Commonwealth v. Urban Mut. Fire Ins. Co. of Pennsylvania
| Decision Date | 10 April 1950 |
| Docket Number | Commonwealth docket,257,1947 |
| Citation | 72 Pa. D. & C. 123 |
| Parties | Commonwealth ex rel. v. The Urban Mutual Fire Insurance Co. of Pennsylvania |
| Court | Pennsylvania Commonwealth Court |
T McKeen Chidsey, Attorney General, and Ralph B Umsted, Deputy Attorney General, for Commonwealth.
John A. Skelton, general counsel, for Pennsylvania Department of Insurance, for defendant.
Storey & Bailey, for exceptant.
Exceptions to petition for assessment order.
The Insurance Commissioner of the Commonwealth of Pennsylvania, as statutory liquidator of the Urban Mutual Fire Insurance Company, has presented his petition praying the court to make an order of assessment against the members, the policyholders of that company. The matter is now before us on the exception of Roy E. Shellenberger, a policyholder, to the liquidator's petition.
The company, a domestic mutual fire insurance company, engaged in the business of writing fire and automobile insurance, was dissolved by order of this court dated November 24, 1947, which order directed the Insurance Commissioner to take possession of the assets of the company and to liquidate its business and affairs.
On September 23, 1949, the statutory liquidator filed his petition for an assessment order, wherein he prayed that the court direct that an assessment be made against the members of the company in an amount equal to the earned premiums on their policies chargeable to that part of the period from November 24, 1946, to November 23, 1947, inclusive, when such policies were in force, and against members with assessable premium note policies the amount shown in said notes; with certain credits for payment of previous assessments. Policies to be assessed under the plan of assessment were of three classes, to wit: (a) Assessable premium note fire policies; (b) cash mutual fire policies; (c) cash mutual automobile policies. The statutory liquidator recommends under the plan of assessment that claims for the unearned cash premiums from the date of the dissolution of the company to the termination of the members' policies should not be allowed.
The petition avers an estimated deficit of $ 75,410.61, necessitating an assessment in order to pay claims and liquidation expenses. The assets are estimated at $ 23,086.23. The liabilities on the basis of the company's records are estimated at $ 98,496.84, of which $ 84,816.31 have been filed with the statutory liquidator, $ 4,863.75 having been filed for unearned premium claims. The maximum assessment liability of the various policyholders totals $ 163,301.98. The total proposed assessment on the basis of the earned cash premiums for one year prior to date of dissolution is in an amount considerably less than the maximum assessment liability.
At the hearing on the petition exceptant appeared in person and by counsel and registered his objection to the plan of assessment. He protested the disallowance of the above-mentioned claims for unearned cash premiums. Exceptant holds fire insurance policy no. 110048, effective April 19, 1946, which was written for a three-year term, in the amount of $ 7,000, covering his buildings and contents, for which he paid a cash premium of $ 136.80. Exceptant maintains that he has a claim for the unearned premium on his policy from November 24, 1947, the date of dissolution, to April 19, 1949, the date of the termination of his policy.
It was admitted at the argument that the earned premium on exceptant's policy from inception date to November 23, 1947, is $ 73.91, and that the claimed unearned premium from November 24, 1947, the dissolution date, to April 19, 1949, amounts to $ 64.69. The pro rata earned premium for the year prior to dissolution, to wit, from November 24, 1946, to November 23, 1947, has been computed as $ 46.07, which is the amount of the proposed assessment against this policyholder.
The question raised by the exception is whether the members of a domestic mutual fire insurance company in dissolution, which had issued policies with assessment liability, have claims against the company's statutory liquidator for the payment of the unearned portion of their cash premiums covering the period from the date of the company's dissolution to what would have been the normal termination date of their policies. If the members have claims for such unearned premiums, then the exception to the petition must be sustained. Otherwise, it must be overruled and exceptant's claim disallowed.
Under The Insurance Company Law of May 17, 1921, P. L. 682, as amended, 40 PS § 341, et seq., and under the express terms of exceptant's policy, a member of the Urban Mutual Fire Insurance Company of Pennsylvania was subject to a contingent liability equal to the amount of the premium written into the policy. Thus, section 806 of The Insurance Company Law, 40' PS § 916, provides:
And the policy provision is as follows:
" Limit of Liability: The contingent liability of the insured shall not exceed an additional amount equal to the premium written in this policy. . . ."
The statutory liquidator in the instant case would have the right to make an assessment equal to the cash policy premium against each policyholder: Commonwealth ex rel. v. Keystone Indemnity Exchange, 34 D. & C. 505 (1938); Commonwealth ex rel. Schnader v. Keystone Indemnity Exchange, 335 Pa. 333 (1939); Commonwealth ex rel. Schnader v. Keystone Indemnity Exchange, 338 Pa. 405 (1940). Since the members who had paid cash premiums could have been assessed the full amount of their premiums, they would have no cause to complain that the proposed assessment, in the interest of expediting liquidation as claimed by the statutory liquidator, is in a sum less than the amount of the premium in their policies.
The liquidator states that the amount of this assessment is predicated on the assumption that claims for unearned premiums subsequent to dissolution are invalid. It is pointed out by the liquidator that in the event the court does not adopt his recommendation as to the disallowance of these claims for unearned premiums, then the proposed assessment based upon the earned premiums will be insufficient. The amount of the assessment then, in the last analysis, depends upon the validity of the contention which exceptant advances in this case with respect to his claim for unearned premium. Hence, the order for assessment which the liquidator seeks by his petition depends upon the disposition of exceptant's claim.
The policyholder's right to return of unearned premium depends upon the contract of insurance: 3 Couch, Insurance, sec. 705. See also Healy v. Stuyvesant Insurance Co., 72 Pa: Superior Ct. 168 (1919); 29 Am. Jur., § 452. The rule is stated in 3 Couch, Insurance, sec. 709, as follows:
In determining the circumstances under which unearned premiums can be collected, we must then resort to the express provisions of the contract or to the applicable statute, which of course is read into and made a part of the insurance contract: Neel, Insurance Commissioner, v. Williams et ux., 158 Pa.Super 478, 483 (1946); 44 C. J. S. 1214; § 302; 1 Couch, Insurance, sec. 150.
The Insurance Company Law, sec. 804, 40 PS § 914, reads, inter alia:
" Mutual insurance companies, other than mutual life companies, may insert, in any form of policy prescribed by the law of this Commonwealth, any provisions or conditions required by its plan of insurance which are not inconsistent or in conflict with any law of this Commonwealth."
Section 807 of that law, 40 PS § 917, provides that domestic mutual fire insurance companies are not required to maintain any unearned premium reserve, as contrasted to other mutual insurance companies and domestic stock companies. In other words, there is no statutory liability imposed upon domestic mutual fire insurance companies by virtue of setting up a reserve for unearned premiums, whereas the contrary is true in the case of other mutual insurance companies and domestic stock companies.
Since a domestic mutual fire insurance...
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