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SUPREME COURT OF LOUISIANA
No. 97-CD-2985 PROGRESSIVE SECURITY INSURANCE COMPANY Versus HONORABLE MURPHY J. FOSTER, IN HIS CAPACITY AS GOVERNOR OF LOUISIANA, HONORABLE JAMES H. "JIM" BROWN, IN HIS CAPACITY AS COMMISSIONER OF INSURANCE, AND THE LOUISIANA INSURANCE RATING COMMISSION, THROUGH ITS CHAIRMAN, JAMES H. "JIM" BROWN Consolidated With LAFAC, INC. Versus HONORABLE RICHARD J. IEYOUB, IN HIS CAPACITY AS LOUISIANA ATTORNEY GENERAL, HONORABLE MURPHY J. FOSTER, IN HIS CAPACITY AS GOVERNOR OF LOUISIANA, HONORABLE JAMES H. "JIM" BROWN, IN HIS CAPACITY AS COMMISSIONER OF INSURANCE, AND THE LOUISIANA INSURANCE RATING COMMISSION, THROUGH ITS CHAIRMAN, JAMES H. "JIM" BROWN INTERVENOR: NATIONAL ASSOCIATION OF INDEPENDENT INSURERS On Supervisory and/or Remedial Writs of Certiorari from the Nineteenth Judicial District Court, For the Parish of East Baton Rouge, State of Louisiana, Honorable Kay Bates

Knoll, Justice1 Progressive Security Insurance Company and LAFAC, Inc. separately petitioned for declaratory judgment against the Governor, the Attorney General,2 the

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Pursuant to Rule IV, Part 2, Section 3, Justice Marcus was not on panel. Recused.

For purposes of clarity, it is noted that only LAFAC included the Attorney General as a party defendant. As a practical matter, it is of no moment that Progressive did not make the Attorney General a party defendant, since the two cases were consolidated and both Progressive and LAFAC raise identical constitutional challenges.

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Commissioner of Insurance, and the Louisiana Insurance Rating Commission (LIRC), challenging the constitutionality of the Omnibus Premium Reduction Act of 1997 (Act 1476), known as the "no pay, no play" statute. The National Association of

Independent Insurers (NAII), a representative of 560 property and casualty insurers, intervened, taking neither side in these proceedings. After consolidation of the cases, the district court rendered judgment, finding that Act 1476 did not violate any provision of the United States or Louisiana Constitutions. Although the plaintiffs filed a motion for an appeal to the Court of Appeal, First Circuit, on joint motion of all parties supervisory writs were filed with this court, seeking review of the trial court ruling. Exercising our supervisory jurisdiction under La.Const. Art. V, Section 5(A), we granted the joint application for supervisory writs of certiorari to consider the constitutionality of the trial court's ruling. No. 97-CD-2985 (La. 12/10/97), ____ So.2d ___.3 FACTS AND PROCEDURAL HISTORY In 1996, Governor Murphy J. Foster appointed the Louisiana Task Force for Reduction of Automobile Insurance Rates (Task Force) which was staffed by the LIRC. Pursuant to its mandate, the Task Force appointed the Actuarial Subcommittee to analyze the cost of various automobile insurance reform proposals generated from the Task Force. The Actuarial Subcommittee was comprised of the Chairman of the Department of Insurance, together with representatives from CNA Insurance

We note that we are not exercising our appellate jurisdiction under La.Const. Art. V, Section 5(D) since that is limited to instances where "a law or ordinance has been declared unconstitutional." (Emphasis added). Rather, we have chosen to exercise our supervisory jurisdiction which has been granted us in La.Const. Art. V, Section 5(A). "The constitutional grant of supervisory authority to this court is plenary, unfettered by jurisdictional requirements, and exercisable at the complete discretion of the court." State Bond Com'n v. All Taxpayers, Property Owners, and Citizens of State, 510 So.2d 662, 663 (La. 1987). See also State v. Peacock, 461 So.2d 1040 (La. 1984); Hainkel v. Henry, 313 So.2d 577 (La. 1975); McClelland v. Gasquet, 122 La. 241, 47 So. 540 (1908). -2-

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Companies, Allstate Insurance Companies, State Farm Insurance Companies, Louisiana Farm Bureau Insurance Companies, and LAFAC. Operating with a deadline of March 5, 1997, the Task Force instructed the Actuarial Subcommittee to review the various proposals submitted, select and prioritize the five proposals which provided the greatest estimated actuarial savings, and issue a report on its findings. Although the Task Force referred approximately 43 proposals to the subcommittee for actuarial assessment, the Actuarial Subcommittee analyzed ten proposals. "No pay, no play" was one of the proposals analyzed and was legislatively implemented in Act 1476, the Omnibus Premium Reduction Act of 1997. Two provisions of Act 1476 are pertinent herein. The first is La.R.S. 32:866, a newly enacted statute, which provides, in pertinent part: (A)(1) There shall be no recovery for the first ten thousand dollars of bodily injury and no recovery for the first ten thousand dollars of property damage based on any cause or right of action arising out of a motor vehicle accident, for such injury or damages occasioned by an owner or operator of a motor vehicle involved in such accident who fails to own or maintain compulsory motor vehicle liability security. It is this proviso which has been dubbed as "no pay, no play." Succinctly stated, if a motorist fails to pay for liability coverage to protect others, he cannot "play" in the legal system, at least to the collection of his first $10,000 damages.4

