The commissioner was supported by the American Insurance Association with the Massachusetts Insurance Federation, the Property Casualty Insurers Association of America (PCI), Public Interest Research Group and a number of insurers who filed a "friend of the court" brief supporting the commissioner.

In its ruling the court overturned a lower court finding that the commissioner did not have authority for her regulation.

Rejecting arguments against an assigned risk pool, the court said that "the fact that an assigned risk plan apportions losses and expenses indirectly, and therefore less precisely than a reinsurance facility or joint underwriting association, does not prohibit the commissioner from selecting that model for a plan..."

The court also noted the commissioner had determined "that an assigned risk plan is a more efficient model than a reinsurance facility for containing losses due to fraud or questionable claims." Under the present plan, "where losses are ceded to the facility and then distributed to participating carriers on a market share basis, the incentive to contain losses is weak."

The court noted that in 2000 the plan had the highest deficit in the nation $323 million.

One minor portion of the new regulation was sent back to the commissioner for revision.

It concerned a provision that drivers with a clean driving record for three years could not take part in the plan. The lower court in rejecting the regulation had noted that drivers in that category, who could not obtain insurance in the voluntary market, would be forced to cause an accident or get a traffic ticket to become eligible.

AIA today called the court's action "good news for consumers and the insurance market."

Under the current system, high-risk drivers obtain their insurance from agents known as exclusive representative producers, who only deal with residual market auto policies and are obliged to take all comers.

Commissioner Bowler's regulations, filed in 2004, will move the state's high-risk insurance system from one where agents are assigned to insurance companies to one in which individual high-risk drivers are assigned to insurers.

According to an AIA spokesman, Michael Moran, certain companies under the existing residual market arrangement have been able to "play the system well" and "cherry pick" to get the best books of residual business from agents.

John Murphy, AIA's vice president for the Northeast Region, said "the current Commonwealth Auto Reinsurers system is outmoded and unfair. This decision allows Massachusetts to join the majority of other states with an assigned risk plan to fairly distribute the riskiest drivers among all insurers in the market."

He said the system the commissioner called for is more equitable and more common in other states.

"Consumers in Massachusetts need more choice among auto insurers, who have been driven away from the state by its dysfunctional regulatory scheme. While this decision removes one huge obstacle facing insurers, it is vital that the legislature take action in 2007 to create more competition in the auto insurance market and attract more insurers to the state," added Mr. Murphy.

"The SJC ruling comes down four-square in favor of the commissioner," said Frank O'Brien, New England regional manager for the PCI.

"The end result will be that the commissioner can now oversee the conversion of the residual market from one based on assigned brokers to an assigned risk system that more closely resembles those of other states," he added. "This is inherently fairer to the insurance companies doing business in Massachusetts and the customers they serve."