## Facts

- The North Carolina Rate Bureau filed a request to increase private passenger automobile and motorcycle insurance rates.
- The Commissioner of Insurance conducted a ratemaking hearing and received extensive expert testimony on loss trends, expenses, and profit provisions.
- The Commissioner disapproved the requested increases and substituted different rate changes, including an average reduction for private passenger automobile insurance and a smaller increase for motorcycle insurance.
- In calculating underwriting results and rate of return, the Commissioner used statutory accounting principles (SAP) rather than generally accepted accounting principles (GAAP).
- The Commissioner credited his own expert’s expense and profit calculations over the Bureau’s competing expert evidence.

## Issues

1. Whether the Commissioner acted within statutory authority and discretion by using SAP rather than GAAP to calculate insurers’ rate of return for ratemaking.
2. Whether the Commissioner’s key findings and resulting rate changes were supported by material and substantial evidence under whole-record judicial review.

## Decision

- The Court of Appeals affirmed the Commissioner’s order.
- The court held the Commissioner permissibly used SAP in the rate-of-return calculation and did not commit an error of law.
- The court held the Commissioner’s expense, profit, and rate determinations were supported by material and substantial evidence in the record.
- The court declined to reweigh conflicting expert testimony, treating the Commissioner’s resolution of technical disputes as entitled to deference on review.

## Legal Principles

- In insurance ratemaking, the Commissioner has broad discretion to select reasonable accounting and analytical methods consistent with governing statutes.
- On whole-record review, a ratemaking order is upheld if the Commissioner’s conclusions are supported by material and substantial evidence; courts do not substitute their judgment on technical matters.
- The Commissioner may credit one qualified expert over another when evidence conflicts, so long as the resulting findings remain supported by substantial evidence.
- If specific treatment of investment income, capital, or surplus is to be required in ratemaking, the directive must come from the legislature rather than judicial imposition of a particular accounting framework.

## Conclusion

The court upheld the Commissioner’s ratemaking order, concluding that use of SAP was within statutory discretion and that the Commissioner’s rate-of-return, expense, and profit findings supporting the ordered rate changes were supported by material and substantial evidence under whole-record review.


State ex rel. Comm'r of Ins. v. N.C. Rate Bureau, 124 N.C. App. 674 (N.C. Ct. App. 1996)