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Certain exceptions are recognized in La.R.S. 32:866(A)(3). The limitation of recovery provisions of this Subsection do not apply if the driver of the other vehicle: (a) Is cited for a violation of R.S. 14:98 as a result of the accident and is subsequently convicted of or pleads nolo contendere to such offense. (b) Intentionally causes the accident. (c) Flees from the scene of the accident. (d) At the time of the accident, is in furtherance of the commission of a felony offense under the law. -3-

The second aspect of Act 1476 that is relative to the constitutional challenge before us involves the 10% rate reduction found in Section 5(A) which states: Every motor vehicle insurer authorized to transact business in the state of Louisiana shall make an automobile policy rate filing with the Louisiana Insurance Rating Commission to reduce its combined rates for bodily injury liability and property damage liability by a minimum of ten percent in each of its respective territorial service areas, based upon the average rate in such area on the day prior to "rate reduction day", unless the motor vehicle insurer can demonstrate at a rate hearing that such a decrease will result in inadequate rates, or would result in the continuation of inadequate existing rates, for the motor vehicle insurer in accordance with R.S. 22:1404 or the provisions of Section 7(B) of this Act become applicable. We observe that two groupings emerge which are affected by the legislation challenged in plaintiffs' petition. Through La.R.S. 32:866(A) the rights of persons who do not have liability insurance, the uninsured, are affected. Likewise, by virtue of Section 5 of Act 1476 insurers who provide automobile liability insurance in Louisiana are mandated to file a plan to reduce the rates they charge their customers. The two plaintiffs we have before us are Progressive, a domestic insurance company which issues casualty insurance, including automobile liability coverage, and LAFAC, a trade association of domestic insurers.5 In their petition for declaratory judgment, these plaintiffs contended in the trial court that Act 1476 was unconstitutional for the following reasons: (1) the language used in the Act is unconstitutionally vague; (2) the Act inflicts cruel and unusual punishment; (3) the Act violates equal protection of the laws; (4) the Act violates separation of powers; (5) the Act provides for the taking of property without due process; (6) the Act denies access

See Louisiana Associated General Contractor's, Inc. v. State, Through Div. of Admin., 952105 (La. 3/8/96), 669 So.2d 1185 for a discussion of when an association has standing to bring an action. -4-

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to the Courts; (7) the Act impairs obligations of contracts; and (8) the Act impairs subrogation rights. The NAII, a non-profit property and casualty insurance trade commission, intervened for the purpose of urging a judicial determination of the constitutionality of Act 1476. In its petition, NAII emphasized that the legislature crafted a declaratory action into Act 1476 which was specially designed to test the constitutionality of the Act and to expeditiously resolve such challenge.6 Keeping in mind the need for a uniform pronouncement on the constitutionality of Act 1476, the trial court consolidated these cases for hearing on October 28, 1997. After conducting an evidentiary hearing, the trial court upheld the constitutionality of Act 1476 and signed a judgment to that effect on November 4, 1997. To definitively address the merits of the litigation, we granted the joint writ application of all parties to this litigation, and agreed to consider the constitutional issues raised. In their argument before us, Progressive and LAFAC have honed their contentions down to five constitutional challenges. Plaintiffs contend that Act 1476:

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Section 6 of Act 1476 provides: Because the legislature finds and declares that questions of law may be raised by some persons with respect to the constitutionality of some of the provisions of the Omnibus Premium Reduction Act, the public welfare requires that such questions of law be resolved with expedition prior to such time as its provisions take effect in order to avoid disruption of the orderly implementation of its provisions. Therefore, the legislature finds that the remedy of declaratory judgment to determine the constitutionality of the provisions of the Omnibus Premium Reduction Act should be immediately made available in order to avoid confusion by the public. Therefore, any domiciliary of this state may institute an action in the Nineteenth Judicial District Court seeking a declaratory judgment to determine the constitutionality of the provisions of the Omnibus Premium Reduction Act. The attorney general and the commissioner of insurance shall be served with a copy of the proceeding and be entitled to be heard. In the interest of further expediting this procedure, the Nineteenth Judicial District Court, First Circuit Court of Appeal, and Louisiana Supreme Court are urged to minimize all unnecessary delays and may suspend all applicable rules of court in contravention hereof and for this limited purpose. -5-

(1) excessively punishes an uninsured motorist; (2) effectively allows the legislature to set insurance premium rates; (3) is impermissibly vague, impairs the rights of subrogation, and fails to provide adequate notice of the depth of the statute; (4) violates the equal protection clauses of the United States and Louisiana constitutions; and (5) denies access to the courts, and constitutes a taking without due process.7 EXCESSIVE PUNISHMENT Progressive and LAFAC argue that Act 1476 excessively punishes an uninsured motorist. They point out that La.R.S. 32:863, 864, and 865 already exist which exact punishment for failing to obtain auto liability insurance. In addition to these penalties, which include suspensions, revocation of license, fines, and community service, the plaintiffs assert that Act 1476 unnecessarily expands the punishments by barring the recovery of the first $10,000 of property damage or bodily injury regardless of fault. As such, it is argued that the punishment which La.R.S. 32:866 metes out is excessive, cruel and unusual as contemplated by La.Const. Art. I,

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