05-002609RP The Florida Insurance Council, Inc. vs. Office Of Insurance Regulation And The Financial Services Commission Status: Closed DOAH Final Order on Wednesday, May 17, 2006.

Summary: Corrected Final Order underlining the text of Proposed Rule 690-170.13(2)(b).

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE FLORIDA INSURANCE )

COUNCIL, INC., )

)

Petitioner, )

)

vs. ) Case No. 05 - 2609RP

)

OFFICE OF INSURANCE )

REGULATION AND THE FINANCIAL )

SERVICES COMMISSION, )

)

Respondent s . )

)

CORRECTED FINAL ORDER

Pursuant to Notice, t his cause came on for formal hearing

before Diane Cleavinger, a duly designated Administrative Law

Judge of the Division o f Administrative Hearings in Tallahassee,

Florida, on October 31, 2005.

APPEARANCES

For Petitioner: Cynthia S. Tunnicliff, Esquire

Brian A. Newman, Esquire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, Second Floor

Post Office Box 10095

Tallahassee, Florida 32302 - 2095

For Respondent: James H. Harris, Esquire

Jamie Metz, Esquire

Department of Financial Services

Office of Insurance Regulation

200 East Gaines Street

612 Larson Building, Room 645A - 5

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

Whether proposed Rules 69O - 175.003, 69 O - 170.005 through

007, 69O - 170.013, 69 O - 170.0135, 69O - 170 . 014, 69 O - 170.0141,

69 O - 1 70.0142, 69O - 170.0143, and 69 O - 170 .0155 ( Proposed Rules)

are in valid exerc ises of delegated legislative authority.

PRELIMINARY STATEMENT

On November 12, 2004, in volume 30, Number 46, of the

Florida Administrative Weekly, the Office of Insurance

Regulation ("OIR"), published two Notices of proposed rulemaking

for Proposed Rules 69 O - 175.003, 69 O - 170.005 through 007,

69 O - 170.013, 69 O - 170.0135, 69 O - 170 . 014, 69O - 170.0141,

69 O - 170. 0142 and 69 O - 170.0155. The Proposed Rules variously

deal with filing procedures for a variety of insurance rates.

Thereafter, Petitioner, the Florid a Insurance Council, Inc.

("FIC"), filed a Petition challenging the Proposed Rules as an

invalid exercise of delegated legislative authority. (DOAH Case

No. 04 - 4490RP).

On January 14, 2005, in Volume 31, Number 2, of the Florida

Administrative Weekly, OI R published two Notices of Change to

Proposed Rules 69 O - 175.003, 69 O - 170.005 through 007, 69 O -

170.013, 69 O - 170.0135, 69 O - 170 . 014, 69 O - 170.0141, 69 O - 170 . 0142,

and 69 O - 170.0155. Thereafter, on March 2, 2005, Petitioner

filed an amended Petition in DOAH Case No. 04 - 4490RP challenging

the validity of the Proposed Rules.

On April 15, 2005, in Volume 31, Number 15, of the Florida

Administrative Weekly, OIR published two Notices of Change to

Proposed Rules 69 O - 175.003, 69 O - 170.005 through 007, 69 O -

170.013, 69 O - 1 70.0135, 69 O - 170 - 014, 69 O - 170.0141, 69 O - 170,0142,

and 69 O - 170.0155.

Petitioner filed a Motion for Summary Recommended Order in

DOAH Case No. 04 - 4490RP alleging that OIR did not have

rulemaking authority and that the Financial S ervices Commission

(Commissi on ), which does have rulemaking authority, had not

authorized the Proposed Rules as required by the Administrative

Procedures Act (APA). This Motion was granted, and a Summary

Final Order was issued on August 11, 2005, finding the Proposed

Rules invalid u nder Section 120.52(8)(a), Florida Statutes,

because they were noticed for adoption without being approved by

the agency head, i.e., the Commission.

