09-003042RX Service Insurance Company vs. Office Of Insurance Regulation And Financial Services Commission Status: Closed DOAH Final Order on Wednesday, April 7, 2010.

Summary: Petitioner has standing to challenge rule since the Office of Insurance Regulation relying upon rule for disciplinary action against company initiated after date rule expired due to the repeal of the statute implemented by the rule. The rule is invalid.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SERVICE INSURANCE COMPANY, )

)

Petitioner, )

)

vs. ) Case No. 09-3042RX

)

OFFICE OF INSURANCE REGULATION )

and FINANCIAL SERVICES )

COMMISSION, )

)

Respondents. )

)

FINAL ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot,

the assigned Administrative Law Judge of the Division of

Administrative Hearings, on July 31, 2009, in Tallahassee,

Florida.

APPEARANCES

For Petitioner: Richard J. Santurri

Mang Law Firm, P.A.

660 East Jefferson Street

Tallahassee, Florida 32302

For Respondents: Elenita Gomez, Esquire Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue presented is whether Florida Administrative Code

Rule 69O-170.105(1)(d), is an invalid exercise of delegated

legislative authority.

PRELIMINARY STATEMENT

On June 5, 2009, Petitioner Service Insurance Company filed

a Petition for Rule Challenge against Respondent Office of

Insurance Regulation, alleging that Florida Administrative Code

Rule 69O-170.105(1)(d) is an invalid exercise of delegated

legislative authority. Petitioner's subsequent motion to amend

its Petition to add the Financial Services Commission as a

Respondent was granted by Order entered June 24, 2009, and

Petitioner's Petition for Rule Challenge was, therefore,

replaced by Petitioner's First Amended Petition for Rule

Challenge filed June 16, 2009.

No witnesses were offered by any party at the final

hearing. However, Joint Exhibits numbered 1-5; Petitioner's

Exhibits numbered 1, 3, and 5-7; and Respondents' Exhibits

numbered 1 and 2 were admitted in evidence. The post-hearing

Joint Motion to Submit Additional Joint Exhibits 6 and 7 was

granted by Order entered August 3, 2009, and Joint Exhibits 6

and 7 were also admitted in evidence in this cause.

The Transcript of the final hearing was filed on August 14,

2009. Respondents' Motion for Extension of Time Within Which to

File Proposed Final Orders was granted up to and including

September 28, 2009. Petitioner and Respondents timely filed

their proposed final orders.

FINDINGS OF FACT

1. Respondent Office of Insurance Regulation (formerly the

Florida Department of Insurance) regulates the insurance

industry in Florida. Petitioner Service Insurance Company is an

insurance company duly licensed and regulated by Respondent

Office.

2. During its regular session, the 1996 Florida

Legislature added Subsection (6) to Section 627.062, Florida

Statutes, effective January 1, 1997. That Subsection provided

as follows:

(6)(a) After any action with respect to a

rate filing that constitutes agency action

for purposes of the Administrative Procedure

Act, an insurer may, in lieu of demanding a

hearing under s. 120.57, require arbitration

of the rate filing. . . . Costs of

arbitration shall be paid by the insurer.

(b) Arbitration under this subsection shall

be conducted pursuant to the procedures

specified in ss. 682.06-682.10. Either party

may apply to the circuit court to vacate or

modify the decision pursuant to s. 682.13 or

s. 682.14. The department shall adopt rules

for arbitration under this subsection, which

rules may not be inconsistent with the

arbitration rules of the American

Arbitration Association as of January 1,

1996. [Emphasis added.]

3. Assumedly in anticipation of the effective date of the

new arbitration option, on November 8, 1996, the Department of

Insurance published in the Florida Administrative Weekly its

notice of development of proposed rules for rate filing

arbitration pursuant to Section 627.062(6), Florida Statutes.

On February 28, 1997, the Department published its proposed

rules. Proposed Rule 4-170.105 was entitled "Costs, Expenses

and Fees of the Arbitration" and read as follows:

Notwithstanding anything to the contrary in

the Florida Arbitration Code or in the AAA

Rules , all costs, expenses and fees of a

rate filing arbitration shall be paid by the

initiating party. For purposes of these

rules, costs, expenses and fees of a rate

filing arbitration include, but are not

limited to, the following items:

(1) Filing fees payable to the American

Arbitration Association pursuant to the AAA

Rules incidental to the rate filing

arbitration.

