National Association of Independent Insurers v. Texas Department of Insurance

Facts

The State Board of Insurance adopted two administrative rules under the authority granted by Texas Insurance Code article 21.21, section 13(a). Rule 1000 prohibited insurance companies from refusing to sell certain types of insurance to prospective purchasers because they had an insurance policy canceled by another insurer or because they had been insured by a county mutual or surplus lines insurance company. Rule 1003 prohibited insurers from conditioning the sale of automobile insurance on the purchase of another policy or denying an application because the applicant owned only one car. The National Association of Independent Insurers and other insurance companies challenged these rules, arguing that they were not adopted in substantial compliance with the procedural requirements for agency rulemaking contained in the Administrative Procedure Act (APA). The Board’s justification for Rule 1000 stated that the prohibited actions were “anti-competitive and results in the blacklisting of some consumers from the insurance market,” but failed to explain why consideration of a previous denial, along with other permissible factors, was unfair or anti-competitive. Similarly, the Board’s justification for Rule 1003 failed to explain why the prohibited practices were unfairly discriminatory or what effect the rules would have on consumers and the insurance market.