MATTER OF MARKOWITZ v. Serio

OPINION OF THE COURT

“Redlining,” as the term is used in the insurance industry, is an insurer’s refusal to issue or renew, or its cancellation of, a policy premised exclusively on the geographic location of the risk. Concerned that auto insurers were engaging in that practice, Marty Markowitz, Brooklyn Borough President and petitioner in this proceeding, filed two Freedom of Information Law (FOIL) requests with the State Insurance Department *48seeking information “for each Kings County zip code, including, by carrier, the number of voluntary [automobile] policies issued, renewed, cancelled (other than for non-payment of premium) or nonrenewed.” Markowitz claimed that such zip code reports (commonly referred to as Regulation 90 reports) were available pursuant to 11 NYCRR 218.7 (d), an insurance regulation which states that such reports “shall be public record.”

The Department provided Markowitz with data relative to the total number of auto policies in force in New York in each county from 1999 through 2002, but refused to release any data generated after 1997 demarcating the number of policies in force broken down, by carrier, for each Kings County zip code. This refusal was based on the Department’s contention that Regulation 90 reports are exempt from disclosure or release under FOIL because their contents constitute either trade secrets or records that, if disclosed, “would cause substantial injury to the competitive position” of insurers (Public Officers Law § 87 [2] [d]). The Department advised Markowitz that the reports would be disclosed, but only after six years.

On December 3, 2004, after exhausting his administrative remedies relative to the denials of both FOIL requests, Markowitz commenced this CPLR article 78 proceeding against respondent Gregory V Serio, Superintendent of the Insurance Department. The petition seeks an order and judgment annulling, as arbitrary and capricious, the Superintendent’s determinations that the Regulation 90 reports are subject to a FOIL exemption, and ordering the Superintendent to produce the reports broken down by zip code. The Department answered asserting that its refusal to release the reports was neither arbitrary nor capricious and that its decision was reasonable and consistent with lawful procedure.

Markowitz and the Superintendent entered into a stipulation permitting several interested insurers to intervene in the proceeding.* Those insurers submitted affidavits in support of their claims that the reports sought by Markowitz constituted confidential information, the release of which would result in substantial competitive harm.

Supreme Court granted the petition, holding that Regulation 90 expressly mandated public disclosure of the reports and that *49the Department failed to meet its burden of demonstrating that the Regulation 90 filings qualified under a FOIL exemption. The Appellate Division reversed and reinstated the Department’s administrative determinations, noting that although the Department had decided in 1994 that the Regulation 90 reports were public records as the regulation clearly stated, they were nevertheless subject to FOIL disclosure and its reversal of position in 2000 was neither arbitrary nor capricious because the Department had relied on additional evidence from insurers that the disclosure of such information would result in competitive harm to them (39 AD3d 247, 248 [1st Dept 2007]). The Appellate Division further held that the Department’s decision to exempt the reports on the ground that their release would result in substantial competitive injury was reasonable {id. at 248-249). This Court granted leave to appeal and we now reverse.

The Legislature enacted Insurance Law § 3429 to proscribe insurers from declining to issue or renew, or from cancelling, certain types of auto insurance “based solely on the geographical location of the risk” (Insurance Law § 3429 [a] [2]). That law directs the Superintendent to promulgate regulations establishing “procedures with respect to notification to insureds of the insurer’s specific reason or reasons for refusal to issue or renew or for cancellation” of auto insurance policies (Insurance Law § 3429 [b]).