(2) Service, processing, hearing,

postponement/cancellation, travel, hearing

room rental and/or any other administrative

fee, charge or expense referred to in the

Florida Arbitration Code, in the AAA Rules,

or elsewhere.

(3) Court reporter costs, expenses and

fees for an expedited transcript of all

arbitration hearings, and all costs

associated with the taking by any party of a

deposition of any expert or non-expert

witnesses.

(4) Expert witness fees, costs and

expenses, for any expert or experts retained

by any party or by the arbitration panel,

including all costs, expenses and fees

related to the taking by any party of a

deposition of any such expert witness(es),

and all costs, expenses and fees related to

the appearance and testimony of such expert

or experts during the arbitration hearing.

(5) Payments to, for, or on behalf of

each of the members of the arbitration panel

in compensation for their services and in

reimbursement of all reasonable and

necessary expenses incurred by each in

connection with the arbitration proceeding.

(6) Any other cost or expense incurred by

any party to the arbitration and deemed by

such incurring party to be necessary for an

effective and proper presentation of such

party’s case to the arbitration panel,

except that each party shall bear its own

attorneys’ fees. [Emphasis added.]

4. Following a rule development workshop conducted by the

Department of Insurance on December 4, 1996, Attorney David A.

Yon sent a letter dated December 10 to the Bureau Chief of the

Department's Bureau of P & C Forms and Rates regarding his

concerns with several provisions of the proposed rules. As

relevant to this proceeding, Yon advised the Department that:

Section 627.062(6)(a) states that the

"[c]ost of arbitration shall be paid by the

insurer." Presumably, this provision would

require the insurer to pay arbitration fees

and perhaps the costs of the hearing room.

However, rule 4-150.05 [sic], as drafted,

provides that the insurer shall pay "all

costs, expenses and fees of a rate filing

arbitration" and describe [sic] in detail

the type of costs that insurers will have to

bear. These costs include the Department's

expert witness fees and any other expenses

deemed by the Department to be reasonably

necessary in preparing its case. We

strongly object to this provision and

believe it exceeds the Department's

statutory authority.

5. As a result of Attorney Yon's concerns, a Department

attorney directed a Memorandum dated January 22, 1997, to the

Director of Insurer Services regarding the Department's

authority to interpret the word "costs" to mean "all costs."

While acknowledging that the Department's expansion of the word

"costs" to include "costs, expenses, and fees" conflicted

specifically with AAA Rule 49, which required that the expenses

of any witnesses shall be paid by the party producing the

witness, he concluded that the AAA Rule was "eclipsed" by the

rate filing arbitration enabling statute. No citation is

provided for that conclusion, nor is the concept of "eclipsed"

explained. The Memorandum further acknowledges that the section

in the Florida Arbitration Code relating to the payment of costs

was specifically made inapplicable to rate filing arbitration by

the Legislature.

6. After concluding that AAA Rule 49 was "eclipsed" and

that the costs rule in the Florida Arbitration Code did not

apply, the attorney concluded that the enabling statute must

mean "all costs." The attorney explained that the Department's

interpretation would be reasonable because if the rate filing

arbitration were a civil action instead, the trial judge would

have discretion to consider the reasonableness of the amount and

the necessity of the expense in determining the taxation of

costs. The attorney concluded that the Department's

interpretation of costs to mean "all costs" and to mean "costs,

expenses, and fees" was reasonable. Since the Department's

interpretation was reasonable, the proposed rule on costs,

expenses, and fees, therefore, did not exceed powers delegated

to the Department by the Legislature, in the opinion of the

author of the Memorandum.

7. Following a public hearing on the proposed rules

conducted by the Department on March 28, 1997, Attorney Yon, on

behalf of the American Insurance Association and the Florida

Insurance Council, sent a letter to the Bureau Chief of the

Department's Bureau of P & C Forms and Rates on April 8, 1997.

