Abdullah v. Commissioner of Insurance of the Commonwealth

United States Court of Appeals
For the First Circuit

No. 95-2316

BASIMAH R. ABDULLAH, et al.,

Plaintiffs-Appellants,

v.

COMMISSIONER OF INSURANCE of the
COMMONWEALTH OF MASSACHUSETTS, et al.,

Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nancy J. Gertner, U.S. District Judge]

Before

Lynch, Circuit Judge,

Coffin, Senior Circuit Judge,

and Cummings,* Circuit Judge.

Jack E. Robinson, with whom Carpenter & Robinson, LLP was on

brief, for appellants.
Judith Fabricant, Assistant Attorney General, with whom Scott

Harshbarger, Attorney General, E. Michael Sloman and Meyer, Connolly,

Sloman & MacDonald were on brief, for appellees.

*Of the Seventh Circuit, sitting by designation.

May 20, 1996

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LYNCH, Circuit Judge. Plaintiffs mounted a facial
LYNCH, Circuit Judge.

challenge to the constitutionality of the Massachusetts

statute requiring the Massachusetts Commissioner of Insurance

to establish at least fifteen territories for use in

classifying risks for setting automobile insurance rates.

Mass. Gen. L. ch. 175E, 4(d). It is claimed this

requirement is irrational on its face and thus violates the

Equal Protection Clause of the Fourteenth Amendment.

Plaintiffs also assert that the statute on its face results

in an unconstitutional taking in violation of the Fifth and

Fourteenth Amendments.

Plaintiff Basimah Abdullah lives in the Roxbury

section of Boston and is aggrieved that policy holders who

live in Roxbury, a mostly poor community of color, may pay

automobile insurance rates more than two and a half times

more than those paid by policy holders with similar driving

records who live in Wellesley, Massachusetts, an affluent

suburb of Boston. She is joined as plaintiff by the National

Association of African Americans, Inc. After considering

cross-motions for summary judgment on stipulated facts, the

district court granted the defendants' motion and denied the

plaintiffs' motion. We affirm.

It is important to be clear about the challenge

plaintiffs have chosen to mount. This is a facial challenge

to the statute. Plaintiffs have stipulated that no

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fundamental right is involved in the litigation and their

challenge does not involve claims of race discrimination.

They do not challenge the group discount provisions of the

insurance regulatory scheme, although they do attempt to

bring those issues to the attention of the court. Plaintiffs

have appropriately stipulated that insurance risk does

correlate with the territory in which the insured lives. In

light of these stipulations and the very narrow review

available in a constitutional challenge to economic

regulation by a state, grant of summary judgment in favor of

the defendants was plainly correct.

The challenged statute requires:

For motor vehicle insurance rates, the
commissioner shall establish a
classification of risks which shall
include a designation of not less than
fifteen territories.

Mass. Gen. L. ch. 175E, 4(d).

In order to prevail, the plaintiffs would have to

show that the establishment of a minimum of fifteen

territories for use in classifying automobile insurance risks

could not be rational. See Members of the City Council v.

Taxpayers for Vincent, 466 U.S. 789, 796 (1984). Indeed,

plaintiffs would have to show that no set of circumstances

exist under which the statute could be validly applied. See

Reno v. Flores, 507 U.S. 292, 301 (1993) (facial attack on

due process grounds). Plaintiffs make two arguments, both

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demonstrating a misunderstanding of the role of the federal

courts in reviewing state economic regulation. They argue

that because there is no legislative history setting forth

the statute's purpose and because the statute allegedly

results in unfairness it is unconstitutional.

Plaintiffs seek to reverse the burdens in

constitutional economic regulation litigation by saying that

the state, in a situation where no fundamental rights are

involved, must provide legislative history explaining the

purpose of its choice of classifications. Cf. City of

Richmond v. J. A. Croson Co., 488 U.S. 469, 500-04 (1989)

(when legislature employs suspect classification, court

reviews legislative findings to support the discrimination

visited). In the absence of legislative history plainly

explaining the purpose of an economic regulatory provision,

the plaintiffs posit, the statute must be presumed to be

irrational. But there is no such requirement and no

presumption. The Constitution does not impose on state

legislatures the requirement of creating a legislative

history record to justify economic regulatory legislation.

See FCC v. Beach Communications, Inc., 508 U.S. 307, 315

(1993) ("we never require a legislature to articulate its

reasons for enacting a statute").

Plaintiffs who claim a statute is irrational bear

the burden of showing that it is so. Id. ("[T]hose attacking

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the rationality . . . have the burden to negative every

conceivable basis which might support it.") (internal

quotation omitted). That showing of irrationality is not

made by simple arguments of perceived unfairness. The

statutory scheme must stand so long as it bears "some

rational relationship to a legitimate state purpose." San

Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 44

(1973). We cannot say that on its face the legislative

choice of requiring at least fifteen territories is

irrational. It is evident that insureds in different

territories pose different risks and it is rational to permit

the insurance companies to set premiums to reflect those

different risks. The choice by the legislature to mandate

the establishment of at least fifteen territories may reflect

a judgment that that number will provide some approximate

reflection of the proper number of categories into which this

type of risk should be divided. That the state has chosen to

classify purchasers into groupings based on objective

characteristics and to use such groupings as a base on which

to set rates is surely rational and promotes a more equitable

insurance system.

