96-005981RE Preferred Mutual Insurance Company vs. Department Of Insurance Status: Closed DOAH Final Order on Friday, March 21, 1997.

Summary: Emergency rule which extended FWUA membership but failed to state emergency basis for the rule is invalid.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PREFFERED MUTUAL INSURANCE )

COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 96- 5981RE

)

DEPARTMENT OF INSURANCE, )

)

Respondent, )

and )

)

FLORIDA WINDSTORM UNDERWRITING )

ASSOCIATION, )

)

Intervenor. )

___________________________________)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings,

by its duly designated Administrative Law Judge, Mary Clark, held

a formal hearing in the above-styled case on January 16, 1997, in

Tallahassee, Florida.

APPEARANCES

For Petitioner: James C. Massie, Esquire

Janice G. Scott, Esquire

Massie & Scott

Post Office Box 10371

Tallahassee, Florida 32302-0371

For Respondent: Thomas D. Valentine, Esquire

Dep artment of Insurance

654A Larson Building

200 East Gaines Street

Tallahassee, Florida 32399-0307

For Intervenor: Daniel C. Brown, Esquire

Ken Donnelly, Esquire

Katz Kutter Haigler Alderman

Marks Bryant & Yon, P.A.

Highpoint Center, Suite 1200

106 East College Avenue

Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

Department of Insurance emergency rule 4ER95-1, effective

August 1, 1995, adopted by reference certain amendments to the

Florida Windstorm Underwriting Association (FWUA) Plan of

Operation and Articles of Agreement.

The amendments included a provision that membership in FWUA

shall terminate at the end of the association year during which

the member is no longer licensed to transact property insurance

in the state. Sued for an assessment to pay claims resulting

from Hurricane Opal, Preferred Mutual Insurance Company now

challenges the emergency rule, and more particularly the extended

membership provision.

Issues for disposition in this case a re the standing of

Preferred Mutual and the validity of 4ER95-1.

PRELIMINARY STATEMENT

The petition for administrative determination of the

invalidity of emergency rule 4ER95-1 was filed on December 24,

1996; the petition requests a determination that the rule is

invalid pursuant to sections 120.54(8) and (9), Florida Statutes

(1995), and seeks attorneys’ fees and costs pursuant to section

120.595(3), Florida Statutes (1996).

After a hearing, an order entered on January 13, 1997,

granted an unopposed motion for continuance and FWUA’s motion to

intervene (opposed by Preferred Mutual).

At the formal hearing Preferred Mutual presented the

testimony of its vice-president for research and development,

Lynn John Woodard; FWUA presented the testimony of its executive

director, Rebecca James Fussell. Preferred Mutual’s exhibits no.

1-9 were received in evidence; its exhibit no. 10, a letter with

attached return receipt, was marked for identification and taken

under advisement. FWUA’s exhibits no. 1-8 were received in

evidence. FWUA exhibit no. 9, a deposition of David Koschik; and

FWUA exhibit no. 10, with an attached certification, were marked

for identification and taken under advisement. The exhibits

taken under advisement are now received in evidence, but are of

limited probative value as discussed below.

After a February 6, 1997 telephone hearing, Preferred

Mutual’s motion for continuation of hearing, to re-open evidence

and for issuance of deposition subpoenas, was DENIED. (See order

entered February 6, 1997).

The formal hearing transcript was filed on January 31, 1997;

the parties filed proposed final orders on February 7 and

February 10, 1997.

FINDINGS OF FACT

The Parties

1. Petitioner, Preferred Mutual Insurance Company

(Preferred) is an advance premium cooperative organized under the

laws of the State of New York, with its principal place of

business in the State of New York.

2. During 1995, at least until September 24, 1995,

Preferred was a member of the Florida Windstorm Underwriting

Association (FWUA).

3. FWUA is an unincorporated association of private

insurance companies organized under the authority of section

627.351(2), Florida Statutes, to provide windstorm insurance

coverage to those “...applicants who are in good faith entitled

to, but are unable to procure, such insurance through ordinary

method.” Section 627.351(2)(a), Florida Statutes (1995). The

applicants are from geographical areas determined to be eligible

pursuant to section 627.351(2)(c), Florida Statutes.