As relevant to this proceeding, Yon advised the Department that:

As addressed at the workshop, all interested

parties are concerned with proposed rule 4-

170.105, which requires insurers to bear all

costs, other than attorneys' fees,

associated with arbitrations. The breadth

of the proposed rule contravenes the intent

of section 627.062, Florida Statutes, and is

not consistent with general arbitration

practices, including the American

Arbitration Association Rules. The statute

provides at paragraph (6)(a) that, "Costs of

arbitration shall be paid by the insurer."

The "cost [sic] of arbitration" refers to

those costs associated with conducting

arbitration proceedings, not the costs of

the parties in presenting their case at such

proceedings. The first draft of the statute

provided that the department and the insurer

would each appoint an employee to the

arbitration panel. There was concern that

this would not make for the most effective

arbitration and the language was modified to

provide for nonemployees [sic]. As a

result, it was agreed that the insurer would

bear the costs of arbitration, with the

clear implication being that cost referred

to the cost of using nonemployed [sic]

arbitrators. This language never

contemplated that the insurer would have to

pay for the department's costs of putting on

its own case, including hiring expert

witnesses. Finally, this provision of the

rule is clearly contrary to Rule 49 of AAA's

Commercial Arbitration Rules. That

provisions [sic] states:

The expenses of witnesses for either side

shall be paid by the party producing such

witnesses. All other expenses of the

arbitration, including required travel and

other expenses of the arbitrator, AAA

representatives, and any witness and the

cost of any proof produced at the direct

request of the arbitrator, shall be borne

equally by the parties, unless they agree

otherwise or unless the arbitrator in the

award assesses such expenses or any part

thereof against any specified party or

parties.

We therefore request that the department

revise the rule to eliminate the requirement

that insurers pay all costs related to

arbitrations and clarify that the rules do

not require insurers to fund preparation of

the department's arbitration cases.

8. On April 9, 1997, the Regional Manager for the Southern

Region of the Alliance of American Insurers sent a letter to an

attorney for the Department noting certain concerns with the

Department's proposed rate filing arbitration rules. Among the

concerns raised was the following:

Our reading of Chapter 627.062(6)(a), FS[,]

shows that an insurer pay only arbitration

costs rather than all costs. We note that a

requirement to pay all costs without consent

by either party is inconsistent with

commercial arbitration rules (see AAA Rule

49, specifically page 18 and 21 relative to

administrative fees and hearing fees and

page 22 relative to

postponement/cancellation and processing

fees).

9. By letter dated April 16, 1997, a Staff Attorney for

the Joint Administrative Procedures Committee (JAPC) requested

the Department's Division of Legal Service to explain a number

of concerns the Committee had with the proposed rules. As to

the rule under challenge in this proceeding, JAPC questioned the

Department's statutory authority to include the American

Arbitration Association in the arbitration process contemplated

by Section 627.062(6), Florida Statutes. The May 16, 1997,

reply states that: "Since the statute mandates conformity to

the AAA rules, we wrote the rule to be consistent with the AAA

rules."

10. The Department filed for adoption its proposed rate

filing arbitration rules on August 11, 1997, and the rules

became effective August 31, 1997. No changes were made to Rule

4-170.105 in its substance or language from the version

published in February except for internal changes to the

subsection numbers within the Rule. Under that re-numbering,

Subsection (4) of the proposed Rule became Subsection (1)(d).

11. The 2008 Legislature amended Section 627.062(6),

Florida Statutes, by deleting the rate filing arbitration option

and requiring that any administrative proceeding arising from

the denial of a rate filing be expedited. § 10, ch. 2008-66,

Laws of Fla. The amendment, effective July 1, 2008, was

approved by the Governor on May 28, 2008.

12. Admitted as joint exhibits in this proceeding were the

awards from two rate filing arbitrations involving Petitioner

and the Office of Insurance Regulation. In American Arbitration

Association Case No. 33 195 Y 00356 07, Petitioner's demand for

arbitration was filed August 20, 2007, but the arbitration

hearing did not take place until February 4-6, 2009. Prior to

the arbitration hearing, on November 5, 2008, Petitioner filed

with the arbitrators a motion relating to the allocation of

costs of the Office's proposed outside expert witness.

