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05/15/78 BARRY J. DWYER & OTHERS *FN1 v.

May 15, 1978

BARRY J. DWYER & OTHERS *FN1
v.
COMMISSIONER OF INSURANCE & OTHERS *FN2



Suffolk. Civil action commenced in the Superior Court on August 5, 1975. The case was heard by O'Connor, J. The Supreme Judicial Court granted a request for direct appellate review.

Hennessey, C.j., Quirico, Kaplan, Wilkins, & Abrams, JJ.

SYLLABUS BY THE COURT

Insurance, Commissioner of Insurance. Civil Service. Contract, Collective bargaining contract. State Administrative Procedure Act. Veteran.

The opinion of the court was delivered by: Kaplan

Under G. L. c. 26, § 7, authorizing the Commissioner of Insurance to "appoint and remove . . . a chief examiner and such additional . . . examiners . . . as the service may require," it was within the discretion of the Commissioner to remove from office forty-three examiners, including some who were military veterans, by reason of lack of work, and his statutory power was not supplanted by the terms of a collective bargaining agreement covering the examiners. [230-234]

Hearings conducted by the Commissioner of Insurance regarding the dismissal of forty-three examiners by reason of lack of work were procedurally sufficient to satisfy the civil service law, the State Administrative Procedure Act, and any constitutional requirements, and the Commissioner's decision to dismiss the examiners was based on substantial evidence. [234-236]

The dismissal of fifty of the fifty-four examiners employed in the Fraudulent Claims Board by the Commissioner of Insurance because of lack of work did not usurp the legislative function. [237]

Forty-three examiners, employed in the Fraudulent Claims Board (FCB) of the Division of Insurance, were dismissed by the Commissioner of Insurance after hearings. They brought suit in the Superior Court against the Commissioner and others for an order of reinstatement with award of back pay. The suit can be read variously as a civil action in the nature of mandamus (G. L. c. 249, § 5), an appeal under the State Administrative Procedure Act (G. L. c. 30A, § 14), and a claim based on a collective bargaining agreement covering these examiners. A Judge of the Superior Court considered the suit in all its phases after a hearing at which he received transcripts of the proceedings before the Commissioner with accompanying exhibits, together with a statement of agreed facts. In a thorough opinion, he held against the examiners' contentions and entered judgment dismissing their complaint. The examiners appealed, and we granted direct appellate review. We affirm.

From the findings of the Judge, supplemented by references to the materials before him, we learn the following. FCB was created in 1968 as a board within the Division of Insurance. G. L. c. 26, § 8B, inserted by St. 1968, c. 643, § 1. Its purpose was to investigate frauds in motor vehicle accident claims with the object of reducing payments by the insurance companies and thereby lowering insurance premiums charged to the public. *fn3 Insurance companies filed with FCB reports of all motor vehicle accident claims, indicating on the forms which claims appeared suspicious and warranted investigation for fraud. FCB would then carry out investigations.

FCB had some early success in its work: in 1970, 900 claims referred to it were withdrawn by the claimants. But with the advent of "no fault" automobile insurance, and the consequent near-disappearance of the relatively minor personal injury claims with which FCB had been dealing, the number of referred claims declined greatly (from 2,673 in 1970 to 585 in 1974), and the number of such claims withdrawn fell to seventeen for the twelve months ending March, 1975.

In spring, 1975, the Commissioner directed the first deputy commissioner to conduct a study of FCB. This official proceeded to interview the senior supervisory personnel of FCB and the claims managers of several large insurers; he assembled the FCB statistics and read its periodic reports and other such documentation; and he went into the details of many sample cases. The lengthy report of the deputy commissioner, filed on April 15, 1975, documented the decline in FCB's work. It noted that in the face of this shrinkage FCB had taken upon itself the investigation of motor vehicle arson cases, an activity which the report considered make-work largely duplicating the efforts of local police and fire departments. The report concluded that FCB was producing substantially no savings or other benefits to offset the cost of maintaining it at the then current level of personnel, a cost of about $750,000 annually in appropriated funds and more in expenses of compliance imposed on the insurance companies, all borne ultimately by policyholders. *fn4

After the submission of the report, the Commissioner sent letters to fifty of the fifty-four FCB examiners notifying them that their employment was to terminate on June 15, 1975, *fn5 by reason of lack of work. While stating that he did not consider the employees entitled to hearings regarding their dismissal, the Commissioner offered them the opportunity for hearings as under the civil service and veterans' tenure laws (G. L. c. 30, § 9A; c. 31, §§ 43, 45, 46A).

The two indicated hearings were conducted by the Commissioner in June, 1975, taking together six days. The whole group of examiners including the present plaintiffs were represented. The case presented to justify the dismissal consisted of the testimony and report of the deputy commissioner. This witness was cross-examined at length on the part of the examiners, and several FCB staff members and a State senator were called to testify in their behalf. There was scarcely any challenge to the circumstances of the fall in claim referrals and withdrawals as suggested by the report. Besides a certain amount of anecdotage about incidents of successful fraud investigation before the drop off, the examiners pressed the utility of FCB's arson investigations (a question, however, was raised whether a practice of investigating arson before the filing of a claim was consistent with the FCB statute). *fn6 The deputy commissioner reiterated his view that this work should be left elsewhere, and pointed out, incidentally, that no claims had been withdrawn as a result of FCB arson investigations during the preceding year.

In the light of the hearings, the Commissioner rendered his opinions holding that worthwhile FCB work had diminished steeply (ascribed to the introduction of "no fault"), and the dismissals accordingly were justified. Following the ...


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