Appeal, No. 79 | Pa. | Jan 19, 1973
Lead Opinion
Opinion by
On February 28, 1964, tlie Commonwealth Mutual Insurance Company [hereinafter OMIC] wag digsolved by order of the Court of Common Pleag of Dauphin County, sitting ag the Commonwealth Court. Pursuant to the Act of May 17, 1921, P. L. 789, art. Y, §506, ag amended, 40 P.S. §206 (1971), the Ingurance Commisgioner of Pennsylvania wag appointed gtatutory liquidator.
Over six yearg later, on May 1, 1970, the Commissioner filed a petition for an aggeggment order,
The principal issue presented is whether the Insurance Commissioner, after approving an insurance policy containing a one year limitation on the imposition of contingent liability, can now, as statutory liquidator, completely disregard that specific policy provision and levy an assessment six years after the expiration of the policy. The relevant provision of the insurance policy
We conclude that the statutory liquidator is bound by the explicit language of the contract and may not here impose an assessment upon the policyholders. To hold otherwise would extravagantly expand a one year contractual limitation to mean six years.
It is beyond doubt that when additional funds are needed to pay losses and expenses of a dissolved mutual insurance company, the right to assess the policyholders rests on the terms of the contract of insurance. See Taggart, Ins. Com. v. Graham, 108 Pa. Super. 320" court="Pa. Super. Ct." date_filed="1932-11-21" href="https://app.midpage.ai/document/taggart-ins-com-v-graham-3857071?utm_source=webapp" opinion_id="3857071">108 Pa. Superior Ct. 320, 165 Atl. 68 (1933), aff’d, sub nom. Taggart, Ins. Com. v. De Fillippo, 315 Pa. 438" court="Pa." date_filed="1934-04-10" href="https://app.midpage.ai/document/taggart-v-de-fillippo-3850668?utm_source=webapp" opinion_id="3850668">315 Pa. 438, 173 Atl. 423 (1934). Here, the right to assess, by the specific terms of the policy, is limited to one year after the expiration of the policy.
Appellee, however, relying on Commonwealth ex rel. Schnader v. Keystone Ind. Exchange, 335 Pa. 333" court="Pa." date_filed="1939-05-25" href="https://app.midpage.ai/document/commonwealth-v-keystone-indemnity-exchange-3850378?utm_source=webapp" opinion_id="3850378">335 Pa. 333, 6 A. 2d 821 (1939), aff’d on rehearing, 338 Pa. 405" court="Pa." date_filed="1940-01-31" href="https://app.midpage.ai/document/commonwealth-ex-rel-schnader-v-keystone-indemnity-exchange-3850097?utm_source=webapp" opinion_id="3850097">338 Pa. 405, 11 A. 2d 887 (1940), contends that he is not bound by the contractual one year limitation in the policy. Keystone is readily distinguishable. There, the “subscriber’s agent, the Indemnity Company, issued policies which not only did not contain the contingent liability provision required by the statute, but even provided no assessment should be made.” Id. at 336, 6 A.2d 821" court="Pa." date_filed="1939-05-25" href="https://app.midpage.ai/document/commonwealth-v-keystone-indemnity-exchange-3850378?utm_source=webapp" opinion_id="3850378">6 A. 2d at 822.
This Court there held that an insurance policy which contained no provision at all for contingent liability was invalid because it did not comport with the legislative requirement that policies contain such a clause. Act of May 17,1921, P. L. 682, art. X, §1004, as amended, 40 P.S. §964 (1971). Here, the policies specifically
The one year limitation, a valid and enforceable provision as between the insurance carrier and the policyholders, retains its full contractual validity even upon the appointment of the statutory liquidator. In Taggart, supra, the Court said: “There is no express additional authority given to the insurance commissioner, substituted simply as a liquidator for a receiver appointed by the court. No sound reason suggests itself, and none has been advanced, why his authority should be more extensive than a receiver formerly had. His duties are the same and Ms power should be subject to the same limitations.” Id. at 327-28, 165 A. 68" court="Pa. Super. Ct." date_filed="1932-11-21" href="https://app.midpage.ai/document/taggart-ins-com-v-graham-3857071?utm_source=webapp" opinion_id="3857071">165 Atl. at 71. Thus, the Commissioner, as statutory liquidator, having the same authority as a receiver, “stand [s] in the shoes of the owner and take[s] only his interest in the property. . . .” Commonwealth Trust Company of Pittsburgh v. Harkins, 312 Pa. 402" court="Pa." date_filed="1933-05-25" href="https://app.midpage.ai/document/commonwealth-tr-co-of-pbg-v-harkins-3846884?utm_source=webapp" opinion_id="3846884">312 Pa. 402, 410, 167 Atl. 278, 281 (1933). His contract rights are, indeed, not superior to nor “more extensive than” those of the carrier whose affairs he is liquidating.
