Mortgage Guaranty Insurance Corp. v. Langdon

THOMAS, Justice.

In this appeal the Court must concern itself with the authority of the Commissioner of Insurance for the State of Wyoming (hereinafter referred to as the Commissioner) to regulate the private mortgage insurance business and with the manner of exercise of that authority. The Commissioner entered separate orders providing with respect to Verex Assurance, Inc. (hereinafter referred to as Verex) that the approval previously given to its premium rate schedule should be withdrawn, and providing with respect to the appellant Mortgage Guaranty Insurance Corporation (hereinafter referred to as MGIC) that the approval previously given to its policies, including the premium rate schedule, should be withdrawn. The Commissioner’s grounds for withdrawing the previous approvals were that the loss ratios of these companies for Wyoming were significantly lower than in other states, making the premium rates in Wyoming excessive, the benefits in Wyoming unreasonable in relation to the premium charged, and resulting in unfair discrimination against premium-paying Wyoming residents. The Commissioner also *511found fault with the amount of the first-year premium, the level renewal premiums, the continuation of coverage when the appraised value of the property at the time of the loan exceeded the loan balance by 25 percent, the provision that all premiums received became fully earned upon payment of a claim, and, in the case of Verex, he also objected to the minimum premium retention of $50 on certificates of insurance can-celled during the first year. The only value' component with respect to the private mortgage insurance business which the Commissioner considered was insurance against default. The appellants, Verex and MGIC, appealed the Commissioner’s determinations, and the district court affirmed the Commissioner’s orders. We conclude that the Commissioner’s restriction of his consideration to the insurance feature only of private mortgage insurance was unduly narrow and did not constitute a proper application of standards to this unique style of insurance. We shall reverse and remand the cases for further consideration.

On January 20, 1977, the Commissioner issued a notice of hearing addressed to all insurance companies selling mortgage guaranty insurance in Wyoming, advising that the purpose of the hearing was to ascertain whether the Commissioner should disapprove the rate and policy form filings of the several companies as they pertained to mortgage guaranty insurance and lease guaranty insurance. This order specified some 11 different areas of concern. A request was made by MGIC that its hearing be held separately, and this request was granted. The first hearing involving Verex and three of the other companies began on April 6, 1977. These other three companies then agreed to be bound by the disposition made in the MGIC hearing, and the Verex hearing resumed without their participation on April 18, 1977.

Following the conclusion of the Verex hearing the Commissioner, on May 6, 1977, issued an order withdrawing the approval of its premium rate schedule effective on June 6, 1977. On that same day a separate order was issued withdrawing the rate schedules of all companies, including MGIC. The Commissioner justified this action by stating that it would be inequitable to disapprove the Verex rates while allowing other companies to continue using the same rates. MGIC and Verex petitioned the District Court of Laramie County for an order staying the Commissioner’s orders pending appeal by Verex and further hearing before the Commissioner as to MGIC. This was granted by the district court. The MGIC hearing began July 11, 1977, and proceeded on various dates with full participation by MGIC. On October 4 the Commissioner issued an order withdrawing the previous approval of the rate schedule and policy forms of MGIC. The orders in the two cases are essentially the same with both containing extensive findings of fact, conclusions of law and justifying discussion by the Commissioner.

As explained by the record before this court, private mortgage insurance companies offer to conventional home mortgage lenders a limited amount of protection against loss if the homeowner-borrower defaults on the home loan mortgage. While the lender is the insured party under the contract, the premium cost is paid in all instances by the borrower or mortgagor. The homeowner-borrower is the premium-paying Wyoming resident referred to in the Commissioner’s orders. The limited coverage ranges from 10 or 20 percent on loans where the loan to value ratio is 80 percent or under through 25 percent where the loan to value ratio is 80 to 90 percent or 90 to 95 percent. Premiums increase based upon increases in the percentage of coverage and higher loan to value ratios. For example, under the most commonly used annual plan, pursuant to which the borrower continues to pay premiums during the entire term of the loan or for such shorter period as the insured mortgagee may require, the first premium is 1 percent where the loan to value ratio is 95 percent and the coverage is 25 percent, and the renewal premiums are ¼ percent for all subsequent years. If the loan to value ratio were 80 to 90 percent with 20 percent coverage, the first premium is of 1 percent and ¼ percent in all subsequent years.

