INSURANCE FEDERATION OF PA, INC. v. Koken

• Decision Date: 17 June 2002
• Citation: 801 A.2d 622
• Parties: INSURANCE FEDERATION OF PENNSYLVANIA, INC., Petitioner v. Diane KOKEN, Insurance Commissioner, Respondent.
• Court: Pennsylvania Commonwealth Court

801 A.2d 622

INSURANCE FEDERATION OF PENNSYLVANIA, INC., Petitioner v. Diane KOKEN, Insurance Commissioner, Respondent.

Commonwealth Court of Pennsylvania.

Argued April 10, 2002.

Decided June 17, 2002.

As Amended June 17, 2002.

John F. Mizner, Erie, for petitioner.

W. Christopher C. Doane and Terrence A. Keating, Harrisburg, for respondent.

Dale G. Larrimore, Philadelphia, for amicus curiae, PA Trial Lawyers Ass'n.

Before: COLINS, President Judge, and McGINLEY, Judge, PELLEGRINI, Judge, FRIEDMAN, Judge, LEADBETTER, Judge, COHN, Judge, and SIMPSON, Judge. Opinion by President Judge COLINS.

The Insurance Federation of Pennsylvania, Inc. (Federation) petitions for review of the order of Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania (Commissioner), denying its petition for declaratory order.

In August 1996, Liberty Mutual Insurance Company, a member of the Federation, filed with the Insurance Department a revision to its private passenger uninsured/underinsured motorist (UM/UIM) coverage that would eliminate the arbitration provisions and have all claims disputes in this area settled by the courts. The Department invited comment, and in October 1996, it disapproved the revision. By letter of disapproval, it determined that the removal of the arbitration provisions failed to meet the requirements of 31 Pa. Code § 63.2, at least as to uninsured motorist coverage, but it disapproved the entire revision. Liberty Mutual did not challenge the determination.

The Federation and its members take the position that the Department has no statutory authority to require the arbitration provisions and that the arbitration provisions are not required by statute. The Federation requested a formal administrative hearing and declaratory order challenging the Department's authority to require mandatory arbitration of UM and UIM coverage disputes. By way of response, the Department asserted that it is authorized to require mandatory arbitration. The parties filed a joint statement of undisputed facts. Common pleas court judges and the Pennsylvania Trial Lawyers Association submitted comments opposing the removal of arbitration provisions.

In July 2001, the Commissioner denied the Federation's petition, concluding that the Insurance Department has the authority to disapprove automobile insurance policies that do not provide for binding arbitration of UM and UIM coverage disputes. As the basis for its authority, the Commissioner cites the law popularly known as the Uninsured Motorist Coverage Act;¹ Sections 1704(b)² and 1731³ of the Motor Vehicle Financial Responsibility Law (MVFRL), 75 Pa.C.S. §§ 1704(b) and 1731; Section 354 of The Insurance Department Act of 1921;⁴ 31 Pa.Code § 63.2; Prudential Property and Casualty Insurance Company v. Muir, 99 Pa.Cmwlth. 620, 513 A.2d 1129 (1986),petition for allowance of appeal denied, 514 Pa. 637, 522 A.2d 1106 (1987); and public policy.

This Court's decision in Muir addressed the same issues raised in the merits of the Federation's claim, and that case controls the outcome in the present matter. In Muir, the Department disapproved policy filings that deleted or modified the UM arbitration clause. On appeal, the insurer challenged the Department's authority to require the arbitration clause and the arbitration clause's constitutionality vis-à-vis the insured's right to a jury trial.

Based primarily on the statutory grant of authority in the Uninsured Motorist Coverage Act, this Court en banc concluded that the Department has the authority to approve UM coverage provisions in insurance contracts and to promulgate regulations with respect to such coverage. Deferring to the Department's expertise in promoting the purposes of the Uninsured Motorist Coverage Act, we held that the Department had the implied authority to require arbitration of UM coverage disputes.

Although the Uninsured Motorist Coverage Act and Muir do not address UIM coverage, the Department's statutory and regulatory authority to mandate arbitration of UIM coverage disputes are found in the MVFRL, 75 Pa.C.S. § 1731, which mandates UIM coverage as well as UM coverage, and 75 Pa.C.S. § 1704(b), which expressly establishes the Department's administrative, regulatory, and enforcement authority over UIM coverage provisions in insurance contracts. We agree with the Commissioner's interpretation of the MVFRL as contemplating uniform treatment of UM and UIM coverage provisions.

