With insurance rates at stake, judge rolls back Washington’s executive power
The extent to which Washington state’s executive branch has been able to invoke the COVID-19 pandemic in its use of emergency rulings met a crossroads in court last Friday afternoon.
In a summary judgment hearing Oct. 8, the Thurston County Superior Court ruled against Washington State Insurance Commissioner Mike Kreidler’s emergency order to ban the use of credit histories when determining private insurance rates.
The emergency order from March of this year was based on the expiration of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act which, according to the commissioner, has artificially buoyed credit scores. Its expiration 120 days after the state of emergency is declared finished will end that protection, with rising insurance premiums likely to follow.
“Credit scoring models are no longer accurately reflected — or can no longer be accurate because of the change in the CARES Act reporting requirements, but also that … question[s] the future validity of credit insurance models that relied on information pre-pandemic where … circumstances have been vastly changed by the pandemic,” Kreidler’s representation said in Friday’s hearing.
“Consumers don’t seem to realize that they are in financial distress because of the artificial protections of the CARES Act at the time and temporary protections that limit the ability of accurate credit history information from being reported,” the defense continued. “This impacts … insurance consumers because, again, this demonstrates that some individuals are not having accurate credit histories reported to credit bureaus whose information is then used by credit insurers to determine how insurance premiums will be set.”
That was the basis by which the state insurance commissioner defended the emergency order on insurance rates. However, the extent to which the executive office can flex that muscle was called into question by the plaintiffs, American Property Casualty Insurance Association (APCIA), in Friday’s decision, which is what ultimately undid the intended consumer protection.
“The issue there is the commissioner by regulatory fiat in emergency rule [can] overturn authorization by legislative statutes that have been in place for nearly 19 or 20 years,” a representative of APCIA declared.
Ultimately, the judge ruled that, while there is precedent for executive law to be handed down in the event of a true state of emergency, and that the commissioner’s office had effectively persuaded that the expiration of the CARES Act was sufficient justification as such, the commissioner had simply failed to communicate that emergency to the public and to the state’s legislature on a well enough timeline, in a fashion which would allow for the normal processes of law making: public comment, advance notice, et cetera.
“The agency can dispense with many parts of regular or permanent rulemaking if it’s an emergency, and the agency has to find that good cause for immediate adoption, amendment, or repeal of a rule [which] is necessary for the preservation of public health, safety or general welfare, and that observing the time requirements for notice and opportunity to comment upon adoption of a permanent rule would be contrary to the public interest,” the judge said.
“I was persuaded … sufficiently in favor of the insurance commissioner … notice-and-comment rulemaking can be done quickly, [within] four to six months, and had the insurance commissioner initiated notice-and-comment rulemaking, and then learned that the CARES Act protections were going to go away in four months, that would have been a time to enact an emergency rule saying, ‘now we have an urgent need to act,'” the judge continued.
Much of the plaintiff’s case rested on the fact that Kreidler had been pursuing this policy for some time, even before the pandemic, and the fact that he did not communicate to the legislature that this was an emergency before his emergency ruling cast doubt on that justification.
“In January through March, the commissioner wasn’t telling the legislature, ‘we have this crisis impending,’” the judge added.
Thurston County ultimately ruled against Kreidler, without offering judgment on the plaintiff’s contention of the “arbitrary and capricious standard” from which the emergency order was handed down, potentially leaving the door open for future emergency orders, at least as far as Thurston County is concerned.
“I’m disappointed by today’s ruling,” the insurance commissioner wrote in a press release. “I have authority to take continuing action to protect consumers from the insurance industry’s unjust, secretive and unrealistic method to determine what consumers pay to insure their vehicles and homes.”
“I will continue the fight to permanently ban credit scoring and will be considering my options.”