Gregory G. SKOTNICKI, Appellant v. INSURANCE DEPARTMENT, Appellee
No. 12 MAP 2017
Supreme Court of Pennsylvania.
December 19, 2017
SUBMITTED: August 25, 2017
Given this commentary-incorporated reasoning and the express cross-reference to the pretermitted spousal section, I remain unpersuaded that the Legislature was required to enact a point-by-point codification of all the rules of construction it sought to apply to inter vivos trusts, rather than proceed via the broad provision of Section 7710.2. Compare Majority Opinion, at 236 (“[T]he fact that the legislature declined expressly to identify the effect that Wife imputes to Section 7710.2 provides powerful evidence that the General Assembly did not intend it.“), with
Justice Baer joins this dissenting opinion.
Amy Daubert, Esq., Melinda Fisher Kaufman, Esq., Kathryn McDermott Speaks, Esq., Pennsylvania Insurance Department, Insurance Department, for Appellee.
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
OPINION
JUSTICE BAER
Pursuant to the regulations that implement The Unfair Insurance Practices Act (“Act 205“),
This matter requires the Court to consider whether, in the context of such an appeal, an insurer is collaterally estopped from litigating issues that were previously discussed in an investigative report that Consumer Services supplied in an earlier and separate appeal involving the same parties, when the Commissioner never entered a final order in the earlier appeal. For the reasons that follow, we hold that, for purposes of the doctrine of collateral estoppel, an investigative report does not constitute a final adjudication on the merits of any issue. Accordingly, an insurer is not collaterally estopped from litigating issues in the scenario described above. Because the Commonwealth Court reached the proper result in this case, we affirm that court‘s order.
The background underlying this matter can be summarized as follows.2 Appellant Gregory G. Skotnicki (“Skotnicki“) owns a home which he has insured since 2003 with a policy he purchased from Phoenix Insurance Company (“Phoenix“).3 In July of 2013, Skotnicki‘s dog bit a neighbor. Phoenix accepted liability for the neighbor‘s claim and paid $42,500 in damages.
In a notice dated April 22, 2014, Phoenix informed Skotnicki that his homeowners’ policy would not be renewed effective May 29, 2014. The notice explained the reason for non-renewal as follows: “There is a substantial change or increase in hazard in the risk assumed by the company subsequent to the date the policy was first issued, as described below: There is an animal or pet that has bitten or injured.” N.T., 9/30/2014, Exhibit S1. Skotnicki appealed the non-renewal, requesting that the Commissioner review the matter pursuant to the Regulations.
On May 28, 2014, Consumer Services issued an “Investigation Report Order.”4
It is our finding that the company, by its actions, is in violation of Act 205. The consumer provides a narrative explaining how this dog bite occurred. Phoenix did not comment on the circumstances surrounding this dog bite in the response dated May 12, 2014. Our Department requested the company‘s narrative and details of the claim on May 21, 2014 and to date we have no record of a response.
Based on the insured‘s narrative this appears to have been a provoked dog bite incident[.] As the company has not justifiably proven any increase in hazard, the company is directed to continue the policy with no lapse in coverage. N.T., 9/30/2014, Exhibit S2, at 1.
The report also informed Phoenix that, if it wished to dispute the determination, then Phoenix could request a formal administrative hearing within 10 days of the issuance of the report. Id. at 2; see
Phoenix requested a formal hearing with the Commissioner, and Melinda Fisher Kaufman was appointed to act as the presiding officer. However, a hearing did not occur. Instead, on June 19, 2014, Presiding Officer Kaufman entered an “order” stating that Phoenix requested to withdraw the appeal.5 Presiding Officer Kaufman‘s “order” granted that request and further noted that the matter would be marked closed and discontinued.6 No formal order thereafter was entered by the Commissioner.