13. The motion challenged the validity of the same rule at

issue in this proceeding requiring that Petitioner pay all

costs, including those of the Office's experts. The arbitrators

ruled that AAA Rule 49, which provides that the expenses of

witnesses be paid by the party producing the witness,

controlled. The Office filed a motion a few days prior to the

arbitration hearing seeking to have Petitioner pay the Office's

expert witness costs incurred prior to the time Petitioner

challenged in the arbitration the applicability of Rule 69O-

170.105 [formerly Rule 4-170.105 under the Department of

Insurance]. In the Award entered April 24, 2009, the Chief

Arbitrator ordered Petitioner to pay the fees, costs, and

expenses of the Office's outside expert witness incurred prior

to September [sic] 5, 2008. One arbitrator dissented from that

requirement, and one arbitrator dissented from the entire

Decision and Award.

14. The Award required Petitioner to pay the costs

allocated to it within 30 days of receipt of invoices. No

evidence was offered as to when Petitioner received an invoice

from or for the Office's outside expert witness.

15. In American Arbitration Association Case No. 33 195 Y

00357 07, the arbitration hearing occurred on February 6-8,

2008. The Award was signed by two arbitrators, one of whom

dissented, on June 2, 2008, and by the third arbitrator on

June 4, 2008. The Award does not specifically address the

payment of the costs, fees, and expenses of expert witnesses.

The Award addressed in the arbitration described in Paragraphs

numbered 12-14 of this Final Order, however, refers to the Award

described in this Paragraph and notes that Petitioner by letter

dated July 23, 2008, advised the Office that it was refusing to

pay the fees and costs of the Office's expert in that related

arbitration. The letter itself refers to the arbitration

described in this Paragraph.

16. On August 5, 2008, Respondent Office filed with the

Division of Administrative Hearings an Order to Show Cause

against Petitioner, seeking to suspend or revoke Petitioner's

Certificate of Authority to transact insurance for violating

Rule 69O-170.105. Service requested an administrative hearing,

and the matter is currently pending before DOAH in Case No. 08-

005961. That case has been placed in abeyance pending the

outcome of this rule challenge.

CONCLUSIONS OF LAW

17. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties hereto

pursuant to Sections 120.56, 120.569, and 120.57(1), Florida

Statutes. Although the challenged Rule was adopted by the

Department of Insurance on August 31, 1997, the Legislature

transferred the Department's arbitration rules to the Financial

Services Commission, effective January 7, 2003, when it

abolished the Department of Insurance and created the Commission

and the Office of Insurance Regulation within the Commission.

are present in this proceeding.

18. The First Amended Petition for Rule Challenge filed by

Petitioner in this cause alleges that Florida Administrative

Code Rule 69O-170.105(1)(d) is an invalid exercise of delegated

authority in that it enlarges, modifies, or contravenes the

specific provisions of law implemented. Section 120.56(3),

Florida Statutes, provides that any substantially affected

person may seek a determination of the invalidity of a rule as

an invalid exercise of delegated authority. Subsection

120.56(3) authorizes seeking such a determination of the

invalidity of an existing rule at any time during the existence

of the rule and provides that the Petitioner has the burden to

prove by a preponderance of the evidence that the existing rule

is an invalid exercise of delegated legislative authority as to

the objections raised. Petitioner has met its burden of proof.

19. The challenged rule enlarges, modifies, or contravenes

the specific provisions of law implemented. During the time

period when arbitration was an option, Section 627.062(6),

Florida Statutes, provided in Subsection (a) that the costs of

arbitration shall be paid by the insurer and in Subsection (b)

that Respondent Commission shall adopt rules for arbitration,

which rules may not be inconsistent with the arbitration rules

of the American Arbitration Association (AAA) as of January 1,

1996.