4. The Department of Insurance (DOI) is the state agency

responsible for enforcing and interpreting the Florida Insurance

Code, including Chapters 624 through 631, Florida Statutes. Bill

Nelson is the Treasurer and Insurance Commissioner of the State

of Florida.

Hurricane Season

5. Hurricane Andrew occurred in August 1992, with lasting

impact on the insurance industry in Florida. In March 1993, DOI

approved new windstorm eligible areas including Dade and Broward

County, thus substantially increasing the exposure of FWUA to

potential loss.

6. In 1994 and 1995, in the event of a windstorm in its

covered territory, the only process available to FWUA to pay

claims exceeding funds on hand from premiums was to assess FWUA

members. In 1994, the Florida legislature amended section

627.351(2), Florida Statutes to limit assessments to ten percent

of gross written premiums for the state.

7. The FWUA board began investigating methods of meeting

its responsibility to continue paying claims on a timely basis.

The board directed its executive director to contact reinsurers

for proposals, but the proposals she received did not provide

sufficient coverage or were prohibitively costly. When this more

traditional method became unavailable, FWUA, in early 1995,

commenced seeking a $1 billion line-of-credit from the banking

industry.

8. By spring of 1995 the FWUA board and its executive

director were heavily involved in obtaining banking proposals,

negotiating with the banks and educating them regarding FWUA. In

May 1995, the board determined to negotiate further with Chase

Manhattan Bank, with other banks participating in syndication

through that bank. The education process included many telephone

calls and meetings to explain statutory restrictions, the

assessment pool and FWUA’s relationship to the voluntary market.

Once that process was accomplished, and after the banks were

given a deadline to decide whether they wanted to participate,

FWUA had to negotiate a credit extension contract acceptable to

the selected banking syndicate.

9. In its negotiations the syndicate insisted on

assurances that the FWUA membership base was reasonably stable

and predictable, and that assessments of members could reasonably

be expected to cover repayments to the banks. The banks, through

counsel, reviewed FWUA’s governing documents, and DOI and FWUA

drafted necessary amendments to the documents.

10. Meanwhile, the 1995 hurricane season commenced and

Hurricane Allison hit Florida the first week of June. It became

urgent that the line-of-credit contract be closed as soon as

possible before Labor Day when historically the hurricane season

is most active.

The Emergency Rule

11. On July 21, 1995, FWUA’s executive director, Rebecca

Fussell, sent amendments to the Plan of Operation and Articles of

Agreement to all FWUA members with a ballot form for their vote.

The three-page cover letter outlines the purpose of the line-of

credit and the need for immediate action by the members. The

letter also includes this language:

The above is a brief description of the

principal points covered by the proposed

amendments regarding the line of credit. The

Department of Insurance has, in addition,

asked that Article IV of the Articles of

Agreement be clarified to provide that the

obligations of members who cease doing

business during the year extends to December

31 st of that year, and a change in Article IV

has been made to accomplish this. You are

urged to review the attached in its entirety.

(Petitioner’s exhibit no. 9)

12. Prior to August 1995, the FWUA Articles of Agre ement,

Article IV, Membership, provided:

Eligibility . Every Insurer licensed to

transact property insurance on a direct basis

in the State shall be a Member of the

Association.

Termination . Membership of any Member shall

terminate when such member is no longer

licensed to transact property insurance in

the State . Any member whose membership in

the Association has been terminated shall,

nevertheless, continue to be governed by the

Plan of Operation and the Articles of

Agreement in order to complete its

obligations for the current Association Year

with regard to any assessments, losses,

expenses, contracts or undertakings under the

Plan of Operation.

(Petitioner’s exhibit no. 6)

( emphasis added )

The August 1995 version provides:

Eligibility . Every Insurer licensed to

transact property insurance on a direct basis

in the State shall be a Member of the

Association.