*512The record is clear that in Wyoming such insurance is an essential feature with respect to granting of loans where the loan to value ratio is 80 percent or higher. The mortgage lenders require mortgage guaranty insurance in connection with those loans as a condition of making the loan. The primary justification of the Wyoming mortgage lenders for this requirement is that it is essential for them to market these loans to other lenders outside of Wyoming. It is the position of the Wyoming mortgage lenders that they must be able to engage in this secondary market in order to have available money to provide loans to service new home buyers in Wyoming. The economic fact associated with this position is that Wyoming is a capital short state, and consequently Wyoming lenders must market their loans to financial institutions outside the state in order to have new capital available to lend to home buyers.

The critical factual findings by the Commissioner with respect to Verex point to its experience of a nationwide loss ratio of 21.6 percent during the years 1971 through 1976, while its loss ratio in the State of Wyoming was .61 percent. With respect to MGIC the Commissioner found that in the same 6-year period it had experienced a nationwide loss ratio of 19.75 percent, while its loss ratio in the State of Wyoming had been .67 percent. Comparing these to the experience of all other companies, the Commissioner noted that the loss ratio of all other companies on a national basis was 20.35 percent and that the loss ratio of all mortgage guaranty insureds in Wyoming was .58 percent. The Commissioner also noted that in the states of Wyoming, Nebraska, Colorado, Utah, Idaho, North Dakota, Montana, and South Dakota, Verex’s loss ratio was only 7.45 percent of total premium earned, and that MGIC in the states of Wyoming, Nebraska, Utah, Idaho, North Dakota, Montana, and South Dakota, had a loss ratio of only 2.8 percent of premium earned. He noted in the latter instance that the loss ratio would still be less than 5 percent if Colorado were included.

Based upon the loss ratio findings, the Commissioner then concluded with respect to both Verex and MGIC that the premium rate schedule utilized in Wyoming was excessive — the benefits provided to Wyoming property owners were unreasonable in relation to the premium charged in violation of § 26.1-270(a)(iv) and § 26.1-316(e), W.S. 1957.1 In addition, the Commissioner concluded that the failure of the insurance companies to differentiate their premium rate schedules between those areas of the country which have produced the greatest losses and those areas of the country which have incurred the fewest losses, such as Wyoming, discriminated unfairly against premium-paying Wyoming residents in violation of § 26.1-270(a)(iv), W.S.1957 (§ 26-14-105(a)(iv), W.S.1977) and § 26.1-316(e), W.S.1957 (§ 26-15-113(a)(v), W.S.1977). The Commissioner further found that the assessment of a first-year premium which is disproportionate to the risk being assumed and the assessment of the same renewal premium for subsequent years of coverage was unfairly discriminatory against premium-paying Wyoming residents, in violation of § 26.1-270(a)(iv), W.S.1957 (§ 26-14-105(a)(iv), W.S.1977) and § 26.1-316(e), W.S. 1957 (§ 26-15-113(a)(v), W.S.1977). The Commissioner also concluded that the premiums were unreasonable in relation to benefits provided to premium-paying Wyoming residents when the principal balance of the loan decreased to the point where the appraised value of the property (at the time the loan was obtained) exceeded the princi*513pal value of the loan by 25 percent. The Commissioner in addition concluded that the practice of providing that all premiums received become fully earned upon the payment of a claim violated § 26.1-262(a), W.S. 1957.2

In the case of Verex the Commissioner also concluded that the minimum premium retention of $50 on certificates cancelled during the first year of coverage was excessive and unreasonable and in violation of § 26.1 — 270(a)(iv), W.S.1957 (§ 26-14-105(a)(iv), W.S.1977) and § 26.1-316(e), W.S. 1957 (§ 26-15-113(a)(v), W.S.1977). He did conclude that the assessment of premiums from the time when the loan transaction was closed until the borrower actually made his first payment did not violate the referenced statutory provisions.

