INSURANCE ‑- UNFAIR PRACTICES ‑- DISCRIMINATION ‑- APPROVAL OF INSURANCE POLICY FORMS
(1) To the extent that RCW 49.60.030, a part of the state law against discrimination, recognizes a civil right to engage in insurance transactions without discrimination because of race, creed, color, national origin, sex, or the presence of any sensory, mental, or physical handicap, the state insurance commissioner is not required or authorized to enforce this right by means of the disapproval of insurance policy forms under RCW 48.18.110.
(2) General discussion of the impact of RCW 49.60.030 upon the legal ability of insurance companies to classify persons on the basis of physical or mental handicap.
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November 26, 1974
Honorable Karl Herrmann
Olympia, Washington 98504 Cite as: AGLO 1974 No. 100
By letter previously acknowledged you have requested our opinion on a question relating to the approval or disapproval of insurance policy forms under the state insurance code. We paraphrase that question as follows:
To the extent that RCW 49.60.030, a part of the state law against discrimination, recognizes a civil right to engage in insurance transactions without discrimination because of race, creed, color, national origin, sex, or the presence of any sensory, mental, or physical handicap, is the state insurance commissioner required or authorized to enforce this right by means of the disapproval of insurance policy forms under RCW 48.18.110?
In addition, turning to RCW 49.60.030, itself, you have also asked the following question:
"Does the statute bar an insurance company from classifying its risks based upon sensory, mental or physical handicaps?
"What constitutes a sensory, mental or physical handicap? Is a physical condition a physical handicap?
"May a life insurer deny life insurance to a person with a serious heart disease because of such disease? May it issue such insurance but charge a rated-up premium?
"May an automobile insurer deny automobile insurance to an epileptic or an alcoholic because of such conditions? May it place such person in a higher rate classification, or surcharge his or her premium?
[[Orig. Op. Page 2]]
"Is it permissible for a disability insurance contract to exclude or limit coverage for preexisting conditions?"
We answer your first question in the negative for the reasons set forth in our analysis; and in accordance with this answer, we respond to your remaining questions as set forth herein.
As last amended by § 1, chapter 32, Laws of 1974, 1st Ex. Sess., RCW 49.60.030, a part of the state law against discrimination, provides as follows, insofar as is here material:
"(1) The right to be free from discrimination because of race, creed, color, national origin, sex, or the presence of any sensory, mental, or physical handicap is recognized as and declared to be a civil right. This right shall include, but not be limited to:
". . .
"(e) The right to engage in insurance transactions without discrimination: PROVIDED HOWEVER, that different insurance rates may be continued and/or applied on the basis of sex when bona fide statistical differences in risk or exposure are substantiated.
". . ."
Your initial question, as above noted, involves your authority or responsibility to enforce this legislatively recognized "civil right" through the approval of insurance policy forms. Accordingly, in order to answer it, we must look to the provisions of the state insurance code which govern this subject.
RCW 48.18.100 provides, in subsection (1), that:
"(1) No insurance policy form other than surety bond forms, or application form where written application is required and is to be attached to the policy, or printed life or disability rider or endorsement form shall be issued, delivered, or used [[Orig. Op. Page 3]] unless it has been filed with and approved by the commissioner. . . ."
However, RCW 48.18.110 then sets forth a listing of what the legislature has therein declared to be the exclusive grounds for any disapproval of such forms. This statute provides, in full, as follows:
"(1) The commissioner shall disapprove any such form of policy, application, rider, or endorsement, or withdraw any previous approval thereof, only
"(a) if it is in any respect in violation of or does not comply with this code; or
"(b) if it does not comply with any controlling filing theretofore made and approved; or
"(c) if it contains or incorporates by reference any inconsistent, ambiguous or misleading clauses, or exceptions and conditions which unreasonably or deceptively affect the risk purported to be assumed in the general coverage of the contract; or
"(d) if it has any title, heading, or other indication of its provisions which is misleading; or
"(e) if purchase of insurance thereunder is being solicited by deceptive advertising.
"(2) In addition to the grounds for disapproval of any such form as provided in subsection (1) of this section, the commissioner may disapprove any form of disability insurance policy if the benefits provided therein are unreasonable in relation to the premium charged." (Emphasis supplied.)
As we read it, this statute does not currently enumerate, among the grounds listed for the disapproval of insurance policy forms, a possible violation by an insurer of any of the civil rights of a policyholder or prospective policyholder which are set forth in RCW 49.60.030, supra. Subsection (1)(a) does not apply [[Orig. Op. Page 4]] because, as above noted, that statute is a part of the state law against discrimination rather than the state insurance code; and none of the other grounds thus listed appear to cover this situation either. Therefore, likewise finding nothing in RCW 49.60.030 itself which purports to empower you, as the state insurance commissioner, to enforce its provisions in this manner, we must advise you that in our opinion, your threshold question to this effect is answerable in the negative.