Termination . Membership of any Member shall

terminate at the end of the Association Year

during which such Member is no longer

licensed to transact property insurance in

the State . Any member whose membership in

the Association has been terminated shall,

nevertheless, continue to be governed by the

Plan of Operation and the Articles of

Agreement in order to complete its

obligations with regard to any assessments,

losses, expenses, contracts or undertakings

under the Plan of Operation.

(Petitioner’s exhibit no. 2)

( emphasis added )

13. By July 28, 1995, a 56% weighted majority of FWUA

members had approved the amendments.

14. On August 2, 1995 , DOI filed with the Secretary of

State emergency rule 4ER95-1, a statement of the facts and

circumstances supporting the emergency rule, and modifications to

the FWUA Plan of Operation and Articles of Agreement incorporated

by reference in the emergency rule. On August 18, 1995, the

notice of adoption of emergency rule 4ER95-1 was published in the

Florida Administrative Weekly.

15. The text of the Amended and Restated Plan of Operation

and Restated Articles of Agreement filed with the Secretary of

State is substantially the same as that provided to the members

on July 21, 1995. 1

16. The text of the published rule adopts by reference the

August 1995 version of the FWUA’s Amended and Restated Plan of

Operation and Restated Articles of Agreement, thus superseding

the previous March 1990 version adopted by reference in DOI rule

4J-1.001, Florida Administrative Code.

17. The notice of emergency rule 4ER95-1 appearing in the

August 18, 1995, Florida Administrative Weekly outlines specific

reasons for finding an immediate danger to the public health,

safety or welfare. Those reasons include the potential exposure

of FWUA to claims beyond its capacity to immediately pay. The

reasons recount the search for alternatives and Chase Manhattan

Bank’s offer of a line-of-credit, which offer needed to be

accepted by August 15, 1995.

18. The notice of 4ER95-1 also details the background of

increased exposure of FWUA and the need for the FWUA to find a

ready source of funds to promptly pay claims in the event of a

hurricane. The notice describes the urgency for amendments to

the Plan of Operation; and the notice explains the reasons for

concluding that the procedure used for promulgating the emergency

rule is fair under the circumstances. Finally, the notice

summarizes the rule, as follows:

SUMMARY OF THE RULE: Emergency rule 4ER95-1

(4J-1.001) adopts a revised Plan of Operation

and Articles of Agreement for the FWUA. The

revisions provide additional definitions,

describe the powers and duties of the FWUA;

authorize borrowing of funds for deficits and

the issuance of bonds; permits [sic] the

pledging of assessments for a line of credit;

provides [sic] notice for assessments for

debt service; provides [sic] procedures for

obtaining approval of credit and need

therefor; provides [sic] criteria for the

subsidiary authorized by law; and procedures

for the issuance of government bonds.

Post-Amendment Events

19. In the culmination of a lengthy process during which

Preferred attempted to withdraw as an insurer in the state of

Florida, Preferred’s vice-president for research and statistics,

Lynn J. Woodard, on September 28, 1995, addressed a letter to

Honorable Bill Nelson, Treasurer and Insurance Commissioner,

Florida Department of Insurance, The Capitol, PL-11, Tallahassee,

Florida 32399-0300. The letter provides, in pertinent part:

Effective September 24, 1995, Preferred

Mutual is surrendering its Certificate of

Authority to transact insurance in the State

of Florida.

The reason for this surrender will be evident

if you review the Consent Order signed by

your office on June 9, 1995, in Case Number:

07376-93-C(SMH).

(Petitioner’s exhibit no. 10;

FWUA’s exhibit no. 10)

20. The date that the letter was received at DOI is a

matter of dispute between the parties. A copy of the letter

produced by DOI reflects that it was stamped received in “P&C

Solvency, Office of the Chief” on October 10, 1995. Preferred’s

copy of the letter, from Lynn Woodard’s file, has a post office

return receipt attached, which receipt reflects that an article

addressed to Honorable Bill Nelson in the same manner as

Woodard’s letter, was delivered on October 2, 1995, and was

stamped by the Department of Insurance and Treasurer, State Fire

Marshall. DOI insists the letter was received on October 10,

1995; Preferred claims that it was delivered on the earlier date.