Based upon these conclusions the Commissioner withdrew the approval given to Verex’s premium rate schedule. In the instance of MGIC the Commissioner withdrew the approval previously given to the policies, including the premium rate schedule. Verex and MGIC appealed their respective orders to the District Court of the First Judicial District in and for Laramie County. That court entered a judgment in each case affirming the action of the Commissioner as provided in Rule 12.09, W.R.A.P, which sets forth the appropriate actions by the district court in appeals from administrative agencies.

As expressed in its brief the issues and points of argument asserted by Verex are as follows:

“I. THE COMMISSIONER’S FAILURE TO ADDUCE EVIDENCE OF EXCESSIVE PROFITS RESULTED IN ACTION THAT WAS ARBITRARY, VIO-LATIVE OF DUE PROCESS AND VIO-LATIVE OF W.S. 9-4L-224.
“1. The Department Failed To Adduce Evidence That Verex’s Profits Were Excessive.
“2. The Arbitrary Action Violated Due Process.
“3. The Commissioner Failed To Specify The Underlying Evidentiary Facts Upon Which He Based His Findings Of Ultimate Facts And Conclusions of Law.
“4. The Commissioner Has Failed To Follow The Mandate Embodied in W.S. 26-14-105.
“5. A National Underwriting Risk Pool Is Essential Under The Effect Of Federal Law.
“II. TO LIMIT THE UNDERWRITING RISK POOL TO WYOMING IS ARBITRARY, VIOLATIVE OF EQUAL PROTECTION AND DUE PROCESS, AND ALSO VIOLATES THE SUPREMACY CLAUSE OF THE U.S. CONSTITUTION.
“1. The Action Violated Principles of Equal Protection And Due Process.
“2. The Action Violates The Supremacy Clause.
“3. The Commissioner Has Misapplied The Discrimination Statute.
“III. TO THE EXTENT THAT W.S. 26-14-105 FAILS IN SPECIFICITY, IT REPRESENTS AN UNLAWFUL DELEGATION OF LEGISLATIVE POWER.
“IV. WHEN STATUTES ARE VAGUE, DUE PROCESS REQUIRES THE AGENCY TO PROMULGATE STANDARDS IN ORDER TO INSURE FAIRNESS.
“V. SINCE THE NOTICE WHICH INITIATED THESE PROCEEDINGS WAS DEFECTIVE, THE ACTION MUST BE SET ASIDE.
“1. The Failure To Conform To The Department’s Own Rules And To Conform to W.S. 9-4-107(bXiv).
“2. The Due Process Violation.”

The MGIC position with respect to the issues on appeal as set forth in its brief is as follows:

*514“1. The Commissioner violated every precept of due process, both from a standpoint of common law and as said precepts are codified in the Administrative Procedure Act.
“2. The Commissioner exercised powers not granted to him by the statutes of the State of Wyoming and, if said powers are granted to the Commissioner, he interpreted and applied the statutes in an unconstitutional manner.
“3. The actions of the Commissioner constituted an interference with and a burden upon interstate commerce.”

We shall address primarily the authority of the Commissioner to regulate the private mortgage insurance companies doing business in the State of Wyoming, and the manner in which that authority was exercised in these instances. In doing so, we shall consider the matter of standards to be applied to this rather unique form of insurance. We shall also deal with the matter of procedural due process and other matters which may reoccur in the further consideration of these cases before the Insurance Commissioner. We cannot at this time make any conclusion as to the asserted interference with and burden upon interstate commerce. That issue must await the further proceedings before the Commissioner.

The general power of the Commissioner to enforce the provisions of the Insurance Code is set forth in § 26-2-109, W.S.1977. In that statutory provision he is given rather broad power to conduct examinations and investigations with respect to identifying violations of the Code or securing information useful in the lawful administration of any provision. Specific authority for the Commissioner to withdraw any previous approval of a policy form filed with him is found in § 26-15-113, W.S.1977. The considerations upon which rates as to casualty and surety insurance shall be made are set forth in § 26-14-105, W.S.1977, as follows:

