Ohio Cas. Ins. Co. v. Insurance Dept. of Com. of Pa.

• Decision Date: 18 January 1991
• Court: Pennsylvania Commonwealth Court
• Parties: The OHIO CASUALTY INSURANCE COMPANY, West American Insurance Company, and American Fire and Casualty Company, Petitioners, v. INSURANCE DEPARTMENT OF the COMMONWEALTH of PENNSYLVANIA and Constance B. Foster, Insurance Commissioner, Respondents.

Page 1160

585 A.2d 1160

137 Pa.Cmwlth. 299

The OHIO CASUALTY INSURANCE COMPANY, West American Insurance Company, and American Fire and Casualty Company, Petitioners, v. INSURANCE DEPARTMENT OF the COMMONWEALTH of PENNSYLVANIA and Constance B. Foster, Insurance Commissioner, Respondents.

Commonwealth Court of Pennsylvania.

Argued Oct. 31, 1990.

Decided Jan. 18, 1991.

Richard E. Freeburn, Wilt, Magdule & Freeburn, Harrisburg, for petitioners.

Richard J. Enterline, Assistant Counsel, with him, Linda J. Wells, Chief Counsel, and Victoria A. Reider, Deputy Chief Counsel, Harrisburg, for respondents.

Before CRAIG, President Judge, and DOYLE, PALLADINO, McGINLEY, PELLEGRINI, KELLEY and BYER, JJ.

DOYLE, Judge.

This is an appeal by Ohio Casualty Insurance Company, West American Insurance Company, and American Fire and Casualty Company (Petitioners) ¹ from an order of the Insurance Commissioner (Commissioner) dismissing without a hearing Petitioners' request for review of an extraordinary circumstances filing because Petitioners did not first file compliance rate filings under Section 1799.7 of the Motor Vehicle Financial Responsibility Law (Law), 75 Pa. C.S. § 1799.7. Section 1799.7 was added to the Law by Section 19 of the Act of February 7, 1990, P.L. 8 (Act 6).

Because the Insurance Department contends that the issue before us is now moot, we must set forth in detail the procedural history of this case. On February 7, 1990, Act 6 was signed into law. Among other things it mandated that effective July 1, 1990 insurers must reduce their then-current insurance rates for private passenger motor vehicles by twenty-two percent for policyholders selecting a limited tort option and ten percent for policyholders selecting a full tort option. Specifically, Section 1799.7, which forms the basis for this litigation, pertinently provides:

(a) Rate filing.--All insurers and the Assigned Risk Plan must file for new private passenger motor vehicle rates on or before May 1, 1990. These rates shall apply to all policies issued or renewed on and after July 1, 1990.

(b) Rate reductions.--The rates charged by insurers under the filing required by subsection (a) shall be reduced from current rates as follows:

(1) For an insured electing the limited tort option under section 1705 (relating to election of tort options), the total premium charged for any selection of coverages and coverage limits shall be reduced by at least 22% from the total premium for the same selection of coverages and coverage limits in effect on December 1, 1989.

(2) For an insured bound by the full tort option under section 1705, the total premium charged for any selection of coverages and coverage limits shall be reduced by at least 10% from the total premium for the same selection of coverages and coverage limits in effect on December 1, 1989.

(3) An insurer aggrieved by the rate reductions mandated by this subsection may seek relief from the commissioner, which relief may be granted when the commissioner deems necessary in extraordinary circumstances.

On May 1, 1990 Petitioners submitted to the Commissioner a filing under subsection (b)(3) of Section 1799.7 (extraordinary circumstances filing). Thereafter, the Deputy Insurance Commissioner, in a letter dated May 4, 1990, advised Petitioners that their extraordinary circumstances filing was "invalid" because they had not also filed rate filings under subsections (b)(1) and (b)(2). The Insurance Department contended that the (b)(1) and (b)(2) filings were a mandatory prerequisite to the relief available under a (b)(3) filing. Petitioners were informed that their failure to make the (b)(1) and (b)(2) filings also constituted a waiver of their right to seek (b)(3) relief. They were additionally informed, however, that when they did make their (b)(1) and (b)(2) filings they could then file a new extraordinary circumstances filing which would be considered. Finally, Petitioners were informed that "your failure to comply with the filing requirements of the law does not relieve you of the obligation to issue and renew policies of insurance to be effective on or after July 1, 1990 at the rates mandated by Act 6." (Emphasis in original.) Petitioners appealed to this Court from the May 4 letter and that appeal was quashed.

