 374.205.3(5) shall include only those portions of the Department's examination report that is adopted by the Director. Additionally, we conclude that the court erred in granting summary judgment to the Department because Section 374.205.3(4) authorizes review of the Director's order and consequently grants MoDocs standing to appeal as the subject company of the Director's order. We reverse the circuit court's judgment as to Counts II and III of MoDocs' first amended petition and remand with instructions to reinstate MoDocs' first amended petition with regard to those claims.

FOOTNOTES

1.  All respondents will be collectively referenced as “Department .”

2.  We note that “[t]he appellate court has jurisdiction over final judgments that dispose of all issues and leave nothing for future determination.” Maskill v. Cummins, 397 S.W.3d 27, 32 (Mo.App.2013). This court's jurisdiction was implicated when the circuit court issued its final judgment dismissing Count I and granting summary judgment to the Department on Counts II and III.

3.  All statutory references are to Missouri Revised Statutes 2000, as updated by the 2009 Cumulative Supplement, unless otherwise noted.

4.  We note that if the court correctly determined that it had no authority to entertain MoDocs' amended petition and/or address the merits of Counts II and III of that petition, then it also had no authority to address the merits of Count I of that petition or partially address the merits of Count II by finding that the Department's action implicated no “rule.”

5.  We have previously recognized the legislature's power to define standing. For example, in the case of economic competitor standing, we have found that “[a]n economic competitor may have standing to challenge an administrative decision adverse to its fiscal interests if there is a clear legislative policy to provide such.” State ex rel. St. Louis Retail Group v. Kraiberg, 343 S.W.3d 712, 717 (Mo.App.2011). In such cases, we have stated that the right exists “when the legislature has broadened the class of affected parties to include those not otherwise having a constitutionally recognized interest.” Id. (Internal quotations and citations omitted.)

6.  We note that, while the Department argues that the order adopting the examination report is merely advisory and does not create any justiciable rights such that MoDocs can appeal, the Department has taken the position in Rules promulgated by the Department that a company's mere receipt of a warrant for a market conduct examination is appealable. The Department's authority for pursuing a market conduct examination is Section 374.205, the same statute that provides authority for financial examinations. While Rule 20 CSR 100–8.002(L) states that a “market conduct examination” is separate and distinct from a financial examination of an insurer, which is what occurred here, Rule 20 CSR 100–8.008 allows a company to appeal whether the Director had “good cause” to even pursue a market conduct examination. The fact that the Director finds a company to have a justiciable interest in whether a market conduct examination even occurs, seems at odds with the Director's position here that a company has no justiciable interest in the actions of the Director prior to, during, or as a result of a financial examination regarding the company. Similarly, pursuant to Rule 20 CSR 100–8.018, an order issued by the Director merely accepting the market conduct examination report as filed or with modification or corrections is considered a final and appealable administrative decision. There is no requirement for an order requiring company action prior to appeal.

7.  The Department admits in its answer to MoDocs' amended petition that the medical malpractice market in Missouri is highly competitive and “information from the Department's Financial Examinations is already being used by competitors in advertising to Missouri physicians.” We presume this admission is in response to the record reflecting that, although the circuit court had placed the record in this case under seal, including the examination report, a competitor of MoDocs requested the record from the court which was then inadvertently released. Thereafter, the competitor apparently mailed and/or e-mai led information to approximately 175 individuals, some policyholders of MoDocs, questioning how policyholders were affected by MoDocs' appeal of the Director's order. The mailing directly quoted negative examination findings from page two of the Department's original examination report.

ANTHONY REX GABBERT, Judge.

All concur.

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