Prior to issuance of the Order , the Commission authorized

the publication of the Proposed Rules which were again published

in Volume 31, Number 26, July 1, 2005, Florida Administrative

Weekly. Petitioner then filed the instant Petition challenging

the validity of the Proposed Rules (DOAH Case No. 05 - 2609RP).

At the hearing, Petitioner presented the tes timony of three

witnesses and offered seven exhibits into evidence marked

Petitioner's Exhibits 1 - 5, 7, and 9. Respondents presented the

testimony of two witnesses and offered 21 exhibits into

evidence, marked Respondent's Exhibits 1 through 19, 21, and 2 2.

After the hearing Petitioner submitted a Proposed Final

Order on February 10, 2006. Likewise, Respondents submitted a

Proposed F inal Order on February 10, 2006 .

FINDINGS OF FACT

1. FIC is a multi - line insurance trade association. FIC's

membe rship consists of 42 parent companies engaged in the

business of writing insurance. These parent company members

consist of approximately 250 subsidiary companies who write

insurance in Florida. FIC members write approximately seventy

percent of the tota l insurance written in Florida.

2. FIC was organized, and now operates, to represent its

members in legislative and regulatory proceedings in Florida.

FIC appeared on behalf of its members at the workshops and

public hearing held on the Proposed Rules. A large number of

FIC's members are substantially affected by the Proposed Rules

because the Proposed Rules regulate the process by which

insurance rates are approved in Florida and such members will be

required to comply with these p roposed r ules. Clear ly FIC has

standing to challenge these p roposed r ules.

3 . The C ommission was created within the Department of

Financial Services pursuant to Section 20.121, Florida Statutes.

However, the Commission is not “subject to control, supervision

or direction by the Department of Financial Services in any

manner.” § 20.121(3), Fla. Stat. The Commission is composed of

the Governor and Cabinet, who collectively serve as the agency

head of the Commission. Action by the Commission can only be

taken by majority vot e “consisting of at least three affirmative

votes.” Id.

4 . OIR is a structural unit of the Commission. Section

20.121(3) , Florida Statutes, states in relevant part, as

follows:

(a) Structure. -- The major structural

unit of the commission is the office.

Each office shall be headed by a director.

The following offices are established:

1. The Office of Insurance Regulation,

which shall be responsible for all

activities concerning insurers and other

risk - bearing entities . . .

* * *

(b) Organi zation. -- The commission shall

establish by rule any additional

organizational structure of the offices.

It is the intent of the legislature to

provide the commission with the flexibility

to organize the offices in any manner they

determine appropriate to promote both

efficiency and accountability.

(c) Powers. -- Commission members shall serve

as the agency head for purposes of

rulemaking . . . by the commission and all

subunits of the commission. . . .

(emphasis supplied)

5 . Clearly, under the Co mmission’s and OIR’s

organizational structure, only the Commission may promulgate

rules for both itself and OIR. The Commission also has control

of internal management of OIR and the relationship between OIR

and the Commission. Thus , for reason s of effic iency to better

utilize staff expertise , the Commission may delegate certain

procedural rulemaking steps to its subordinate units such as

OIR, as long as, the ultimate product of that process is

approved by the Commis sion prior to publication of a Notice o f

Rulemaking under Chapter 120. There was no evidence that

demonstrated any impact such internal management decisions might

have on any interests FIC or its members may have. Therefore,

such internal management policies are exempt from required

rulemakin g under Chapter 120. See § 120.52(15)(a), Fla . Stat.

6 . In this case the Commission authorized the P roposed

Rules on June 16, 2005 , and authorized the re - publication of the

P roposed R ules. The P roposed R ules were re - published on July 1,

200 5 . Th e Commi ssion’s action occurred during the time FIC’s

rule challenge was on - going and the statutory stay of rulemaking

under Chapter 120 was in effect. However, Chapter 120’s stay

does not divest any agency of jurisdiction to act in areas over

which it has been g iven authority. The stay simply stops a

P roposed R ule from taking effect while the rule challenge is

pending. An agency may correct any defect that might have

occurred during rulemaking or take other rulemaking steps at any

time during the pendency of a rule challenge. See § 120.56

(2)(b), Fla . Stat. In this instance, the agency corrected its

failure to authorize the language of the p roposed r ules by

approving those proposed rules and re - publishing them. Finally,

there was no evidence that the Commissi on’s post - stay action was

in any way detrimental, prejudicial or unfair to FIC or any

other person that might be effected by these P roposed R ules.

