October 12, 1994

Mike Mehlhaff, Secretary
Department of Commerce and Regulation
910 E. Sioux
Pierre, SD 57501

OFFICIAL OPINION NO. 94-10

Office of Administrative Hearings

Dear Secretary Mehlhaff:

You have requested an official opinion of this Office based upon the following facts:

FACTS:

Prior to enactment of SDCL 1-26C, and the utilization by the South Dakota Division of Insurance (Division) of Administrative Law Judges (ALJ) assigned by the Office of Administrative Hearing (OAH), when a hearing was determined to be necessary by the Division, the Division drafted and issued a Notice of Hearing to the interested parties. SDCL 1-26-16 and 58-4-15. If the agency head did not sit as hearing officer, a hearing officer was assigned by the Director and would issue proposed Findings of Fact, Conclusions of Law, and an Order. SDCL 58-2-24 and 1-26-18.1. All administrative hearings conducted on behalf of the Division were conducted with the greatest degree of informality possible. SDCL 58-4-25 and 1-26-19(1). The hearing officer also sent copies of the proposed Findings, Conclusions, Decision, and Order to the parties involved, and provided those parties an opportunity to submit written objections and alternative proposals. SDCL 1-26-24 and 1-26-25. The entire record was also turned over by the hearing officer to the agency head. From that point on, unless the agency head (the person who makes the final decision) decided to remand the matter back for further hearing, the hearing officer would be out of the picture because the agency is responsible for certifying and providing the record on appeal and maintaining permanent records of the proceedings at the Division. SDCL <185><185> 1-26-30.1, 1-26-31, 1-26-32.2, 1-26-21, 1-26-32.3, 1-26-32.4, and 58-2-26. The agency head would then consider the record, and the objections and alternative proposals, if any, submitted by the parties, and then issue a final decision. The final decision would be mailed by the agency head to the parties, who could then appeal if deemed necessary.

Based upon the foregoing facts, you have asked the following question:

QUESTION:

Does the enactment of SDCL 1-26C have precedence over any of the specific provisions set forth in SDCL Title 58 or SDCL Chapter 1-26, or abrogate any of the procedures followed by the Division of Insurance for administrative hearings as set forth in the facts above?

IN RE QUESTION:

There are several separate, individual procedural actions set out in your factual situation. I will comment briefly on each, but first will answer your question in general. I interpret SDCL 1-26C as establishing the OAH and giving power to the ALJs appointed under that chapter to conduct hearings in accordance with the chapter and in accordance with other preexisting statutes and regulations. SDCL ch. 1-26C is unambiguous, so I must presume that the Legislature said what it meant and meant what it said. Crescent Electric Supply Co. v. Nerison, 232 N.W.2d 76, 80 (S.D. 1975). Further, since SDCL ch. 1-26C is the Legislature's most recent enactment among the laws relevant to your questions, that chapter will prevail if conflicts exist. In re Estate of Smith, 401 N.W.2d 736, 740 (S.D. 1987). However, a statute specific to insurance hearings that conflicts with the general terms of SDCL ch. 1-26C nonetheless controls. Meyerink v. Northwestern Public Service, 391 N.W.2d 180, 183-184 (S.D. 1986). With those principles in mind, I now turn to your specific inquiries.

The chief administrative law judge may adopt procedural rules. SDCL 1-26C-10. After hearing, the presiding administrative law judge is to make proposed findings of fact and conclusions of law and a proposed decision, which the agency may accept, reject or modify. SDCL 1-26C-11. There has been a transfer of hearing officers and administrative staff to OAH. SDCL <185><185> 1-26C-15 and 1-26C-16. There is also a provision, SDCL 1-26C-13, that gives certain deference to the findings of the administrative law judge, insofar as the findings result from the opportunity of the administrative law judge to observe the witnesses. Credence is given to all past administrative decisions. SDCL 1-26C-21. Beyond these indicators, however, there are few statutory provisions that directly govern the matters you have set out. I remain of the opinion that SDCL 1-26C does not change or abrogate any procedural rules within the Code that do not specifically conflict with it. National Farmers Union Property and Casualty Co. v. Bang, 516 N.W.2d 313, 317 (S.D. 1994).

