Genworth Life Insurance Company v. New Hampshire Department of Insurance

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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Merrimack
No. 2019-0727

GENWORTH LIFE INSURANCE COMPANY

v.

NEW HAMPSHIRE DEPARTMENT OF INSURANCE

Argued: November 19, 2020
Opinion Issued: February 17, 2021

Cook, Little, Rosenblatt & Manson, p.l.l.c., of Manchester (Arnold
Rosenblatt and Kathleen M. Mahan on the brief), and Saul Ewing LLP, of
Philadelphia, Pennsylvania (Paul M. Hummer and Sean T. O’Neill on the brief,
and Mr. Hummer orally), for the plaintiff.

Gordon J. MacDonald, attorney general (Samuel R.V. Garland, assistant
attorney general, and Anthony J. Galdieri, senior assistant attorney general, on
the brief, and Mr. Garland orally), for the defendant.

DONOVAN, J. The plaintiff, Genworth Life Insurance Company,
challenges amended regulations promulgated by the New Hampshire
Department of Insurance (Department) retroactively limiting rate increases for
long-term care insurance (LTCI) policies. The plaintiff is an insurer that
provides LTCI to over 6,000 New Hampshire residents. It appeals orders of the
Superior Court (Tucker, J.) dismissing its claim that the regulations violate the
contract clauses of the State and Federal Constitutions, and entering summary
judgment for the Department with respect to the plaintiff’s claims that the
regulations are ultra vires and violate the takings clauses of the State and
Federal Constitutions. Because we conclude that the regulations are ultra
vires, and, therefore, invalid, we reverse and remand.

I. Facts

The record supports the following facts. The Long-Term Care Insurance
Act governs LTCI policies issued in New Hampshire. See RSA ch. 415-D
(2015). LTCI policies cover costs associated with long-term care, such as
nursing homes and assisted living. The LTCI Act requires the Insurance
Commissioner to “issue reasonable rules to promote premium adequacy and to
protect the policyholder in the event of substantial rate increases, and to
establish minimum standards for marketing practices, agent compensation,
agent testing, penalties and reporting practices.” RSA 415-D:12. As relevant
here, the purpose of the LTCI Act is “to promote the public interest, to promote
the availability of [LTCI] policies, . . . and to facilitate flexibility and innovation
in the development of [LTCI] coverage.” RSA 415-D:1.

In 2004, the Commissioner issued regulations governing premium rate
schedule increases for LTCI policies. Previously, the regulations governing
LTCI policies imposed a minimum anticipated loss-ratio standard of 60
percent, meaning that for every dollar an insurer anticipated receiving in
premiums, it was expected to spend no less than 60 cents on claims. The
regulations permitted insurers to increase premium rates provided that the
increases did not cause the policies to fall below the loss-ratio standard. By
contrast, the 2004 regulations required insurers to obtain the Commissioner’s
approval before increasing premium rates. See N.H. Admin. R., Ins
3601.19(b)(5) (2004). To obtain approval, insurers had to satisfy more
stringent loss-ratio standards and certify that requested increases were
actuarially justified. See N.H. Admin. R., Ins 3601.19(b)-(c) (2004). The 2004
regulations applied only to LTCI policies issued on or after the regulations’
effective date. See N.H. Admin. R., Ins 3601.19(a) (2004).

In 2014, the Commissioner proposed several amendments to the rate-
increase regulations (Amended Regulations). The Amended Regulations, which
became effective in 2015, allow insurers to increase rates once every three
years, subject to the Commissioner’s approval.1 See N.H. Admin. R., Ins
3601.19(b)(5), (d) (2015). The Amended Regulations also slightly alter the loss-

1 The Commissioner subsequently amended the rate-increase regulations in 2018. However,
because the 2018 amendments did not change the relevant language of the Amended Regulations,
they do not impact our consideration of the plaintiff’s appeal. See N.H. Admin. R., Ins 3601.19
(2018).

