Appendix — Aetna Life & Casualty Co. v. Gurnee

Supreme Court of the United States

October Term, 1981

No. 81-2348

AETNA LIFE AND CASUALTY COMPANY,

Petitioner,

against

MORRIS C. GURNEE,

Respondent.

STATE WIDE INSURANCE COMPANY, et ai.,

Petitioners,

against

MOSHE WEINREICH, and all others similarly situated,

Respondents.

On PeTiTion For A Writ OF CERTIORARI

To THe New York COURT OF APPEALS

Counsel LAWRENCE MILBERG

WILLARD M. Portte, Jr SOL

A Respondent G oe Respondents

ttorneys for urnee

17 Court M . Bershad & Specthrie

Buffalo, New York 14202 One

(716) 852-6905 New New York 10119

(212) 5300

SHELDON V. 2 P. C.

275 Madison A

New York, New York York 10016

(212) 685-7188 5

and

& FUCHSBERG

New York. New York 10007

(212) 962-2800

— — — — ee ee ——

Rr N

*

*

(i)

Questions Presented

1. (a) Whether any substantial federal question is raised

under the due process clause, where the New York State

Court of Appeals first interprets a state statute dictating

the terms of New York No-Fault automobile insurance

contracts, thereby overruling a state regulatory agency’s

invalid interpretation of that statute upon which Peti-

tioners claim to have relied, and where the Court of

Appeals then applies its interpretive decision to con-

tracts written after the effective date of the statute but

(b) Assuming arguendo that the foregoing acts of the New

York Court of Appeals may result in a denial of due

process in some circumstances, whether any substantial

federal question warranting review by this court is

presented by this record which is devoid of evidence that

Petitioners have been injured by reason of that due

2. Whether any substantial federal question under the contract

clause is raised where New York's highest court interprets the terms

of a contract contrary to the understanding of one party who acted

in reliance on his mistaken reading of the contract.

(ii)

TABLE OF CONTENTS

Page

r te rendre ae hee „.. i

r 2 pe ee ii

Table of Authorities .......... e iii

Counterstatement of The Case ................... 2

Reasons Why The Writ Should Be Denied ......... 7

ee ee 7

1. (a) There Is Neither A Due Process Violation,

Nor A Taking Of Property For Public Use

Without Just tion, When Parties To

A Contract Are Obliged to Fulfill Their Com-

* 9

(b) No Substantial Federal Due Process Claim Is

Stated Because the Record Does Not Estab-

lish that Petitioners Were Injured By Reason

Of Any Of The Events They Complain Of 12

2. The Impairment Of Contracts Clause Is Not

Violated By State Judicial Decisions .......... 16

SEE . - 19

TABLE OF AUTHORITIES

CASES:

A. M. Klemm & Sons v. City of Winter Haven, 309

U.S. 638, 60 S. Ct. 810, 84 L.Ed. 993 (1940) . 18

Atlantic Coast Line R. R. v. Florida, 295 U.S. 301,

55 S. Ct. 713, 79 L.Ed. 1451 (1935) ......... 11

Board of R s v. Roth, 408 U.S. 564, 92 S. Ct.

2701, 33 L.Ed.2d 548 (1972) ............... 13

Bouie v. N 378 U.S. 347, 84S. Ct.

1697, 12 L.Ed.2d 894 (1964) ............... 12

Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281

US. 673, 50 S. Ct. 451, 74 L.Ed. 1113 (1930) 1875

Chevron Oil Co. v. Huson, 404 U.S. 97, 90 S. C.

349, 30 L. Ed. 2d 296 (1971)

(iii)

Cases (Continued):

City of Los An WY Ae + of Water & Power v.

anhart, 43 02, 98 S. Ct. 1370, 55

L.Ed.2d 657 (1978) NN 10

Cross Lake Shooting & Fishing Club v. Louisiana,

224 US. 632, 32 S. Ct. 577, 56 L.Ed. 924 (1912) 16

Dow las v. Pike County, 101 U.S. 677, 25 L.Ed. 968

0 17

Erie R. R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817,

Z 17

Gelpke v. 4 of Dubuque, 68 U.S. (1 Wall) 175,

1.84 39 1823 D 17

8 fbi Co. v

Div.2d m2. 40 NYS 3d 657 (2d Hd Dep't 191) 4

Great — 2 Railway Co. v. Sunburst Oil &

ng 8 287 US. 358, 53 S. Ct. 145, 5

450 (1932) o 0

Hibbard, S , Bartlett & Co. v. City of Chi-

ca 3 U.S. 505, 60 S. Ct. Lia. 84 P. . 433,

Dees ee eee 06 60660 18

Jeffries v. Turkey Run Consolidated School Dis-

trict, 492 F.2d 1 (7th Cir. 1974)............. 13

Kurcsics v. Merchants Mutual Insurance Se 93

Misc. 2d 281, 402 N. V. S. 2d 763 (Sup. Ct Erie

r ere 4

Kurcsics v. Merchants Mutual Insurance Co., 49

N.Y.2d 451, 426 N.Y.S.2d 454, 403 N.E.2d 159

Fr 5.6

7.8. 13.14. 16

Linda R. S. v. Richard D., 410 US. 614, 93 S. Ct.