20. The statute did not define costs. The AAA Rules as of

January 1, 1996, did not contain a definition of costs. Rather,

the Rules dealt separately with different items carrying a

monetary burden for the parties, such as administrative fees,

filing fees, hearing fees, hearing room rental, and cancellation

fees. Rule 49 is entitled "Expenses" and provides that the

expenses of witnesses for either side are to be paid by the

party producing the witness. The Department expanded the

statutory term "costs" and promulgated the challenged rule which

is entitled "Costs, Expenses and Fees of the Arbitration" and

required one party, the insurance company, to pay the expert

witnesses fees and expenses of the other party, now the

Respondent Office. Simply stated, the Department took one

category of monetary obligation (costs) and expanded it to three

(costs, expenses, and fees). Accordingly, the challenged Rule

directly contravenes the statute implemented because it is

inconsistent with the AAA Rules. See Dept. of Ins. v. First

Floridian Auto and Home Ins. Co. , 803 So. 2d 771 (Fla. 1st DCA

2001), wherein the Court resolved conflicts between the

Department's arbitration rules and the AAA Rules in favor of the

AAA Rules.

21. Prior to the adoption of the challenged Rule, the

Department of Insurance was repeatedly advised that the

challenged Rule was inconsistent with the AAA Rules and,

therefore, contrary to the statute the Rule is alleged to be

implementing. The only record evidence that the Department

considered the infirmity of the then-proposed Rule is the

internal memorandum dated January 22, 1997, wherein the author

declared the controlling AAA Rule to be "eclipsed," whatever

that means; relied upon a provision in the Florida Arbitration

Code that the Legislature had specifically provided did not

apply; and relied upon the discretion given to a trial judge in

a different branch of government to determine reasonable and

necessary costs and then assess them.

22. The memorandum, therefore, successfully avoided

considering directly the issue before the Department and, now,

this forum. There is no evidence that the Legislature intended

the arbitration process to constitute a blank check for the

Department to expend any amounts it desired if the insurance

company chose arbitration rather than a Section 120.57, Florida

Statutes, proceeding. There is no evidence that the Legislature

anticipated that the Department would hire outside expert

witnesses if the insurance company chose arbitration rather than

using its own employees whose opinions resulted in the

Department's preliminary determination to deny the rate filing.

23. Respondents argue that the challenged Rule has been

legislatively protected from being challenged in a Section

120.56 proceeding and/or that the Legislature actually adopted

the Department's rules. Respondents rely on Section 20.121(5),

Florida Statutes, which provides as follows:

Effective January 7, 2003, the rules of the

Department of Banking and Finance and of the

Department of Insurance that were in effect

on January 6, 2003, shall become rules of

the Department of Financial Services or the

Financial Services Commission as is

appropriate to the corresponding regulatory

or constitutional function and shall remain

in effect until specifically amended or

repealed in the manner provided by law.

24. The Legislature did not ratify the rules being

transferred when it created Section 20.121(5), Florida Statutes,

and transferred the Department of Insurance's rules to, in this

instance, Respondent Financial Services Commission. The

Legislature has provided the process transfers must follow in

Section 20.06, Florida Statutes, which states:

Method of reorganization . --The executive

branch of state government shall be

reorganized by transferring the specified

agencies, programs, and functions to other

specified departments, commissions, or

offices. Such a transfer does not affect

the validity of any judicial or

administrative proceeding pending on the day

of the transfer, and any agency or

department to which are transferred the

powers, duties, and functions relating to

the pending proceeding must be substituted

as a party in interest for the proceeding.

The transfers provided herein are intended

to supplement but not supplant the

requirements of s. 6, Art. III of the State

Constitution. The definitions provided in

s. 20.03 apply to this section, and the

types of transfers are defined as follows:

* * *

(2) TYPE TWO TRANSFER.-– A type two

transfer is the merging into another agency

or department of an existing agency or

department or program, activity, or function

thereof or, if certain identifiable units or

subunits, programs, activities, or functions

are removed from the existing agency or

department, or are abolished, it is the

merging into an agency or department of the

existing agency or department with the

certain identifiable units or subunits,

programs, activities, or functions removed

therefrom or abolished.

* * *

(c) Unless otherwise provided by law, the

administrative rules of any agency or

department involved in the transfer which

are in effect immediately before the

transfer remain in effect until specifically

changed in the manner provided by law.

The transfer applicable to the creation of the Department of

Financial Services was a type two transfer as defined in Section

20.06(2), Florida Statutes. See § 3, Ch. 2002-404, Laws of Fla.

25. Section 20.121(5) is not the first time that the

Legislature has transferred rules from one agency to another.