“(a) All rates as to casualty and surety insurance shall be made in accordance with the following provisions:
“(i) Due consideration shall be given to past and prospective loss experience within and outside this state, to catastrophe hazards, if any, to a reasonable margin for underwriting profit, to past and prospective expenses both countrywide and those specially applicable to this state, and in the case of participating insurers to policyholders’ dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers;
“(H) The systems of expense provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or groups of insurers to reflect the requirements of the operating methods of any such insurer or group with respect to any kind of insurance, or with respect to any subdivision or combination of insurances for which subdivision or combination separate exspence provisions are applicable;
“(iii) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any difference among risks that can be demonstrated to have a probable effect upon losses or expenses;
“(iv) Rates shall not be excessive, inadequate or unfairly discriminatory.
“(b) Except to the extent necessary to meet the provisions of subdivision (iv) of subsection (a) of this section, uniformity among insurers in any matters within the scope of this section is neither required nor prohibited.”

The appellants complain of the generality of § 26-14-105 with respect to standards, but we conclude that standards with respect to the regulation of insurance matters need not be established exclusively by statute or through prior rule or regulation. Ad hoc adjudication in the course of consideration of a specific problem is an *515appropriate method of establishing standards in an area such as this. New Hampshire-Vermont Physician Service v. Durkin, 113 N.H. 717, 313 A.2d 416 (1973). See Security and Exchange Commission v. Chenery Corporation, 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995, reh. denied 332 U.S. 783, 68 S.Ct. 26, 92 L.Ed. 367 (1947).' Furthermore we conclude that there has not been an improper or unconstitutional delegation of power to the Commissioner pursuant to these statutes. State ex rel. Wisconsin Inspection Bureau v. Whitman, 196 Wis. 472, 220 N.W. 929 (1928). Other jurisdictions have found no inhibition to the action of the administrator under similar statutory provisions where that official was determining whether rates were excessive, inadequate or unfairly discriminatory. Massachusetts Medical Service v. Commissioner of Insurance, 344 Mass. 335, 182 N.E.2d 298 (1962); Insurance Services Office v. Wha-land, 117 N.H. 712, 378 A.2d 743 (1977); Long v. National Bureau of Casualty Underwriters, 209 Tenn. 435, 354 S.W.2d 255 (1962); and Fire Insurance Rating Bureau v. Bogan, 4 Wis.2d 558, 91 N.W.2d 372, 377 (1958). We conclude that the Insurance Commissioner in the State of Wyoming does have authority under the applicable statutes to regulate private mortgage insurance.

Our concern and basis for disposition in this case in not so much with respect to what the Commissioner did do as it is with respect to what he did not do. The Commissioner proceeded on the premise that the only value component with respect to the purchase of mortgage guaranty insurance is the insurance feature. We do not criticize such an assumption by one in the role of the Commissioner. It is his job to treat with insurance companies and insurance problems, and in so doing he well might assume that only insurance is involved. We conclude, however, that such a premise with respect to mortgage guaranty insurance, as a matter of law, is unduly restrictive. The Commissioner should consider relevant factors other than specified factors enumerated in a statute. Cf., Long v. National Bureau of Casualty Underwriters, 209 Tenn. 245, 354 S.W.2d 255 (1961).

We noted earlier the requirement of mortgage lenders for such insurance in connection with conventional home mortgage loans unless the borrower can make a down payment of 20 percent. It is common knowledge that 20 percent of a purchase price for a home at this time in Wyoming is a minimum of several thousand dollars. Not all those who are interested in purchasing homes and who can make scheduled monthly payments are able to produce such a down payment. To such purchasers there is a value factor in connection with mortgage insurance which is separate from the insurance feature, and that is the value of the opportunity to borrow the money. Realistically, that is an item of value which the purchaser obtains in connection with mortgage insurance. We recognize, as the Commissioner did, that the premium is being paid by that purchaser. It is essential to consider the business transaction from his point of view as well.

In terms of the insured, the mortgage lender in such arrangements, there is another value factor, and that is the opportunity to resell the mortgage on the secondary market. The economic necessity for having the opportunity for resale has been alluded to earlier. Wyoming is a capital short state, and there is a need to be able to replenish capital funds by permitting Wyoming mortgage lenders to market mortgages on the secondary market outside the state. Indeed if we were to identify a burden upon interstate commerce by virtue of the Commissioner’s action, it well might be the burden upon the home financing business rather than the insurance business.

