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PRIOR HISTORY: [**1] The New York State Department of Insurance (the "Department") appeals from a decision of the United States District Court for the Southern District of New York (Casey, J.) enjoining it from enforcing New York Insurance Law § 2610(b), and certain regulations promulgated thereunder. The district court found the challenged provisions to be unconstitutional regulations of commercial speech. This Court certified questions of state law to the New York Court of Appeals, which accepted certification and answered three of the four questions certified. We REMAND for further consideration in the light of the decision of the New York Court of Appeals.

Certified to New York Court of Appeals: July 23, 2001. Decided by New York Court of Appeals: April 30, 2002.

DISPOSITION: Remanded for reconsideration.

CASE SUMMARY:

PROCEDURAL POSTURE: The United States District Court for the Southern District of New York enjoined defendant New York State Department of Insurance from enforcing N.Y. Ins. Law § 2610(b), and certain regulations promulgated thereunder. The district court found that the challenged provisions were unconstitutional regulations of commercial speech. The Department appealed. The instant court certified questions of state law to the New York Court of Appeals.

OVERVIEW: Four questions were certified four questions to the state court. (1) Was a letter a valid interpretation of N.Y. Ins. Law § 2610(b)? (2) Under § 2610(b), could the Department have properly imposed a settlement of the sort reached by the Department with plaintiff insurance company one? (3) Under § 2610(b), could the Department have prohibited the preferred repairer clause proposed by plaintiff insurance company three for its automobile casualty manual? (4) If any of these Department actions was permitted under § 2610(b), was that statute an unconstitutional regulation of commercial speech? The state court held that the letter and the settlement reached between the Department and the insurance company one were invalid as they exceeded the statute's requirements and that the rejection of the preferred repairer clause proposed by the insurance company three was not sustainable under § 2610(b). The state court declined to reach the fourth question.

OUTCOME: The case was remanded to the district court for reconsideration of the issues and of its opinion in the light of the decision of the state court.

COUNSEL: PENNY SHANE, Sullivan & Cromwell, NY, NY for Plaintiff-Appellee Allstate Insurance Co. (Ellen V. Holloman on the brief).

WILLIAM P. MALONEY, Maloney & Porcelli, NY, NY for Plaintiff-Appellee GEICO.

DEON J. NOSSEL, Assistant Solicitor General, for Eliot Spitzer, Attorney General of the State of New York (Michael S. Belohlavek, Deputy Solicitor General on the brief).

Eugene R. Anderson, Anderson, Kill & Olick, NY, NY for Amicus Curiae United Policyholders.

JUDGES: Before: WALKER, Chief Judge, OAKES, and CALABRESI, Circuit Judges. WALKER, [**2] Chief Judge, concurring. OAKES, Senior Circuit Judge, concurring

OPINION: [*95] PER CURIAM:

Familiarity with the facts of this case, as set forth in this court's decision in Allstate Insurance Co. v. Serio, 261 F.3d 143 (2d Cir. 2001), is assumed. In that decision, we certified four questions to the New York Court of Appeals: (1) Is Circular Letter 4 a valid interpretation of New York Insurance Law § 2610(b)? (2) Under § 2610(b), can the Department of Insurance properly impose a settlement of the sort reached by the Department with Allstate? (3) Under § 2610(b), can the Department of Insurance prohibit the "preferred repairer" clause proposed by GEICO for its Automobile Casualty Manual? (4) If any of these Department actions is permitted under Insurance Law § 2610(b), is that statute an unconstitutional regulation of commercial speech under Article I, Section 8 of the New York Constitution?

The New York Court of Appeals accepted certification and answered three of these questions. See Allstate Ins. Co. v. Serio, 98 N.Y.2d 198, 774 N.E.2d 180, 746 N.Y.S.2d 416, No. 46, 2002 N.Y. Slip Op. 03288 (N.Y. Apr. 30, 2002). It held that Circular Letter 4 and the settlement reached between the Department [**3] of Insurance and Allstate are "invalid" as they "exceed the statute's requirements" and that the rejection of the [*96] "preferred repairer" clause proposed by Geico "is not sustainable" under § 2610(b). Id. at 8-10. In light of these responses, the Court of Appeals declined to reach the fourth question. Id. at 12. In addition, it stated that its holding did not address the question whether the Department would have been justified in rejecting Geico's proposal pursuant to § 2610(a). Id. at 10.