Given these facts, the Commission has complied with the

procedural aspects of rulemaking and these P roposed R ules are

not invalid for failing to comply with essential rulemaking

procedure.

7 . As indicated, the P roposed R ules variously deal with

electronic filing for a variety of insurance rates through OIR’s

I - file system and I - file workbook. The authority lis ted in the

Notices for promulgating the P roposed Rules was Section

624.308(1), Florida Statutes. Section 624.308(1) grants the

Department of Financial Services (Department) and the Commission

the general authority to adopt rules, pursuant to Sections

120. 536(1) and 120.54 in order to implement laws that confer

duties upon them. One such grant of authority is contained in

Section 624.424(1)(c), Florida Statutes dealing with annual

statements and other information, as well as, electronic filing.

That Secti on provides that the Commission may adopt rules that

require, “reports or filings . . . . to be submitted by

electronic means in a computer - readable form compatible with the

electronic data processing equipment specified by the

commission.” These p roposed r ules, in fact, attempt to

implement an electronic system of filing known as “I - file.” The

evidence demonstrated that the I - file workbook is essentially

the format for submitting rate filing data to OIR in electronic

form. The workbook provides various sections where an insurer

may explain any alternative methods or techniques used by an

insurer in developing a rate. The intent of the rules was not

to establish additional standards that an insurer must meet to

justify a proposed rate. Specifically, P ro posed Rule 69 O -

175.003(2)(a)3, states that accurate information in the I - file

workbook will result in an aggregate average statewide rate

indication. A statewide aggregate is used for analytical

purposes when an individual insurer submits rates based on

t erritorial considerations. The aggregate is a generally

accepted actuarial technique and is used only for analytical

purposes . The development of such data, by itself, does not

constitute an attempt by OIR to establish rate s for an insurer .

Additionally , P roposed Rule 69O - 170.0135(2)(c), states that an

insurer may provide an explanation to OIR as to why “the

methodology or technique used in the filing is more appropriate

for the filing than the methodology or technique used in the I -

file system indicatio ns.” The rule clearly states that “use of

different data or methods does not create a presumption of . . .

inappropriateness . . .” Moreover, OIR is required to analyze

the reasonableness of the judgment reflected in the rate filing.

§ 627.062(2)(b)5, F la . Stat. To th e extent that the R ules

and specifically P roposed Rule s 690 - 170.0135(2)(c) and

690 - 175.003(2)(a)3 , implement the I - file system through the

I - file workbook the P roposed R ules fall well within the

authority granted to the Commission to establ ish an electronic

filing system.

8 . P roposed Rule 69O - 170.013(2), attempts to defi ne the

general content of a rate filing and re - start the review period

should any additional information be submitted after OIR has

made its decision. Proposed Rule 690 - 1 70.013(2) provides as

follows:

(a) A "rate filing" contains all the

information submitted in the filing made by

the insurer, plus any supplemental

information received during the course of

the Office's review, for all purposes of the

filing made under Sec tions 627.062(2)(a) or

627.0651, F.S. and shall be the sole basis

for determination of final agency action .

(b) Any information provided subsequent to

the Office's issuance of a notice of intent

to disapprove pursuant to Section 627.062 or

627.0651, F.S . will be a new filing subject

to the filing requirements of this rule and

chapter and applicable statutes. (Emphasis

added.)

9 . Sections 627.062 and 627.0651, Florida Statutes,

provide a mechanism whereby insurers submit proposed premium

rates f or OIR' s review in the form of rate filings. Filings are

required both at the initial use of a policy form and annually.