On June 18, 2014, Phoenix provided Skotnicki with a second notice, informing him that his homeowners’ policy would be cancelled effective July 25, 2014 (as opposed to non-renewal of the policy, which was the gist of the initial proceedings between the parties).7 This notice explained the reason for cancellation as follows: “There is a substantial change or increase in hazard in the risk assumed by the company subsequent to the date the policy was first issued, as described below: There is an animal or pet on the residence premises
On July 14, 2014, Consumer Services issued an investigative report,8 addressing Skotnicki‘s second appeal which challenged Phoenix‘s cancellation of his policy. In this report, Consumer Services stated that, following its investigation, it determined that Phoenix met the requirements of Act 205 and that Phoenix, therefore, could cancel the policy. Investigative Report, 7/14/2014, at 1. The report informed Skotnicki that he could request a formal administrative hearing. Id. Further, like the report issued in response to Skotnicki‘s appeal involving the non-renewal of his policy, this report contained a footer stating, “[B]e advised that this communication does not constitute an adjudication under the Administrative Agency Law.” Id. at 2.
Skotnicki requested a formal administrative hearing, and the Commissioner again appointed Melinda Fisher Kaufman as the presiding officer. The hearing took place on September 30, 2014. At the hearing and in his subsequently submitted brief, Skotnicki presented several arguments in support of his position that Phoenix wrongfully cancelled his homeowners’ policy. Relevant to the appeal currently before this Court, Skotnicki contended that the doctrine of collateral estoppel barred Phoenix from relitigating whether: (1) Phoenix violated Act 205; (2) the dog bite was provoked; and (3) an increase in hazard occurred. Skotnicki‘s Memorandum in Support of his Appeal for the Wrongful Termination of his Homeowners’ Insurance Policy (“Skotnicki Memorandum“), 12/1/2014, at 9.
Skotnicki pointed out that the elements of collateral estoppel are:
(1) the issue decided in the prior adjudication was identical with the one presented in the later action; (2) there was a final judgment on the merits; (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication; and (4) the party against whom it is asserted has had a full and fair opportunity to litigate the issue in question in a prior action.
Skotnicki Memorandum at 9 (quoting Safeguard Mut. Ins. Co. v. Williams, 463 Pa. 567, 345 A.2d 664, 668 (1975)). In arguing that all of the elements of collateral estoppel were met in this case, Skotnicki insisted that Phoenix had a full and fair opportunity to litigate all of the issues that it raised in this matter during the litigation of Skotnicki‘s first appeal from Phoenix‘s notice of non-renewal. Id. According to Skotnicki, Consumer Service‘s May 18, 2014 “Investigative Report Order” became a final adjudication and judgment on the merits when Presiding Officer Kaufman entered her order on June 19, 2014, which granted Phoenix‘s motion to withdraw the appeal of the non-renewal of his policy. Id. at 9-10.
Regarding the merits of Phoenix‘s decision to cancel Skotnicki‘s policy, the parties presented competing evidence at the hearing as to whether the dog bite was provoked. In support of his position that the dog bite was provoked, Skotnicki presented testimony from his wife, as well as his own testimony. In support of its position that the dog bite was unprovoked, Phoenix presented testimony from the claims adjuster who handled Skotnicki‘s dog-bite claim and from one of its senior product specialists.
The filings and submittals in a matter or proceeding, a notice or agency order initiating the matter or proceeding, and if a hearing is held, the following: the designation of the presiding officer, transcript of hearing, exhibits received in evidence, exhibits offered but not received in evidence, offers of proof, motions, stipulations, subpoenas, proofs of service, references to the agency head and determinations made by the agency head thereon, certifications to the agency head and anything else upon which action of the presiding officer or the agency head may be based; but not including a proposed testimony or exhibits not offered or received in evidence. Adjudication and Order, 1/15/2015, at 10-11 (quoting
1 Pa. Code § 31.3 ).
The Commissioner then emphasized that “the administrative hearing held in response to an appeal from an Investigative Report is a de novo proceeding.” Id. at 11.