Moreover, lest we be thought to be thus taking an unduly technical approach to this matter, we should explain further that we see nothing inconsistent in the legislature declaring that there is a right to be free from discrimination because of physical or mental handicap everywhere, including insurance transactions, and at the same time saying that the insurance commissioner is not to disapprove of insurance company forms with provisions that may impair this right. The declaration of right is substantive; the grant of power to the insurance commissioner is procedural. The civil right exists whether or not the insurance commissioner is empowered to enforce it in a particular way. Thus, a court could declare that a particular insurance policy or offering violates the RCW 49.60.030 civil rights of a person in the circumstances proved, and it could further order comprehensive relief through injunctive orders and an award of damages, even though the policy form involved was not one which the insurance commissioner was empowered to disapprove under RCW 48.18.110, supra.
In fact, with respect to the particular matter of physical or mental handicap to which the remaining questions in your request refer, it is also noteworthy that not even the state human rights commission, which administers the law against discrimination, has been empowered by the legislature to enforce the civil rights of handicapped persons in the area of insurance transactions. See, RCW 49.60.178, defining the scope of those "unfair practices" by insurers over which the board is to have jurisdiction as follows:
"It is an unfair practice for any person whether acting for himself or another in connection with an insurance transaction to fail or refuse to issue or renew insurance to any person because of sex, marital status, race, creed, color or national origin. . . ."
[[Orig. Op. Page 5]]
This statute (codifying § 6, chapter 141, Laws of 1973), it will be seen, presently omits "sensory, mental, or physical handicap" from the factors which will constitute an unfair practice if invoked by an insurance company as a reason for refusing to issue or renew insurance to an applicant. Thus, the legislature has apparently determined that the enforcement of the civil rights of the handicapped, insofar as insurance is concerned, should be entrusted solely to the courts rather than either to the human rights commission or the insurance commissioner's office. And, upon reflection, we can most certainly see sound policy reasons for this legislative decision.
As enacted by the legislature, RCW 49.60.030 was drafted with constitutional simplicity and generality:
"The right to be free from discrimination because of . . . the presence of any sensory, mental, or physical handicap is recognized as and declared to be a civil right. . . ."
Such language can take meaning only as applied to specific facts on a case‑by-case basis. In this it is like the constitutional concepts of "equal protection of the laws" and "due process of law,"1/ which have never been defined and never will be. Instead, these concepts simply have developed and continue to do so from an ever enlarging body of case law; i.e., judicial interpretation and application in specific case after case. Therefore, it was most sensible for the legislature, first, to have laid a foundation for the handicap discrimination law to be defined through its application; and, secondly, for it to have chosen with care the agency or agencies to perform this function.
This observation, of course, leads us to the problem of how best to respond to the remaining questions set forth in your opinion request. Under RCW 43.10.030, our statutory authority to issue written opinions to state officers is expressly limited, by subsection (5) of that statute, to the answering of ". . . legal questions relating to the duties of such officers." Thus, while we were able, earlier, to provide you with an opinion (AGO 1973 No. 21 [[to Karl Hermann, Insurance Commissioner on October 11, 1973]]) with respect to the impact of RCW 49.60.030, supra, upon life insurance rate differentials for men and women of the same age because [[Orig. Op. Page 6]] of your involvement in administering certain provisions of the insurance code expressly authorizing those sex-related differentials,2/ we cannot properly do so in this case in view of our disposition of your initial question. Nevertheless, based upon the reasoning of that earlier (October 11, 1973) opinion, a copy of which is enclosed for your immediate reference, we can here suggest to you a probable approach to those additional questions which we would expect the courts to take in resolving them on (as above stated) a case‑by-case basis.
To begin with, we would not expect the courts to deny the right of an insurer to classify persons on the basis of physical or mental handicaps for rate purposes simply because of the proviso which was added to RCW 49.60.030 by the 1974 legislature ‑ a proviso which, here repeated for ease of reference, states that:
". . . different insurance rates may be continued and/or applied on the basis of sex when bona fide statistical differences in risk or exposure are substantiated."
While some support for a contrary view is to be derived from the rule of statutory construction stated in the Latin maxim expressio unius est exclusio alterius (the principle that the expression of one thing excludes the implication of another), that maxium requires caution in its application. As indicated in State ex rel. Becker v. Wiley, 16 Wn.2d 340, 351, 133 P.2d 507 (1943), it should be invoked only as one means of ascertaining legislative intent, not as a means of defeating an underlying purpose of a statute. Other authority likewise cautions that ". . . there should be some evidence the legislature intended its application lest it prevail as a rule of construction despite the reason for and the spirit of the enactment . . ." Columbia Hospital Asso. v. Milwaukee, 35 Wis.2d 660, 669, 151 N.W.2d 750 (1967).
In this case, having been anacted as it was following our issuance of AGO 1973 No. 21, supra, in which we [[Orig. Op. Page 7]] said much the same thing,3/ we would view the purpose of the above proviso as being to confirm our analysis and interpretation of the law as it read without the proviso, but not to restrict our resulting sanction for the continuing use of rate differentials to those instances involving classification on the basis of sex alone.