The record here is replete with testimony by expert witnesses about these factors. Even the primary witness who articulated the position of the insurance department testified on cross-examination as follows:

“Q. Now, as far as the function of private mortgage insurance, what do you perceive it to be, to just simply be some kind of insurance such as a household insurance or do you perceive it to be a *516vehicle by which people are able to obtain loans?
“A. I think in some cases that is a byproduct of it.
“Q. What other product does pmi insurance have? I mean, now you have criticized the fact that the party that is really protected is the bank or the S&L; isn’t that true?
“A. Well, I’m not really criticizing that. The primary function in my mind of private mortgage guarantee insurance is the protection of the lender.
“Q. All right.
“A. I mean, I’m not being critical of the fact that lenders desire this protection.
“Q. Is there any other function for pmi other than the protection of the lender?
“A. I think in some circumstances that it does facilitate access to the secondary market, it does facilitate or ameliorate to some extent a capital short situation in some states. I wouldn’t really be emphatic about the importance of it, but I think that’s another by-product of it.
“Q. If the borrower such as you when you went to the American National Bank, for example, goes into a bank and knows that the party protected is the bank and that he would never get the proceeds if he defaults, is there actually any benefit to the borrower then?
“A. If a borrower is in a situation where he has exhausted all of his private resources and the best that he can do is still come up with a bare 5 percent down, then I would be forced to conclude that in that situation it enables him to buy a house at that particular point in time, where as it might be impossible for him to otherwise do so.” (Emphasis added.)

Indeed the recognition of multiple value factors appears in the conclusions of law of the Commissioner in the form of ascribing motivation to lenders. In the conclusions of law relating to MGIC the following language appears:

“The homeowner in Worland, Wyoming, pays the same premium as the homeowner in Detroit, Michigan, even though the lender in Detroit insists upon obtaining coverage because he recognizes a great risk of default, while the lender in Wor-land obtains coverage on an excellent risk simply to facilitate the sale of the loan on the secondary market.”

In the Verex file the same concept is expressed in this way:

“The homeowner in Butte, Montana, pays the same premium as the homeowner in Detroit, Michigan, even though the lender in Detroit insists upon obtaining coverage because he recognizes a great risk of default, while the lender in Butte obtains coverage on an excellent risk simply to facilitate the sale of the loan on the secondary market.”

While the specific evidence to support such statements, which are findings of fact rather than conclusions of law,3 is not apparent, arguably they may represent appropriate inferences. Certainly they belie the statement made by the Commissioner in the findings of fact in the MGIC order to this effect:

“Likewise was nothing presented at this hearing which has persuaded me that the availability of a secondary financial market is material or even relevant to insurance premiums for mortgage guaranty insurance.”

We give credence to the witness’ statements that by-products of mortgage insurance are that it furnishes a vehicle by which people are able to obtain loans and that it facilitates access to the secondary market. We also give credence to the Commissioner’s statements of dual motivation. We conclude that what is manifested in the record is a multiple value factor in connection with private mortgage insurance. The value factors that the Commissioner eschewed in treating with these cases are those of availability of money to loan and the opportunity to receive a loan. The stat*517ute, any regulations of the Commissioner and this adjudicatory proceeding all are silent as to the standards for determining and weighing the value to be attached to these other value factors. It is possible that if dealt with upon appropriate evidence, the Commissioner might conclude the value was nil. In refusing to consider these value factors, however, the Commissioner did treat with this matter in an arbitrary fashion and in so doing did abuse his discretion and failed to consider the multiple value factors in accordance with law. For this reason we hold unlawful and set aside the agency action, findings and conclusions. Prior to making conclusions of law such as were here made the Commissioner should segregate the cost of mortgage guaranty insurance among these factors, and then limit his regulatory considerations to the amount allocated to the value of the insurance factor.

