The New Brunswick Court of Appeal has ordered the province's insurance regulatory board to re-hear two cases with insurance companies.

The New Brunswick Court of Appeal has sided with the New Brunswick government in an ongoing dispute it's been having with its own tribunal over auto insurance rates.

The New Brunswick Insurance Board has been ordered to re-hear two auto insurance rate applications it ruled on last year because it gave no reasons for the rates it picked. 

The province contends the board approved premiums that were too high for drivers and the appeal court said the board's failure to explain it's decisions made it impossible for consumers to know if rates are too high or not.

'The board’s failure to provide reasons undermines public confidence that the board will attempt to balance the interests of insurers and policy-holders alike.' — Justice Joseph Robertson

"How is the public to be assured that the Board is not engaged in arbitrary decision-making?" Justice Joseph Robertson wrote in a unanimous decision of the Appeal Court in one of the cases involving the Dominion General Insurance company.

"The board’s failure to provide reasons undermines public confidence that the board will attempt to balance the interests of insurers and policy-holders alike."

In its submissions to the court, lawyers for the province suggested consumers in New Brunswick have been overcharged by what amounts to hundreds of millions of dollars for auto insurance over several years at rates approved by the insurance board.

It also claimed the board was not co-operating with government attempts to examine company data to prevent that from continuing. 

The province alleges several dozen private auto insurance companies, which are supposed to earn about $60 in profit for every $1,000 in auto insurance premiums they charge New Brunswick drivers, made several times more than that on the nearly $2 billion they charged for auto insurance in the province between 2004 and 2008. 

In response, the province formally intervened in two rate applications in 2009 — one by Dominion General Insurance for a 0.49 per cent rate increase and one by Allstate owned Pembridge Insurance for a 3.49 per cent increase. 

The province argued both applications should be rejected and their rates lowered substantially instead.

In the case of Pembridge Insurance, the province's actuary calculated that a 7.8 per cent rate reduction would be required to get the company's New Brunswick profits down to the target level.

The insurance board approved Dominion's application and imposed a rate freeze for Pembridge — rejecting rate reductions for both companies — but provided no reasons for its decision in either case. 

The board also rejected the province's request to see more detailed information from Pembridge about its New Brunswick projections and dismissed it's request — made by New Brunswick's Attorney General's office — to question several other insurers about their rates.

Appeal court appalled

The Court of Appeal was appalled by how the board handled its statutory powers.

"In disentitling the Attorney General to the answers he sought [about Pembridge's application] the board exercised its statutory powers in a manner disharmonious with its mandate and breached its obligation of procedural fairness to the Attorney General," wrote Appeal Court Chief Justice Ernest Drapeau, in the court's unanimous decision on the Pembridge case.

The court ordered that the insurance board rehear both applications and reach new decisions in each, complete with reasons.

It also ordered that no Insurance Board member involved in the original decisions — including Insurance board chairman Paul D'Astous — be allowed to participate. 

It also banned the insurance board's actuary from participating in the new hearings. 

"Disqualification simply avoids the allegation that the decision makers may be unable to fairly and objectively distance themselves from their initial decision," wrote Justice Robertson.

Neither the province, nor the insurance board, were commenting on the appeal court's decision.

A spokesman for Pembridge told CBC News the company is prepared to participate in a new hearing and will justify its rate request again. 

But Tony Irwin said it seemed clear his company just got caught in the middle of a dispute between the province and its insurance board.

"We did feel in some respects we did get caught up in that," he said.