For purposes of this proceeding it is unnecessary to resolve the

conflict or to establish precisely when the letter was received

by DOI.

21. Hurricane Opal hit Florida on October 4, 1995, the la st

major event in an extremely active hurricane season, a season

which produced the greatest losses in FWUA’s history.

22. On or about October 17, 1995, FWUA sent an assessment

of $243,509.00 to Preferred Mutual for Hurricane Opal. Preferred

has not paid the assessment and contests the liability which is

the subject of a lawsuit pending in Jacksonville, Florida.

23. The amended complaint in Florida Windstorm Underwriting

Association v. Preferred Mutual Insurance Company , case no. 96-

3879, in the Circuit Court, Fourth Judicial Circuit, in and for

Duval County, Florida, alleges in paragraph 10:

10. As of January 1, 1995, and through

September 23, 1995, Preferred was an insurer

licensed to transact property insurance on a

direct basis in the State of Florida.

Effective September 24, 1995, Preferred

withdrew from the State of Florida and

surrendered its certificate of authority.

However, by virtue of its license to transact

property insurance on a direct basis in this

state in 1995, Preferred was a member of FWUA

for the entire calendar year 1995 and subject

to the terms of the Amended Plan, including

liability for any assessments levied by the

Board on its members for the year 1995.

(Petitioner’s exhibit no. 7)

24. In that same civil action, an “Order on Defendant’s

Motion to Dismiss Complaint”, paragraph 2, states:

2. Based upon the statement by counsel for

Plaintiff, made on the record of this

hearing, to wit, that the document attached

to the Complaint is not a “contract” with the

Defendant, and that the Complaint is not

based on breach of contract but is actually

based on an alleged “obligation” arising by

virtue of Department of Insurance Emergency

Rule 95-1, which rule allegedly adopted the

amended Plan of Operation and Articles of

Agreement of the Plaintiff association,

thereby allegedly conferring on the Plan the

force of law and allegedly binding PREFERRED

to the terms and conditions thereof; and,

further based upon the amendment of the

Complaint instanter , over objection of

Defendant, at the hearing of this cause,

wherein Plaintiff was given leave to amend

the Complaint to allege “obligation” rather

than “contract,” PREFERRED’S Motion to

Dismiss on this first ground is hereby

denied.

(Petitioner’s exhibit no. 8)

Final Analysis

25. Most of the changes to the Plan of Operation and

Articles of Agreement, adopted by reference in 4ER95-1, were

essential to FWUA’s closing on the line-of-credit offer. These

essential changes are described in the emergency rule notice’s

summary of the rule. Without those changes, FWUA did not have

the authority to accept the Chase Manhattan Bank offer. FWUA and

DOI acted promptly and prudently to identify a source of funds

and to effectuate the changes necessary to secure that source.

The need for emergency action was not occasioned by avoidable

delay or administrative inaction.

26. The need for emergency changes to the Articles of

Agreement, Article IV, membership provisions, however, is not

described in the notice of the rule nor is the need established

in the record of this proceeding. While the banks were

interested in assuring a stable and identifiable membership

subject to assessments, there is no evidence that the changes to

Article IV were a condition of extending credit to FWUA. Those

changes, according to FWUA’s executive director, were requested

by DOI, and were merely part of the documents reviewed and

approved by the bank.

27. More significantly, for purposes of this proceeding,

the Article IV membership changes are nowhere mentioned in the

text of the emergency rule notice provided to the public in the

Florida Administrative Weekly. Those membership changes, which

are very different from the powers and duties amendments, are not

included in the valid and specific justification for the

emergency adoption of the amended plan of operation.

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction pursuant to sections 120.56 and 120.57(1), Florida

Statutes (1996).

29. Section 120.56(1)(a), Florida Statutes (1996),

provides:

Any person substantially affected by a rule

or a proposed rule may seek an administrative

determination of the invalidity of the rule

on the ground that the rule is an invalid

exercise of delegated legislative authority.