In fact, the Commissioner has chosen to create 27

territories, a decision which is also rational on the theory

that somewhat more territories more closely reflect the risk

associated with the residents of those territories. The

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parties have appropriately stipulated that the risk of loss

"varies according to the town in which the [insured]

vehicle[] [is] principally garaged." They have also

stipulated that each state uses some form of territorial

subdivision system to set rates and such use of territorial

assignment has existed in this country since 1917. Prior

rate-setting schemes in Massachusetts, also implementing some

form of territorial system, have twice been held

constitutional by the state courts. See Doherty v.

Commissioner of Ins., 102 N.E.2d 496 (Mass. 1951); Brest v.

Commissioner of Ins., 169 N.E. 657 (Mass. 1930).

The scheme itself has been tested in a manner

consonant with democracy. Prior unhappiness about the

territorial rating system once led to an initiative petition

which would have abolished the use of territories. The

voters rejected the petition by a margin of three to one.

Commonwealth of Massachusetts Election Statistics, Pub. Doc.

No. 43, at 343-45 (1950). The Commissioner establishes

territories in a public proceeding which is subject to

judicial review, and we do not understand plaintiffs to

complain about these procedures. Indeed, the federal courts

would abstain from considering the constitutionality of a

particular decision of the Commissioner defining the

territories or setting particular rates. See Allstate Ins.

Co. v. Sabbagh, 603 F.2d 228, 233 (1st Cir. 1979) (affirming

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decision of district court to abstain from such a suit due to

intensity of local interest and because Massachusetts had

"indicated the importance it place[d] on coherency by

concentrating review of all regulatory decisions in one

court").

Even consideration of the facts surrounding Ms.

Abdullah's individual situation does not establish the

irrationality of the statute. The territory in which Ms.

Abdullah lives, the Roxbury section of Boston, does reflect

greater insurance risks than the territory she has chosen as

a comparator, the territory including the town of Wellesley,

Massachusetts. The parties agree that in 1993, the Roxbury

territory, Territory 22, had 3.5 times the state average of

bodily injury claims, while the Wellesley territory,

Territory 2, had half the claims. Further, if one looks at

bodily injury per 100 accidents, the statewide average was

30.6. The territory in which Ms. Abdullah lives had 56.6

bodily injuries per 100 accidents, while the Wellesley

territory had 17.4. As a final example, although insurance

coverage for theft is not compulsory (see Mass. Gen. L. ch.

90, 34A, 34B, 34O; ch. 175, 113O), in the Roxbury

territory, the theft rate is five times the state average,

while the rate in the Wellesley territory is one-half the

state average. These statistics support the rationality of

the statutory scheme.

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Plaintiffs' efforts to bootstrap their Equal

Protection claim into some form of takings analysis is

neither supported by the case law nor the facts. Plaintiffs

argue that because some ratings schemes have been held

unconstitutionally confiscatory to the insurance company if

the scheme deprives the company of an opportunity to achieve

a fair return, see Aetna Casualty & Sur. Co. v. Commissioner

of Ins., 263 N.E.2d 698, 703 (Mass. 1970), Ms. Abdullah may

assert a claim that the premiums she pays as an insurance

purchaser are so high as to be unconstitutionally

confiscatory. Without accepting the premise of the argument

or its leap from the property rights of a regulated insurance

company to the premiums paid by an insured, the argument

suffers from fatal flaws. The facts asserted in support of

the argument are not properly before us. Ms. Abdullah states

in her brief before this court that she pays more than one-

third of the value of her car to insure it each year. This,

she says, effectively denies her the use of her automobile,

as the Massachusetts legislature requires that automobiles be

insured in order to be operated on a public way. See Mass.

Gen. L. ch. 90, 34B. And without a car, Ms. Abdullah says,

her constitutional right to travel is infringed. However,

the parties agreed to litigate this case on stipulated facts.

The only facts with respect to Ms. Abdullah's personal

circumstances that are properly before us are that she

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"resides . . . in the Roxbury section of Boston," that she

"owns a private passenger automobile which is garaged in

Roxbury and is insured . . . under the compulsory automobile

insurance laws of the Commonwealth," and that the average

rate for the standard package of insurance was higher in the

Roxbury territory than in the Wellesley territory.

Even were there facts in the record to support Ms.

Abdullah's claim, the argument collapses because a

foundational piece is missing. The statutory provision under

attack does not per se result in any particular rate being

set or premium being charged. It simply requires that there

be at least fifteen territories used in assessment of risk

factors, and plaintiffs do not attempt to show that any

possible designation of fifteen or more territories would

result in a confiscatory rate for Ms. Abdullah. Moreover,

other risk factors such as driver class (which includes

number of years of driving experience) and group discounts

also go into the assessment of an individual's rates. The

facts before the court do not establish a causal connection

between the statute facially attacked and the rates claimed

to be confiscatory. In essence, plaintiff's argument

inappropriately asks us to turn this facial challenge to the

statute into an as applied challenge. Cf. Keystone

Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 494-95

(1987) (in facial challenge, "mere enactment" of the statute

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must deprive plaintiff of economically viable use of her real

property); Gilbert v. City of Cambridge, 932 F.2d 51, 56 (1st

Cir.), cert. denied, 502 U.S. 866 (1991).

Plaintiffs' claim at bottom is that the system is

unfair. It may or may not be. There is evidence submitted

by the defendants that in fact the Commissioner has required

certain non-urban areas essentially to subsidize the

insurance of persons, such as Ms. Abdullah, living in highly

urban areas. Importantly, however, the question of fairness

is not properly addressed to this court. Those arguments

should be made to the state insurance regulatory authorities

or to the Massachusetts legislature or directly to the

citizenry through the petition process. Our review is

restricted to whether there is any rational basis for this

scheme. There is, and the constitutional challenge must

fail.

For these reasons, the decision of the district

court is affirmed.

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