432 Pa. 543 | Pa. | 1968
Lead Opinion
Opinion by
In April and June of 1965, the National Automobile Underwriters Association and the National Bureau of Casualty Underwriters who, together, represent companies writing significant portions of the automobile liability and physical damage insurance in Pennsylvania, filed proposed rate increases with the insurance commissioner. The commissioner held hearings on the proposed increases and approved them as filed. Appellant excepted to the rate increase approvals and hearings were held on his complaints by the insurance department. The hearings were held in October 1965, and, on March 7, 1966 the commissioner dismissed appellant’s complaints. An appeal from the commissioner’s adjudication was filed in the Commonwealth Court and dismissed by that court on February 6, 1967. The
Appellant raises five questions on appeal Avhieh may be reduced to three general issues pursued by him throughout this litigation. He argues that: the commissioner conducted the hearings in an unjudicial and discourteous manner and failed to consider a full record by virtue of her refusal to allow the court reporter to take his counsel’s closing speech; the record fails to sustain the grant of a 20% rate increase; and a conflict of interest existed by virtue of the retention by the commissioner of an actuarial consultant in connection with her review of the disputed rate filings.
The first of these contentions need not detain us. A careful review of this record fails to substantiate appellant’s allegations. At most, we find only hotly pursued advocacy and no indication of discourtesy or attempt on behalf of the commissioner to prevent appellant’s counsel from fully presenting his case. Nor do we find error in the refusal of the commissioner to permit a verbatim taking of the closing speech of appellant’s counsel. That speech was surely not evidence and we fail to perceive how its noninclusion in the transcribed record prejudiced appellant.
Appellant’s second argument is not without difficulty. He contends that the underwriting losses testified to by the Bureau and the Association do not accurately reflect their financial position. He contends that investment income was not taken into consideration and that the accounting method employed by the insurers distorts the profit picture. Specifically, appellant contends that the insurers sustained losses of only 5 to 7% in the year in question. His conclusion is based on a cash method of accounting, or a premiums received against losses paid basis. The insurers, on the other hand, calculate their profits or losses on
Appellant’s final argument presents an extremely difficult question. The Act of May 17, 1921, P. L. 789, Art. II, §205, 40 P.S. 48, provides: “No officer or employe of the Insurance Department shall be employed by or be pecuniarily interested in any insurance company, association, or exchange, or in any insurance business other than as a policyholder”. In the course of this proceeding, the commissioner retained the services of Woodward & Fondiller, Inc. as a consultant. The firm is a nationally known group of actuaries and
We agree with the courts below that Mr. Eoberts’ integrity is in no way in question. We cannot agree, however, that he or his firm was not an employee of the commissioner. We believe that to give a narrow reading to the word “employe”, limiting the definition to those who are controlled, subject to withholding, etc., is to defeat the obvious intent of the statute. The statute seeks to prevent conflicts of interest in insurance rate making. As in all conflict of interest situations, the proper test is not whether an actual conflict exists but whether the possibility of a conflict exists. Jedwabny v. Phila. Tr. Co., 390 Pa. 231, 135 A. 2d 252 (1957). With this precept in mind and considering the purpose of the prohibition of the statute, we conclude that a liberal interpretation of the term employe is required. Mr. Eoberts and his firm were employed by the commissioner in connection with these filings and even if they might not be categorized employes for certain purposes, we are convinced that they were employes within the intendment of the statute.
Despite this conclusion, however, we are not disposed to reverse the judgments below. In order that
Although we disapprove the practice of engaging experts whose other activities are incompatible with the proscriptions of the statute, we fail to find that such employment here prejudiced the position of appellant.
Order affirmed.
Concurrence Opinion
I agree with the result reached by the majority but not with all its reasoning.
First, I believe that the majority’s suggestion that the accounting system approved by the commissioner distorts insurance company income is improper. The majority correctly decides that this decision is within the commissioner’s expert discretion. This is so because here especially we are involved in an area where the commissioner has considerable expertise which the Court lacks. Once this is conceded, I see no reason why the Court should go on to discuss and detail its “grave doubts” about the correctness of the commissioner’s judgment. If the Court really has sufficient reason to express “grave doubts,” which I believe is not the case here, it should reverse the commissioner’s determination. Otherwise, it should merely defer to the commissioner’s discretion.
As to the conflict of interest issue, at the outset I am not convinced that the proper relief, even were the actuary here involved within the prohibition of 40 P.S. §43, would be to vitiate the rate proceeding absent showing of prejudice (which I assume would vitiate the proceeding regardless of whether a violation of §43 existed). I do not believe that this need be decided however, because I think that the majority is wrong in holding that the actuary in this case falls within §43. Here the actuary was an independent contractor of both the commissioner and the bureaus and companies, and I do not believe that the statute prohibits this arrangement any more than it would prevent the commissioner and an insurance company from retaining on an independent basis the same attorney, data processing firm, or bricklayer.
Mr. Justice Jones joins in this concurring opinion.
Dissenting Opinion
I contend and tbe majority concedes that the actuary employed by the insurance department is in a position of conflict of interest. I believe that the evidence of record does not adequately dispose of the taint that accompanies such a conflict. Since we cannot isolate the effect of this conflict to determine the good from the bad, it follows that we cannot say, as does the majority, that this conflict was harmless. Hence I would vacate these proceedings so that a hearing without this conflict can be inaugurated.
Concurrence Opinion
Concurring Opinion by
Because I disagree with the Court’s interpretation of “officer or employe of the Insurance Department,” I concur in the result. Roberts was a consultant, not an officer or employe.
