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MATTER MARIO A. PROCACCINO v. RICHARD E. STEWART (09/04/69)

SUPREME COURT OF NEW YORK, SPECIAL TERM, NEW YORK COUNTY 1969.NY.42797 <http://www.versuslaw.com>; 303 N.Y.S.2d 593; 60 Misc. 2d 551 September 4, 1969 IN THE MATTER OF MARIO A. PROCACCINO, INDIVIDUALLY AND AS COMPTROLLER OF THE CITY OF NEW YORK, ET AL., PETITIONERS,v.RICHARD E. STEWART, AS SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK, ET AL., RESPONDENTS. IN THE MATTER OF CITY OF NEW YORK, PETITIONER, V. RICHARD E. STEWART, AS SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK, ET AL., RESPONDENTS Fuchsberg & Fuchsberg for Mario A. Procaccino and another, petitioners. J. Lee Rankin, Corporation Counsel, for City of New York, petitioner. Breed, Abbott & Morgan for Associated Hospital Service of New York and another, respondents. Louis J. Lefkowitz, Attorney-General, for Richard E. Stewart, respondent. Joseph A. Brust, J. Author: Brust


Joseph A. Brust, J.

Author: Brust

 Two separate article 78 proceedings are before this court for determination, one by petitioner Mario A. Procaccino individually and as Comptroller of the City of New York and the other by the petitioner City of New York. Both petitioners are applying for judgment annulling the determination of respondent Richard E. Stewart, as Superintendent of Insurance of the State of New York, dated August 15, 1969, which approved an amended application of respondent Associated Hospital Service of New York (commonly known as "AHS" and "Blue Cross"), for an increase averaging 43.3% in premium rates on its community-rated contracts, effective October 1, 1969 on contracts now in force and effective immediately on new contracts.

Respondents have interposed answers denying material allegations of both petitioners, pleading affirmatively that neither petitioner is an "aggrieved person", that they have no standing to maintain these proceedings and, furthermore, that they do not allege sufficient facts entitling them to any relief. Blue Cross has also formally moved to dismiss the petition summarily.

At the hearing held before this court on August 27, 1969, all parties hereto stipulated in open court that both these article 78 proceedings be consolidated and treated as one for the purpose of hearing and determination. It was further stipulated that Marie Rose Procaccino, a daughter of petitioner Procaccino, who is a "community-rated" subscriber of Blue Cross, be added as a party petitioner to the Procaccino proceeding and that the caption of said proceeding be deemed amended accordingly.

On May 22, 1969, Blue Cross applied to the Superintendent of Insurance for a premium rate increase on its "community-rated" contracts averaging 49.5%. On August 14, 1969 the Superintendent rendered an opinion and decision denying the requested 49.5% rate increase, but indicating that he would grant an application for a rate increase averaging 43.3%. Accordingly, on August 15, 1969, Blue Cross submitted an application for the suggested 43.3% average rate increase and it was granted the same day by the Superintendent of Insurance. In his afore-mentioned opinion and decision, the Superintendent of Insurance stated that according to his projection of the amounts of future drain on the assets of Blue Cross, if the present rate levels were to continue, Blue Cross would become legally insolvent some time in October, 1969, and that an increase averaging 43.3% was the minimum necessary rate increase which would permit Blue Cross to function at approximately the present level of benefits. He failed to state clearly the duration of time for which a rate increase was approved, refusing to grant it on the usual two-year basis, but indicating that it would be good "until the end of 1970". Subdivision 3 of section 256 of the Insurance Law requires public corporations providing insurance to its subscribers against the cost of hospitalization, such as Blue Cross, to maintain a surplus equal to at least 5% of its annual premium volume. This 5% may be waived, with the permission of the Superintendent of Insurance, and decreased to 2 1/2%, but in such event the 5% surplus must be restored within two years (Insurance Law, § 256, subd. 4). On June 24, 1969 while Blue Cross' application for a rate increase was pending before him, the Superintendent of Insurance authorized a temporary reduction on the surplus from 5% to 2 1/2%.

The record discloses that there are approximately eight million Blue Cross subscribers, of whom some 53% are on the "community-rated" basis and approximately 47% are on the "experience-rated" basis. All employees of the City of New York, including petitioner Procaccino, as Comptroller, are covered by "experience-rated" contracts and the premium rates for this category are fixed on the experience of the group in which the particular subscriber is a member. The City of New York pays the premium for all its employees.