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ratio and actuarial-certification requirements from the 2004 regulations. See
N.H. Admin. R., Ins 3601.19(b)-(c) (2015). Most notably, however, the
Amended Regulations cap the maximum percentage rate increases for LTCI
policies based upon the attained age of the policyholders. See N.H. Admin. R.,
Ins 3601.19(f) (2015). According to Table 3601.1 in the Amended Regulations,
insurers may obtain larger percentage rate increases for policyholders with
lower attained ages, and smaller increases for policyholders with higher
attained ages. Id. The Amended Regulations provide that the Commissioner
“shall not approve” any requested increase that exceeds the caps. Id. Unlike
the 2004 regulations, the Amended Regulations apply to rate increases on all
LTCI policies, including those issued before the amendments. See N.H. Admin.
R., Ins 3601.19(a) (2015).

In 2016, the plaintiff sought declaratory and injunctive relief against the
Department, challenging the validity of the rate-increase caps imposed by the
Amended Regulations. Specifically, the plaintiff argued that the Amended
Regulations are invalid because they are ultra vires, meaning that they exceed
the Commissioner’s statutory authority under RSA 415-D:12, which mandates
the Commissioner to issue reasonable rules to promote premium adequacy, to
protect policyholders in the event of substantial rate increases, and to establish
minimum standards for marketing practices, agent compensation, agent
testing, penalties and reporting practices. See RSA 415-D:12. The plaintiff
also argued that the Amended Regulations violate the contract and takings
clauses of the State and Federal Constitutions. See U.S. CONST. art. I, § 10,
cl. 1, amend. V; N.H. CONST. pt. I, arts. 12, 23. On the Department’s motion,
the trial court dismissed the contract clause claim. Both parties then moved
for summary judgment on the remaining ultra vires and takings claims. The
trial court granted summary judgment to the Department on both claims. The
plaintiff then filed a motion for reconsideration, which the trial court denied.
This appeal followed.

II. Analysis

On appeal, the plaintiff argues that we should reverse and remand the
trial court’s decisions because the Amended Regulations: (1) substantially
impair its contractual rights in violation of the contract clauses of the State
and Federal Constitutions; (2) deprive insurers of reasonable rates of return in
violation of the takings clauses of the State and Federal Constitutions; and (3)
exceed the Commissioner’s mandate under RSA 415-D:12 to issue reasonable
regulations to promote premium adequacy and to protect policyholders in the
event of substantial rate increases. Because we decide constitutional questions
only when necessary, State v. Brouillette, 166 N.H. 487, 489 (2014), we first
address the plaintiff’s ultra vires argument.

When reviewing a trial court’s rulings on cross-motions for summary
judgment, we consider the evidence in the light most favorable to each party in

3
its capacity as the nonmoving party. Langevin v. Travco Ins. Co., 170 N.H.
660, 663 (2018). If our review of the evidence discloses no genuine issue of
material fact, and if the moving party is entitled to judgment as a matter of law,
we will affirm the grant of summary judgment. Id. We review the trial court’s
application of the law to the facts de novo. Id.

As relevant here, the plaintiff argued to the trial court that the Amended
Regulations exceed the Commissioner’s statutory mandate because: (1) they
subvert, rather than promote, premium adequacy; and (2) they prevent
substantial rate increases, rather than protect policyholders in the event of
substantial rate increases. The trial court rejected these arguments, noting
that, regardless of whether the Amended Regulations “prove harmful to [the
plaintiff’s] effort to realize a reasonable return,” the LTCI Act nevertheless
“permits ‘reasonable rules’ promoting premium adequacy while protecting the
policyholder.” The trial court further concluded that the Amended Regulations
did not exceed the Commissioner’s mandate under RSA 415-D:12 because they
permit substantial rate increases, but cap rate increases in certain
circumstances “in order to protect the policyholder from the consequences of a
more sizable one.” Accordingly, the trial court ruled in the Department’s favor
on the plaintiff’s ultra vires claim.