1146, 35 L. Ed. 2d 536 (197)3))))z 13

Mariniello v. Shell Oil Co., 511 F. 2d 853 (3rd Cir.

eee tees eee 16

Matter of Rizzo, New York Law Journal, July 6,

1978 5 5 49 ° 3

ar v. Daniels, 38 N. V. 2d 41, 378

1. 340 N. E. 2d 444 (17% ))) 2.5

(iv)

Page

Cases (Continued):

Patterson v. Colorado, 205 U.S. 454, 27 S. Ct. 556,

F ̃ͤ ͤ———— eee 10

Raley v. Ohio, 360 U.S. 423, 79 S. Ct. 1257, 3

D . 12

Secor v. Fulton, 293 U.S. 517, 55 S. Ct. 574, 79

F A sda eade 18

State Farm Mutual Automobile Insurance

nies v. Brooks, 78 App. Div.2d 456, 435 N.Y.S.2d

e el 2

Stockholders of Peoples Banking Co. v. Sterling,

300 U.S. 175, 57 S. Ct. 386, 81 L.Ed. 59 (193 16

Tidal Oil Co. v. Flana 263 U.S. 444, 44 S. Ct.

8 FR 8 CO . 9,18

United States v. Bensinger, 507 F.2d 103 (7th Cir.

cc 10

United States v. Dillon, 346 F.2d 633 (9th Cir.

y%%%y— „ 8.9

Woodall v. Keller, 357 F. Supp. 595 (D. Md. 1972) 10

Worth v. Seldin, 422 U.S. 490, 95 S. Ct. 2197, 45

1 SED GUNTED cdodiccccccesocccsecese 13

(v)

Page

CONSTITUTIONAL PROVISIONS:

United States Constitution

D inns ba a caddcckbeeesee 6,7,

8.16.17

r . eB 6,7,

8,9,12,13

r a es ee aes 6,7,

8,9,10,11,12,13

STATUTES:

Judicial Code

D i te 17

New York Insurance Law [Comprehensive Automo-

bile Insurance Reparations Act], Article 13, vol.

27 McKi 's Consolidated Laws of New York

(1966 ed., 1981-1982 pocket part) ............ 2

c ö 14

F cn a TUG 6 ne Cag beak ekennsaseken 13

ccc 6

r .. 3.4

F en Ge SSS SRE 3,4

EE ˙ Io Pigg tek a 2

D vee Dk ell Ree anid et etane 6

Divs. dc cidli< be etek bcunkucdunconie 2

ccc 2

t 2.15

r A 2.15

( 3.13,

14.15

REGULATIONS:

New York Insurance tion

11 NYCRR 65. ny ia) N 4

I 4

OTHER AUTHORITIES:

Mekinney's Sessions Laws of New York, vol. 2

(1973), p. 2335

IN THE

Supreme Court of the United States

October Term, 1981

AETNA LIFE AND CASUALTY COMPANY,

Petitioner,

against

MORRIS C. GURNEE,

Respondent.

STATE WIDE INSURANCE COMPANY, et al.

Petitioners,

against

MOSHE WEINREICH, and all others similarly

situated,

Respondents.

ON PETITION For A WRIT OF CERTIORARI

To THE NEw YorRK COuRT OF APPEALS

RESPONDENTS’ BRIEF IN OPPOSITION

Respondents Morris C. Gurnee and Moshe Weinreich

on behalf of themselves and all others similarly situated

respectfully request that this Court deny the Petition for

Writ of Certiorari seeking review of the decision of the

Court of Appeals of the State of New York in this case.

2

Counterstatement of The Case

On February 13, 1973, the New York State Legisla-

ture enacted the Comprehensive Automobile Insurance

Reparations Act, Article 13 of the Insurance Law [L. 1973,

c. 13; 27 McKinney’s Consolidated Laws, §§ 670-678]

commonly known as the No-Fault law, which became effec-

tive on February 1, 1974. The Act, while curtailing to a

certain extent the common law right of injured motorists

and other covered persons to recover damages for pain and

suffering except in the case of “serious” injuries [see Insur-

ance Law §671(4)], was designed primarily to “assure

prompt and full compensation to accident victims of sub-

stantially all their economic loss without regard to fault” [2

McKinney’s Session Laws of New York, 1973, p. 2335;

State Farm Mutual Automobile Insurance Companies v.

