A recent decision by the Nevada Supreme Court has given one state agency considerable power to ignore its implementing statute. The decision was based, in part, on a novel understanding of what it means to discriminate between “similarly situated” groups.[1]

The dispute in NAMIC v. Nevada arose out of a Nevada Division of Insurance regulation that prohibited insurers from considering negative changes in credit scores during the pandemic when underwriting insurance policies and raising premiums.[2] The regulation was based on a statute that allows the Division of Insurance to promulgate “reasonable regulations” to ensure that the use of credit information does not “lead to unfair or invidious discrimination.”[3] The plaintiff, a trade association of insurers, argued that the regulation conflicted with a statute that expressly permits insurers to use credit scores.

Despite that statute, the Division of Insurance claimed the power to prohibit insurers from using negative credit changes, at least for certain periods of time. It reasoned that the Governor’s pandemic declaration cost many Nevadans their jobs by closing down businesses, which negatively impacted their credit through no fault of their own.  As a result, declines in their credit scores did not accurately predict their insurance risk, and it was unfair for insurers to use those declines to increase premiums or to make adverse underwriting decisions.[4]

After concluding that the insurers had standing to sue, a unanimous Nevada Supreme Court, with Justice Kristina Pickering writing, upheld the regulation.[5]

The insurers threw a slew of arguments at the regulation.

First, they argued that the regulation exceeded the Division’s authority because the use of negative credit information would not lead to “unfair or invidious discrimination.”[6] They took the “commonly understood” meaning of “discrimination” to be “the differential treatment of similarly situated groups.” The pandemic did not create different classes of individuals, they argued, but even if it did, “insureds with recent negative credit events are not similarly situated to other insureds whose credit remained stagnant or improved since the governor's emergency declaration.”[7] The Division responded that, in fact, the Governor’s declaration did create different classes: those who lost their jobs because of his declaration and those who did not. Moreover, the Division argued that those who lost their jobs would be treated worse than those who did not “despite being otherwise similarly situated and exhibiting the same risk characteristics.”[8] The court agreed with the Division and, in so doing, accepted the dubious premise that losing one’s job does not make someone a higher credit risk if the loss was not that person’s fault. After all, regardless of how the job was lost, that person still lacks an income. 

Next, the insurers argued that the prohibition on “unfair discrimination” was limited to protected class-based discrimination. The court rejected this argument, however, because the part of the Insurance Code delegating authority to the Division “makes no mention of protected class-based discrimination.”[9] The court acknowledged that another part of the Code ties the phrase “unfair discrimination” to protected-classes, but it chose not to give the phrase the same meaning here because that part was enacted later.[10]

After that, the insurers argued that the addition of the word “invidious” in the statutory language “unfair or invidious discrimination” limited that phrase to protected-class discrimination. But the court rejected this too because “invidious” is “additive, not subtractive.”[11] The insurers also argued that any discrimination had to be intentional, but the court rejected this argument because the statute includes no intent element.[12]

Then the insurers argued that the regulation conflicts with the statute that allows them to use credit information by entirely prohibiting what the statute expressly allows.[13] But to the court, it was enough of a difference that the regulation’s prohibition was temporally constrained to the pandemic years and only applied to adverse changes.[14]

Next, the insurers argued that the statute giving the Division the power to pass the regulation violated the state non-delegation doctrine.[15] The court dismissed this argument out of hand because the Division’s powers were limited to prohibiting unfair discrimination and the legislature provided “various standards” to measure it.[16]

Finally, the insurers argued that the regulation unconstitutionally interfered with their contracts. But they failed to produce any insurance policies that conflicted with the regulation.[17]

For all these reasons, the court held that the Division had the power to prohibit insurers from using negative credit events that occurred during the pandemic.

There are two major thrusts of the decision. First, a pandemic closure order can create separate classes of people based on whether they kept or lost their jobs. And second, losing a job only makes a person dissimilarly situated for credit risk purposes if the job was lost through his own fault. It’s an interesting, although dubious, assertion and has given the state administrative bureaucracy the ability to claim additional pandemic-related powers.

[1] Nat’l Ass’n of Mut. Ins. Companies v. Dep’t of Bus. & Indus., Div. of Ins., 524 P.3d 470 (Nev. 2023).

[2] Id. at 474.

[3] Id.

[4] Id. at 474–75. The regulation also required the insurers to refund any premium increases made before the regulation was promulgated, but the district court struck down this part of the regulation and the Division did not appeal. Id. at 475.

[5] Id. at 474.

[6] Id. at 480.

[7] Id. at 481.

[8] Id.

[9] Id. at 482.

[10] Id.

[11] Id.

[12] Id.

[13] Id. at 483.

[14] Id.

[15] Id. at 484.

[16] Id. at 484–85.

[17] Id.

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