The district court had previously prohibited and enjoined the Department from "enforcing Section 2610(b) and the rules and regulations promulgated thereunder, including Circular 4." Allstate Ins. Co. v. Serio, 2000 U.S. Dist. LEXIS 6055, No. 97 Civ. 0670, 2000 WL 554221, at *26 (S.D.N.Y. May 5, 2000). In addition, it declared the Enforcement Letter "null and void, and . . . unenforceable against Allstate." Id. It premised each of these holdings on federal constitutional grounds.

In light of the Court of Appeals' decision, we REMAND this case to the district court for reconsideration of the issues and of its opinion.

CONCUR BY: WALKER; OAKES

CONCUR: WALKER, Chief Judge, concurring:

I concur in [**4] the judgment certifying the questions set forth in the conclusion to Judge Calabresi's opinion. I concur in only as much of Judge Calabresi's reasoning as justifies certification as appropriate in cases where: (1) there is an unresolved question of state law that will (2) conclusively determine the outcome of the litigation and (3) avoid federal constitutional questions when (4) the delays associated with Pullman abstention are great and potentially outcome-determinative. Where the circumstances of a case would support Pullman abstention, certification serves the same purpose more efficiently.

Because New York Insurance Law § 2610 (b) and its application to Allstate and GEICO in this case raise serious federal constitutional questions under prevailing commercial speech doctrine, I believe that certification is the appropriate course.

OAKES, Senior Circuit Judge, concurring:

The New York State Consumer Protection Board said as to section 2610 (b ), when it was proposed, that:

The bill prohibits a practice which has been reported to the Board wherein an insurer, having a tie-in agreement with an auto body repair shop, will unduly coerce a consumer to have [**5] the repairs effected at a shop selected by the insurer.

According to the New York Insurance Department, the "complaints received by this Department indicate that the consumer is left to deal with a body shop which has no interest in satisfying its customers." Thus, section 2610 in both of its subsections is a consumer protection law prohibiting insurers from requiring repairs to be made at a particular shop and from coercing their insureds to have the repairs effected at a particular shop. This seems to be very much a regulation of the business of insurance which by the McCarron-Ferguson Act is subject to the laws of the several states and cannot be impaired or superseded by any act of Congress. See 15 U.S.C. § 1012 (2000 ). Circular Letter 4 simply spells out for insurers what they can and cannot do as to "steering":

Insurers may maintain a repair program and in the ordinary course of business disseminate directly or through their agents information and literature fully describing the program's existence and benefits, to prospective customers, to applicants and to policy holders. It is understood that sales or renewal materials of this kind [**6] may reach a policy holder who has a pending claim. Consistent with paragraph 1 above, however, literature referring to any repair program or insurer guarantees concerning repairs, should not be knowingly distributed to a policy holder once a claim has been reported.

It seems to me that section 2610 (b ) and the interpretation of it that is contained in Circular Letter 4 are entirely consistent with the First and Fourteenth Amendments to the U.S. Constitution in that there is a substantial state interest in protecting the right of insureds to select their own repair shop. Indeed, twenty-nine states other than New York also have laws prohibiting insurers from requiring repairs to be made at a particular shop. Section 2610 (b ) directly and materially advances the state's interest by protecting insureds against coercion by insurers, and that section is sufficiently narrowly drawn so as to comply totally with Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557, 65 L. Ed. 2d 341, 100 S. Ct. 2343 (1980 ) and its progeny. I would, therefore, have little problem in signing a judgment of reversal.

My colleagues prefer, however, to take the cautious -- some [**7] would say "prudent" -- course of certifying to the New York Court of Appeals the questions they propose. I would hope that the very act of certification, if the New York Court of Appeals grants it, will not induce that court to give a narrow interpretation to what the New York legislature thought was a salutary consumer protection bill merely on the basis that it conceivably could fall under the protection of commercial free speech. Certainly the GEICO case presents a proposed endorsement which, in my view, clearly violates not only section 2610 (b ) but also section 2610 (a ) in that it requires the insured to agree that "covered repairs will be completed at a repair shop recommended by us" with the penalty that, if the insured does not do so, he "will be paid the amount of the estimate prepared by us and/or the preferred repairer."

I concur with Judge Calabresi that the case should be certified, with the caveats hereby expressed.

NY Insurer Referral - Freedom of Speach Issue - Info-Argued 3-5-2001 - Decided 5-30-2002