Brooks, 78 App. Div. 2d 456, 435 N.Y.S.2d 419 (4th Dep’t

1981)], in exchange for limiting their common law rights.

Another purpose of the law was reduction of the cost of

automobile insurance premiums. Montgomery v. Daniels,

38 N.Y.2d 41, 62, 378 N.Y.S.2d 1, 19, 340 N.E. 2d 444

(1975).

In effectuating the legislative purpose to reduce insur-

ance premiums Insurance Law Section 676 mandates that

each insurer’s initial insurance premiums under No-Fault

be at least 15% less, or if a $200 deductible is included,*

20% less than that insurer’s premiums for such coverage

was on January 1, 1973. Insurance Law Section 677(1)

provides that no rate can be made effective until it has been

approved by the Superintendent of the Department of

Insurance. Section 677(3) provides that between February

1, 1974, the effective date of the statue, and subsequent

dates (which have ultimately been extended to December

31, 1983), the approval of me Superintendent is required

* The Act mandated of a $200.00 deductible option

{Insurance Law Section 660

3

for all premium rate changes resulting in an increase in

such rates above the previously approved level.* Section

677(5) provides for the establishment of procedures for the

reimbursement to policy holders of “excess” profits of

insurers attributable to No-Fault policies.

The No-Fault law commands that automobile accident

insurance policies issued in New York State provide that

covered persons (operators, passengers and pedestrians, and

motorcyclists up to December 1, 1977) who are injured in

accidents involving the operation of insured motor vehicles,

be paid 80% of gross lost earnings, with a maximum benefit

of $1,000.00 per month, for periods of disability up to three

years from the date of the accident causing the injury

[Insurance Law, Sections 671(1)(b), 671(2)(a)]. Section

671(1)(b) defines lost earnings as:

Loss of earnings from work which the injured

person would have performed had he not been injured,

and reasonable and necessary expenses incurred by

such person in obtaining services in lieu of those that

he would have performed for income, up to $1,000.00

per month for not more than three years from the date

of the accident causing the injury.

Section 671(2) reads:

“First party benefits” means payments to reim-

burse a person for basic economic loss on account of

personal injury arising out of the use or operation of a

motor vehicle, less; . . .

(a) 20% of lost earnings pursuant to paragraph

(b) of subdivision (1) of this section.

* An approved rate could be lowered and then returned to its

level without the need for new a but could not

os previously approved without review by

perin t.

4

Both before and after the effective date of the No-

Fault law, uncertainty existed among the insurance com-

munity, the public and the judiciary* as to the effect, if any,

of Section 671(2)(a)’s 20% reduction on the $1,000.00

monthly maximum provided for in Section 671(1)(b).

Industry spokesmen frankly acknowledged that the lan-

guage of the No-Fault law was less than clear. One insur-

ance industry representative stated at public hearings

before the Insurance Department: “as our first speaker

mentioned, there is some ambiguity in the statute” [Appel-

lant’s Appendix in the New York Court of Appeals, pp.

A287-A288**]. On January 25, 1974, seven days before

the No-Fault law took effect, the New York State Depart-

ment of Insurance issued an interpretive regulation stating

that the maximum lost earnings benefit would be $800.00

per month [Regulations Interpreting The Comprehensive

Automobile Insurance Act,” 11 NYCRR 65.6(n)(2)(xi),

continued in 11 NYCRR 65.15(n)(2)(xi) as to accidents

occurring on December Il. 1977 and after, reproduced at

Petitioners’ Appendix of Constitutional, Statutory and

Regulatory Provisions, p. 20s}. However, the language of

the standard policy continued to reflect the statutory man-

date.*** Thereafter arbitrations of no-fault claims some-

times followed the interpretive regulation and sometimes

~ *Compare Kurcsics v. Merchants Mutual Insurance Co., 93

Misc. 2d 281, 402, N.Y.S.2d 763 (S. Ct. Erie Co. dec. 222

entitled

fits) with Government Insurance Co. v. S , 66 iv.

782, 410 N.Y¥.S.2d 657 (2d Dep't 1978) ($800.00 is maximum

under statute).

5

applied a $1,000.00 maximum lost earnings recovery, the

Insurance Department Regulations notwithstanding [See

Appendix of Samuel Uretsky, et al., Amici Curiae in the

New York Court of Appeals, pp. AA80-AA113]. Arbitral

decisions upholding the $1,000.00 figure were affirmed by

the courts. See, e.g., Matter of Rizzo, New York Law

Journal, July 6, 1978 (Sup. Ct. Suffolk Co.) [reproduced at

id., p. AA23}.