OIR is charged under Sections 627.062(2)(b) and 627.0651(2) with

reviewing rate filings to determine whether the rate changes

requested are excessive, inadequate, or unfairly discriminatory.

In reviewing a rate filing OIR may require an insurer to provide

all information necessary to evaluate the condition of the

company and the reasonableness of the filing according to the

criteria enumerate d in Section 627.062, Florida Statutes,

dealing with rate standards. OIR must review the rate in

accordance with generally accepted and reasonable actuarial

techniques. Some of the criteria reviewed by O IR include past

and prospective losses and expenses , expected investment income,

adequacy of loss reserves, trend factors and “the reasonableness

of the judgment reflected in the filing.” § 627.062, Fla . Stat.

Because these factors generally involve future predictions based

on past information or data, c omplex mathematical formulas and

models are used to support any given rate. A dditionally,

various categories of data may be combined to demonstrate

different trends or factors. It is the validity of this data

processing that is governed by a variety of a ctuarial techniques

that hopefully yield reasonably accurate future predictions.

Included in this actuarial process is the exercise of judgment ,

on both OIR’s and the insurer’s part, as to how to process a

wide variety of data. Whether a rate filing is a dequately

supported is often a matter of debate among qualified,

credentialed actuaries who can disagree. Indeed, applicable

actuarial standards contemplate and recognize the exchange of

supplemental information during the rate filing review process.

Inh erent in OIR’s review of a rate filing is the same

application of actuarial techniques or methods utilized by the

insurer .

1 0 . Ultimately, OIR is required to notify an insurer of

its intent to either approve or disapprove a rate filing with in

the tim e prescribed by statute (i.e. within ninety days for

property and casualty insurance and sixty days for motor vehicle

insurance). §§ 627.062(2)(a)1. and 627.0651(1)(a), Fla. Stat.

OIR may, but is not required by statute or rule, to notify an

insurer of a ny perceived deficiency in a rate filing before a

notice of intent to deny is issued. However, even though not

required, OIR and its predecessor agency, the Department of

Insurance, have generally requested explanation of rate filings

or additional suppor ting information prior to issuing notices of

intent to deny a rate filing. Importantly, the statutory review

period is not tolled if OIR requests supporting information.

1 1 . If the insurer proposing the rate disagrees with OIR’s

determination, the insurer may r equest a hearing under Chapter

1 20, Florida Statutes, or proceed to arbitration. § 627.062(6),

Fla . Stat. In any administrative hearing Section 627.0651(1),

Florida Statutes, states that the insurer has the burden to

prove the rate is not e xcessive, inadequate or unfairly

discriminatory.” The issue is not, as OIR contends, whether the

rate filing , as reviewed by it, demonstrates that it is not

excessive, inadequate or unfairly discriminatory. To this end,

the insurer is entitled to present any relevant evidence that

supports the rate .

1 2 . In this case, Proposed Rule 690 - 170.013(2) does not

simply define the contents of a rate filing, but operates to

exclude all evidence offered by the insurer in an administrative

hearing on insurance rate s that was not p reviously provided to

OIR prior to its notice of intent . Additionally the Rule

extend s the statutory review period beyond that provided in the

relevant statute . The rationale for the Rule was based on OIR’s

experience that insurer’s d o not willin g ly provide everything

OIR may desire to support its rate filing and the relatively

short statutory review period . However, the statute

contemplates that OIR may request such information if the

desired information is necessary to review the ra te, and, if the

information is not forthcoming within the statutory review

period, OIR may issue a notice of intent to deny. The statute

is very clear that the review time period is not tolled and the

issue to be resolved in an administrative proceeding . To that

extent the Rule contravenes the statute and is an invalid

exercise of statutory authority.

CONCLUSIONS OF LAW

1 3 . The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. § 120.57( 1), Fla . Stat.

1 4 . FIC has standing under Section 120.56(1), Florida

Statutes , to challenge the Proposed Rules as a trade association

because it has demonstrated that a substantial number of its

member s are substantially affected by the Proposed Rules. NAACP

v. Florida Board of Regents , 863 So. 2d 294, 298 (Fla. 2003).