On appeal, the plaintiff reprises the arguments that it made to the trial
court. As explained below, we agree with the plaintiff that the Amended
Regulations exceed the Commissioner’s mandate under RSA 415-D:12 because
they are not reasonable rules that either promote premium adequacy or protect
policyholders in the event of substantial rate increases.

An administrative regulation exceeds an agency’s authority when it
contradicts the terms of the governing statute. Appeal of Wilson, 161 N.H. 659,
662 (2011). Although the legislature may delegate to administrative agencies
the power to make rules necessary for the proper execution of the law, an
agency’s authority “is designed only to permit the [agency] to fill in the details
to effectuate the purpose of the statute.” Id. (quotation omitted). “Thus,
administrative rules may not add to, detract from, or modify the statute which
they are intended to implement.” Id. (quotation omitted).

Resolving the plaintiff’s ultra vires argument requires that we interpret
the language of RSA 415-D:12. We recognize, as the Department argues, that
“it is well established in our case law that an interpretation of a statute by the
agency charged with its administration is entitled to deference.” Appeal of
Town of Seabrook, 163 N.H. 635, 644 (2012); see N.H. Resident Ltd. Partners of
Lyme Timber Co. v. N.H. Dep’t of Revenue Admin., 162 N.H. 98, 101 (2011)
(stating that an administrative regulation adopted by an agency pursuant to a
statute is “prima facie evidence of the proper interpretation of the . . . statute”
(quotation omitted)). However, the deference afforded is not absolute. Appeal
of Town of Seabrook, 163 N.H. at 644. We are the final arbiter of the

4
legislature’s intent as expressed in the words of the statute considered as a
whole. Id. We will not defer to an agency’s statutory interpretation if it clearly
conflicts with the statutory language or if it is plainly incorrect. Id.

Accordingly, we review the Commissioner’s interpretation of RSA 415-
D:12 de novo. See id. When interpreting statutory language, we ascribe the
plain and ordinary meaning to the words used. Id. We interpret legislative
intent from the statute as written, and we will not consider what the legislature
might have said or add language that the legislature did not see fit to include.
Appeal of Town of Lincoln, 172 N.H. 244, 248 (2019). Our goal is to apply
statutes in light of the policy sought to be advanced by the entire statutory
scheme. Appeal of Morrissey, 165 N.H. 87, 92 (2013). We apply the same
principles of construction to both statutes and regulations. See Bach v. N.H.
Dep’t of Safety, 169 N.H. 87, 92 (2016).

We now turn to the merits of the plaintiff’s argument. Both parties point
to RSA 415-D:12 as the primary source of statutory authority for the Amended
Regulations. As relevant here, this provision requires the Commissioner to
“issue reasonable rules to promote premium adequacy and to protect the
policyholder in the event of substantial rate increases.” RSA 415-D:12.

We first address the plaintiff’s argument that the Amended Regulations
subvert, rather than promote, premium adequacy. Because the LTCI Act does
not define the term “promote,” we look to the dictionary for guidance. See
Working Stiff Partners v. City of Portsmouth, 172 N.H. 611, 617 (2019). The
New Oxford American Dictionary defines the word “promote” as to “support or
actively encourage.” New Oxford American Dictionary 1398 (3d ed. 2010).
Similarly, the Shorter Oxford English Dictionary defines the word “promote” as
to “encourage, help forward, or support actively.” 2 Shorter Oxford English
Dictionary 2366 (6th ed. 2007). These definitions suggest that RSA 415-D:12
requires the Commissioner to issue reasonable regulations to support or
encourage insurers seeking to maintain premium adequacy.