In Montgomery v. Daniels, supra, the case in which

the New York Court of Appeals affirmed the constitutional-

ity of the No-Fault law, the court observed in obiter dictum

that

[c]ompenstion for basic economic loss is payable as

“first party benefits” after reducing the gross amount

of such loss by deducting (a) 20% of “lost earnings”

38 N.Y.2d at 46-47; 378 N.Y.S.2d at 5 (emphasis added).

This dictum foreshadowed the holding in Kurcsics v.

Merchants Mutual Insurance Company, 49 N.Y.2d 451,

426 N.Y.S.2d 454, 403 N.E.2d 159 (1980), where in simi-

lar language* the Court of Appeals, construing the statute

for the first time, held that the Insurance Department's

interpretation of the statute, limiting to $800.00 the maxi-

mum lost earnings benefits, was of no force and effect as

being contrary to the meaning of the No-Fault statute. The

— TT — L

refers to the 20% deduction from lost earnings but the

contract is silent as to whether or not the deduction related to the

$1000.00 maximum figure.

go ap te ee eo tion

these statutory provisions, 20% was

— ID, agsten he press anew of lest

49 N.Y.2d at 456-457, 426 N.Y.S.2d at 446 (emphasis added).

6

court held that the proper maximum benefit for lost earn-

ings was $1,000.00 per month. Kurcsics’ interpretation of

the meaning of Insurance Law Section 671 was the first

construction by a court of last resort of the statutory lan-

guage incorporated in all No- Fault insurance policies [see

Insurance Law § 672(1)]} previously issued in the State of

New York.

After Kurcsics, Respondents brought the instant

actions below. They argued that Kurcsics’ interpretation of

the Insurance Law, and hence of their insurance contracts,

should be applied to them so as to entitle them to payments

equalling $1,000.00 per month for lost wages, rather than

the $800.00 previously paid. On February 18, 1982, the

New York Court of Appeals unanimously held that Kurc-

sics should be given retroactive effect [A28a]. Analyzing

the factors set forth in Chevron Oil Co. v. Huson, 404 US.

97, 106-107, 90 S. Ct. 349, 30 L.Ed.2d 296 (1971), to

determine whether a ruling should be retroactive, the unan-

imous court held that Kurcsics had been foreshadowed and

did not establish a new principle of law; that retroactive

application of Kurcsics would further the purposes of the

No-Fault legislation by insuring that persons injured in

automobile accidents covered by No-Fault would receive

prompt and full compensation of economic losses; and, that

balancing the equities and the effect of retroactive applica-

tion on Petitioners and Respondents, the equities favored

retroactivity [A30a-A33a]. The Court of Appeals further

held without dissent that retroactive application of Kurcsics

did not infringe the contract clause of the United States

Constitution [Article 1, Section 10], because judicial con-

struction of a state statute cannot by its nature constitute a

“law impairing the obligations of contract.” It further held

that retroactive application was not an unconstitutional

taking of property without due process because it was

merely a function of its interpretation in 1980 of a statute

5

enacted in 1974 and insurance policies written thereafter

pursuant to statutory mandate [A33a].

The instant Petition seeks review of the New York

Court of Appeals’ determination on those constitutional

issues.

REASONS WHY THE WRIT SHOULD BE DENIED

Summary of Argument

In making its determination as to retroactivity or non-

retroactivity, the New York court applied equitable and not

constitutional principles—a classic state court function. It

did this in the context of a case involving the interpretation

of a state statute in à state regulated industry, applying an

equitable balancing of the financial consequences of its

decision. There is no federal question here.

Petitioners’ claim of deprivation of property without

due process or for public use without just compensation

relates to the retroactive payments for lost earnings which

the decision below will compe! them to make and for which

they claim they were unable to charge adequate premiums

Petition, pp. 9-10]. The allegation of injury is bottomed on

their claim that they will be deprived of the right to recoup

any retroactive payments by factoring such payments into

future premium rate increase requests [Petition, p. 13].

Petitioners’ claim under the contract clause is simply that

their contracts called for a maximum lost earnings payment

of $800.00 and to now them to pay more would

constitute an impairment of their contracts [Petition, p.

15]. Because none of those contentions has merit, no

substantial federal question is raised and therefore the writ

should be dismissed.