1 5 . The ultimate question in a proposed rule challenge is

whether the rule is "an invalid exercise of delegated

legislative authority." § 120.56(1), Fla. Stat. (2005).

Section 120.52(8 ), Florida Statutes (2005), defines the term as

an "action which goes beyond the powers, functions, and duties

delegated by the Legislature."

1 6 . In 1999, the Legislature revised the closing paragraph

of Section 120.52(8), Florida Statutes, after the decision in

St. Johns River Water Management District v. Consolidated - Tomoka

Land Co. , 717 So. 2d 72, 80 (Fla. 1st DCA 1998) which held that :

[ a] rule is a valid exercise of delegated

legislative authority if it regulates a

matter directly within the class of powers

and duties identified in the statute to be

implemented.

The language of Section 120.52(8), Florida Statutes, was amended

to read:

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a spe cific law to be

implemented is also required. An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by

the enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislati o n and is not arbitrary

and capricious or is within the agency's

class of powers and duties, nor shall an

agency have the authority to implement

statutory provisions setting forth general

legislative intent or policy . Statutory

language granting rulemaking authority or

generally describing the powers and

functions of an agency shall be construed to

extend no further than implementing or

interpreting the specific powers and duties

conferred by the same statute. ( Emph asis

added.)

§ 120.52(8), Fla. Stat. (2005). See Board of Trustees of the

Internal Improvement Trust Fund v. Day Cruise Association Inc. ,

794 So. 2d 696 (Fla. 1st DCA 2001); See also Southwest Florida

Water Management District v. Save the Manatee Club Inc. , 773 So.

2d 594 (Fla. 1st DCA 2000).

1 7 . Thus for a Rule to be valid it must be developed

pursuant to a valid grant of general rulemaking authority, but

also pursuant to a "specific law to be implemented" and

implements or interprets "specific power s and duties." Day

Cruise , 794 So. 2d at 704. The court in Day Cruise discussed

the importance of the 1999 Administrative Procedures Act (the

"APA") amendments as follows:

Under the 1996 and 1999 amendments to the

APA, it is now clear, agencies have

rule making authority only where the

Legislature has enacted a specific statute,

and authorized the agency to implement it,

and then only if the proposed rule

implements or interprets specific power s or

duties , as opposed to improvising in an area

that can be s aid to fall only generally

within some class of powers or duties the

Legislature has conferred on the agency.

(Emphasis added.)

Day Cruise , 794 So. 2d at 700. See generally Save the Manatee

Club Inc. , 773 So. 2d 598 - 599 (interpreting Section 120.52(8) ,

Florida Statutes (1999), as removing an agency of the authority

to adopt a rule merely because it is within the agency's class

of powers and duties). On the other hand, statutes need not

specify the content of a rule, within a given subject area.

Such specificity is generally left for rulemaking since rules by

definition interpret statutes. See Florida Board of Medicine v.

Florida Academy of Cosmetic Surgery , 808 So. 2d 243 (Fla. 1st

DCA 2002); and Board of Podiatric Medicine v. Florida Medical

A ssocia tion , 779 So. 2d 658 (Fla. 1st DCA 2001). The limit to

such interpretation is that they may not contravene, enlarge or

modify the governing statutes. Id. § 120.52, Fla. Stat.

1 8 . The Commission is one integrated agency, as that term

is defined in Ch apter 120, Florida Statutes, and is composed of

at least two Offices. The general rulemaking authority cited in

all of the Proposed Rules is Section 624.308(1), Florida

Statutes . . . " That statu t e grants the Commission general

rulemaking authority. A r easonable interpretation of that

statute extends the purview of such authority to the duties of

the Offices, such as OIR, within the Commission. This view is

supported by the fact that the legislature provided that the old

Rules of the Commission’s and De partment’s predecessor agencies

woul d remain in effect . § 20.121(4), Fl a. Stat .