To that end, the Superintendent promulgated 11 NYCRR 218.7 (d), which provides that Regulation 90 reports must be filed annually “in a format . . . prescribed by the superintendent” and that “every such report shall be public record” (emphasis supplied). Contrary to Markowitz’s contention, however, the “public record” language does not negate an insurer’s right to assert that some information required to be included in the reports is exempt from disclosure under FOIL. Rather, as the Department has reasonably concluded, such language suggests that, although Regulation 90 reports are submitted by a private entity at the behest of the Department, they are subject to public disclosure unless the insurer asserts that a FOIL exemption applies and is able to sustain its burden of establishing nondisclosure. This interpretation is consistent with this Court’s construction of the “public records” language in the context of FOIL exemptions (see e.g. Matter of Xerox Corp. v Town of Webster, 65 NY2d 131, 132 [1985]; Matter of New York Tel. Co. v Public Serv. Commn., 56 NY2d 213, 219-220 [1982]). Indeed, this Court has held that “the FOIL exemp*50tions must be read as having engrafted, as a matter of public policy, certain limitations on the disclosure of otherwise accessible records” (Matter of Xerox Corp., 65 NY2d at 132). Accordingly, the Department’s interpretation that 11 NYCRR 218.7 (d) does not deprive insurers of their right to contest the disclosure of Regulation 90 reports is neither irrational nor unreasonable and is “entitled to deference” (Matter of Gaines v New York State Div. of Hous. & Community Renewal, 90 NY2d 545, 549 [1997]).

Further evidence of the reasonableness of the Department’s interpretation of 11 NYCRR 218.7 (d) is found at 11 NYCRR part 241 (Regulation 71), which provides a regulatory framework concerning requests for, and the release of, Department records. For instance, 11 NYCRR 241.3 (a) states that “[e]xcept as otherwise provided by the Insurance Law, section 87 (2) of the Public Officers Law, or other provisions of law, all records produced [by the Department] shall be available for public inspection and copying,” thereby evidencing that FOIL exemptions are potentially applicable to all Department' records, even those filed pursuant to Regulation 90. Moreover, 11 NYCRR 241.6 (a) explicitly permits one “who submits any information to the [Department” to “request that the [D]epartment except such information from disclosure under” Public Officers Law § 87 (2) (d). Indeed, several of the insurers here have done so in the past when filing their annual Regulation 90 reports. Therefore, it is apparent that the Department’s interpretation of 11 NYCRR 218.7 (d) reconciles, and gives effect to, the key disclosure components of Regulations 90 and 71. As such, while the “public record” language indicates that the Regulation 90 reports are subject to disclosure, an insurer retains the right to assert and attempt to prove that they fall within an applicable FOIL exemption.

The Department and insurers argue that the applicable FOIL exemption here is Public Officers Law § 87 (2) (d), which states that the Department “may deny access to records or portions thereof that . . . are trade secrets or are submitted . . . by a commercial enterprise . . . and which if disclosed would cause substantial injury to the competitive position of the subject enterprise.” As the parties seeking the exemption, the Department and insurers are charged with the burden of proving their entitlement to it (see Public Officers Law § 89 [4] [b]; [5] [e]), meaning that they must demonstrate that the reports “ ‘fall[ ] squarely within a FOIL exemption by articulating a particular*51ized and specific justification for denying access’ ” (Matter of Data Tree, LLC v Romaine, 9 NY3d 454, 462-463 [2007], quoting Matter of Capital Newspapers Div. of Hearst Corp. v Burns, 67 NY2d 562, 566 [1986]). Because the overall purpose of FOIL is to ensure that the public is afforded greater access to governmental records, FOIL exemptions are interpreted narrowly (see Matter of Washington Post Co. v New York State Ins. Dept., 61 NY2d 557, 564 [1984]). To meet its burden, the party seeking exemption must present specific, persuasive evidence that disclosure will cause it to suffer a competitive injury; it cannot merely rest on a speculative conclusion that disclosure might potentially cause harm.

Here, the Department and insurers have failed to meet this burden. The evidence suggesting they will suffer a competitive disadvantage is theoretical at best. The insurers’ key argument is that if they are forced to reveal zip codes of areas where relatively few policies are issued, competitors could use this information to exploit an insurer’s geographic weak spot. It has not been shown that zip code data, without more, would necessarily put the insurer at a competitive disadvantage. Because neither the Department nor insurers have met their burden of justifying the exemption of the reports under Public Officers Law § 87 (2) (d) (see Matter of Washington Post Co., 61 NY2d at 567), the order of the Appellate Division should be reversed, with costs, and the order and judgment of Supreme Court reinstated.