Thereafter, instead of making the (b)(1) and (b)(2) filings, Petitioners supplied to the Insurance Department forms pertinent to their (b)(3) filing. These forms were "disapproved" on May 17, 1990 because the extraordinary circumstances filing had never been approved. ² On May 29, 1990, Petitioners requested a hearing before the Commissioner. A hearing was scheduled for June 25, 1990, then cancelled to allow the parties first to address the legal question, in briefs due June 22, 1990, of whether the (b)(1) and (b)(2) filings are a precondition to an Insurance Department review of an extraordinary circumstances filing. The legal memoranda were sought in light of conflicting opinions filed by single judges of this Court in cases arising under our original jurisdiction. Thereafter, on June 28, 1990 the Commissioner issued an opinion and order which are the subject of this appeal. In her opinion she astutely recognized that when faced with admittedly conflicting opinions of this Court she could not "pick and choose among opinions." She thus determined to stand by a statement of policy ³ published April 21, 1990 which states that (b)(1) and (b)(2) filings are mandatory prerequisites to a (b)(3) review. She thus dismissed Petitioners' request for review of its extraordinary circumstances filing. That same day she also denied Petitioners' petition for a stay of proceedings.

Also that same day, June 28, 1990, Petitioners filed with this Court their petition for review of the Commissioner's order and an "Application for Stay or Injunction Pending Review" which application was denied the following day by Senior Judge Lehman. His order specifically provided in pertinent part:

Petitioners shall submit a rate filing that complies with Sections 1799.7(b)(1) and (b)(2) of the Act of February 7, 1990, P.L. 11, 75 Pa.C.S. §§ 1799.7(b)(1) and (b)(2) (Act 6), with the respondent Commissioner within 20 days of this Court's Order. However, respondent Commissioner shall not act upon, rule, or otherwise attempt to institute a rate pursuant to Sections 1799.7(b)(1) and (b)(2) of the Act until respondent Commissioner has afforded petitioners a full hearing relating to its request for extraordinary circumstances relief pursuant to Section 1799.7(b)(3) of Act 6, 75 Pa.C.S. § 1799.7(b)(3).

Following the completion of the (b)(3) extraordinary circumstances hearing, the respondent Commissioner shall render its decision in accordance with Section 2005 of the Motor Vehicle Insurance Rate Review Procedures Act, 75 Pa.C.S. § 2005.

Pending disposition of the petitioners' (b)(3) extraordinary circumstances petition as outlined above, the petitioners' rates in effect and frozen as of December 1, 1989 pursuant to Section 1799.7(d) of Act 6, 75 Pa.C.S. 1799.7(d), shall remain in effect.

Thereafter, Petitioners filed with this Court a motion to modify our June 29, 1990 order. In that motion they sought approval to charge the rates requested in their May 1 extraordinary circumstances filing which provided for no reduction for full tort electors and a twelve percent reduction for limited tort electors. In response to that motion, Senior Judge Narick, on September 18, 1990, amended our June 29 order. His order reads, in pertinent part, as follows:

[T]he Insurance Commissioner will afford the Petitioners a full extraordinary circumstances hearing under Section 1799.7(b)(3) of the Act of February 7, 1990, P.L. 11, 75 Pa.C.S. § 1799.7(b)(3) (Act) and included therein is the issue of whether or not the Petitioners are entitled to deemed approval rates pursuant to the Act.

In all other respects the June 29, 1990 order is incorporated herein and made a part hereof. Further, the Insurance Commissioner shall conduct an extraordinary circumstances hearing in this matter in not more than twenty days from the date of this order and that the parties are to submit briefs to the Commissioner in not more than five days after the receipt of the transcript. Further, that the Commissioner is to render its decision in not more than fifteen days after the receipt of the briefs of the parties.

Further, the Petitioners shall be required to place in escrow funds sufficient to represent the difference between the rates of December 1, 1989 and the 10% reduction provided under Section 1799.7(b)(2).

We were advised at oral argument that a hearing pursuant to our September 18 order had already been held by the Department and post-hearing briefing was in process. The Commissioner contends that because Petitioners have had their extraordinary circumstances hearing their appeal here is now moot. At argument Petitioners maintained that the appeal is not moot because if we decide that the May 1 filing was a proper one since the Commissioner did not either request additional information regarding that filing or approve or disapprove it or schedule an administrative hearing within sixty days as required by Section 2003 of the Motor Vehicle Insurance Rate Review Procedures Act, (Rate Review Act) 75 Pa.C.S. § 2003, ⁴ the May 1 rate filings are deemed into effect. We agree that this "deemer issue" prevents the case from being moot and, accordingly, will proceed to examine the merits of Petitioners' appeal.

Petitioners first argue that under Section 1799.7 the (b)(1) and (b)(2) filings are not a prerequisite to obtaining (b)(3) relief. We disagree. It is not even necessary to resort to principles of statutory construction because the literal language of the statute says in (b)(3) that "[a]n insurer aggrieved by the rate reductions mandated by this subsection may seek relief.... in extraordinary circumstances" (emphasis added). Thus, before relief may be...