19 . In this case, OIR ’s duty is to review rate filings and

notify an insurer of its intent to either approve or disapprove

the filing within the time prescribed by statute. §§ 627.062

(2)(a)1. and 627.0651(1)(a), Fla. Stat. To that end, OIR has

the power to require the insurer to provide data and information

necessary to that review. The statute also provides that the

insurer has the right to establish in an administrative hearing

that its rate is not excessive, etc. Likewise, the Commission

may adopt a system for electronic submission of information

required by OIR. § 624.524(1)(c), Fla. Stat.

2 0 . As discussed previously, these provisions provide an

adequate statutory basis for the P roposed Rules except Rule 69 0 -

170.013(2). In regards to Rule 69 0 - 170.013(2), the Rule

contravenes the required statutory review period and violates

the insurer’s right to an administrative hearing to establish

its rate.

2 1 . Section 626. 062 is consistent with the APA which

affords a party the right to a hearing whenever the substantial

interests of a party are determined by an agency. § 120.569(1),

Fla. Stat. (2005). When the hearing involves disputed issues of

material fact (such as wh ether any insurer's proposed rate is

excessive, inadequate, or unfairly discriminatory) the party is

entitled to a hearing conducted pursuant to Section 120.57(1).

§ 120.569(1), Fla. Stat. (2005).

2 2 . Section 120.57(1)(k) provides that all proceedings

c onducted pursuant to Section 120.57(1) "shall be de novo ."

Further, OIR is specifically prohibited from overturning

findings of fact in a recommended order without complying with

Section 120.57(1). According to Section 627.0612:

In any proceeding to dete rmine whether

rates, rating plans, or other matters

governed by this part comply with the law,

the appellate court shall set aside a final

order of the office if the office has

violated s. 120.57(1)(k) by substituting its

findings of fact for findings of a n

administrative law judge which were

supported by competent substantial evidence.

2 3 . Proposed Rule 690 - 170.013(2) contravenes the

provisions of the Rating Law and the APA that guarantee an

insurer a de novo hearing. Under Proposed Rule 690 - 170.01 3(2):

(a) A "rate filing" contains all the

information submitted in the filing made by

the insurer, plus any supplemental

information received during the course of

the Office's review, for all purposes of the

filing made under Sections 627.062(2)(a) or

62 7.0651, F.S. and shall be the sole basis

for determination of final agency action .

( b) Any information provided subsequent to

the Office's issuance of a notice of intent

to disapprove pursuant to Section 627.062 or

627.0651, F.S. will be a new filing su bject

to the filing requirements of this rule and

chapter and applicable statute. (Emphasis

added.)

The underlined parts of these paragraphs would prevent an

insurer from supplementing its rate filing with any information

after the agency's notice of prel iminary or intended action is

issued, even though final agency action has not yet been taken.

"A request for formal administrative hearing commences a de novo

proceeding intended to formulate agency action, and not to

review action taken earlier or preli minarily. ” Beverly

Enterprises - Florida, Inc. v. Department of Health and

Rehabilitative Services , 573 S o. 2d 19 (Fla. 1st DCA 1990);

citing Florida Department of Transportation v. J.W.C. Co., Inc. ,

396 So. 2d 778 (Fla. 1st DCA 1981). The APA clearly auth orizes

the presentation of additional information at a de novo hearing

to provide the agency an opportunity to change its intended/

preliminary agency action as part of the formulation of final

agency action. As the Florida Supreme Court stated in Young v .

Department of Community Affairs , 625 So. 2d 831, 838 (Fla.

1993):

. . . by stating that the hearing should

be held pursuant to chapter 120, the

Legislature also had indicated that the

hearing should encompass more than just the

record below. Specifica lly, new evidence

can be presented, and the hearing officer

has the opportunity to issue a recommended

order based upon the consideration of all of

the issues.

2 4 . In Hamilton County Board of County Commissioners v.