For example, in 1996, the Legislature transferred powers from

the Department of Health and Rehabilitative Services to the

Department of Health in Section 8, Chapter 96-403, Laws of

Florida, by means of a type two transfer. Likewise, in 1993,

the Legislature created both the Department of Business and

Professional Regulation (DBPR) and the Department of

Environmental Protection (DEP). DBPR was created by merging and

transferring the Department of Business Regulation and the

Department of Professional Regulation in Sections 2 and 3 of

Chapter 93-220, Laws of Florida, by means of type one transfers

and type three transfers. (Type 3 transfers authorized at the

time are the equivalent of a type 2 transfer currently. See

Section 12, Chapter 94-235, Laws of Fla.) DEP was created by

transferring the Department of Natural Resources and the

Department of Environmental Regulation in Section 8 of Chapter

93-213, Laws of Florida, by means of a type 3 transfer.

26. The Legislature did not include a ratification of any

agency rules in the above transfers in the session laws or

Florida Statutes. All appear to be subject to the condition

expressed in Section 20.06(2)(c), that rules "remain in effect

until specifically changed in the manner provided by law." This

language is very similar to that contained in Section 20.121(5),

which states rules "shall remain in effect until specifically

amended or repealed in the manner provided by law." One method

by which rules are repealed or amended is in response to the

rule challenge process.

27. Another indication that the Legislature did not intend

the language in Section 20.121(5), Florida Statutes, to operate

as a ratification of the agency rules is Section

163.3177(10)(k), Florida Statutes. Section 163.3177(10)(k)

discusses Florida Administrative Code Chapter 9J-5, which had to

be submitted to the Legislature for approval before it could

become effective. Section 163.3177(10)(k) states, in its

relevant part:

. . . Therefore, the Legislature declares

that changes made to chapter 9J-5, Florida

Administrative Code, prior to October 1,

1986, shall not be subject to rule

challenges under s. 120.56(2), or to drawout

proceedings under s. 120.54(3)(c)2. The

entire chapter 9J-5, Florida Administrative

Code, as amended, shall be subject to rule

challenges under s. 120.56(3), as nothing

herein shall be construed to indicate

approval or disapproval of any portion of

chapter 9J-5, Florida Administrative Code,

not specifically addressed herein. No

challenge pursuant to s. 120.56(3) may be

filed from July 1, 1987, through April 1,

1993. Any amendments to chapter 9J-5,

Florida Administrative Code, exclusive of

the amendments adopted prior to October 1,

1986, pursuant to this act, shall be subject

to the full chapter 120 process.

28. In Section 163.3177(10)(k), Florida Statutes, the

Legislature expressly stated when changes to Chapter 9J-5,

Florida Administrative Code, were and were not subject to rule

challenges. There is no such language within Section 20.121(5),

Florida Statutes. If the Legislature had intended Section

20.121(5), Florida Statutes, to grant an immunity from rule

challenges, it would have included language such as the language

contained in Section 163.3177(10)(k).

29. Accordingly, Respondents' novel argument is without

merit because (1) the Legislature did not use any language that

would suggest that the Department's rules were exempt from

Chapter 120, Florida Statutes; (2) the language used is the

usual "housekeeping" language used when the Legislature moves

functions from one agency to another; and (3) if the Legislature

had not used the language it used in transferring the rules, the

Commission would have had no rules for the functions it received

from the Department of Insurance unless and until it adopted

rules through the Chapter 120, Florida Statutes, rulemaking

process.

30. Respondents argue that Petitioner lacks standing to

maintain this proceeding because (1) the rule has been repealed

by operation of law and cannot be challenged, and (2) a rule can

only be declared invalid prospectively but Petitioner seeks a

retroactive application. Neither argument has merit in this

proceeding.

31. As to Respondents' first argument, the general

proposition is that the repeal of a statute which is implemented

by a rule results in an automatic expiration of the rule. See

Christo v. Dept. of Banking and Fin. , 649 So. 2d 318, 321 (Fla.