In explaining its reasons for rejecting Skotnicki‘s collateral estoppel claim, the Commissioner concluded that Consumer Services’ May 28, 2014 “Investigative Report Order” did not create a formal record, did not constitute a separate cause of action in which any issues were litigated, and did not result in a final judgment on the merits. Id. The Commissioner further suggested that, even though the April 22, 2014 notice of non-renewal and the June 18, 2014 notice of cancelation contain similar language, “the review of the first does not impact review of the latter.” Id. Thus, in the Commissioner‘s view, Skotnicki failed to establish that collateral estoppel applied to his second appeal. Id. Regarding the merits of the appeal, it is sufficient to note that the Commissioner determined that the dog bite was unprovoked and, therefore, that Phoenix‘s cancellation of Skotnicki‘s homeowners’ policy did not violate Act 205.
Skotnicki filed a petition for review in the Commonwealth Court. In that petition, Skotnicki, inter alia, renewed his claim regarding the doctrine of collateral estoppel. Skotnicki maintained that the Commissioner‘s holding that no formal record was created in the first appeal from the notice of non-renewal is belied by the facts and law. Petition for Review, 2/11/2015, at 6. Skotnicki also took the position that, by withdrawing the appeal before a formal hearing occurred, Phoenix agreed to be bound by the terms and conditions of the May 28, 2014 “Investigative Report Order,” which concluded that the dog bite incident was provoked and that Skotnicki‘s homeowners’ policy should continue to provide coverage without a lapse (i.e., Phoenix‘s non-renewal of the policy was disallowed). Id.
Skotnicki later filed a brief in support of his petition for review further developing his argument that the Commissioner erred by rejecting his claim regarding the doctrine of collateral estoppel. Skotnicki point-9
In its responsive brief, the Department insisted that the essential elements of collateral estoppel were not met. First, the Department asserted that the initial proceeding involved the non-renewal of a policy and that the second proceeding concerned a different matter—cancellation of a policy. Department‘s Commonwealth Court Brief at 24-26. Second, the Department suggested that neither the May 28, 2014 “Investigative Report Order” nor Presiding Officer Kaufman‘s June 19, 2014 order constituted a final judgment on the merits. Id. at 26.
The Commonwealth Court affirmed the Commissioner‘s Adjudication and Order, rejecting Skotnicki‘s collateral estoppel claim and concluding that the Commissioner‘s decision on the merits was correct. Skotnicki v. Ins. Dep‘t, 146 A.3d 271 (Pa. Cmwlth. 2016). Regarding the issue of collateral estoppel, the court began its analysis by explaining that, pursuant to
Next, the Commonwealth Court concluded that the doctrine of collateral estoppel does not apply in this case. After reiterating the elements of that doctrine, the court stated that it is undisputed that both reviews conducted by Consumer Services involved Phoenix and Skotnicki and that both parties had a full and fair opportunity to litigate Phoenix‘s termination of homeowners’ coverage following the July 3, 2013 dog bite incident. However, according to the court, “the decisions differed in that one action progressed only through a first-level [Consumer Services‘] review, while the other was subjected to a de novo hearing at which additional evidence was accepted.” Id. (footnote omitted).
The Commonwealth Court further highlighted that, in the May 28, 2014 “Investigative Report Order,” Consumer Services made clear that limited information informed its decision that the dog bite was provoked. Id. at 283-84. Thus, the court concluded, collateral estoppel did not bar the Commissioner from reaching a different result after a formal hearing, which included additional evidence and credibility determinations. Id. at 284.
In closing, the Commonwealth Court opined that, contrary to Skotnicki‘s contention that the May 28, 2014 “Investigative Report Order” was an adjudication, Consumer Services clearly stated therein:
“[B]e advised that this communication does not constitute an adjudication under the Administrative Agency Law.” Id.
