Abdullah v. MA Com. of Insurance

• Court: Court of Appeals for the First Circuit
• Decided: May 20, 1996
• Docket: 95-2316
• Status: Published

Opinion

USCA1 Opinion

United States Court of Appeals

                                For the First Circuit

                                 ____________________


No. 95-2316



                             BASIMAH R. ABDULLAH, et al.,



                                Plaintiffs-Appellants,



                                          v.



                           COMMISSIONER OF INSURANCE of the

                        COMMONWEALTH OF MASSACHUSETTS, et al.,



                                Defendants-Appellees.


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                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                     [Hon. Nancy J. Gertner, U.S. District Judge]
                                             ___________________



                                 ____________________



                                        Before



                                 Lynch, Circuit Judge,
                                        _____________



                            Coffin, Senior Circuit Judge,
                                    ____________________



                            and Cummings,* Circuit Judge.
                                           ______________



                                 ____________________



            Jack  E. Robinson,  with whom  Carpenter  &  Robinson, LLP  was on
            _________________              ___________________________

        brief, for appellants.

            Judith  Fabricant, Assistant  Attorney  General, with  whom  Scott
            _________________                                            _____

        Harshbarger, Attorney General, E.  Michael Sloman and Meyer, Connolly,
        ___________                    __________________     ________________

        Sloman & MacDonald were on brief, for appellees. 
        __________________


____________________



                            
        ____________________



        *Of the Seventh Circuit, sitting by designation.



May 20, 1996

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LYNCH, Circuit Judge.  Plaintiffs  mounted a facial
                      LYNCH, Circuit Judge.
                             _____________



            challenge  to  the  constitutionality  of  the  Massachusetts



            statute requiring the Massachusetts Commissioner of Insurance



            to  establish  at  least   fifteen  territories  for  use  in



            classifying risks  for  setting automobile  insurance  rates.



            Mass.  Gen.  L.  ch.  175E,     4(d).   It  is  claimed  this



            requirement  is irrational on its  face and thus violates the



            Equal   Protection  Clause   of  the   Fourteenth  Amendment.



            Plaintiffs also assert that  the statute on its face  results



            in an unconstitutional taking  in violation of the  Fifth and



            Fourteenth Amendments.



                      Plaintiff  Basimah Abdullah  lives  in the  Roxbury



            section of Boston  and is aggrieved  that policy holders  who



            live  in Roxbury, a mostly  poor community of  color, may pay



            automobile insurance  rates more than  two and  a half  times



            more  than those paid by  policy holders with similar driving



            records  who live  in  Wellesley, Massachusetts,  an affluent



            suburb of Boston.  She is joined as plaintiff by the National



            Association  of African  Americans, Inc.    After considering



            cross-motions for  summary judgment on stipulated  facts, the



            district court granted the  defendants' motion and denied the



            plaintiffs' motion.  We affirm.



                      It  is important  to be  clear about  the challenge



            plaintiffs  have chosen to mount.  This is a facial challenge



            to  the   statute.    Plaintiffs  have   stipulated  that  no


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fundamental  right is  involved in  the litigation  and their



            challenge does  not  involve claims  of race  discrimination.



            They do  not challenge the  group discount provisions  of the



            insurance  regulatory  scheme, although  they  do attempt  to



            bring those issues to the attention of the court.  Plaintiffs



            have  appropriately  stipulated   that  insurance  risk  does



            correlate  with the territory in which the insured lives.  In



            light  of  these  stipulations  and the  very  narrow  review



            available   in  a   constitutional   challenge  to   economic



            regulation  by a state, grant of summary judgment in favor of



            the defendants was plainly correct.



                      The challenged statute requires:



                      For  motor  vehicle insurance  rates, the

                      commissioner     shall    establish     a

                      classification   of  risks   which  shall

                      include  a designation  of not  less than

                      fifteen territories.



            Mass. Gen. L. ch. 175E,   4(d).



                      In order  to prevail, the plaintiffs  would have to



            show  that   the  establishment  of  a   minimum  of  fifteen



            territories for use in classifying automobile insurance risks



            could  not be rational.   See Members of  the City Council v.
                                      ___ ____________________________



            Taxpayers for  Vincent, 466  U.S. 789,  796 (1984).   Indeed,
            ______________________



            plaintiffs would have  to show that  no set of  circumstances



            exist  under which the statute could be validly applied.  See
                                                                      ___



            Reno  v. Flores, 507 U.S.  292, 301 (1993)  (facial attack on
            ____     ______



            due process  grounds).   Plaintiffs make two  arguments, both


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demonstrating a  misunderstanding of the role  of the federal



            courts in  reviewing state  economic regulation.   They argue



            that because  there is  no legislative history  setting forth



            the statute's  purpose  and  because  the  statute  allegedly



            results in unfairness it is unconstitutional.