In the absence of the assignment or at least the consideration of the value of those factors identified as the opportunity to receive a loan and to have access to the secondary market, we conclude that the benefits may or may not be unreasonable to Wyoming property owners in relation to the premiums charged. The failure to differentiate the premium rate schedule between high loss ratio areas and Wyoming may or may not discriminate unfairly against Wyoming residents. The assessment of a first-year premium disproportionate to the risk being assumed and the assessment of the same renewal premium for each and every year may or may not be unfairly discriminatory against premium-paying Wyoming residents. The same comment is pertinent with respect to the premium assessed being reasonable when the principal balance has declined so that the appraised value at the time the loan is made exceeds the principal balance by 25 percent. It also could apply to the Commissioner’s criticism of the practice of providing that all premiums received become fully earned upon payment of a claim.

In summary we hold that in connection with the regulation of private mortgage insurance the pragmatic realities demand that the Commissioner take into account in the development of standards for regulation of policy forms and rates the multiple value factors which attach to such transactions. Regulation based only upon the insurance feature without considering and making findings of fact and conclusions of law with respect to the other value factors of importance to both lenders and borrowers in Wyoming is arbitrary and an abuse of discretion. Standards set in the absence of such considerations are not in accordance with law. Indirect regulation of the home financing business by failure to recognize those components of the value factor in the cost of mortgage guaranty insurance constitutes action in excess of the statutory authority of the Commissioner.

Turning to some other matters that best are resolved at this time, the Court concludes that the contention of the appellants with respect to a deprivation of procedural due process cannot be sustained. Both appellants assert lack of proper notice and argue that their hearings were conducted in such a way as to deny them procedural due process. MGIC emphasizes the proposition that what was instituted as a fact-finding investigation evolved into an adversary proceeding, but in a context in which the decision actually was made prior to the hearing. The appellants assert a denial of due process under the Wyoming Administrative Procedure Act, §§ 9-4-101(a)(ii) and 9-4— 107(b)(iv), W.S.1977.

Chapter 15 of Title 26, W.S.1977, by its own terms applies to all insurance contracts except re-insurance, policies or contracts not issued for delivery in this state, and wet marine and transportation insurance. Section 26-15-101(a), W.S.1977. For our purposes § 26-15-112, W.S.1977, requires all proposed insurance policies or contracts to be filed with the Commissioner for his approval. A policy must be filed 45 days before it can take effect, and if no action is taken within that time it is deemed approved by the Commissioner. This 45-day period can be extended by the Commissioner for an additional 45 days. The concluso-ry language of § 26-15-112(b) is, “The com*518missioner may at any time, after notice and for good cause shown, withdraw such approval.” An appeal is permitted from either a denial or withdrawal of approval.

Section 26-15-113 relates to the grounds for disapproval of a policy form and it provides in pertinent part:

“(a) The commissioner shall within forty-five (45) days after filing of the insurance policy, disapprove any form filed under W.S. 26.1-315 [26-15-112] or withdraw any previous approval thereof, only on one (1) or more of the following grounds:
$ ⅜ ⅝ ¡⅝ ⅜ $
“(v) If the commissioner finds that the benefits provided in the policy are unreasonable in relation to the premiums charged, or that such rates or classification are excessive, inadequate or unfairly discriminatory. If the commissioner does not approve the insurance policy, the insurer may request a hearing pursuant to the provisions of the Wyoming Administrative Procedure Act [§§ 9-4-101 to 9-4-115].”

If the Commissioner within the 45-day period has acted to approve a policy, he still may withdraw that approval without affording a hearing. Pursuant to the provisions of § 26-15-112(c), W.S.1977, he simply disapproves or withdraws approval of the policy or rate, stating the grounds therefor. The remedy of the applicant in such an instance is to ask for a rehearing, thereby invoking the pertinent provisions of the Wyoming Administrative Procedure Act and any rules of court applicable thereto. A different situation prevails if the 45 days have expired. While there is specific authority for the Commissioner to revoke an approval in that instance, it can only occur “after notice and for cause shown.” There is a legislative distinction between the situations. The legislature has directed in the latter instance that the Commissioner must give notice of a hearing and at the hearing show cause why his previous action should be rescinded before revocation. The legislative mandate is clear, and we cannot avoid the conclusion that both MGIC and Verex were entitled to notice and hearing before the previous approval of the policy form and rates could be revoked.