There was no due process violation below. The New

York Court of Appeals in Kurcsics merely construed a New

York statute whose meaning was presented to that court for

the first time after several nisi prius and intermediate

appellate courts had disagreed as to its meaning. Whether

the maximum payment for lost earnings was $800.00, or

more, up to $1,000.00 per month, depended on the interpre-

tation of the statute. In the instant cases the issue was

whether equity required that Petitioners be held to their

contracts as the Court of Appeals had interpreted them in

Kurcsics, or relieved of their statutory and contractual

obligation. The Court held, inter alia, that because its

Kurcsics ruling had been foreshadowed, equity required

that insurance claimants receive the full benefits which the

legislature intended them to have. Thus, the decision below

merely obliged Petitioners to comply with their agreements.

As the New York Court of Appeals held, no due process

violation was occasioned thereby. See Brinkerhoff-Faris

Trust & Savings Co. v. Hill, 281 U.S. 673, 50 S. Ct. 451,

74 L.Ed.2d 1113 (1930); U.S. v. Dillon, 346 F.2d 633 (9th

Cir. 1965).

Moreover, the writ should be denied because the

record indicates that Petitioners have not suffered the

injury they allege. They have not shown that a vested

property right has been impaired. Thus, no violation of

their constitutional rights is stated. Since further state

administrative and judicial procedures must take place

before Petitioners’ right to apply for recoupment can be

vindicated or denied, their resort to certiorari is premature.

Petitioners’ bare claim that future recoupment of moneys

they have been ordered to pay is not possible is utterly

unsupported by the record. In addition, the statutory-

regulatory scheme designed to reduce No-Fault insurance

premiums gave them no assurance of premium rate

increases in any event. Thus, Petitioners have not shown,

and cannot show on this record, that they were deprived of

property in violation of due process or for public use with-

out just compensation.

As to Petitioners’ contract clause claim, they have

failed to cite persuasive authority for the change in settled

law they seek when they request this Court to hold a

retroactive decision of a state court interpreting a state

statute violative of the contract clause of the federal

constitution.

9

1. (a) There Is Neither A Due Process Violation Nor A

Taking Of Property For Public Use Without Just

Compensation, When Parties To A Contract Are

It is not a taking of property without just compensation

or a deprivation in contravention of due process to hold the

insurance companies to their contractual obligation to pay

$1,000.00 in monthly No-Fault lost earnings benefits.

A Fifth Amendment “taking” does not occur

when the state simply requires an individual to fulfill a

commitment he had made.

U.S. v. Dillon, 346 F.2d 633, 638 (9th Cir. 1965).*

Moreover, the law is equally clear that a judicial deci-

sion retroactively applied does not amount to an unconstitu-

tional deprivation of property without due process of law.

As this court has stated:

The mere fact that a state court . . . has overruled

principles or doctrines established by previous

decision on which a party relied does not give rise

to a claim under the Fourteenth Amendment.

Brinkerhoff-Faris Trust and Savings Co. v. Hill, 281 U.S.

673, 680, 50 S. Ct. 451, 454, 74 L.Ed. 1113 (1930) (empha-

sis added). Accord, Great Northern Railway Co. v. Sun-

burst Oil & Refining Co., 287 U.S. 358, 361, 364, 53 S. Ct.

145, 147, 148, 77 L.Ed. 360 (1932); Tidal Oil Co. v.

Flanagan, 263 U.S. 444, 450, 44 S. Ct. 197, 198, 68 L.Ed.

10

382 (1924); Patterson v. Colorado, 205 U.S. 454, 461, 27

S. Ct. 556, 557, 51 L.Ed. 879 (1907); United States v.

Bensinger, 507 F.2d 103, 104 (7th Cir. 1974); Woodall v.

Keller, 357 F. Supp. 595, 596-97 (D. Md. 1972). If a state

high court may reverse its own prior decision on which

reliance was based without infringing the due process

clause, a fortiori reliance on an administrative regulation

which is later invalidated by a state court, as occurred

below, presents no greater constitutional claim.

The petitioning insurance companies thus had no

vested right in their interpretation that $800.00 per month

was the statutory maximum, even taking into account the

Insurance Department regulation to that effect. The due

process clause does not shield Petitioners from the risk that

a state court of last resort would disagree with that reading

of the No-Fault law, and that there might thus result an

imbalance between premium rates and policy benefits. Any

party to a contract who withholds a payment due under the

terms of the contract based on his construction of the

document, always faces the risk that a court of last resort

might interpret the contract contrary to his expectations.*

The cases relied on by Petitioners in asserting the

existence of a substantial due process violation are not

compelling. While City of Los Angeles Dep't of Water and

Power v. Manhart, 43S U.S. 702, 98 S. Ct. 1370, 55

L.Ed.2d 657 (1978), indicates that the impact of retroac-

tive judicial rulings on insurance funds must be carefully

considered [435 U.S. at 721; 98 S. Ct. at 1382], this court

"* Furthermore, Petitioners chose to live with the ambiquity rather

11

there indicated that in assessing the availability of retroac-

tive relief the equities must be weighed on a case by case

basis [435 U.S. at 718-719, 723; 98 S. Ct. at 1380, 1383].