1st DCA 1995). Thus, the effective "repeal" of a rule by

operation of law would prevent the Division of Administrative

Hearings (DOAH) from accepting jurisdiction in a challenge to

that rule after the authorizing statute was repealed. See Dept.

of Rev. v. Sheraton Bal Harbour Ass'n., Ltd. , 864 So. 2d 454

(Fla. 1st DCA 2003), appealing the final order in DOAH Case No.

03-2441RX, wherein the taxes had already been paid and the

challenged rule had been formally repealed.

32. Those general propositions are not, however, the end

of the inquiry as to whether such a rule can be challenged at

DOAH after the repeal of the statute implemented by the rule.

The application of the rule and the effect of the rule on the

challenger must also be considered. See Witmer v. Dept. of Bus.

& Prof. Reg., Div. of Pari-Mutuel Wagering , 662 So. 2d 1299

(Fla. 4th DCA 1995).

33. The circumstances in the case at bar are more similar

to those in Witmer than to those in Sheraton Bal Harbour . In

this proceeding, the Rule is being challenged by a licensed

insurance company which is regulated by Respondent Office. The

Rule still appears as an existing Rule in the Florida

Administrative Code.

34. More importantly, however, are the facts that (1) one

of the arbitrations described in the Findings of Fact portion of

this Final Order occurred after the repeal of the statute

authorizing the rate filing arbitration option and the

expiration of the challenged Rule, and (2) Respondent Office's

Order to Show Cause pending in DOAH Case No. 08-005961 seeking

to suspend or revoke Petitioner's license was initiated after

the repeal of the statute and the expiration of the challenged

Rule. As in Witmer , Respondent Office seeks to discipline

Petitioner's license based upon an expired rule. As Witmer had

standing to maintain his challenge, Petitioner has standing to

maintain its challenge in this proceeding.

35. Respondents' second argument that Petitioner lacks

standing because it seeks a retroactive, rather than a

prospective, application of the Rule fails for the same reasons

Respondents' first argument fails. In addition, Respondent

Office's Order to Show Cause filed after the Statute's repeal

and the Rule's expiration is in and of itself a prospective

application of the Rule. The fact that Respondent Office is

still operating under the Rule confirms Petitioner's standing to

challenge it.

36. It is concluded that the portion of the agency rule

that requires the insurer to pay the agency's expert witness

fees contravenes the express language of Section 627.062(6)(b),

Florida Statutes, prohibiting the agency from adopting a rule

inconsistent with the AAA rules. Accordingly, Rule 69O-

170.105(1)(d), which is contrary to AAA Rule 49, is an invalid

exercise of delegated legislative authority. Further,

Petitioner has standing to initiate and maintain this rule

challenge.

37. In its First Amended Petition for Rule Challenge,

Petitioner asserts that it is entitled to an award of attorney's

fees pursuant to Section 120.595, Florida Statutes. During the

final hearing in this cause no mention of attorney's fees, the

amount thereof, or the reasonableness of the amount was made by

Petitioner or Respondents. Petitioner's Proposed Final Order

reiterates its request for attorney's fees and adds a request

for costs, with no further specificity as to what might be

reasonable.

It is, therefore,

ORDERED that:

1. Florida Administrative Code Rule 69O-170.105(1)(d) is

an invalid exercise of delegated legislative authority.

2. Petitioner has sufficiently pled its entitlement to

reasonable costs and reasonable attorney's fees. Jurisdiction

is reserved as to all issues involving the amount of reasonable

attorney's fees and costs to be awarded to Petitioner.

DONE AND ORDERED this 22nd day of October, 2009, in

Tallahassee, Leon County, Florida.

S

LINDA M. RIGOT

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of October, 2009.

COPIES FURNISHED:

Douglas A. Mang, Esquire

Richard J. Santurri

Mang Law Firm, P.A.

660 East Jefferson Street

Tallahassee, Florida 32302

Elenita Gomez, Esquire

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399-0305

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399-0305

Steve Parton, General Counsel

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399-0305

Liz Cloud, Program Administration

Administrative Code

Department of State

R.A. Gray Building, Suite 101

Tallahassee, Florida 32399

F. Scott Boyd, Executive Director and

General Counsel

Joint Administrative Procedure Committee

120 Holland Building

Tallahassee, Florida 32399-1300

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 the original

Notice of Appeal with the agency 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 rendition of the order to be reviewed.