We interpret the phrase “premium adequacy,” as used in RSA 415-D:12,
to mean that insurers are capable of maintaining premiums at sufficient levels
to cover the anticipated costs of claims over the life of the LTCI policy without
the need to request future rate increases. An important aspect of LTCI is that
premiums remain level over time, although such consistency is not guaranteed.
U.S. Gov’t Accountability Office, GAO-08-712, Long-Term Care Insurance:
Oversight of Rate Setting and Claims Settlement Practices, at 9 (2008),
https://www.gao.gov/new.items/d08712.pdf. When calculating premiums for
LTCI policies, insurers seek “to ensure that the total premiums paid by all
consumers who bought a given policy and the interest earned on invested
assets over the lifetime of the policy are sufficient to cover costs.” Id. If,
however, an insurer miscalculates “the revenue needed to cover costs,” it may
need to increase premium rates. Id. at 10 (noting that some companies have

5
struggled with “[s]etting LTCI premium rates at an adequate level to cover
future costs”). Thus, an insurer’s ability to cover costs depends, at least in
part, on its ability to increase rates when its actuarial assumptions prove
flawed. See id.

The regulations governing rates for LTCI policies reflect this same
interest in maintaining level premiums while ensuring that insurers are
capable of covering costs and losses. For example, prior to making LTCI
available for sale, an insurer must submit actuarial certification stating, in
part, that “the initial premium rate schedule is sufficient to cover anticipated
costs under moderately adverse experience and . . . reasonably expected to be
sustainable over the life of the [policy] form with no future premium increases
anticipated.” N.H. Admin. R., Ins 3601.09(b)(2). Similarly, an insurer seeking
to increase premium rates must provide, among other things, actuarial
certification stating that “[i]f the requested premium rate schedule increase is
implemented and the underlying assumptions are realized, then no further
premium rate schedule increases are anticipated.” N.H. Admin. R., Ins
3601.19(b)(2). Accordingly, we conclude that the phrase “promote premium
adequacy,” as used in RSA 415-D:12, requires the Commissioner to issue
reasonable rules to support or encourage insurers in their efforts to maintain
premiums at sufficient levels to cover the anticipated costs of claims over the
life of the LTCI policy.

We agree with the plaintiff that the rate-increase caps in the Amended
Regulations, N.H. Admin. R., Ins 3601.19(f) (2015), fail to promote premium
adequacy. Before 2015, when the Amended Regulations took effect, the
Commissioner had authority to approve rate-increase requests as necessary for
insurers to maintain premium adequacy, provided that the increases satisfied
the loss-ratio and actuarial-certification standards set forth in the 2004
regulations. See N.H. Admin. R., Ins 3601.19(b)-(c) (2004). The Amended
Regulations, by contrast, contain slightly altered versions of the previous loss-
ratio and actuarial-certification standards, see N.H. Admin. R., Ins 3601.19(b)-
(c) (2015), but now cap percentage rate increases based upon the attained age
of the policyholder. See N.H. Admin. R., Ins 3601.19(f) (2015) (stating that the
Commissioner “shall not approve any increase if the resultant increase results
in a percentage increase for any policyholder that exceeds an amount as set
forth [in Table 3601.1] based on the policyholder’s attained age”). These
percentage rate-increase caps apply “to all requests for premium rate schedule
increases” for all LTCI policies, including policies issued before the Amended
Regulations took effect. N.H. Admin. R., Ins. 3601.19(a) (2015). As a result,
insurers who issued LTCI policies based upon the previous rate-increase
regulations, believing they could increase rates as necessary to maintain
premium adequacy, are now more restricted in their ability to achieve premium

6
adequacy, especially given the unique difficulties insurers face in predicting
costs for LTCI policies.2