                       Plaintiffs   seek  to   reverse  the   burdens  in



            constitutional  economic regulation litigation by saying that



            the  state, in a  situation where  no fundamental  rights are



            involved,  must provide  legislative  history explaining  the



            purpose  of  its  choice of  classifications.    Cf. City  of
                                                             ___ ________



            Richmond v. J.  A. Croson  Co., 488 U.S.  469, 500-04  (1989)
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            (when  legislature  employs  suspect   classification,  court



            reviews  legislative findings  to support  the discrimination



            visited).   In  the  absence of  legislative history  plainly



            explaining the purpose  of an economic regulatory  provision,



            the  plaintiffs posit,  the statute  must be  presumed  to be



            irrational.    But  there  is  no  such  requirement  and  no



            presumption.    The Constitution  does  not  impose on  state



            legislatures   the  requirement  of  creating  a  legislative



            history  record to  justify economic  regulatory legislation.



            See  FCC v.  Beach Communications,  Inc., 508  U.S. 307,  315
            ___  ___     ___________________________



            (1993)  ("we never  require a  legislature to  articulate its



            reasons for enacting a statute").



                      Plaintiffs who  claim a statute  is irrational bear



            the burden of showing that it is so.  Id. ("[T]hose attacking
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the  rationality  . .  . have  the  burden to  negative every



            conceivable   basis  which  might   support  it.")  (internal



            quotation  omitted).   That showing  of irrationality  is not



            made  by  simple  arguments  of perceived  unfairness.    The



            statutory  scheme  must  stand  so long  as  it  bears  "some



            rational relationship  to a  legitimate state purpose."   San
                                                                      ___



            Antonio Indep.  Sch.  Dist.  v. Rodriguez,  411  U.S.  1,  44
            ___________________________     _________



            (1973).    We cannot  say that  on  its face  the legislative



            choice   of  requiring  at   least  fifteen   territories  is



            irrational.    It  is  evident  that  insureds  in  different



            territories pose different risks and it is rational to permit



            the  insurance companies  to  set premiums  to reflect  those



            different risks.   The choice by  the legislature to  mandate



            the establishment of at least fifteen territories may reflect



            a  judgment that  that number  will provide  some approximate



            reflection of the proper number of categories into which this



            type of risk should be divided.  That the state has chosen to



            classify  purchasers   into  groupings  based   on  objective



            characteristics  and to use such groupings as a base on which



            to set rates is surely rational and promotes a more equitable



            insurance system.



                      In fact,  the Commissioner has chosen  to create 27



            territories, a decision which is  also rational on the theory



            that somewhat more territories  more closely reflect the risk



            associated  with the  residents  of those  territories.   The


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parties have  appropriately stipulated that the  risk of loss



            "varies  according  to  the   town  in  which  the  [insured]



            vehicle[]  [is]   principally  garaged."     They  have  also



            stipulated  that each  state  uses some  form of  territorial



            subdivision system to  set rates and such  use of territorial



            assignment has  existed in this  country since  1917.   Prior



            rate-setting schemes in Massachusetts, also implementing some



            form   of   territorial   system,   have  twice   been   held



            constitutional  by   the  state  courts.     See  Doherty  v.
                                                         ___  _______



            Commissioner of Ins., 102  N.E.2d 496 (Mass. 1951);  Brest v.
            ____________________                                 _____



            Commissioner of Ins., 169 N.E. 657 (Mass. 1930).
            ____________________



                       The  scheme itself  has  been tested  in a  manner



            consonant  with  democracy.    Prior  unhappiness  about  the



            territorial rating system once  led to an initiative petition



            which  would have  abolished  the use  of  territories.   The



            voters rejected the  petition by  a margin of  three to  one.



            Commonwealth of Massachusetts Election Statistics,  Pub. Doc.
            _________________________________________________



            No.  43,  at 343-45  (1950).    The Commissioner  establishes



            territories  in  a  public  proceeding which  is  subject  to



            judicial  review,  and we  do  not  understand plaintiffs  to



            complain about these procedures.   Indeed, the federal courts



            would  abstain  from considering  the constitutionality  of a



            particular   decision  of   the  Commissioner   defining  the



            territories or  setting particular rates.   See Allstate Ins.
                                                        ___ _____________



            Co.  v. Sabbagh, 603 F.2d 228, 233 (1st Cir. 1979) (affirming
            ___     _______


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decision of district court to abstain from such a suit due to



            intensity of  local  interest and  because Massachusetts  had



            "indicated  the  importance  it  place[d]  on  coherency   by



            concentrating review  of  all  regulatory  decisions  in  one



            court").



                      Even  consideration of  the  facts surrounding  Ms.



            Abdullah's   individual  situation  does  not  establish  the



            irrationality  of the  statute.  The territory  in which  Ms.



