Opinion
No. 78-010
Decided November 30, 1978. Rehearing denied December 28, 1978. Certiorari granted March 19, 1979.
Group of life insurance salesmen brought action challenging regulation promulgated by the Colorado Division of Insurance specifying certain consumer protection measures to be taken by life insurance companies issuing new insurance to replace existing insurance. The regulation's validity was, for the most part, upheld by the trial court, and plaintiffs appealed.
Affirmed in part, Reversed in part.
1. ADMINISTRATIVE LAW AND PROCEDURE — Insurance Division Regulation — Specific Applicability — Plaintiffs — Insurance Salesmen — Standing — Challenge Validity. Where group of licensed life insurance salesman sought to challenge regulation issued by insurance commissioner, the regulation itself required express conduct by all members of a particular and readily identifiable group which is already closely regulated by the insurance commissioner, and it further required that, if members of that group wished to continue to sell life insurance in Colorado, then they must commence on a definite date to perform the precise acts required by the regulation; accordingly, the effect of that regulation upon plaintiffs is immediate, specific, and unequivocal and its effect on their operation is readily ascertainable; consequently, those plaintiffs do have standing to challenge the promulgation of the regulation.
2. INSURANCE — Regulation — Sale — Replacement Life Insurance — Valid — Within Discretion — Legislative Authority — Anti-Competitive Consequences — Not Shown. Where Division of Insurance issued regulation requiring that agent selling life insurance must determine whether new insurance will replace existing insurance, and, if so, must furnish applicant with a "disclosure statement" detailing costs, advantages, disadvantages, and giving notice about possible problems that might arise from the replacement, that regulation was promulgated under a valid delegation of legislative authority, and there being no showing of any adverse competitive consequences flowing from it, it is a valid regulation.
3. CONSTITUTIONAL LAW — Insurance Salesman — Standing — Challenge Regulation — Not Include — Constitutional Violation — Rights of Their Clients — No Standing — Raise Issue. Where group of insurance salesman sought to challenge validity of Division of Insurance regulation, their standing to challenge the regulation as it affects their business activities did not include standing to challenge the regulation on the basis that it violates the constitutional rights of their clients; such a challenge could be raised only by members of the group whose rights were assertedly being impaired, or whose interests the statute was designed to protect; consequently, plaintiffs had no standing to raise that issue and the trial court erred by addressing its merits.
Appeal from the District Court of the City and County of Denver, Honorable Robert T. Kingsley, Judge.
Lohf Barnhill, P.C., David G. Ebner, for plaintiffs-appellees cross-appellants.
J. D. MacFarlane, Attorney General, David W. Robbins, Deputy Attorney General, Edward G. Donovan, Assistant Attorney General, Jeffrey G. Pearson, Assistant Attorney General, for defendant-appellant cross-appellee.
This appeal questions the validity of Regulation 72-7 promulgated by the Colorado Division of Insurance specifying consumer protection measures to be taken by life insurance companies issuing new insurance to replace existing insurance. The trial court held the regulation valid except a provision requiring the replacing insurance company to notify the replaced company of the insured's plan to change insurance despite the insured's request that this information not be divulged. We affirm the holding of the trial court except as to the latter provision.
[1] Initially, we must determine whether plaintiffs, who are licensed insurance salesmen actively engaged in the sale of life insurance policies in Colorado, have standing to challenge the promulgation of the regulation. The rule that this court recently announced in Colorado Ute Electric Association, Inc. v. Air Pollution Control Commission, 41 Colo. 393, 591 P.2d 1323 (1978), is inapposite here. In that case we dealt with a series of regulations which established administrative procedures by which individuals or businesses whose operations might cause pollutants to be released in the air could obtain permits authorizing such operations where these pollutants happen to exceed certain levels. These regulations of the Air Pollution Control Commission also set forth broad general guidelines as to the criteria that would be used in administratively determining whether permits would be granted, and if so, what reasonable conditions might be imposed thereon. The regulations themselves did not impose a specific standard of conduct, nor were they directed at any specific individual or identified group of individuals; neither were they self executing.
Here the regulation in question itself requires express conduct by all members of a particular and readily identifiable group which is already closely regulated by the insurance commissioner, and who if they wish to continue to sell life insurance in Colorado, must commence on a definite date and thereafter perform the precise acts required by the regulation. Thus, the effect upon plaintiffs here is immediate, specific, unequivocal and its effect on their operation is readily ascertainable.
Legislative concern about unfair practices in the sale of replacement insurance is apparent in § 10-3-1104(1)(a)(VI), C.R.S. 1973, which designates misrepresentation for the purpose of inducing exchange or conversion of an insurance policy as an unfair method of competition and a deceptive business practice. Under § 10-1-109 and 10-3-1110 C.R.S. 1973, the commissioner of insurance is statutorily authorized to promulgate rules identifying and prohibiting unfair methods of competition and deceptive practices.
Pursuant to this legislative mandate, the commissioner promulgated Insurance Division Regulation 72-7, which provides that an agent selling life insurance must determine whether new insurance will replace existing insurance and, if so, the agent must furnish the applicant with a "disclosure statement" detailing the costs, advantages, and disadvantages of the proposed replacement insurance, and a notice warning applicants about problems that may arise from replacement. Insurance companies are required to make certain that their agents have followed the prescribed procedures and to notify immediately any insurer whose life insurance is being replaced about the proposed replacement.
The correctness of the procedure followed by the commissioner in promulgating this regulation is not questioned. Plaintiffs challenge the regulation on the grounds that it has an anti-competitive effect in violation of § 10-3-1101, C.R.S. 1973. In this regard, they contend that it is biased against the sale of replacement insurance and places restrictive requirements only on the replacing insurer.
[2] Administrative regulations regularly promulgated are presumed valid and the burden is upon the challenging party to establish the asserted invalidity. Moore v. District Court, 184 Colo. 63, 518 P.2d 948 (1970). We agree with the findings of the trial court that under the relevant statutory provisions, the commissioner had a valid delegation of legislative authority to regulate replacement insurance sales practices. Since the purpose of the regulation is not to regulate competitive relationships between the insurers, and since there has been no showing of any adverse competitive consequences, the regulation complies with § 10-3-1101, C.R.S. 1973. Any alleged anti-competitive bias in the Division's approved disclosure statement and notice forms is remedied by Article VIII of the regulation allowing substitute forms to be used with the approval of the Division.
The Commissioner appeals the finding of the trial court that Article VI(4)(c) of the regulation, requiring notification to the replaced insurer of the proposed replacement even when the insured has specifically requested that such notice not be given, is a violation of the insured's right of privacy.
[3] Plaintiffs' standing initially to challenge the regulation as it affects their business activities does not include standing to challenge this provision of the regulation on the grounds that it violates the constitutional rights of their clients. Constitutional challenges may be raised only by members of the group whose rights are being impaired, American Metal Climax, Inc. v. Butler, 188 Colo. 116, 532 P.2d 951 (1975), or whose interests the statute was designed to protect. Colorado Chiropractic Ass'n v. Heuser, 177 Colo. 434, 494 P.2d 833 (1972). Therefore, plaintiffs lack standing to raise this issue, and the trial court should not have reached the merits of the alleged violation of the right to privacy. Accordingly, the order entered by the trial court enjoining enforcement of this provision must be reversed.
Judgment is therefore affirmed in part and reversed in part, and the cause is remanded to the trial court to dissolve the permanent injunction restricting enforcement of Article VI(4)(c) of the regulation.
JUDGE SMITH and JUDGE BERMAN concur.