30. Although emergency rule 4ER95-1 is no longer in effect,

Preferred is currently experiencing the impact of the rule and

may still challenge its validity. Witmer v. Dept. of Business

Regulation , 662 So.2d 1299 (Fla. 4 th DCA 1995)

31. Preferred’s standing in this proceeding is derived from

the civil suit described in paragraphs 23 and 24, above. The

challenged emergency rule is the backbone of that suit. It is

unnecessary to determine whether Preferred surrendered its

license before or after Opal hit Florida, and it is impossible,

based on the record in this proceeding to make that

determination. Aside from the dispute of when the September 28,

1995 surrender letter was actually received, there are other

factual and legal issues, not addressed by the parties in this

proceeding, regarding when a license to transact property

insurance in Florida is deemed terminated.

32. Those are issues to be resolved in the civil suit. It

is enough here to show that the challenged rule is being applied

against the challenger. By analogy, a party subject to

discipline under an alleged invalid rule need not concede its

guilt in order to challenge the rule.

33. Preferred, which has the burden of proof in this

matter, 2 argues four bases for the invalidity of 4ER95-1:

a) The rule impermissibly modifies the statute

implemented;

b) DOI has no authority to amend the Articles of

Agreement;

c) There was no emergency justification for the rule;

and

d) Amendment through incorporation was illegal.

(see, section 120.52(8), Florida Statutes (1995))

34. Section 624.308(1), Florida Statutes, describes DOI’s

rule-making authority:

624.308 Rules.

(1) The department may adopt reasonable

rules necessary to effect any of the

statutory duties of the department. Such

rules shall not extend, modify, or conflict

with any law of this state or the reasonable

implications of such laws.

35. Section 627.351(2), Florida Statutes (1995), the “law

implemented” by 4ER95-1, provides, in pertinent part:

(2) WINDSTORM INSURANCE RISK

APPORTIONMENT.-

(a) Agreements may be made among property

insurers with respect to the equitable

apportionment among them of insurance which

may be afforded applicants who are in good

faith entitled to, but are unable to procure,

such insurance through ordinary methods ; and

such insurers may agree among themselves on

the use of reasonable rate modifications for

such insurance. Such agreements and rate

modifications shall be subject to the

applicable provisions of this chapter.

(b) The department shall require all

insurers licensed to transact property

insurance on a direct basis in this state to

provide windstorm coverage to applicants from

areas determined to be eligible pursuant to

paragraph (c) who in good faith are entitled

to, but are unable to procure, such coverage

through ordinary means; or it shall adopt a

reasonable plan or plans for the equitable

apportionment or sharing among such insurers

of windstorm coverage . The commissioner

shall promulgate rules which provide a

formula for the recovery and repayment of any

deferred assessments.

...

2.a. All insurers required to be members of

such plan shall participate in its writings,

expenses, profits, and losses. Such gross

participation shall be in the proportion that

the net direct premiums of each member

written on property in this state during the

preceding calendar year bear to the aggregate

net direct premiums of all members of the

plan written on property in this state during

the preceding calendar year . The

commissioner, after review of annual

statements, other reports, and any other

statistics which he deems necessary, shall

certify to the plan the aggregate net direct

premiums written on property in this state by

all members.

...

6. The plan may authorize the formation of

a private nonprofit corporation, a private

nonprofit unincorporated association, or a

nonprofit mutual company which may be

empowered, among other things, to borrow

money and to accumulate reserves or funds to

be used for the payment of insured

catastrophe losses. The plan shall

incorporate and continue the plan of

operation and articles of agreement in effect

on the effective date of chapter 76-96, Laws

of Florida , to the extent that it is not

inconsistent with chapter 76-96, and as

subsequently modified consistent with chapter

76-96.

...

( emphasis added )

36. FWUA w as created pursuant to subsection 627.351(2)(b)

2.6., above. The statute requires that insurers licensed to

transact property insurance in Florida be members of FWUA.

Preferred argues that since amended Article IV extends membership

to the entire calendar year during which an insurer was licensed,

the emergency rule amendment conflicts with the statute.