There is no question that the order of May 6,1977, directed to all other companies, entered in connection with the Verex order was made before MGIC had been afforded a hearing. Relief was obtained in the district court, however, and a stay of enforcement of the Commissioner’s order became effective. Thereafter the matter was heard completely, and MGIC had ample opportunity to participate in the hearing. There was dialogue between counsel and the Commissioner with respect to the adequacy of the notice, which resulted in an apparent agreement that MGIC waived its objection concerning notice but reserved its objections concerning the lack of hearing prior to the entry of the May 6, 1977, order. Verex continues to assert that the notice was defective.

The Commissioner’s position that the notice which was given in January 1977 was sufficient must be sustained. The notice referred to the statutes claimed to have been violated, stated that the hearing was scheduled for the general purpose of ascertaining whether the Commissioner should disapprove the rate and policy form filings of any or all of the respondent companies, and specified eleven areas in which the policies were deemed to be in violation. The notice was mailed January 20, 1977; the hearing was originally set for three days beginning March 9, 1977; and the hearing except as to MGIC actually commenced on April 6, 1977. This notice encompasses a “plain statement of the matters asserted” as required by § 9-4-107(b)(iv), W.S.1977, and there was compliance with the Commissioner’s own rules requiring a statement of the facts in plain language. We hold that there was no violation of due process requirements insofar as the notice of hearing is concerned.

We hold also that the Verex hearing in April and the later MGIC hearing were conducted in such a way as to be constitutionally and statutorily fair hearings. Both parties participated to the ex*519tent that they deemed desirable in their respective hearings. There was no attempt made to inhibit testimony of witnesses or argument of counsel, and all pertinent testimony was introduced. The parties were cognizant of the issues and the position of the insurance department. While the claim is made that the Commissioner was prejudiced and biased, the record discloses that he participated patiently in hearing lengthy testimony and arguments of counsel, and after that issued a detailed summary of his findings and conclusions. We have held that it is the burden of parties such as Verex and MGIC to establish any improprieties on the part of a member of an administrative board. Board of Trustees, Laramie County School District No. 1 v. Spiegel, Wyo., 549 P.2d 1161 (1976). Prior to the presentation of evidence counsel for MGIC examined the Commissioner with respect to bias. The record of that examination leads us to the conclusion that the burden of showing disqualification was not met. Furthermore, the record in each case fails to disclose any motion by appellants to have the Commissioner disqualified. This failure amounts to a waiver of any right of review on the subject. Bower v. Eastern Airlines, 214 F.2d 623 (3rd Cir. 1954); Thompson v. City of Long Beach, 41 Cal.2d 235, 259 P.2d 649 (1953).

In connection with the hearing process, it appears that the question of burden of proof was a troublesome one in both of these cases, and there was considerable argument about the point. This is not a matter that has been considered by this court, but decisions from other states are helpful in its resolution. We conclude that the proper rule is that in the case of a new filing of a policy form and rates the burden of proof rests upon the party making the filing. Conversely, once the filing has become effective there arises a presumption of validity, which then makes it the burden of anyone (including the Commissioner) complaining against those rates to show that they are wrong. Massachusetts Medical Service v. Commissioner of Insurance, 346 Mass. 346,191 N.E.2d 777 (1963); Insurance Services Office v. Whaland, supra; Insurance Department v. City of Philadelphia, 196 Pa.Super. 221,173 A.2d 811 (1961). Our statutory scheme, particularly that portion set forth in § 26-15-112(b) and (c), is consistent with these rulings of other courts. Consequently the burden of proof rests upon the Commissioner.

We add a caveat with respect to further hearing. It certainly is possible that the allocation of the value factors which we have previously described may be a very troublesome evidentiary matter. It should be clear to the parties that upon further hearing the Commissioner will have the burden of proof as to the allocation of charges for mortgage guaranty insurance among these factors, or alternatively the burden of proof of showing that there is no value with respect to the opportunity to obtain a loan or the opportunity to reach the secondary market.

