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NATIONAL COUNCIL ON COMPENSATION INS. v. TODD11/3/1995
The opinion of the court was delivered by
This is an appeal by the Kansas Insurance Department (KID). The trial court held that K.A.R. 40-3-50, a regulation promulgated by KID, exceeded the statutory authority of K.S.A. 40-1117, which KID relied on in promulgating the regulation. The trial court also found the regulation constituted a public taking without just compensation , thereby violating the 5th and 14th Amendments of the United States Constitution.
The regulation in question was adopted by KID at the request of the Kansas Association of Insurance Agents. The regulation has the practical effect of shifting part of the cost of insurance agents doing business from the insurance agents to all workers compensation insurance purchasers in this state.
The appellee, the National Council on Compensation Insurance (NCCI), is a free-standing, not-for-profit corporation which is totally owned by 700 member insurance carriers. NCCI is in the business of developing workers compensation premium rates which are used throughout the United States by insurance companies marketing workers compensation insurance.
NCCI develops premium rates for approximately 225 insurers in Kansas who write workers compensation insurance. It is the only licensed rating organization in Kansas which develops workers compensation insurance rates. NCCI develops these rates by gathering figures from the employer-insured and setting exposure factors. At the time of this lawsuit, NCCI provided two sets of worksheets to member insurance carriers upon request at no charge and instructed the carrier to furnish one copy to the insured. Currently,
NCCI sends a worksheet directly to the insured on an annual basis at no charge.
Insureds and independent insurance agents utilize the worksheets for various reasons. When an insured attempts to buy workers compensation insurance, its agent submits a worksheet to an insurance carrier. The carrier uses the worksheet to determine if it will offer a workers compensation quote to the employer. Moreover, insureds and agents utilize the worksheets to determine that NCCI and the insurance carrier calculated an accurate premium.
K.S.A. 40-1117 requires rating organizations such as NCCI to provide insureds and their agents direct access to the worksheets upon request. K.S.A. 40-1117 states in pertinent part:
"Every rating organization and every insurer which makes its own rates shall, within a reasonable time after receiving written request therefor, furnish to any insured affected by a rate made by it, or to the authorized representative of such insured, all pertinent information as to such rate. Every rating organization and every insurer which makes its own rates shall provide within this state reasonable means whereby any person aggrieved by the application of its rating system may be heard, in person or by authorized representative, on written request to review the manner in which such rating system has been applied in connection with the insurance afforded such person."
In complying with the statute, NCCI incurs a regular and repeated cost every time it retrieves, copies, and mails a worksheet. The persons requesting the worksheets, thereby incurring the distribution cost, are either insurance agents who need the worksheet information to attract new clients or insureds and their agents who need to replace misplaced worksheets. Through an assessment, the insurance carriers compensate NCCI for the initial worksheets. However, the insurance carriers do not compensate NCCI to retrieve, copy, and mail out a worksheet every time an insured or agent requests one. Thus, to recover its distribution
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