The New Vork Court of Appeals so analyzed the case

below, considering, inter alia, the differing economic

impact of retroactivity on each party and concluding that in

this case, the equities favored retroactivity [A32a-A33a].

Petitioners have not challenged the standards or analysis by

which the New York Court of Appeals reached that

determination.

In Atlantic Coast Line R.R. v. Florida, 295 U.S. 301,

55 S. Ct. 713, 79 L.Ed. 1451 (1935), this court refused to

order the return of tariffs collected under voidable regula-

tions whose validity was ultimately upheld. That case does

not support Petitioners’ proposition that they should not be

required to disburse retroactively funds they improperly

failed to pay out in reliance on the void regulations of the

Insurance Department at bar. In addition, the Atlantic

Coast Line R.R. determination not to order reimbursement

was based on the limited, prospective powers of the Inter-

state Commerce Commission and not at all on constitu-

tional principles [295 U.S. at 311; 55 S. Ct. at 717].

Moreover, the phrase quoted by Petitioners [ Petition, p. 11]

observing the plight of the carrier who was “not at liberty to

take the law into its own hands and refuse submission to the

order [of the agency] ...” was applied in Atlantic Coast

Line R.R. in its analysis of whether in that case, equity

required retroactivity [295 U.S. at 310-311; 55 S. Ct. at

717]. As stated, the New York Court of Appeals has

considered the equitable aspects of this case and found

against Petitioners.

In Brinkerhoff-Faris Trust and Savings Co. v. Hill,

supra, this court held that Federal due process rights may

occasionally be violated by state judicial actions [281 U.S.

at 679-680; 50 S. Ct. at 454], but it referred to procedural

due process. There, in a classic Catch-22 decision, the

12

Missouri Supreme Court had affirmed denial of equitable

relief by reason of laches, and upheld a tax assessment

against Brinkerhoff-Faris, because they had failed to pur-

sue administrative remedies before the State Tax Commis-

sion which, under precedents in effect until that very case,

had been held not to exist. This Court held that “the

practical effect of the judgment of the Missouri Court is to

deprive the plaintiff of property without affording it at any

time an opportunity to be heard in its defense” [281 U.S. at

678-679; 50 S. Ct. at 453]. That type of denial of procedu-

ral due process does not exist here. Petitioners herein had

their forum and fair hearing in the New York courts in

Kurcsics and the instant case. Brinkerhoff-Faris expressly

noted that every overruling of precedent by a state court

does not a due process claim make [281 U.S. at 680; 50 S.

Ct. at 454, quoted supra, p. 9], and Petitioners’ due process

rights were not violated herein.

Finally, Raley v. Ohio, 360 U.S. 423, 79 S. Ct. 1257, 3

L.Ed.2d 1344 (1959), and Bouie v. City of Columbia, 378

U.S. 347, 84 S. Ct. 1697, 12 L.Ed.2d 894 (1964) were

criminal matters involving vastly different and constitution-

ally more sensitive retroactivity considerations than the

case at bar. See Bouie v. City of Columbia, supra, 378

U.S. at 352; 378 S. Ct. at 1702.

(b) No Substantial Federal Due Process Claim Is

Petitioners allege that because they will be deprived of

the right to obtain a premium rate increase to recoup the

lost earnings benefits they have been ordered to pay pursu-

ant to their New York No-Fault contracts, the decision

below deprives them of property without just compensation

and in violation of due process [Petition, pp. 9-10, 13]. It is

axiomatic that unless some impairment of Petitioners’

13

vested property rights is established, no claim of unconstitu-

tional taking or violation of due process is stated. See, e.g.,

Board of Regents v. Roth, 408 U.S. 564, 569, 92 S. Ct.

2701, 2705, 33 L.Ed.2d 548 (1972); Jeffries v. Turkey Run

Consolidated School District, 492 F.2d 1, 3 (7th Cir. ©

1974). Petitioners have not demonstrated that they may

not recoup and thus have not shown that the constitutional

rights they invoke have been violated.*

The relevant statutes indicate that the Insurance

Department has authority to take appropriate action to

provide for recoupment of losses resulting from retroactive

application of Kurcsics if equity so requires. Furthermore,

notwithstanding Petitioners’ claim, the record does not

establish, nor even support, the contention that they have

ever had an absolute right to a rate increase, of which they

have been deprived.

