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Anzinger v. Ill. St. Med. Inter-ins. Exch.





Appeal from the Circuit Court of Cook County; the Hon. Joseph M. Wosik, Judge, presiding.


The plaintiffs, who are emergency room physicians licensed to practice in Illinois, appeal the circuit court's dismissal of their class action complaint against defendant, Illinois State Medical Inter-Insurance Exchange (ISMIE), to recover what was claimed to be excessive premiums they had paid for medical malpractice insurance. ISMIE is a physician owned and controlled reciprocal insurance company which writes medical malpractice insurance for Illinois physicians. The premiums plaintiffs claimed to be excessive were collected pursuant to a rate schedule filed with the Director of Insurance (Director), and subsequently approved by him following a hearing. Later the rate in question was found to be excessive and unfairly discriminatory by the circuit court of Cook County on judicial review. This court affirmed the circuit court's decision. Anzinger v. O'Connor (1982), 109 Ill. App.3d 550, 440 N.E.2d 1014.

The plaintiffs initially challenged defendant's 1977 rate and classification filing as it pertained to emergency room physicians by filing a petition with the Director seeking review of the rates charged by the defendant. The plaintiffs asserted that the rates did not conform with the requirements and standards of the Illinois Insurance Code (Ill. Rev. Stat. 1977, ch. 73, par. 613 et seq.). Specifically, the plaintiffs contended that the rates charged to emergency room physicians violated section 155.18(b) of the Insurance Code which prohibited insurance rates that are excessive and unfairly discriminatory. Ill. Rev. Stat. 1977, ch. 73, par. 767.18(b).

Following a hearing convened by the Director and conducted before a hearing officer appointed by the Director, the classification system was found not unfairly discriminatory towards emergency room physicians and the rates charged were found not to be excessive. The Director adopted the findings of the hearing officer and determined on March 24, 1980, that the rates charged by ISMIE were permissible. Subsequently, as previously stated, the circuit court reversed the decision of the Director as contrary to the manifest weight of the evidence and found the rates charged were in fact unfairly discriminatory and excessive. Thereafter, upon remand from the appellate court following its decision affirming the trial court's decision, the Director, on May 31, 1983, vacated his previous order, reversed his findings and prohibited use of the successfully challenged rates after July 1, 1983, pursuant to section 155.18(d)(1) of the Illinois Insurance Code (Ill. Rev. Stat. 1983, ch. 73, par. 767.18(d)(1)).

The plaintiffs then brought the instant action on behalf of themselves and all other emergency room physicians who purchased medical liability insurance from ISMIE between July 1, 1977, and June 30, 1983. These dates represented the period in which the defendant collected premiums under the questioned rate. The defendant, ISMIE, filed two motions, one to strike plaintiffs' complaint and dismiss the action under section 2-615 of the Code of Civil Procedure for failure to state cause of action, and a second requesting an involuntary dismissal of the action under section 2-619 of the Code for various other reasons. (Ill. Rev. Stat. 1983, ch. 110, pars. 2-615, 2-619.) Thereafter, on July 12, 1984, the trial court granted both motions and dismissed the plaintiffs' suit with prejudice.

The plaintiffs in their appeal urge this court to recognize an implied right of action under section 155.18 of the Insurance Code to recover premiums paid to an insurance company that are ultimately determined to be excessive and unfairly discriminatory under the standards set forth in that section. The plaintiffs submit that a private right of action may be implied here under the same rationale that our supreme court utilized when it implied a private right of action under the Real Estate Brokers and Salesmen License Act in Sawyer Realty Group, Inc. v. Jarvis Corp. (1982), 89 Ill.2d 379, 432 N.E.2d 849. Such an action would be consistent, plaintiffs argue, with the underlying policy of the Insurance Code and is necessary to effectuate the purpose of the statute itself since the premiums have been judicially determined to be in violation of the Code and the Director has only prospective enforcement authority.

ISMIE, on the other hand, contends that the situation here is quite different than that presented in the Sawyer case and the other cases cited by the plaintiff. This case is a rate case where the questioned rate was adopted pursuant to a statute which established a legislatively approved scheme of rate making, and, hence, no right to a refund exists, the defendant contends, express or implied. The system here, ISMIE says, was one of prospective rate regulation, and thus, there was no authority for the Director to order, or for a private litigant to claim, a refund of premiums paid under a contract of insurance issued when the rate was in effect, even if the rate was later disapproved.

