On April 23, district court Judge Mary Sue Wilson ruled against insurers’ petition for a preliminary injunction to hold in abeyance the Washington insurance commissioner’s emergency rule prohibiting the use of credit history when writing personal lines coverages. Ruling from the bench, Wilson denied the preliminary injunction, finding more credence in the arguments made by the defense attorney Marta DeLeon, an assistant attorney general who was representing Insurance Commissioner Mike Kreidler. The hearing on the emergency rule issued on March 23 was conducted on Zoom.
Wilson found little chance of success by the petitioning insurer and insurance agent groups, APCIA, PIA West, and IIABW, in permanently nullifying the emergency rule. Since the ruling, Washington insurers expressed determination to review their legal options, but indicated they will follow the law and comply with the “unreasonable deadline” of May 6, when new rate filings, that eliminate credit-based scoring as a factor, are due. The rule specifies that all new and renewal policies effective on or after June 20 are subject to the emergency prohibition.
Wilson found that industry associations challenging the rule were unlikely to succeed with their two main arguments that Kreidler lacked “good cause” and had no authority to issue the rule. Wilson cited several factors that led to her ruling in favor of Kreidler. She found that the combination of the negative phrasing in the statute authorizing insurers to use credit based scoring, along with the general law authorizing the commissioner to issue regulations consistent with the Insurance Code, gave him the authority to issue the regulation. She accepted the reasoning from the documents filed by the commissioner that the federal Coronavirus Aid, Relief and Economic Security (CARES) Act limitation on negative credit reporting by financial institutions during the pandemic emergency creates a situation where similarly situated individuals experience different results when credit-based scoring is used as a factor in insurers’ pricing. The commissioner is obligated by law to make certain insurers do not employ unfairly discriminatory practices in rating, and this emergency rule is consistent with this obligation, according to Wilson.
The discriminatory situation that arises due to the CARES Act is this: The credit history of a policyholder becomes more favorably treated if his policy was issued subsequent to implementation of the CARES Act who, but for CARES Act protections, would have been penalized. The policyholder whose credit history was scored prior to the CARES Act, but similarly situated to the post CARES Act policyholder, then bears an unequal penalty. The judge interpreted this as unfair discrimination among similarly situated individuals, a situation that the commissioner is obligated by law to disallow.
In an April 27 news release, Kreidler said the emergency rule, and ultimately a permanent rule, protects those who are the most hurt financially by the pandemic from being forced to pay even higher premiums. It will also protect those who will see their credit scores plummet when the federal protections on pandemic credit reporting end.
The insurers’ arguments were unpersuasive to Wilson.
“What we have here is an extraordinary effort to nullify existing law,” said attorney Damon Vocke, who represented the insurer and agent groups at the hearing. “It is a contrived emergency,” Vocke said. The CARES Act was signed into law on March 27, 2020, by then President Donald Trump. “Now suddenly, one year later, there has to be an emergency rule that invalidates existing law.” Vocke went on to summarize Kreidler’s multiple unsuccessful attempts since 2001 to pass legislation banning credit scoring. Further, said Vocke, a short term ban is disruptive. Credit-based insurance scoring is a legitimate risk factor, he said.
Vocke argued that actuaries in the insurance department acknowledge the correlation between poor credit scores and high claiming activity. Further, an emergency rule, by law, can be effective no more than 120 days, he said. The nature of an insurance policy issued for six months or one year would extend the reach of this emergency rule far beyond the authorized 120 days.
Also, said Vocke, the Office of the Insurance Commissioner has not disputed the affidavits from insurers which demonstrate that over one million policyholders in Washington will experience higher insurance premiums because of this rule. The commissioner’s court filing regards this position of insurers and insurance agents as “speculative.”
Wilson disregarded any comments the insurance commissioner or his representatives may have made during any legislative hearings on failed legislation that would have prohibited insurers’ use of credit scoring. “Failed legislation does not inform the court,” she said, agreeing with the department’s filed response to the petitioners that cites judicial precedent, “…(A)s a general principle, the court is loath to ascribe any meaning to the Legislature’s failure to pass a bill into law.”
In addition to the attorneys and the judge present virtually, there were more than 100 observers of the hearing. The Washington Insurance Commissioner’s website includes an April 28 news release wherein Kreidler urges other state insurance commissioners to join him in banning the use of consumers’ credit scores for determining insurance rates; this news release contains a link to a recording of the April 23 Thurston County Superior Court hearing.
Who is Judge Mary Sue Wilson?
Mary Sue Wilson is a judge for the Thurston County Superior Court in Washington. Wilson was appointed to the court by Gov. Jay Inslee, a Democrat, in October 2014 to replace a judge who was appointed to the Washington Court of Appeals. Wilson ran unopposed for election in 2015, then unopposed for reelection in 2016 and 2020.
According to the court website, Wilson currently serves in Family and Juvenile Court, a department of Superior Court, where she presides over family law, juvenile and dependency bench trials and pretrial hearings.
Prior to serving as a judge, Wilson served as an assistant attorney general for the state of Washington for two decades. In this capacity she represented state agencies and state officials in state and federal trial and appeals courts on a range of statutory, constitutional and environmental matters. She earned her J.D. summa cum laude from Gonzaga University School of Law in 1989. Following graduation, Wilson served as a judicial clerk to former Washington State Supreme Court Justice Robert Brachtenbach, the longest serving member of the state Supreme Court and a Republican who previously served in the Washington state legislature.
Superior court judges in Washington are elected to four-year terms. Vacancies between elections are filled by appointment of the governor, and the newly appointed judge serves until the next general election.