There is one matter peculiar to the Verex proceeding which requires further comment and which well could be an appropriate ground in and of itself to reverse that judgment. In that record, in a somewhat argumentative statement supporting the Commissioner’s conclusion that the assessment of the first-year premium which is disproportionate to the risk being assumed and the assessment of the same renewal premium for each and every year in which coverage is continued is unfairly discriminatory, the Commissioner used the following language:

“It is an accepted practice in the casualty area to reflect certain acquisition costs in the first year premium, but this does not justify the assessment of a premium which, in some instances, is four times as much for the first year of coverage as it is for the second year of coverage or any year thereafter (nor does it explain why the first year premium to insure a loan with a loan to value ratio of under 80 percent is the same as the second year premium, while the first year premium to insure a loan with a loan to value ratio of 95 percent with a 25 percent option is four times higher than the second year *520premium). At any rate it would seem that the minimum premium retention of $50 ($10 for renewals) is more than adequate to enable the respondent to recoup any acquisition costs which may otherwise be lost as a result of cancellation.” (Emphasis added).

In a subsequent conclusion of law the Commissioner rules that the minimum premium retention of $50 on certificates can-celled during the first year of coverage is excessive and unreasonable. We do not perceive how the Commissioner can justify one conclusion of law in part by the minimum premium retention of $50 and then conclude that the minimum premium retention of $50 is excessive and unreasonable. The inconsistency in this approach is obvious.

We have noted above the justification for the Commissioner to proceed in adjudicatory fashion to establish standards as an alternative to the adoption of rules. This option invokes the principles of Tri-State Generation and Transmission Association, Inc., v. Environmental Quality Council, Wyo., 590 P.2d 1324 (1979), in which we noted that a requirement of providing a statement of reasons for the adoption of a rule is tied to the power of the court to review the actions of the agency to determine if they are arbitrary, capricious or characterized by an abuse of discretion. We then noted that this ground for review calls for an examination of whether the agency’s decision is based on a consideration of relevant factors and is rational. The conflict between the justification for one conclusion in this record and a different conclusion of law does not satisfy the requirement of rationality. Since the order of the Commissioner was justified in the conjunctive based upon all of the conclusions of law, we hold that the conclusion of law relating to the minimum premium retention of $50 being excessive and unreasonable is inconsistent with the justification for the earlier conclusion of law, and both may not stand. It follows that the Commissioner’s action in part was premised upon an impermissible conclusion, and since we cannot determine whether the Commissioner would have reached the same result absent such a conclusion of law, the Verex order for that reason would require re-evaluation.

The respective judgments of the district court affirming the action of the Commissioner in these instances are reversed, and the cases are remanded to the district court with instructions that they be remanded to the Commissioner of Insurance for the State of Wyoming for further proceedings in conformity with these directions. In the further proceedings the Commissioner should proceed to determine the amounts of the premium costs which are fairly allocable to the value component of the opportunity to receive a mortgage loan; the value component of the opportunity to participate in the secondary home mortgage loan market; and the pure insurance feature of the mortgage guaranty insurance. The Commissioner then should proceed with a determination as to whether the proportion of the cost properly allocable to the insurance feature of the mortgage guaranty insurance costs contravenes the standards developed upon the basis of the statutory requirements.

. These statutory provisions have been renumbered. Section 26.1-270(a)(iv), W.S.1957, now appears as § 26-14-105(a)(iv), W.S.1977, and it provides:

“Rates shall not be excessive, inadequate or unfairly discriminatory.”

Section 26.1-316(e), W.S.1957, now appears as § 26-15-113(a)(v), W.S.1977. The statute provides that the Commissioner shall withdraw any previous approval of an insurance- policy only on one or more of the following grounds, and subparagraph (v) provides:

“If the commissioner finds that the benefits provided in the policy are unreasonable in relation to the premiums charged, or that such rates or classification are excessive, inadequate or unfairly discriminatory. * * * ”

. Section 26.1-262(a), W.S.1957, has been renumbered as § 26-13-121, W.S.1977, and it provides:

“(a) No person shall willfully collect any sum as premium or charge for insurance, which insurance is not then provided or is not in due course to be provided (subject to acceptance of the risk by the insurer) by an insurance policy issued by an insurer as authorized by this code.”

. It is to be regarded as what it is regardless of how it is styled by the administrative agency or where it is located in its order. Stockmen’s Bank and Trust Co. v. Financial Institutions Board, Wyo., 616 P.2d 1273 (1980).