The Amended Regulations make no exception for LTCI policies that
require increases in excess of the rate-increase caps in order to avoid premium
inadequacy. See N.H. Admin. R., Ins 3601.19(f) (2015). Nor do they afford the
Commissioner discretion to approve increases that exceed the caps. See id.
Indeed, the phrase “shall not approve,” id., indicates that the Commissioner
must reject increases that exceed the rate-increase caps, even if the
Commissioner determines that greater increases are necessary to support or
encourage insurers’ efforts to cover anticipated costs over the life of their LTCI
policies. See In the Matter of Bazemore & Jack, 153 N.H. 351, 354 (2006) (“It
is a general rule of statutory construction that . . . the word ‘shall’ makes
enforcement of a provision mandatory.”). Therefore, because the Amended
Regulations deprive the Commissioner of the discretion to evaluate, on a case-
by-case basis, whether increases exceeding the rate-increase caps are
necessary to ensure that insurers can maintain premium adequacy, we
conclude that the rate-increase caps set forth in the Amended Regulations,
N.H. Admin. R., Ins 3601.19(f) (2015), are not rules that promote premium
adequacy.

The Department, on the other hand, counters that the Amended
Regulations do not prohibit the Commissioner from approving increases that
exceed the rate-increase caps.3 Specifically, the Department points to the
administrative appeals process, which allows insurers to request hearings to
challenge decisions made by the Commissioner and appeal any adverse
rulings. See RSA 400-A:17, :24 (2018). The Department also relies upon its
own authority to issue declaratory rulings on any matter within its jurisdiction.
See N.H. Admin. R., Ins 209.01. Although these provisions may allow insurers
to challenge the Commissioner’s decisions, they do not permit the
Commissioner to deviate from the mandatory language of the Amended
Regulations when reviewing rate-increase requests. Indeed, it is well

2According to the plaintiff’s complaint, in setting initial premium rates, insurers make various
assumptions about, among other things, mortality rates, morbidity rates, lapse rates, and interest
rates on invested assets. However, because policyholders tend to purchase LTCI coverage when
they are younger and healthier, most LTCI claims occur long after the insurer issued the policies.
Consequently, the ability to predict future claim costs for LTCI is more limited than for other types
of insurance with shorter terms of coverage. See Long-Term Care Insurance, supra at 10 (noting
that “[b]ecause LTCI is a relatively new product, companies lacked and may continue to lack
sufficient data to accurately estimate the revenue needed to cover costs”).

3We recognize that the Department makes this argument in response to the plaintiff’s claim that
the Amended Regulations are confiscatory in violation of the takings clauses of the State and
Federal Constitutions. However, this argument is equally relevant to our conclusion that the
Commissioner has no discretion to deviate from the Amended Regulations in order to promote
premium adequacy.

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established that “an administrative agency must follow its own rules and
regulations.” Appeal of Nolan, 134 N.H. 723, 728 (1991) (quotation and
brackets omitted). We are therefore unpersuaded that these provisions afford
the Commissioner discretion to approve premium rate increases exceeding the
caps imposed by the Amended Regulations.

The Department also emphasizes the Commissioner’s authority to, under
certain circumstances, “issue an order to modify or suspend a specific
provision or provisions of this rule with respect to a specific [LTCI] policy.”
N.H. Admin. R., Ins 3601.16. However, the Department’s regulations do not
allow insurers to increase rates for specific LTCI policies. See N.H. Admin. R.,
Ins 3601.05(a). Rather, insurers may only increase rates for certain types of
LTCI policies, provided that the increases apply “on a class basis.” N.H.
Admin. R., Ins 3601.05(a)(2). Because Rule 3601.16 expressly limits the
Commissioner’s discretionary power to “modify or suspend” regulations to
“specific” LTCI policies, we do not interpret this provision as authorizing the
Commissioner to approve increases for entire classes of policies in excess of the
caps set forth in the Amended Regulations. See Appeal of Nolan, 134 N.H. at
728. Moreover, the LTCI Act specifically protects policyholders from policies
that are “unjust, unfair, and unfairly discriminatory to the policyholder.” RSA
415-D:5, II(h). To allow the Commissioner to increase rates with respect to
specific LTCI policies facing possible premium inadequacy would unfairly
disadvantage policyholders with potentially larger claims, undermining the
protections afforded to policyholders under the LTCI Act. See id. Accordingly,
we conclude that the Commissioner lacks discretion to approve increases that
exceed the caps in the Amended Regulations, N.H. Admin. R., Ins 3601.19(f)
(2015), and, as a result, the Amended Regulations are not reasonable rules
that promote premium adequacy.