The trial court’s determination is even less tenable in light of the fact that the Insurance Commissioner, who has authority to disapprove policies which contain provisions “inconsistent or in conflict with any law of the Commonwealth”, Act of May 17, 1921, P. L. 682, art. VIII, §804 (1971), approved the very policies which he now seeks to ignore. Those policies contain a mandatory one year limitation. That specific contractual provision is sufficient to preclude the result which the trial court reached. So too, the Commissioner is estopped from denying the applicability of the one year limitation. In Walsonavich v. United States, 335 F.2d 96" court="3rd Cir." date_filed="1964-06-24" href="https://app.midpage.ai/document/john-walsonavich-individually-and-trading-as-service-electric-company-v-united-states-265144?utm_source=webapp" opinion_id="265144">335 F. 2d 96 (3d Cir. 1964), the court stated: “The
Order reversed.
The Insurance Commissioner’s authority to assess members of a mutual insurance company is derived from the Act of May 17, 1921, 1>. L. 789, art. V, §509.1, as amended, 40 P.S. §209.1 (1971).
The assessment was to be divided among the individual policy-holders by multiplying, in the case of each policyholder, the premium written in the policy by the total of the monthly assessment factors for the period when the policy was in force. Each policyholder was to be assessed on the basis of those losses which occurred when his policy was in effect. No policyholder was to be assessed an amount in excess of one hundred percent of the premiums he had previously paid.
Dissenting Opinion
Dissenting Opinion by
The majority bases its reversal of - the decree of the Court of Common Pleas of Dauphin County, sitting as Commonwealth Court, on the policy provision limiting the time within which contingent liabilities might be levied against CMIC’s insureds to one year from the date of expiration or cancellation of their respective policies. The majority reasons that the insurance commissioner approved that policy language and is, therefore, estopped, as statutory liquidator, from ignoring
My view that the insurance commissioner may disregard the one-year limitation on assessments contained in the policy does not mean that I am not sympathetic with the plight of appellants, who may now learn for the first time that they cannot rely on a provision contained in the policy or who may even, as is alleged, be learning for the first time that they can be assessed at all. The insurance department of the Commonwealth should not have approved the one-year restriction contained in the policy. Moreover, the department should have insured that the policy contained a clea,r explanation to all policyholders that if they purchase a policy of a mutual insurance company, they will be assessed if the company is unable to pay its claims. Nevertheless, the statutory provision for contingent assessment of premiums was designed to protect the claimants and creditors of a dissolved company. In the conflict between these innocent claimants and the policyholders who previously received the economic benefits of coverage by mutual insurance policies, the statute makes clear that it is the policyholders who must bear the cost of these claims, to the extent of amounts they previously paid in premiums.
Appellants also emphasize that a period of more than six years elapsed between the February 28, 1961, order dissolving the company and the May 1, 1970, petition for an assessment order. The majority distinguishes this case from Commonwealth ex rel. Schnader v. Keystone Ind. Exchange, 335 Pa. 333" court="Pa." date_filed="1939-05-25" href="https://app.midpage.ai/document/commonwealth-v-keystone-indemnity-exchange-3850378?utm_source=webapp" opinion_id="3850378">335 Pa. 333, 8 A.2d 821" court="None" date_filed="1939-09-27" href="https://app.midpage.ai/document/brown-v-grand-view-auditorium-inc-8506825?utm_source=webapp" opinion_id="8506825">8 A. 2d 821 (1939), because the policy language approved by the commissioner in Keystone forbade the imposition of assessments. The majority reasons that such policy language was contrary to the statute and was beyond the power of approval of the insurance commissioner. I believe that the instant policy language is equally
In the instant case, we are not totally without a guide as to the reasonableness of the time lapse of slightly more than six years between the dissolution order and the petition for the assessment order. The General Assembly recognized the problems inherent in permitting lengthy delays in assessment processes and enacted, in 1970, §509.1 of The Insurance Department Act of 1921. That act states that no assessment may be made after five years from the expiration date of the policy. However, that section does not apply to the assessments of members of companies which were dissolved
In my view, CMIC’s policyholders, who had the advantage of the lower premiums afforded by the mutual insurance company, should bear the burden imposed by the failure of the carrier, rather than innocent victims of torts committed by policyholders, and since the commissioner, in my view, approved policy language which made it impossible to enforce the provisions of the insurance law, I would affirm the decree of the court below.