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November 15, 2022

An administrative regulation, or an amendment to such regulation, will be sustained if not arbitrary or irrational

The Independent Insurance Agents and Brokers of New York, Inc., et al., [Petitioners], challenged the validity of the recently amended Insurance Regulation 187 (11 NYCRR 224), which provides protections to consumers engaging in life insurance and annuity transactions. 

The Court of Appeals held that "[b]ecause the Department of Financial Services [DFS] appropriately exercised its authority to create a carefully considered and clear regulation, it found no basis to invalidate the regulation." 

The court explained that: 

1. An administrative regulation will be upheld only if it has a rational basis, and is not unreasonable, arbitrary or capricious, citing New York StateAssn. of Counties v Axelrod, 78 NY2d at 166. 

2. "If a regulation is to be nullified, the challenger must establish that it is so lacking in reason for its promulgation that it is essentially arbitrary", citing Kuppersmith v Dowling, 93 NY2d 90.

3. "So long as the regulation is 'genuine[ly] reasonable and rational' it should be upheld—courts should not scrutinize the 'policy considerations underlying the' regulation”, citing New York StateAssn. of Counties v Axelrod, 78 NY2d 158.

The Court of Appeals then opined "The goal of the amendment is straightforward and supported by the administrative record, and the amendment is plainly tailored to achieve those objectives [and] DFS reasonably concluded that the 'best interest' framework was needed to protect consumers, and [Petitioners] cannot show that the amended regulation is 'essentially arbitrary'".

In the words of the court, "[e]ach of [Petitioners] arguments for invalidating the regulation is unavailing. Petitioners have fallen woefully short of their burden to sustain a facial due process challenge on vagueness grounds, and the extensive administrative record supporting the amended regulation refutes their alternative challenges."

Click on the URL shown below to access the text of the decision of the Court of Appeals.

 https://www.nycourts.gov/reporter/3dseries/2022/2022_05917.htm

 

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NYPPL Blogger Harvey Randall served as Principal Attorney, New York State Department of Civil Service; Director of Personnel, SUNY Central Administration; Director of Research, Governor’s Office of Employee Relations; and Staff Judge Advocate General, New York Guard. Consistent with the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations, the material posted to this blog is presented with the understanding that neither the publisher nor NYPPL and, or, its staff and contributors are providing legal advice to the reader and in the event legal or other expert assistance is needed, the reader is urged to seek such advice from a knowledgeable professional.
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