In support of this contention, the defendant relies on Mandel Brothers, Inc. v. Chicago Tunnel Terminal Co. (1954), 2 Ill.2d 205, 117 N.E.2d 774, where the court held that an authorized rate, later set aside on judicial review, cannot be deemed excessive for the purpose of awarding reparations. The court there said that a private action for damages would not lie and there could be no recovery of the difference between the old and new rates under the circumstances unless a right of action was specifically conferred by statute. Here, as the defendant points out, no such right was granted under the Insurance Code. Also, the defendant further contends that, as Mandel Brothers noted, any attempt to refund payment made pursuant to an approved rate would be inconsistent with the requirement of the statutory scheme that the rate must be charged until it is set aside or subsequently disapproved.

We concur with the defendant's argument that the policy of the statutory scheme under the circumstances here does not allow for the imputation of a private cause of action. Even in the Sawyer case, cited by the plaintiffs, the court there expressly stated that a private right of action cannot always be implied. The court said:

"If there is no indication that the remedies available are only those the legislature expressed in the Act, [and] then where it is consistent with the underlying purpose of the Act and necessary to achieve the aim of the legislation, [then] a private right of action can be implied. (Kelsay v. Motorola, Inc. (1978), 74 Ill.2d 172; Sherman v. Field Clinic (1979), 74 Ill. App.3d 21.) The court looks to the totality of circumstances in endeavoring to discover legislative intent. Hoover v. May Department Stores Co. (1979), 77 Ill.2d 93." Sawyer Realty Group, Inc. v. Jarvis Corp. (1982), 89 Ill.2d 379, 386, 432 N.E.2d 849.

Here the statute clearly sets forth the remedies that are available, and where as here, the particular rates, i.e., charges, were, following a hearing, approved by the Director, an implied right of action would clearly be inconsistent with the policy and purpose of the Act.

Rate making by government, historically, has been considered to be prospective only because government is viewed as acting in its legislative capacity when it sets rates, and it is a long standing principle that the legislature acts prospectively and not retroactively. (Poor, Utility Rates Pending Judicial Review: A Riddle Wrapped in a Mystery in Illinois, 17 J. Mar. L. Rev. 743, 752-56 (1984).) This was the basis for the proposition recognized and set forth in Mandel Brothers, Inc. v. Chicago Tunnel Terminal Co. (1954), 2 Ill.2d 205, 117 N.E.2d 774, that the approval of the schedule of rates there was legislative in character and prospective in operation, and thus, afforded no basis for a right of action for any reparation or damages where the rates were subsequently reduced or set aside.

The common law right to recover reparations for unreasonable charges had been superceded, the Mandel Brothers court observed, by the enactment of the statute there. At common law, certain enterprises, most notably common carriers, were considered to owe a special duty to serve the public at large and to do so at a reasonable rate because of the nature of their function. (See Arizona Grocery Co. v. Atchison, Topeka & Santa Fe Ry. Co. (1932), 284 U.S. 370, 76 L.Ed. 348, 52 S.Ct. 183; Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co. (1907), 204 U.S. 426, 51 L.Ed. 553, 27 S.Ct. 350.) Reparation for these charges would then be awarded to the customer in much the same way as they would be awarded in the usual breach of contract action. Poor, Utility Rates Pending Judicial Review: A Riddle Wrapped in a Mystery in Illinois, 17 J. Mar. L. Rev. 743, 753 (1984).

However, when government assumed the burden of determining through its administrative agencies or bodies what were reasonable rates, it did so, as stated above, in its legislative capacity and only in a prospective manner. Thus, when the agency or body sets the rates, these then are the only lawful rates that can be charged and remain such until overturned or set aside by a court. Again, as the court in Mandel Brothers stated, there is no basis for a refund under such circumstances if a rate was subsequently set aside because the government agency had determined that the initial rate was reasonable and that only this rate could be charged. It would be inconsistent with the scheme of the statute itself, the court in Mandel Brothers said, if, in charging ...

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