Department of Environmental Regulatio n , 587 So. 2d 1378, 1387 - 88

(Fla. 1st DCA 1991) the First District Court of Appeal affirmed

a hearing officer's consideration of new information supporting

the applicant's air emissions permit at a Section 120.57(1)

hearing, stating:

Any additional informa tion necessary to

provide reasonable assurance that the

proposed facility would comply with the

applicable air emission standards could be

properly provided at the hearing. See

McDonald v. Department and Banking and

Finance , 346 So. 2d 569, 584 (Fla. 1st DCA

1977) (a petition for a formal 120.57

hearing commences a de novo proceeding, and

because the proceeding is intended to

formulate final agency action and not to

review action taken earlier and preliminary,

the hearing officer may consider changes or

ot her circumstances external to the

application. See also Florida Department of

Transportation v. J.W. C . Co. Inc. , 396 So.

2d 778 (Fla. 1st DCA 1981). At the hearing,

TSI presented additional information to

provide reasonable assurances that the

incinerato r facility would comply with the

applicable rules on the specific points

raised by Hamilton County.

2 5 . The de novo review of preliminary agency action at a

Section 120.57(1) hearing does not place OIR at a disadvantage.

To the contrary, OIR may presen t evidence or information that it

did not consider during its initial review of the rate filing as

grounds for denial. Further, the rules governing discovery

during the pre - hearing phase of a Section 120.57(1) hearing

prevent unfair surprise of new inform ation. As the final order

issued in Hughes Supply, Inc. v. Department of Environmental

Protection , DOAH Case No. 91 - 8334, 1992 WL 881056

(Fla.Div.Admin.Hrgs. 1992) states:

The administrative hearing held June 10,

1992, under Section 120.57, Florida

Statut es, was a de novo proceeding that had

as its purpose the formulation of agency

action, not the review of agency action

previously taken. Florida Department of

Transportation v. J.W.C. Co., Inc. 396 So.

2d 778 (Fla. 1st DCA 1981). As such,

evidence consid ered by the Department in

making is preliminary determination that the

necessary conditions for coverage were not

met could be supplemented by additional

evidence offered by either party that

related to the presence or absence of other

violations or instan ces of noncompliance at

the facility. Obviously, an exception might

apply on grounds of fundamental fairness or

unfair surprise if a party wrongfully failed

to disclose evidence in its possession in

response to a discovery request, but no such

issue has b een raised in the instant case.

The Hearing Office r could lawfully base

findings of fact and conclusions of law on

such additional evidence, provided it was

competent, substantial and credible.

2 6 . Finally, Section 627.062 establishes the burden of

pro of on the insurer once OIR has made its determination . The

burden is on the insurer to establish its rate is not excessive,

etc. Therefore, the underlined portions of P ropos ed Rule 69 0 -

170.013(2) are invalid under Section 120.52(8) (b), (c), (d) and

(e) b ecause they contravene the provisions of the agency’s

statutes and the APA which entitle insurers to a de novo hearing

to challenge OIR's intended denial of rate s .

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

The Propo sed Rule s are valid exercise s of delegated

legislative authority except for the underlined portions of Rule

69O - 170.013(2) which are invalid exercises of delegated

legislative authority .

DONE AND ORDERED this 22nd day of May, 2006, in

Tallahassee, Leon County, Florida.

S

DIANE CLEAVINGER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of May, 2006.

COPIES FURNISHED :

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

Financial Services Commission

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0305

Steve Parton, Esquire

Office of Insurance Regulation

Financial Services Commission

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0305

Cynthi a S. Tunnicliff, Esquire

Brian A. Newman, Esquire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, Second Floor

Post Office Box 10095

Tallahassee, Florida 32302 - 2905

James H. Harris, Esquire

Jamie Metz, Esquire

Department of Financial Services

Office of Insurance Regulation

200 East Gaines Street

612 Larson Building, Room 645A - 5

Tallahassee, Florida 32399

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial revie w pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the original notice of appeal with the Clerk of the

Division of Administrative Hearings and a 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 rendi tion of the order to

be reviewed.