Petitioners have be d their argument that they would

not be entitled to recoupment on Sections 183(1)(d) and

677(5) of the New York Insurance Law.** However,

neither of these statutes contains language foreclosing an

insurance company from seeking a rate adjustment to com-

pensate for paying out in any year benefits resulting from

retroactive application of a decision invalidating an Insur-

ance Department regulation which the company was

required to follow. Section 183(1)(d) merely lists various

factors to be considered in formulating rates, including “the

past and prospective loss experience,” a reasonable profit,”

*Otherwise stated, unless and until it is established that Petitioners

have been ived of a vested right to recoup, the instant case is not

ripe for consideration by this court of the raised in the

Petition. Cf. Worth v. 422 US. 490, n. ents

text, 95S. Ct. 2197, 2205, 45 L.Bd.2d 343 (1975); Li .

hard D D., 410 US. 614, 617, 93 S. Ct. 1146, L444 536

14

and “past and prospective expenses. Section 677(5)

requires the Superintendent to establish a plan for

refunding to the purchasers of No-Fault insurance policies

“their share of the insurer’s excess profit, if any, on such

policies.” Section 677(5) states that such a plan must take

into consideration “the fact that losses or profits below a

reasonable average profit will not be recouped from such

policyholders.” However, that language does not address a

situation where, as here, insurance company “losses”

resulted not from the company’s underestimates of claims

or expenses, but rather from compliance with an Insurance

Department regulation subsequently held invalid.

In their joint affidavit below, on behalf of the Insur-

ance Department of New York State* which appeared as

amicus in support of Petitioners’ motion to dismiss the

complaint, Stanley A. Dorf and Milton L. Freedman do not

state that there is any statutory prohibition disallowing

recoupment of benefits paid out as a result of a retroactive

application of Kurcsics. Rather, they state only that

“under long-established principles of insurance rate mak-

ing, insurers may not recoup losses by assessing either their

past, present or future policy holders.” But this does not

necessarily refer to applications for premium increases.

Such a general principle may not apply in the situation

here, where the expenditures were not losses but ordinary

benefit payments previously withheld as the result of

mandatory compliance with Insurance Department regula-

tions ultimately determined to be invalid. This conclusion

is supported by the legislature’s express declaration of pol-

icy that “[rJates shall not be.. . inadequate, unfairly dis-

criminatory, . . or detrimental to the solvency of insurers”

[Insurance Law Section 176(1)]. Allowing a rate adjust-

ment if equity requires would be fair and proper.

„„

15

In light of the foregoing, the proper channel for presen-

tation of the instant claim in a way which might raise

constitutional issues, would be for Petitioners to petition the

Superintendent of Insurance for an adjustment of rates to

compensate for the impact of any payments ordered in this

action, receive a denial of such petition, bring appropriate

judicial proceedings in the New York courts to review and

then, after final New York appellate action denying their

claim, file for certiorari, if there is a constitutional basis.

Petitioners cannot claim that they have been injured

by the decision below until such state procedures have been

followed. Only when that has happened may they assert

their challenge based on the alleged existence of the “long-

established principles of insurance rate making,” referred

to above. Here they are improperly challenging a decision

of New York’s Court of Appeals interpreting a law of the

state, before a showing that they have sustained constitu-

tionally recognized injury.

Petitioners’ claims that New York has deprived them

of their alleged existing rights to rate increases by forcing

them to conform their benefit structure to the void Insur-

ance Department regulation and then retroactively altering

the benefit structure to their detriment, are utterly unsup-

ported. While Respondents were certainly financially

prejudiced to the tune of up to $200.00 per month in

heretofore withheld reimbursements for lost earnings, all

the law ever assured Petitioners was an opportunity to

request premium increases; not an absolute right to their

award. That ultimate decision is in the Superintendent’s

discretion [Insurance Law Section 677(3)]. In view of the

legislative purpose to reduce premiums, and its commands

that initial No-Fault premiums be reduced by 15% to 20%

below previous premiums [Insurance Law Section 677(1)]

and that losses or less than reasonable average profits aris-

ing out of No-Fault may not be a basis for recoupment from

16

policyholders [Insurance Law Section 677(5)], it is improb-

able at best that the increased insurance company payouts

which would have been attributable to a $1,000.00 rather

than an $800.00 maximum lost-earnings recovery would

have generated an exercise of discretion by the Superinten-

dent to permit increased premiums. Thus, it is not estab-

lished on this record that reliance on the void Insurance

Department Regulation caused Petitioners any injury at all.

Consequently, they present no compelling claim of violation

of their constitutional rights worthy of this court’s attention

at this juncture.

2. The Impairment of Contracts Clause Is Not Violated

By State Judicial Decisions.