            Abdullah lives,  the Roxbury section of  Boston, does reflect



            greater insurance risks than the territory  she has chosen as



            a comparator, the territory  including the town of Wellesley,



            Massachusetts.  The  parties agree that in  1993, the Roxbury



            territory, Territory  22, had 3.5 times the  state average of



            bodily   injury  claims,   while  the   Wellesley  territory,



            Territory 2,  had half the claims.   Further, if one looks at



            bodily injury  per 100  accidents, the statewide  average was



            30.6.  The  territory in  which Ms. Abdullah  lives had  56.6



            bodily  injuries  per  100  accidents,  while  the  Wellesley



            territory had 17.4.   As a final example,  although insurance



            coverage for theft is  not compulsory (see Mass. Gen.  L. ch.
                                                   ___



            90,     34A,  34B,  34O; ch.  175,    113O),  in  the Roxbury



            territory, the theft  rate is five  times the state  average,



            while the  rate in  the Wellesley  territory is  one-half the



            state average.   These statistics support  the rationality of



            the statutory scheme. 


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Plaintiffs'  efforts  to  bootstrap   their  Equal



            Protection  claim  into  some  form of  takings  analysis  is



            neither  supported by the case law nor the facts.  Plaintiffs



            argue  that  because  some  ratings schemes  have  been  held



            unconstitutionally  confiscatory to the  insurance company if
                                             __ ___  _________ _______



            the scheme deprives the company of an opportunity  to achieve



            a  fair return, see Aetna Casualty & Sur. Co. v. Commissioner
                            ___ _________________________    ____________



            of Ins., 263 N.E.2d  698, 703 (Mass. 1970), Ms.  Abdullah may
            _______



            assert a claim  that the  premiums she pays  as an  insurance



            purchaser   are  so   high   as  to   be   unconstitutionally



            confiscatory.  Without accepting  the premise of the argument



            or its leap from the property rights of a regulated insurance



            company to  the premiums  paid  by an  insured, the  argument



            suffers from fatal flaws.   The facts asserted in  support of



            the argument are not properly before us.  Ms. Abdullah states



            in her brief before this court  that she pays more than  one-



            third  of the value of her car to insure it each year.  This,



            she says, effectively denies  her the use of her  automobile,



            as the Massachusetts legislature requires that automobiles be



            insured in order to be  operated on a public way.   See Mass.
                                                                ___



            Gen. L. ch. 90,   34B.  And without a car, Ms. Abdullah says,



            her constitutional  right to  travel is infringed.   However,



            the parties agreed to litigate this case on stipulated facts.



            The  only  facts  with  respect to  Ms.  Abdullah's  personal



            circumstances  that  are  properly  before us  are  that  she


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"resides .  . . in  the Roxbury section of  Boston," that she



            "owns  a private  passenger  automobile which  is garaged  in



            Roxbury  and is insured . . . under the compulsory automobile



            insurance  laws of  the Commonwealth,"  and that  the average



            rate  for the standard package of insurance was higher in the



            Roxbury territory than in the Wellesley territory.



                      Even were there  facts in the record to support Ms.



            Abdullah's   claim,   the   argument   collapses   because  a



            foundational piece is missing.  The statutory provision under



            attack  does not per se  result in any  particular rate being



            set  or premium being charged.  It simply requires that there



            be at  least fifteen territories  used in assessment  of risk



            factors,  and  plaintiffs do  not  attempt to  show  that any



            possible  designation of  fifteen or  more territories  would



            result in  a confiscatory rate  for Ms. Abdullah.   Moreover,



            other  risk  factors such  as  driver  class (which  includes



            number of  years of  driving experience) and  group discounts



            also  go into the assessment  of an individual's  rates.  The



            facts before the court  do not establish a  causal connection



            between the  statute facially attacked and  the rates claimed



            to  be  confiscatory.     In  essence,  plaintiff's  argument



            inappropriately asks us to turn this facial challenge to  the



            statute  into   an  as  applied  challenge.     Cf.  Keystone
                                                            ___  ________



            Bituminous Coal  Ass'n v. DeBenedictis, 480  U.S. 470, 494-95
            ______________________    ____________



            (1987) (in facial challenge,  "mere enactment" of the statute


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must deprive plaintiff of economically viable use of her real



            property); Gilbert v. City of Cambridge, 932 F.2d 51, 56 (1st
                       _______    _________________



            Cir.), cert. denied, 502 U.S. 866 (1991).
                   ____________



                      Plaintiffs' claim  at bottom is that  the system is



            unfair.  It may or  may not be.  There is  evidence submitted



            by the defendants that in fact the Commissioner  has required



            certain   non-urban  areas   essentially  to   subsidize  the



            insurance of persons, such as Ms. Abdullah,  living in highly



            urban areas.  Importantly,  however, the question of fairness



            is not properly  addressed to  this court.   Those  arguments



            should be made to  the state insurance regulatory authorities



            or  to  the  Massachusetts  legislature or  directly  to  the



            citizenry  through  the  petition  process.   Our  review  is



            restricted to  whether there is  any rational basis  for this



            scheme.   There  is,  and the  constitutional challenge  must



            fail. 



                      For  these reasons,  the  decision of  the district



            court is affirmed.
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