In Department of Transportation v. Beam, 567 Pa. 492, 788 A.2d 357 (2002), the Pennsylvania Supreme Court most recently explained the limits of an administrative agency's implied authority as only that necessary to effectuate its express mandates. In our view, our decision in Muir recognized those limitations and continues to be a viable precedent. Since that time, in the MVFRL, the General Assembly has reinforced its express mandate that the Department administer, regulate, and enforce the statutory UM and UIM coverage requirements, and we remain convinced that the Department has the implied authority to require arbitration of UM and UIM coverage disputes. By requiring arbitration of UM and UIM coverage disputes, the Insurance Department is furthering the legislative purposes of the Uninsured Motorist Coverage Act and MVFRL to provide the maximum restoration and compensation of victims of automobile accidents and protecting accident victims from financially irresponsible drivers. As we noted in Muir, "arbitration provides the most expeditious manner, as well as the least expensive, of accomplishing this salient goal." 513 A.2d at 1130.

We do not address the Federation's remaining arguments as they were not expressly raised in petition for review or fairly comprised within the general statement of the Federation's objections to the Commissioner's determination. Pa. R.A.P. 1513.

Accordingly, the order of the Commissioner is affirmed.

ORDER

AND NOW, this 17th day of June 2002, the order of the Insurance Commissioner in the above-captioned matter is affirmed.

PELLEGRINI, J., concurs and files opinion.

SIMPSON, J., dissents and files opinion.

Concurring opinion by Judge PELLEGRINI.

I concur with the majority's decision to affirm the decision of the Insurance Commissioner (Commissioner) denying the Insurance Federation of Pennsylvania, Inc.'s (Federation) Petition for Declaratory Order but do not do so because I believe that our outcome in Prudential Property and Casualty Insurance Company v. Muir, 99 Pa.Cmwlth. 620, 513 A.2d 1129 (1986), petition for allowance of appeal denied, 514 Pa. 637, 522 A.2d 1106 (1987) was correct. Rather, I do so because Muir should not be reversed under the doctrine of stare decisis.

On June 30, 1997, Federation filed a Petition for Declaratory Order challenging the authority of the Insurance Department of Pennsylvania (Department) to require mandatory arbitration of uninsured (UM) and underinsured (UIM) motorist insurance coverage disputes. Asserting that it was authorized to require mandatory arbitration regarding such claims, the Department filed its response on August 4, 1997. At the pre-hearing conference, the parties agreed that the matter would be decided on stipulated facts in lieu of a hearing, and the parties filed a joint statement of undisputed facts on January 9, 1998.⁵

On July 16, 2001, the Commissioner issued a Declaratory Opinion and Order denying Federation's petition and concluding that the Department could disapprove automobile insurance policies which did not provide for binding arbitration of UM and UIM insurance coverage disputes. The Commissioner concluded that the Department was authorized to do so based upon this court's en banc holding in Muir; the Department's regulation at 31 Pa.Code § 63.2; the Department's authority pursuant to the Uninsured Motorist Coverage Act, Act of August 14, 1963, P.L. 909, as amended, 40 P.S. § 2000;⁶ Sections 1704(b) and 1731 of the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S. §§ 1704(b)⁷ and 1731;⁸ Section 354 of The Insurance Company Law of 1921, Act of May 17, 1921, P.L. 682, as amended, 40 P.S. § 477b;⁹ and public policy.

In affirming the Commissioner's order, the majority relies on our en banc decision in Muir to hold that the Department was authorized to promulgate 31 Pa.Code § 63.2, effectively taking away the right to access to the judicial system, pursuant to the statutory authority contained in the Uninsured Motorist Coverage Act and Section 1704(b) of the Motor Vehicle Financial Responsibility Law to promulgate regulations. I, however, believe that Muir was wrongly decided.

I.

While I disagree with the outcome in Muir, I agree with that portion of the opinion that holds that the requirement of compulsory arbitration does not violate the constitutional right to a jury trial of both insurers and consumers even though an insurance policy is a contract between an insurer and the insured, and the common law form of a contract action was in assumpsit and, under the common law, actions in assumpsit were subject to trial by jury, entitling its members and consumers the right to a jury trial.

Article 1, Section 6 of the Pennsylvania Constitution states, in relevant part, "[t]rial by jury shall be as heretofore and the right thereof remain inviolate." The article and section preserving the right of a trial by jury has appeared in each version of Pennsylvania's Constitution. In construing that provision, our Supreme Court has made clear that the right to a jury trial does not exist in every case but only "in those cases where it existed for the particular cause of action at the time our Constitution was adopted." Wertz v. Chapman Township, 559 Pa. 630, 637, 741 A.2d 1272, 1275-76 (1999). In Wertz, our Supreme Court addressed whether an employee was entitled to a jury trial for sexual harassment and discrimination claims arising under the Pennsylvania Human Relations Act, Act of October 27, 1955, P.L. 744, as amended...