Appeal from a judgment of the Supreme Court at Special Term (Connor, J.), entered August 3, 1983 in Albany County, which dismissed petitioners’ application, in a combined proceeding pursuant to CPLR article 78 and an action for declaratory judgment, to declare unlawful a regulation of the Department of Insurance.
As part of the no-fault auto insurance system, the Legislature directed the Superintendent of Insurance to promulgate regulations to ensure that any of an insurer’s “excess profits” were returned to consumers (Insurance Law, § 677, subd 5 [all statutory references are to the Insurance Law]).* Specifically, subdivision 5 of section 677 provides in pertinent part: “In accordance with regulations prescribed by the superintendent, each insurer issuing policies which are subject to this article * * * shall establish a fair, practicable and nondiscriminatory plan for refunding or otherwise crediting to those purchasing such policies their share of the insurer’s excess profit, if any, on such policies. An excess profit shall be a profit beyond such percentage rate of return on net worth attributable to such policies, as computed in accordance with the regulation required by subdivision three of section one hundred seventy-eight of this chapter, as is determined by the superintendent to be so far above a reasonable average profit as to amount to an excess profit”. Pursuant to this section, the superintendent promulgated part 166 of title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York (NYCRR) after years of extensive study and consideration. The regulation referred to in subdivision 5 of section 677 as being required by subdivision 3 of section 178 is 11 NYCRR part 165.
*831New York Public Interest Research Group, Inc. (NYPIRG) and certain individual motorists commenced this lawsuit as a combined CPLR article 78 proceeding and declaratory judgment action to challenge 11 NYCRR part 166. NYPIRG contends that this regulation is arbitrary and capricious and, contrary to the statutory requirement of subdivision 5 of section 677, is not consistent with 11 NYCRR part 165. Therefore, argues NYPIRG, 11 NYCRR part 166 must be struck down as unlawful. Special Term determined that the regulation was not arbitrary and capricious and dismissed the combined petition and complaint. NYPIRG appeals.
Initially, we note that a CPLR article 78 proceeding is not the proper method by which to challenge an agency’s quasi-legislative acts (see Matter of Lakeland Water Dist. v Onondaga County Water Auth., 24 NY2d 400, 407). We will, however, address the merits of the declaratory judgment portion of the lawsuit (see Matter of Sherman v Frazier, 84 AD2d 401, 405). In this regard, Special Term’s determination that the regulations challenged were not arbitrary and capricious appears well founded. The record reveals that public hearings, though not required, were held and that various viewpoints were aired. The Department of Insurance spent years developing a method to implement the Legislature’s intent and the regulation seems well formulated to return excess profits as the Legislature desired. Nonetheless, these facts and conclusions are not particularly relevant to resolving the issue posed under the declaratory judgment portion of the cases: whether 11 NYCRR part 166 is unlawful because it is at variance with 11 NYCRR part 165, promulgated pursuant to subdivision 3 of section 178, despite the requirement for uniformity imposed by subdivision 5 of section 677.
It is evident from our review of the regulations at issue that profit is defined in terms of net worth in 11 NYCRR part 165 and in 11 NYCRR part 166 (compare 11 NYCRR Appendix 15, pp A-3, A-5, with 11 NYCRR 166-1.4) and, thus, the regulations are consistent in this regard. It is further evident, however, that profit is computed on a per company basis under 11 NYCRR part 165 (see 11 NYCRR 165.3 [b]), whereas profit is computed using aggregate industry data under 11 NYCRR part 166 (see 11 NYCRR 166-1.2, 166-1.6). Such computations may be well advised and thoughtfully conceived (see 11 NYCRR 166-2.2, Appendix 15), but they are contrary to the dictate of subdivision 5 of section 677, which requires that profit for purposes of excess profit be computed in accordance with 11 NYCRR part 165. The fact that the formula under 11 NYCRR part 165 includes industry data (see 11 NYCRR 165.2 [e], [f], [g]; Appendix 15, p A-6) *832and the formula under 11 NYCRR part 166 considers individual insurer data (see 11 NYCRR 166-2.2 [c]) does not alter the conclusion that profit is calculated in different ways using different data. This cannot be countenanced in light of the requirement for uniformity imposed by subdivision 5 of section 677.
We find no merit to respondent’s contention that the discretion vested in the superintendent by 11 NYCRR 165.3 (c) to utilize an alternative method for calculating profit permits the differences found in 11 NYCRR parts 165 and 166. Pursuant to 11 NYCRR 165.3 (c), the superintendent can authorize the use of an alternative method for calculating profit when a more reliable result will thereby be produced. There is no evidence in the record to indicate that the superintendent has in fact exercised his discretion and allowed the calculation of profit in any manner but that designated in 11 NYCRR part 165. Moreover, the superintendent’s discretion can be exercised only in those situations where it is necessary to reach a more reliable result than that reached by using the prescribed calculation. We simply cannot permit respondent to justify the differences in the calculations of profit found in 11 NYCRR parts 165 and 166 by relying on an unexercised authorization of discretion, which is designed to accomplish a goal unrelated to the case now before us. Accordingly, we are of the view that 11 NYCRR part 166 is contrary to the statutory directive of subdivision 5 of section 677 and must be declared unlawful. It remains for respondent to either promulgate new regulations in accordance with subdivision 5 of section 677 or convince the Legislature to amend subdivision 5 of section 677 so as to permit the regulations as promulgated.
Judgment modified, on the law, without costs, by reversing so much thereof as dismissed the complaint; 11 NYCRR part 166 is declared to be unlawful and invalid; and, as so modified, affirmed. Main, J. P., Yesawich, Jr., and Harvey, JJ., concur.
Pursuant to a complete recodification of the Insurance Law effective September 1,1984, section numbers have been changed (L 1984, ch 367). Thus, subdivision 5 of section 677 has been recodified as section 2329 and subdivision 3 of section 178 has been recodified as subdivision (a) of section 2323. We refer to the sections as they were numbered and worded prior to the recodification and as they were referred to by the parties. No substantive changes which would affect the outcome of this case resulted from the recodification.