Petitioners assert that their insurance contracts would

be impaired if the decision of the New York Court of

Appeals is permitted to stand and they are compelled to pay

$1,000.00 in no-fault benefits to pre-Kurcsics accident vic-

tims, when they had calculated premiums based on the

assumption that $800.00 would be the maximum amount

payable. This claim, as the New York Court of Appeals

unanimously held, has no merit.

Article I, Section 10 of the United States Constitution

is expressly addressed to legislative action. It commands

that Inlo state shall ... pass any ... law impairing the

obligation of contracts.” (Emphasis added). Legislatures

“pass” laws; courts do not. Thus, the authorities are legion

that no federal question is raised by a determination of a

state court under a pre-existing statute even if it errone-

ously impairs the obligations of a contract. See, e.g., Cross

Lake Shooting and Fishing Club v. Louisiana, 224 US.

632, 638, 32 S. Ct. 577, 579, 56 L.Ed. 924 (1912); Stock-

holders of Peoples Banking Co. v. Sterling, 300 U.S. 175,

182, 57 S. Ct. 386, 390, 81 L.Ed. 59 (1937). The Third

Circuit Court of Appeals most recently so held in

Mariniello v. Shell Oil Co., 511 F.2d 853, 859 (3rd Cir.

1975). Rejecting a contract-clause challenge, that court

17

upheld the retroactive application of a New Jersey Supreme

Court ruling which held invalid on state public policy

grounds termination-at-will clauses in gasoline station

franchises and leases. If a judicial determination striking an

unambiguous contract provision is not an impairment, a

fortiori a judicial interpretation defining a disputed term is

not an impairment. Indeed, acceptance of Petitioners’

argument would preclude all judicial review of disputed

contracts, since any determination in favor of one party

would necessarily affect the contractual expectations of the

other party.

Lacking direct authority for their claim, Petitioners’

only argument is that these rules are now of doubtful

validity [Petition, pp. 16-17]. They pass over into an

entirely different and inapplicable frame of reference and

cite by way of analogy cases interpreting the Rules of

Decision Act [Judiciary Act of 1789, 28 U.S.C. § 1652] as

including state judicial decisions among the sources of state

law to which federal courts must give deference in appropri-

ate situations (such as diversity cases). The Act provides,

however, that “[t]he laws of the several states, except where

the constitution or treaties of the United States or Acts of

Congress otherwise require or provide, shall be regarded as

rules of decision...”. Petitioners invoke Erie R.R. v.

Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L.Ed. 1188

(1938) because it defined the Act’s “laws” to include judi-

cial decisions. With respect to the impairment of contract

issue at bar, the constitution has “otherwise provided.” The

United States Constitution Article 1, Section 10 expressly

requires states only to refrain from passing laws impairing

the obligations of contracts. Acts of state courts are not

within its purview. Therefore, Erie and The Rules of

Decision Act have no application at bar.

Petitioners also cite Gelpcke v. City of Dubuque, 68

U.S. (1 Wall.) 175, 17 L.Ed. 520 (1863) and Douglas v.

Pike County, 101 U.S. 677, 25 L.Ed. 968 (1879) in support

of their view that a judicial construction of a state statute

may constitute an unconstitutional impairment of a con-

tract [Petition, p. 17]. This court has expressly rejected the

reliance which Petitioners place on those cases. In Tidal

Oil Co. v. Flanagan, 263 U.S. 444, 451, 44 Sup. Ct. 197,

199, 68 L.Ed. 382 (1924), referring to the above two cases

among others, this court noted that “the fact that it has

been necessary for this court to decide the question [that

judicial decisions do not violate the impairment clause] so

many times is evidence of persistent error in regard to it.”

Thus, in repeated instances where the issue has been

presented on appeal, this court has dismissed for want of a

substantial federal question. See, A.M. Klemm & Sons v.

City of Winter Haven, 309 U.S. 638, 60 S. Ct. 810, 84

L.Ed. 993 (1940); Hibbard, Spencer, Bartlett & Co. v. City

of Chicago, 308 U.S. 505, 60 S. Ct. 114, 84 L.Ed. 433

(1939); Secor v. Fulton, 293 U.S. 517, 55 S. Ct. 574, 79

L.Ed. 1533 (1934). We respectfully urge the court to do

the same with this Petition.

19

CONCLUSION

For all of the foregoing reasons, Respondents Morris

C. Gurnee and Moshe Weinreich, et al., pray that the writ

of certiorari be denied.

Respectfully submitted,

Counsel LAWRENCE MILBERG

WILLARD M. PorTLe, In SOL

Attorneys J Respondent Gurnee — Respondents

17 Court Street Milberg, Weiss Bershad & Specthrie

Buffalo, New York 14202 One Plaza

(716) 852-6905 New York, New York 10119

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