## Facts

- Insurance Services Office (ISO) developed standardized automobile insurance rating plans used by member insurers.
- Insurers used sex, marital status, and scholastic achievement as rating factors, asserting the factors were statistically predictive of loss experience and expenses.
- The Florida Department of Insurance adopted a rule prohibiting insurers from using those factors in automobile ratemaking.
- The Department justified the ban on the ground that such factors were “unfairly discriminatory” and not “equitable” because they lacked a causal connection to an individual driver’s driving behavior.
- ISO and insurers challenged the rule in an administrative proceeding, arguing the rule exceeded the Department’s statutory authority and conflicted with the Insurance Code’s rating standards.
- A hearing officer invalidated the rule, finding the Department had not shown the factors were actuarially unsound and that the rule improperly redefined statutory terms used in ratemaking.
- The Department appealed the hearing officer’s ruling to the Florida First District Court of Appeal.

## Issues

1. Whether the Department exceeded its statutory authority by adopting a categorical rule banning the use of sex, marital status, and scholastic achievement in automobile ratemaking.
2. Whether the Department could construe “equitable” and “unfairly discriminatory” according to ordinary meanings rather than their technical, actuarial meanings in insurance regulation.
3. Whether the Department’s rule impermissibly expanded a statutory prohibition on discrimination based “solely” on specified characteristics into a broader ban.

## Decision

- The court affirmed the hearing officer’s order invalidating the Department’s rule.
- The court held the Department lacked authority to impose a categorical prohibition where the statutory scheme barred only unfair discrimination based solely on specified characteristics.
- The court accepted that “equitable” and “unfairly discriminatory,” in the ratemaking context, are technical terms tied to actuarial justification rather than lay notions of fairness.
- The court determined the Department failed to support the ban with sufficient evidence that the challenged factors produced actuarially inequitable (unfairly discriminatory) rates.

## Legal Principles

- An administrative agency may not adopt a rule that is inconsistent with, contrary to, or enlarges the statute it administers.
- Technical terms used in specialized regulatory statutes are construed in their technical sense when the statutory context shows they operate as terms of art.
- In insurance ratemaking, “equitable” and “not unfairly discriminatory” generally mean actuarially justified classification: rates may differ when supported by statistically credible differences in expected losses and expenses.
- A statutory limitation on unfair discrimination based “solely” on specified characteristics cannot be converted by rulemaking into an across-the-board ban on using those characteristics in combination with other factors.
- When an agency seeks to displace established ratemaking practices, it must support the rule with evidence showing the practice violates statutory actuarial standards; policy objections alone are insufficient.

## Conclusion

The court invalidated the Department’s rule banning sex, marital status, and scholastic achievement as automobile rating factors because the rule exceeded delegated authority, conflicted with the statute’s “solely” limitation, and disregarded the actuarial meaning of “equitable” and “unfairly discriminatory” absent adequate evidentiary support.


State, Dep’t of Ins. v. Ins. Servs. Office, 434 So. 2d 908 (Fla. Dist. Ct. App. 1st Dist. 1983)