Initially, as to the jurisdictional attack on petitioners' capacity, it plainly appears as to both that the contention is without merit. The subject matter of these proceedings is permeated with public interest and concern, and, unquestionably, if any relief is granted to these petitioners, it will redound to the benefit of the general public (see 22 Carmody-Wait, New York Practice, § 310, pp. 397, 398; Matter of General Bldg. Contrs. of N. Y. State v. County of Oneida, 54 Misc. 2d 260). The health and welfare, if not the very lives, of many of the 8 million citizens, who are AHS subscribers, are inextricably connected with the rates charged them for Blue Cross service, and petitioners, on this basis alone, may be sustained in their standing to represent such citizenry.

Moreover, any citizen is legally capable of maintaining a proceeding to compel the enforcement of an official duty mandated by statute, as will appear hereafter, especially if the matter is of abiding interest to the community at large (see Matter of Andresen v. Rice, 277 N. Y. 271, 281; Matter of Kornbluth v. Rice, 250 App. Div. 654, affd. 275 N. Y. 597).

In addition, however, both petitioners have sufficiently demonstrated that they have special interests in respondent Superintendent's decision to permit AHS rate augmentations; that they are parties aggrieved; and that they each have standing to complain as such. The City of New York has a contract with AHS in behalf of thousands of city employees. Comptroller Procaccino, individually, is a premium-paying subscriber (see Matter of Thaler v. Stern, 44 Misc. 2d 278).

It is of no significance that petitioners are experience-rated subscribers, whereas the present rate increase is directed only to community-rated subscribers and to new subscribers. There is an interwoven and built-in relationship -- acknowledged by respondent Superintendent himself -- between the charges for community-rated contracts and the charges for experience-rated contracts. A rise in one contract rate historically and inevitably results in a corresponding increase for the other. Economically and practically, in fact, there can ultimately be no other result, since the primary factor in determining all Blue Cross subscriber premiums is the rates at which Blue Cross reimburses its member hospitals, whether for community or experience-rated subscribers. There can be no doubt, therefore, that petitioners will suffer personal injury as a result of the complained of acts and that, again, they have legal standing to sue herein accordingly (see Matter of Donohue v. Cornelius, 17 N.Y.2d 390, 397).

Furthermore, as to petitioner city, an even more direct personal aggrievement will be suffered if the Superintendent's action is allowed to stand, stemming from said petitioner's obligation to operate and to maintain a number of municipal hospitals. It is crystal clear that the extensive premium increase directed by the Superintendent will compel a great many families, immediately and prospectively, through financial inability, to discontinue their AHS coverage. As such, when, thereafter, hospitalization is required, they will be forced to seek the largest of the municipal hospitals (already overcrowded and understaffed), and petitioner city will be compelled to assume these increased financial burdens. Once again, direct economic injury suffices to establish standing as a party aggrieved.

Finally, and in all events, we have a newly-joined party petitioner, Marie Rose Procaccino, who, in her own right, is a fully paid community-rated subscriber, and who already has been afforded written notice by AHS of a prospective premium increase as of October 1, 1969. Accordingly, even if the standing of all other petitioners was now rejected, the proceedings would clearly be maintainable by this petitioner alone.

As to the legal sufficiency and merits of the petitions, it appears that petitioners are correct in their assertions that respondent Superintendent of Insurance has acted illegally, in prematurely rendering a decision to permit increases in AHS subscriber rates, and arbitrarily and capriciously, in fixing the percentages of increases allowed.

The public hearing conducted by respondent Superintendent, before he approved his own suggested, "temporary" rate increase formula, was apparently merely an abortive exercise in "fish bowl group therapy", providing a forum for verbal expression of public indignation and private support, but affording little realistic opportunity for an adversary-type proceeding in which detailed contradictory evidence would be presented and in which the cross-questioning of witnesses concerning their supposedly expert views might be undertaken. (This suggested adversary type of hearing, incidentally recommended by the Superintendent in his own decision, but not adopted by him in practice, the practical benefits of which are obvious, is a course earnestly suggested for legislative consideration and approval). Despite this voluminous, so-called public hearing, respondent Superintendent, in making his determination, admittedly did not receive prior certification of new hospital payment rates from the State Commissioner of Health; did not first approve any such new payment rates as legally mandated; and did not take into consideration any such new hospital rates or the revised method for fixing such charges, as recently prescribed by the Legislature (see ...


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