We next address the plaintiff’s argument that the Amended Regulations
do not protect policyholders “in the event of substantial rate increases.” RSA
415-D:12. As explained above, the Amended Regulations prohibit the
Commissioner from approving increases that exceed the rate-increase caps.
See N.H. Admin. R., Ins 3601.19(f) (2015). Although, as the Department
argues, the Amended Regulations may protect policyholders from excessive
premiums that dilute the value of their policies, the conditional language of
RSA 415-D:12 limits the Commissioner’s authority to enact such protective
measures. The phrase “in the event of,” RSA 415-D:12, is an expression of
condition, meaning that the Commissioner may issue reasonable regulations
aimed at protecting policyholders if an insurer substantially increases its rates.
See Greenwald v. Keating, 172 N.H. 292, 298 (2019) (concluding, as a matter of
contract interpretation, that the phrase “[i]n the event that” created a condition
precedent (quotation omitted)); In re Magoon Estate, 109 N.H. 211, 212 (1968)
(holding that the phrase “in the event of her death” in the testator’s will
described “an uncertain event” and demonstrated the testator’s intent to devise
property to his wife “if she survived him”); see also Webster’s Third New

8
International Dictionary 1124 (unabridged ed. 2002) (defining the word “if” as
“in the event that”).

However, the Amended Regulations do not merely protect policyholders if
insurers substantially increase rates. Rather, by barring the Commissioner
from approving any increase that exceeds the caps set forth in Table 3601.1,
the Amended Regulations inhibit insurers from substantially increasing rates.
See N.H. Admin. R., Ins 3601.19(f) (2015). This prophylactic function
distinguishes the Amended Regulations from Rule 3601.27, which requires
insurers to offer certain benefits to policyholders if they substantially increase
their rates. N.H. Admin. R., Ins 3601.27. Unlike the benefits referenced in
Rule 3601.27, which apply only after insurers have already substantially
increased rates, the Amended Regulations apply before the Commissioner
approves any rate-increase requests. See id. Therefore, we conclude that the
rate-increase caps set forth in the Amended Regulations, N.H. Admin. R., Ins
3601.19(f) (2015), do not protect policyholders “in the event of” substantial rate
increases. RSA 415-D:12.4

Accordingly, we conclude that the rate-increase caps set forth in the
Amended Regulations, N.H. Admin. R., Ins 3601.19(f), exceed the
Commissioner’s mandate under RSA 415-D:12 because they are not
reasonable rules that either promote premium adequacy or protect
policyholders in the event of substantial rate increases. See RSA 415-D:12.
Because we conclude that the rate-increase caps are ultra vires, and, therefore,
invalid, we need not address the plaintiff’s remaining arguments.

III. Conclusion

For the reasons stated above, we reverse and remand the trial court’s
decision denying the plaintiff’s motion for summary judgment, and entering
summary judgment for the Department, on the plaintiff’s ultra vires claim. We
consider waived any issues that the plaintiff raised in its notice of appeal, but
did not brief. See Weare Bible Baptist Church v. Fuller, 172 N.H. 721, 729
(2019).
Reversed and remanded.

HICKS, BASSETT, and HANTZ MARCONI, JJ., concurred.

4The Department argues that the LTCI Act affords the Commissioner discretion to balance the
promotion of premium adequacy and the protection of policyholders in the event of substantial
rate increases. See RSA 415-D:12. According to the Department, the Commissioner’s discretion
to balance these two potentially conflicting goals is entitled to substantial deference. Because we
conclude that the Amended Regulations fail to adequately advance either goal, we need not decide
whether the LTCI Act affords the Commissioner such discretion.

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