37. The statute further requires that members share in the

surplus or losses of FWUA in the proportion that the members’ net

direct premiums during the preceding calendar year bear to the

aggregate net direct premiums of all members of the plan written

during the preceding calendar year. The statute is silent on the

manner of apportioning profits, expenses or losses when an

insurer surrenders its license mid-year. Since the statute is

silent, the interpretation given by the agency charged with its

administration and found in an existing rule, is entitled to

deference. General Tel. Co. of Florida v. Florida Public Serv.

Comm’n . 446 So.2d 1063 (Fla. 1984).

38. Preferred also argues that DOI had no authority to

amend the Articles of Agreement, which it claims is a separate

document from the FWUA Plan of Operation, and is an agreement

among insurers who are members of the FWUA.

39. The Articles of Agreement provide in Article XI that

they are effective only upon their adoption as rules by the

Department of Insurance. Further, subsection 627.351(2)(b)6.,

Florida Statutes, cited above, provides that the plan of

operation (which is adopted by DOI, pursuant to subsection

627.351(2)(b), Florida Statutes) shall incorporate the plan of

operation and articles of agreement in effect and as subsequently

modified consistent with chapter 76-96, laws of Florida.

40. This legislative guidance has been consistently heeded

by DOI since at least 1983, when the “Amended and Restated Plan

of Operation and Restated Articles of Agreement” was adopted by

reference in Rule 4-49.01, Florida Administrative Code. Later,

the rule was amended in 1988 and 1990, and was renumbered as 4J-

1.001, Florida Administrative Code. The agency’s construction of

a statute by rulemaking over an extended period of time without

objection by the legislature or by affected parties buttresses

the validity of that construction. Jax Liquors, Inc. v. Division

of Alcoholic Bev. And Tobacco , 388 So.2d 1306 (Fla. 1 st DCA

1980); Department of Admin. V. Nelson , 424 So.2d 852 (Fla. 1 st

DCA 1983).

41. Sections 120.54(8) and (9), Florida Statutes (1995)

provide, in pertinent part:

(8) ...Pursuant to rule of the Department

of State, a rule may incorporate material by

reference but only as such material exists on

the date the rule is adopted. For purposes

of such rule, changes in such material shall

have no effect with respect to the rule

unless the rule is amended to incorporate

such material as changed. No rule shall be

amended by reference only. Amendments shall

set out the amended rule in full in the same

manner as required by constitution for laws.

(9)(a) If an agency finds that an

immediate danger to the public health,

safety, or welfare requires emergency action,

the agency may adopt any rule necessitated by

the immediate danger by any procedure which

is fair under the circumstances and necessary

to protect the public interest, provided

that:

1. The procedure provides at least the

procedural protection given by other

statutes, the Florida Constitution, or the

United States Constitution.

2. The agency takes only that action

necessary to protect the public interest

under the emergency procedure.

3. The agency publishes in writing at the

time of, or prior to, its action the specific

facts and reasons for finding an immediate

danger to the public health, safety, or

welfare and its reasons for concluding that

the procedure used is fair under the

circumstances. In any event, notice of

emergency rules, other than those of

educational units or units of government with

jurisdiction in only one county or a part

thereof, including the full text of the

rules, shall be published in the first

available issue of the Florida Administrative

Weekly and provided to the committee. The

agency’s findings of immediate danger,

necessity, and procedural fairness shall be

judicially reviewable.

42. Contrary to Preferred’s assertion, rule amendment by

reference is legitimate. Section 120.54(8), Florida Statutes

specifically provides for such amendment, as long as the adopting

rule is itself amended to reference the amended material. See ,

also , Department of State Rule 1S-1.005(3), Florida

Administrative Code. This process is expressly countenanced for

statutory amendments as well. See, State v. J.R.M. , 388 So.2d

1227 (Fla. 1980). As addressed above, the evidence established

that the amended referenced material did exist at the time the

rule notice was published.

43. There is, however, a fatal flaw in the adoption of

amendments to Article IV, as found in paragraph 27, above.