Pursuant to that opinion, I believe that SDCL 58-4-15 controls the issue of the appropriate entity for the giving of notice of hearing. SDCL 58-4-15 provides that such notice "shall not be effective" unless signed by the director of the Division of Insurance "or by his authority." Thus, the notice of hearing may be signed by the director or by the ALJ, if the authority of the director is delegated to the ALJ.

With regard to the hearing, the director may, of course, hear the matter herself. If she chooses not to hear the matter herself, SDCL 1-26C-9 provides that the case will be heard by an ALJ. The ALJ in turn proposes findings of fact, conclusions of law and a decision to the director who retains the final authority to render a decision, except in those cases in which the ALJ has been properly delegated the ultimate decision-making authority. SDCL 1-26C-11, 1-26C-12. Additional ALJ powers and responsibilities are set out in SDCL 1-26C-6, 1-26C-10 and 1-26-19.2.

SDCL 1-26C-1 specifically provides that the OAH conduct hearings with the greatest degree of informality consistent with fairness in the nature of the proceeding. The individual ALJ, however, has control over the taking of evidence and other matters involved in the administrative hearing. SDCL ch. 1-26C and 1-26C-10. The ALJs nonetheless should take to heart as much as possible the requirements of SDCL 1-26C-1.

You next inquire whether parties ought to be served with proposed findings, conclusions and decisions and provided with an opportunity to submit written objections and alternate proposals. SDCL 1-26-25 provides that "if, in accordance with agency rules, parties submitted proposed findings of fact, the decision shall include a ruling on each proposed finding." (Repeated references to SDCL ch. 1-26 in SDCL ch. 1-26C make it clear that the former chapter's general principles continue to apply. See, especially, SDCL <185><185> 1-26C-2 and 1-26C-22.) Further, SDCL 1-26-24 requires service of a tentative or proposed decision upon the parties if the officials of the agency who are to render a decision have not heard the case or read the record. Essentially, SDCL 1-26 allows for proposals by parties, but does not require them unless the ultimate decision maker, i.e. the Director of Insurance, has not read the record or heard the case. I am not unmindful of 1-26C-11, stating that the administrative law judge makes proposed findings of fact and conclusions of law and that the agency may accept, reject or modify those findings and conclusions. That statute, however, does not prohibit the practice of allowing the parties to submit proposed findings.

Your next question regards the maintenance of records of the Division of Insurance. It is my opinion that the records involved belong to the Division, not to the Office of Administrative Hearings. SDCL 58-2-26 requires the director to keep records of the director's official transactions. On the other hand, I have found no statute that directly imposes the duty of keeping Division of Insurance Records in OAH. For convenience, it would be acceptable for parties to file certain original documents with OAH. The Director, however, is responsible for her files under SDCL 58-2-26. I see nothing in SDCL 1-26C that would convey agency files to the Office of Administrative Hearings merely because the administrative law judges are conducting a hearing. In my view, the role of the Office of Administrative Hearings is defined and limited, and consists of receiving agency files and records, scheduling and conducting hearings, and issuing proposed findings of fact, conclusions of law and decisions, which are then acted upon by the agency, unless the agency previously has delegated full decision-making authority to OAH pursuant to SDCL 1-26C-12.

Finally, you raise the issue of how the record is considered after the ALJ renders his or her decision. Unless full decision-making authority has been granted pursuant to SDCL 1-26C-12, the agency may review the findings of an administrative law judge as it sees fit. SDCL 1-26C-11. The only limits on Division review of the administrative law judge decision are contained in SDCL 1-26C-13. The agency must, if it rejects the administrative law judge's proposals, give reasons for doing so in writing. It also must give due regard to the administrative law judge's opportunity to observe the witnesses. Further, an appeal from agency action to the circuit court is available. SDCL 1-26C-11; 1-26-30.2.

MWB:CME:nan