This having been said, it next follows, then, in response to your second question, supra, that in accordance with our reasoning in AGO 1973 No. 21, we would likewise expect the courts also to allow such classification by insurers on the basis of physical or mental condition as is relevant to the legitimate insurance objectives for which it is made. In this manner, the group characteristic of insurance will be given due weight. Ibid, at p. 6, where we said of RCW 49.60.030, supra, insofar as it pertains to insurance transactions:
"The problem presented by this amendatory provision has few parallels in the heretofore decided civil rights cases because ordinarily civil rights, like constitutional rights, belong to individual persons and not to classes of persons. Generalities about the class of persons to which the complainant belongs are usually immaterial to his or her rights under a civil rights statute, even if these generalities are true. As the court said in Diaz v. Pan American World Airways, 442 F.2d 385 (5th Cir. 1971), cert. den. 404 U.S. 950, 30 L.Ed. 2d 267, 92 S.Ct. 275 (1971):
[[Orig. Op. Page 8]]
"'. . . Pan Am cannot exclude all males simply because most males may not perform adequately [as stewards-stewardesses].'
"Insurance, however, is something which by its very nature applies to classes of persons. Its function is to reduce individual risk by lumping persons together in classes, all members of the class then sharing the cost of the total risk of the class. A realistic application of a civil rights statute to insurance must, therefore, deal with the class characteristics of the insurance industry, and since most of the decided cases dealing with civil rights take an 'individualistic' approach, they are thus of little assistance in resolving the present question.
"It is well established by these cases, however, that any civil rights statute such as RCW 49.60.030, supra, is to be given a practical construction to promote the ends it is designed to achieve. Stated positively, those ends are the achievement of equality of opportunity under conditions that are racially and sexually neutral. See, McDonnell Douglas Corp. v. Green, U.S. , 36 L.ed [[L.Ed.]]2d 668, 93 S.Ct. (1973). Griggs v. Duke Power Co., 401 U.S. 424, 28 L.ed [[L.Ed.]]2d 158, 91 S.Ct. 849 (1971). But as indicated by the Supreme Court in the Griggs case, equality of treatment may be denied as much by equal application of a single standard to persons unequally situated as by application of unequal standards to persons equally situated."
In addition, sensible limitations on the application of the statute will in this way be recognized by the courts; and absurd results will be deemed not to be intended by the legislature. Wilson v. Lund, 74 Wn.2d 945, 447 P.2d 718 (1968).
In short, RCW 49.60.030 will not be read and applied as an absolute prohibition against any classifcation of insureds or potential insureds on the basis of handicap. Nevertheless, as is also to be seen from our earlier opinion, such classifications most certainly will be suspect and will have to be justified by the insurers involved. If they cannot be avoided, they will be permitted, but then only in a form that intrudes least into the protection of the civil rights which the statute is intended to afford.
[[Orig. Op. Page 9]]
For example, a heart disease such as is referred to in your fourth question is most certainly a "handicap" ‑ as is any physical, mental or sensory condition that an insurer views as a handicap in classifying persons for purposes of insurance coverage. Cf., your third question, supra. However, if those persons who suffer from this infirmity are known to have a different life expectancy than other persons of the same age, then their placement in their proper life expectancy classifications will not be a discrimination on the basis of handicap, but, instead, it will constitute the making of a proper placement based upon life expectancy. On the other hand, if this sort of adjustment is made for handicapped persons only, and not for other high risk persons such as habitual speeders, or persons engaged in dangerous occupations, then it will likely be held by the courts to constitute an illegal handicap discrimination under the statute.
Similarly, in the case of your fifth question, we would expect the courts to take a rather dim view of an insurer who either denies automobile insurance to a person suffering from alcoholism or epilepsy, or places such a person in a higher rate classification, simply because of his or her disease condition. But if, because of that condition, the individual's driving record discloses him to belong to a higher risk category than the normal driver, such a classification might be allowed.
As for your final question, this one appears to pose a somewhat different case. Repeated for ease of reference you have thus asked:
"Is it permissible for a disability insurance contract to exclude or limit coverage for preexisting conditions?"
In this situation, the insurer would not be denying coverage to the applicant because of his physical or mental condition. Instead, the insurer would simply be defining the scope of its coverage to exclude any and all preexisting conditions equally in the case of all applicants, and not merely in the case of those known to be presently handicapped by reason of such conditions. Therefore, again, however, speaking only in generalities and without reference to any specific factual situation, we would expect the courts to allow this to continue to be done ‑ even under the provisions of RCW 49.60.030.
[[Orig. Op. Page 10]]
It is hoped that the foregoing official response to your first question and informal treatment of your others will be of some assistance to you, and we trust that you will understand the reasons for this approach to the latter.
Very truly yours,
PHILIP H. AUSTIN
Deputy Attorney General
*** FOOTNOTES ***
1/United States Constitution, Amendment 14.
2/See, RCW 48.12.150, RCW 48.23.180 and RCW 48.23.350.
3/I.e., in the words of the syllabus to that opinion:
"The antidiscrimination provisions of §§ 3 and 6, chapter 141, Laws of 1973, do not now require the same life insurance premium rates to be charged to men and women of the same age in lieu of a continuing use by life insurers in this state of a reduced age factor in computing premium rates for women such as heretofore permitted by RCW 48.12.150 and RCW 48.23.350, and as apparently contemplated by RCW 48.23.180."