The court asserted, “Certainly, if the Commissioner was bound by [Consumer Services‘] investigative reports, the second-level de novo review afforded by Section 59.7(e)(4) of the Department‘s Regulations would have little value. Accordingly, Skotnicki‘s argument cannot stand.” Id.
Skotnicki subsequently filed a petition for allowance of appeal, which this Court granted, limited to the following issue: “Whether the Commonwealth Court erred in its conclusion that the Department is not bound by the May 28, 2014 Department Investigative Report Order directing [Phoenix] to continue [Skotnicki‘s] coverage without a lapse in coverage?” Skotnicki v. Ins. Dep‘t, ___ Pa. ___, 169 A.3d 24 (2017).
In his brief to this Court, Skotnicki contends that, in concluding that the Commissioner was not bound by Consumer Services’ initial “Investigative Report Order,” the Commonwealth Court overlooked that this report was part of the “formal record” in the appeal from the notice of non-renewal. Skotnicki‘s Brief at 9-10. Citing to
Next, Skotnicki contends that the Commonwealth Court erred by holding that the doctrine of collateral estoppel does not apply in this case because the court‘s conclusion was based on the mistaken belief that Phoenix did not appeal the initial “Investigative Report Order,” dated May 28, 2014, to the Commissioner. Id. at 11. According to Skotnicki, Phoenix‘s appeal, in seeking a formal hearing, of the “Investigative Report Order” made the report a final adjudication when Phoenix withdrew the appeal. Id. at 11-12. Skotnicki suggests that Phoenix “had a right to a formal administrative hearing and it took advantage of that right when it appealed the [‘Investigative Report Order‘].” Id. at 12. Skotnicki asserts that, because Phoenix decided to forgo that hearing, the matter should have been decided on the basis of the parties’ written comments and the investigative report. Id. at 12 (quoting
Lastly, Skotnicki renews his argument that all of the traditional elements of the doctrine of collateral estoppel were met in this case. Specifically, Skotnicki maintains that: (1) the same issue of fact, i.e., whether the dog bite was provoked, was litigated in both appeals; (2) the parties were identical in both appeals; (3) the initial appeal ended with a final judgment on the merits of the issue of fact; and (4) Phoenix had a full and fair opportunity to litigate the merits of that issue. Id. at 12-13. For these reasons, Skotnicki asks this Court to reverse the Commonwealth Court‘s order.
The Department next avers that the Commonwealth Court correctly concluded that collateral estoppel does not apply to Consumer Services’ investigative reports. Id. at 20-29. As to this case, the Department suggests that the issue decided in Skotnicki‘s first appeal was not identical to the issue decided in Skotnicki‘s second appeal because the appeals addressed different notices issued by Phoenix and these notices contained different language. Id. at 22-23. Further, the Department takes the position that neither the May 28, 2014 “Investigative Report Order” nor the June 19, 2014 order granting Phoenix‘s request to withdraw the initial appeal amount to a final judgment on the merits of whether the dog bite was provoked. In this regard, the Department is of the opinion that, because the Commissioner had not received any response from Phoenix at that point in the appeal process, the provocation issue had not actually been litigated. Id. at 23-29. In the Department‘s view, Phoenix “did not have a full and fair opportunity to litigate an issue before [Consumer Services], and therefore, the May 28, 2014 Investigative Report Order . . . is not binding on the Commissioner in any future de novo hearings.” Department‘s Brief at 29. Accordingly, the Department requests that this Court affirm the order of the Commonwealth Court.
It is well-settled that the doctrine of collateral estoppel precludes relitigation of an issue settled in a previous action if:
(1) the issue decided in the prior case is identical to the one presented in the later action; (2) there was a final adjudication on the merits; (3) the party against whom the plea is asserted was a party or in privity with a party in the prior case; (4) the party or person privy to the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding; and (5) the determination in the prior proceeding was essential to the judgment.