44. Touting the amendments to the Plan of Operation and

Articles of Agreement as a single package required for closing a

complicated and urgent line-of-credit, DOI and FWUA argue that

the emergency circumstances were thoroughly described in the

notice of rule amendment published on August 18,1995. The

evidence does not support this contention. The amendments

regarding authority of FWUA and which were essential to the

association’s closing the deal are severable and distinguishable

from the membership amendments in Article IV which were presented

to the bank, but were not required by the bank. The membership

amendments, vital to a member like Preferred who surrendered its

certificate mid-year, were so far removed from the emergency that

they were not even mentioned in the notice, much less included in

the justification of emergency statement.

45. There may be few emergency situations more sensitive

than that those existing in a state prison in the days and hours

preceding the execution of a condemned inmate. Yet the

experience of the Florida Department of Corrections in twice

attempting to promulgate an emergency rule restricting interviews

with prisoners on death row is instructive. In two cases, by two

separate appellate courts, those attempts were both determined

invalid for lack of proper notice:

The factual allegations and reasoning set

forth in the affidavits [of the prison

superintendent filed with the court] may well

have provided a sufficient predicate for the

promulgation of the emergency rule. However,

we note that the statute requires that the

agency publish “in writing at the time of, or

prior to , its action the specific facts and

reasons for finding an immediate danger to

the public health, safety or welfare and its

reasons for concluding that the procedure

used is fair under the circumstances.” This

simply was not done. The conclusionary

statement of the Department which was issued

at the time the rule was promulgated falls

short of what the legislature requires to

justify the issuance of an emergency rule.

Hence, Emergency Rule 33 ER 79-1 must fall.

Times Pub. v. Florida Dept. of Corrections nd ,

375 So.2d 304, 306 (Fla. 2 DCA 1979)

It may be that immediate dangers of an

emergency nature attend interviews, under

permanent Rule 33-15.02(1)(c), of two or

three condemned prisoners whose execution is

imminent; but if so those dangers are not

shown by the Department’s justification

statement which so emphasizes the dangers of

handling substantial numbers of prisoners.

In emergency rulemaking, especially that

emergency rulemaking which effectively

cancels rule policy previously adopted after

open public debate, Section 120.54(1), an

agency is confined to measures which are

demonstrably necessary to alleviate the

emergency described in its justification

statement...

Times Pub. Co. v. Fla. Dept. of Corrections st ,

375 So.2d 307, 310 (Fla. 1 DCA 1979)

The First District Court remained mindful of its limited

role in scrutinizing the broad discretion of the agency:

Remembering that our task is not to make

prison interview policy but to determine

whether the Department has shown an

“immediate danger” in continuing its own

interview policy as stated in permanent Rule

33-15.02(1)(c), we cannot overlook that the

permanent rule is merely suspended for a few

days in its application to the great number

of death row prisoners, while it is abrogated

forever in its application to those who

execution warrants are outstanding. ( Id .)

46. Preferred has met its burden of proving that the

amendments to Article IV, Articles of Agreement pertaining to

membership in FWUA, incorporated by reference in 4ER95-1 are an

invalid exercise of delegated authority, in contravention of

rulemaking requirements of section 120.54(9), Florida Statutes

(1995).

Request for Fees and Costs

47. In anticipation of prevailing, Preferred has included

in its petition and proposed final order a prayer for award of

reasonable costs and attorney’s fees pursuant to section

120.595(3), Florida Statutes (1996).

48. This case is in a peculiar or unique procedural

posture. The rule that is challenged no longer exists, but is

still being applied against the challenger. Section 120.595(3),

Florida Statutes, was created through amendments to Chapter 120,

which became effective October 1, 1996. Ordinarily a fee statute

may not be applied retroactively, as it impacts the respective

rights and responsibilities of the parties and is considered

substantive, rather than procedural. Kraft Dairy Group v. Sorge ,

634 So.2d 720 (Fla. 1 st DCA 1994); See also, Life Care Centers of

America, Inc. v. Sawgrass Care Center, Inc. and Agency for Health

Care Administration , 21 Fla. L. Weekly D2487 (Fla. 1 st DCA

opinion filed November 21, 1996). The parties are entitled to

brief this and other issues related to application of Section

120.595(3), Florida Statutes (1996) in this case.

