Filed Rate Doctrine No Bar to Rate Claims

By Don R. Sampen, published, Chicago Daily Law Bulletin March 12, 2019

On certified questions, the 5th District Appellate Court recently held that the filed rate doctrine does not bar claims against an insurance company for deceptive and unfair business practices regarding automobile insurance rates. Further, the court held that the Illinois Department of Insurance lacks primary jurisdiction to determine whether conduct by an insurance company constitutes a deceptive and unfair practice.

The class plaintiffs in Corbin v. Allstate Corp., 2019 IL App (5th) 170296 (Jan. 29, 2019), were represented by, among other law firms, Mehri & Skalet PLLC of Washington, D.C. HeplerBroom LLC of Edwardsville represented the defendant Allstate-related insurance companies.

The plaintiffs were Illinois residents who purchased auto insurance from Allstate for two decades or more. They claimed that Allstate charged them and other longtime policyholders higher premium rates than new customers.

Allstate did so, according to the plaintiffs, because it determined that longer term policyholders were more willing to tolerate higher premiums than newer customers, who were more price-sensitive.

The plaintiffs brought suit alleging that Allstate used the customer-longevity no-risk-based factor to calculate rates without disclosing its use in rate filings with the Illinois Department of Insurance. Two counts of their complaint alleged that Allstate had engaged in unfair and deceptive practices under the Consumer Fraud Act. A third count alleged unjust enrichment.

Allstate moved to dismiss based on the filed rate doctrine and the primary jurisdiction doctrine. The filed rate doctrine protects regulated entities from civil actions if the entity is required to file its rates with the governing regulatory agency and the agency has the authority to set, approve or disapprove rates. Under the doctrine, any rate set by the agency is per se reasonable.

The primary jurisdiction doctrine holds that, even if the circuit court has jurisdiction over a matter, the court should, in some instances, stay the judicial proceeding in favor of an administrative agency.

The stay would apply where the agency also has jurisdiction and specialized expertise in the matter and a need exists for uniformity in the handling of the subject matter.

The trial court denied Allstate’s motion but, at the same time, certified two questions for appeal under Illinois Supreme Court Rule 308. The two questions were whether either doctrine should apply with respect to the plaintiffs’ claims regarding unfair or deceptive premium rates.

Filed rate analysis

In an opinion by Justice Judy L. Cates, the 5th District answered no to the applicability of each doctrine.

With respect to the filed rate doctrine, Cates observed that the Illinois Administrative Code requires companies which write specific types of insurance, including auto insurance, to file their rates and rules for applying the rates with the Department of Insurance. The department, however, does not have authority to approve or disapprove the rates.

Cates further noted that, before 1969, Illinois law required “prior approval” of insurance rates. But after that time, an open competition rating law went into effect. The law had a sunset provision, but after the sunset deadline, the legislature neither reinstated the “prior approval” law nor enacted a new rating law. Rather, the legislature appears to have determined that open competition would remain in effect.

As a result, Allstate was free to establish its rates without approval or disapproval by the insurance department. Hence, the filed rate doctrine could not apply where, as here, the state has embraced a practice of open competition in regard to rate-setting for auto insurance.

Primary jurisdiction analysis

As to primary jurisdiction, Cates found that the Insurance Code prohibits unfair methods of competition and deceptive practices. It also gives the Insurance Department the authority to investigate such practices. See 215 ILCS 5/423, 424, 425, 427, 429. The department, however, has no enforcement authority but may refer a matter to the state attorney general’s office for the filing of a complaint.

Under these provisions, the department does not have primary or exclusive authority in the area of regulation of deceptive prices by insurance companies. Cates further said that Allstate had not shown that the department has any specialized knowledge in the area. Unfair and deceptive practices, moreover, fall within the conventional competence of the Illinois courts.

She, therefore, found that the primary jurisdiction doctrine does not apply.

After so determining, Cates briefly distinguished Schilke v. Wachovia Mortgage FSB, 758 F.Supp.2d 549 (N.D. Ill. 2010), aff’d on other grounds, 735 F.3d 601 (7th Cir. 2013), on which the dissent relied. In that case, a federal district court found that the filed rate doctrine would apply to claims against a property insurer. Although the 7th U.S. Circuit Court of Appeals affirmed, it did so on other grounds and in the process questioned the applicability of the doctrine.

Cates indicated the 5th District panel majority’s agreement with the skepticism express by the 7th Circuit. Accordingly, the 5th District found both the filed rate and primary jurisdiction doctrines inapplicable.

Justice James R. Moore dissented, relying in part on the Schilke case for the filed rate doctrine. He further stated that the primary jurisdiction doctrine should apply because of the Insurance Department’s technical expertise and need for uniform administrative standards.

Key point

According to the panel majority, neither the filed rate doctrine nor the primary jurisdiction doctrine justify a dismissal or stay in private litigation brought against an insurance carrier in Illinois based on claims of false or deceptive premium rates.