Office of Disciplinary Counsel v. Kiesewetter, 585 Pa. 477, 889 A.2d 47, 50-51 (2005). “Collateral estoppel relieves parties of the cost and vexation of multiple lawsuits, conserves judicial resources, and, by preventing inconsistent decisions, encourages reliance on adjudication.” Id. at 51.
To determine whether Consumer Services’ investigative report triggered application of collateral estoppel, we begin and end our analysis by examining whether the report constitutes a final adjudication of the merits of an insured‘s appeal, when the Commissioner did not enter an order disposing of the appeal. Such an issue presents a question of law. Like all questions of law, our standard of review is de novo, and our scope of review is plenary. In re Vencil, 638 Pa. 139, 152 A.3d 235, 241 (2017). To the extent that the answer to this question can be found in the Regulations which implement Act 205, we observe that, generally speaking, the best indicator of the intent of regulations is the
Section 59.6 of the Regulations outlines the items that insurers must include in their notices of cancelation and non-renewal of homeowners’ insurance policies.
Importantly, Subsection 59.7(c) of the Regulations explains, “Upon completion of the investigation, a copy of the investigative report will be supplied to both the insured and the insurer. Within ten days of receipt of the report either party may submit written comments for consideration by the Insurance Commissioner.” Id. at
The next provision of the Regulations explains the procedures to be followed at a formal administrative hearing. Id. at
This regulatory scheme grants to an insured a mechanism to appeal to the Commissioner when an insurer issues notice that it intends to not renew or cancel the insured‘s policy. When an insured takes advantage of this appeal procedure, the Commissioner should initiate an investigation and, after completing that investigation, provide the parties with “the investigative report.” At that point, the parties are faced with a choice before the Commissioner issues an order deciding the fate of the appeal: (1) submit written comments for the Commissioner‘s consideration; or (2) request a formal administrative hearing.
If no formal hearing is requested, then the Commissioner will enter an order which decides the matter based upon the parties’ written comments and the investigative report. If a hearing occurs, then the Commissioner will enter an order which decides that matter based upon the evidence submitted at the hearing. Thus, regardless of whether a hearing is held, it is not until the Commissioner enters an order that any issue implicated in the appeal is finally adjudicated on its merits.
Despite Consumer Services’ apparent practice of labeling some of its investigative reports as orders, the Regulations indicate that “the investigative report” provided by the Commissioner, through Consumer Services, appears to be simply what it purports to be—a report explaining the outcome of an investigation. These investigative reports perhaps argu-
As noted above, the doctrine of collateral estoppel precludes relitigation of an issue if, inter alia, “there was a final adjudication on the merits[.]” Kiesewetter, 889 A.2d at 50-51. Here, the issues in Skotnicki‘s initial appeal from the notice of non-renewal of his policy were tentatively decided in his favor in the “Investigative Report Order” issued by Consumer Services on May 28, 2014. However, the merits of those issues were not adjudicated to finality because the Commissioner never entered an order as contemplated by the Regulations.11 Rather, Presiding Officer Kaufman permitted Phoenix to withdraw the appeal and entered an “order” discontinuing and closing the matter.
Neither the “Investigative Report Order” nor Presiding Officer Kaufman‘s “order” constituted a final adjudication of the merits of the issues presented in Skotnicki‘s initial appeal; accordingly, they did not operate to estop collaterally Phoenix from litigating any issue in the appeal from the notice of cancellation. Thus, the Commonwealth Court reached the correct result in this matter. Consequently, we affirm that court‘s order, which allowed to stand the Commissioner‘s determination that Phoenix did not violate Act 205 by cancelling Skotnicki‘s homeowners’ insurance policy.
Chief Justice Saylor and Justices Todd, Donohue, Dougherty, Wecht and Mundy join the opinion.
Appeal of: Joy Plance
No. 25 WAP 2016
Supreme Court of Pennsylvania.
Argued: April 4, 2017
Decided: December 19, 2017