ORDER

Based on the foregoing findings of fact and conclusions of

law, it is hereby, ORDERED:

The Petition for Administrative Determination of the

Invalidity of Emergency Rule 4ER95-1 is GRANTED, to the limited

extent that revisions to Article IV, Restated Articles of

Agreement, pertaining to membership and incorporated by reference

in 4ER95-1 are stricken. Jurisdiction is retained for the

determination of Petitioner’s entitlement to reasonable costs and

attorney’s fees pursuant to section 120.595(3), Florida Statutes

(1996).

DONE and ORDERED this 21 st day of March 1997 in Tallahassee,

Leon County, Florida.

___________________________________

MARY CLARK

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax F iling (904) 921-6847

Filed with the Clerk of the

Division of Administrative Hearings st

this 21 day of March 1997.

ENDNOTES

1/ There were pagination differences, presumable because of the

type sizes in the two versions.

2/ The 1996 legislature shifts the burden to the agency to prove

the validity of a proposed rule, but leaves intact the

challenger's burden as to existing rules. See Sections

120.56(2)(a) and (c), Florida Statutes (1996)

COPIES FURNISHED:

James C. Massie, Esquire

Janice G. Scott, Esquire

Massie & Scott

Post Office Box 10371

Tallahassee, Florida 32302-0371

Daniel C. Brown, Esquire

Ken Donnelly, Esquire

Katz Kutter Haigler Alderman

Marks Bryant & Yon, P.A.

Highpoint Center, Suite 1200

106 East College Avenue

Tallahassee, Florida 32301

Thomas D. Valentine, Esquire

Department of Insurance

654A Larson Building

200 East Gaines Street

Tallahassee, Florida 32399-0307

Carroll Webb, Executive Director

Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO APPEAL

A party who is adversely affected by this final order is entitled

to judicial review pursuant to Section 120.68, Florida Statutes.

Review proceedings are governed by the Florida Rules of Appellate

Procedure. Such proceedings are commenced by filing one copy of

the notice of appeal with the Agency Clerk of the Division of

Administrative Hearings and a second copy, accompanied by filing

fees prescribed by law, with the District Court of Appeal, First

District, or with the District Court of Appeal in the Appellate

District where the party resides. The notice of appeal must be

filed within 30 days of rendition of the order to be reviewed.

1 There are pagination differences, presumably because of the type sizes in

the two versions. 2

The 1996 legislation shifts the burden to the agency to prove the validity

of a proposed rule, but leaves intact the challenger’s burden as to existing

rules. See Sections 120.56(2)(a) and (c), Florida Statutes (1996)

COPIES FURNISHED:

James C. Massie, Esquire

Janice Scott, Esquire

Massie & Scott

Post Office Box 10371

Tallahassee, Florida 32302

Daniel C. Brown, Esquire

Ken Donnelly, Esquire

Katz Kutter Haigler Alderman

Marks Bryant & Yon P.A.

Highpoint Center, Suite 1200

106 East College Avenue

Tallahassee, Florida 32301

Thomas D. Valentine, Esquire

Department of Insurance and Treasurer

Division of Legal Services

645A Larson Building

Tallahassee, Florida 32399-0333

Carroll Webb, Executive Director

Administrative Procedure Committee

120 Holland Building

Tallahassee, Florida 32399-1300

Case No.: 96- 5981RE

lbd

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled

to judicial review pursuant to Section 120.68, Florida Statutes .

Review proceedings are governed by the Florida rules of Appellate

Procedure. Such proceedings are commenced by filing one copy of

a notice of appeal with the Clerk of the Division of

Administrative Hearings and a second copy, accompanied by filing

fees prescribed by law, with the District Court of Appeal, First

District, or with the District Court of Appeal in the Appellate

District where the party resides. The notice of appeal must be

filed within 30 days of rendition of the order to be reviewed.