## Facts

- An automobile insurance applicant held a driver’s license for less than one year and applied to Allstate for motor vehicle insurance.
- Allstate declined the application based on a policy requiring more than one year of licensed driving experience and directed the applicant to a joint underwriting plan.
- The applicant complained to the state Insurance Division about Allstate’s handling of the application and premium.
- The Chief Deputy Insurance Commissioner issued a cease-and-desist order barring Allstate from using length of driving experience to reject applications and assessed a $3,000 civil penalty for violating HRS § 431:10C-207.
- After an administrative hearing, a hearings officer recommended vacating the order on the ground that the statute applied to rating, not underwriting.
- The Insurance Commissioner rejected the recommendation and issued a final order reaffirming the cease-and-desist directive and penalty.
- The circuit court affirmed the Commissioner’s final order, and Allstate appealed.

## Issues

1. Whether HRS § 431:10C-207’s prohibition on basing “any standard or rating plan” on length of driving experience applies to underwriting decisions to accept or reject applicants, or only to rate making.
2. Whether the Commissioner’s interpretation applying the statute to underwriting constituted improper rulemaking requiring formal administrative procedures.
3. Whether imposing a $3,000 civil penalty was an abuse of discretion.

## Decision

- The Supreme Court of Hawaiʻi affirmed the circuit court’s judgment and the Commissioner’s final order.
- The court held that HRS § 431:10C-207 prohibits discrimination based on length of driving experience in underwriting as well as in rating.
- The court rejected the claim that the Commissioner engaged in unauthorized rulemaking, characterizing the agency action as interpretive application of existing law in an adjudication.
- The court upheld the $3,000 penalty as within statutory authority and not arbitrary or capricious.

## Legal Principles

- Statutory terms must be construed to give effect to all words; “standard” in “any standard or rating plan” has independent meaning and is not treated as surplusage.
- In motor vehicle insurance regulation, “standard” can include underwriting criteria (eligibility rules), while “rating plan” concerns premium-setting among accepted risks.
- Anti-discrimination limits that bar certain classifications (including length of driving experience) apply to denying coverage when statutory language and purpose indicate protection against discrimination at the point of access to insurance, not only at pricing.
- An agency’s construction of a statute it administers is given substantial weight when consistent with statutory text and purpose, and interpretive adjudication is not invalid merely because it affects regulated conduct.
- Civil penalties imposed within the authorized statutory range are reviewed for abuse of discretion and upheld absent arbitrariness or caprice.

## Conclusion

The court upheld the Insurance Commissioner’s determination that Hawaiʻi’s unfair-discrimination statute for motor vehicle insurance bars insurers from using length of driving experience as an underwriting screen, and it sustained both the cease-and-desist order and the associated $3,000 civil penalty.


Allstate Ins. Co. v. Schmidt, 104 Haw. 261, 88 P.3d 196 (Haw. 2004)