Stone and Edwards Ins. Agency, Inc. v. Department of Ins.
| Decision Date | 03 January 1994 |
| Citation | 636 A.2d 293,161 Pa.Cmwlth. 177 |
| Parties | STONE AND EDWARDS INSURANCE AGENCY, INC., Emerson D. Lightner and Gary W. Lightner, Petitioners, v. DEPARTMENT OF INSURANCE, Cynthia M. Maleski, Acting Insurance Commissioner, Thomas S. Buzby, Deputy Insurance Commissioner, Laura C. Plumley, Presiding Officer, Respondents. STONE & EDWARDS INSURANCE AGENCY, INC., Emerson D. Lightner and Gary W. Lightner, Petitioners, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF INSURANCE, Cynthia M. Maleski, Acting Insurance Commissioner, Thomas S. Buzby, Deputy Insurance Commissioner, Laura C. Plumley, Presiding Officer, and Steven J. Harman, Chief, Division of Agents & Brokers, Respondents. |
| Court | Pennsylvania Commonwealth Court |
James W. Evans, for petitioners.
Gregory E. Dunlap, Executive Deputy General Council and Scott M. Schwartz, Dept. Counsel, for respondents.
Before CRAIG, President Judge, and DOYLE, COLINS, PALLADINO, SMITH, PELLEGRINI and FRIEDMAN, JJ.
Before this court are cross-motions for summary judgment questioning whether the Unfair Insurance Practices Act (UIPA) 1 is unconstitutional because it permits commingling of prosecutorial and adjudicative functions in the office of Insurance Commissioner (Commissioner), and whether the Insurance Department's (Department) placing of administrative "holds" on an agent's applications is improper.
Stone & Edwards Insurance Agency, Inc. (Stone & Edwards) is a licensed corporation authorized to sell insurance 2 within the Commonwealth. Both Emerson Lightner and Gary Lightner (collectively, with Stone & Edwards, Petitioners) are licensed agents affiliated with Stone & Edwards. 3
In February, 1988, the Department began investigating allegations of insurance law violations made against the Petitioners. As a result of the investigation, the Department determined $107,000 in premiums collected by Stone & Edwards to be unlawful, and in the summer of 1990, demanded that restitution be made. Stone & Edwards denied any impropriety and refused.
The Department, through the Deputy Insurance Commissioner for Consumer Service Enforcement and Program Services (Deputy Commissioner-Enforcement), commenced an enforcement action, P-91-10-35 (enforcement proceeding), seeking to have the existing licenses of Gary and Emerson Lightner revoked. The Lightners answered and requested a hearing. The Office of Hearing Appeals then appointed a hearing officer to take testimony and make a recommendation to the Commissioner pursuant to 31 Pa.Code § 56.1 and 1 Pa.Code §§ 35.123, 35.187.
While their investigation into Petitioners' business practices was ongoing but before the enforcement proceeding was instituted by the Department, two insurance companies, Colony Life Insurance Company (Colony) and Aetna Life Insurance & Annuity Company (Aetna) applied to have Emerson Lightner licensed as their agent. 4 The Department advised both Aetna and Colony that no new licenses would be issued for Emerson Lightner until the investigation of Stone & Edwards was resolved. No notice, however, of the "holds" on license applications was given to Emerson Lightner.
The day after the Department commenced the enforcement proceeding, it lifted the "hold" and denied the Colony and Aetna applications to have Emerson Lightner appointed their agent. The reason for this denial was that the Department considered Emerson Lightner to be "unworthy" for additional licenses based upon the underlying facts of the enforcement proceeding. Emerson Lightner appealed the denial (P92-03-06 (license appeal)). Because the issues in the two proceedings were similar, the Insurance Commissioner appointed the same hearing officer to hear the license appeal and the proceedings were consolidated for hearing. On October 16, 1992, the Department placed "holds" on any new license applications by either Gary or Emerson Lightner and Stone & Edwards pending disposition of the enforcement proceeding. 5
Before any hearings were held on the enforcement proceeding and license appeal, Petitioners filed two petitions for review. The first was a complaint for declaratory judgment and request for injunctive relief (No. 216 M.D.1992) seeking to have Section 506 of the Administrative Code of 1929 6 and Section 102(a) of the Administrative Agency Law 7 declared unconstitutional because facially, those provisions permit an impermissible commingling of prosecutorial and adjudicative functions within the Insurance Department. 8 The second petition (No. 317 M.D.1992) sought to have Sections 7, 8 and 9 of UIPA declared unconstitutional also for impermissible commingling, as well as seeking a mandamus to have the Department issue the "held" licenses. 9
Following the Department's answers and the close of the pleadings, both parties filed motions for summary judgment, 10 agreeing that the disposition of this matter turns strictly on questions of law. 11 The cross-motion presents two general issues: 1) whether a statute which on its face vests both prosecutorial and adjudicative functions is unconstitutional because it purportedly permits impermissible commingling; and 2) whether the Department's holding of Petitioners' license applications pending the outcome of the enforcement action against Petitioners is unlawful.
Article I, Sections 1, 9 and 11 of the Pennsylvania Constitution 12 give to the people of Pennsylvania the right to due process guaranteeing those appearing in any judicial or administrative tribunal the right to a fair and impartial hearing. While the rights protected under those Articles and the rights guaranteed under the Fourteenth Amendment are substantially coextensive, the Pennsylvania due process rights are more expansive in that, unlike under the Fourteenth Amendment, a violation of due process occurs, even if no prejudice is shown, when the same entity or individual participates in both the prosecutorial and adjudicatory aspects of a proceeding. Compare Lyness v. State Board of Medical Examiners, 529 Pa. 535, 605 A.2d 1204 (1992) with Withrow v. Larkin, 421 U.S. 35, 95 S.Ct. 1456, 43 L.Ed.2d 712 (1975). Petitioners contend that their right to a fair hearing under the Pennsylvania Constitution is being denied because of the appearance of impermissible commingling by the purported vesting by UIPA of prosecutorial and adjudicatory functions to investigate unlawful insurance practices in the Insurance Commissioner.
Impermissible commingling exists within an administrative agency when the prosecutorial and administrative functions are not adequately separated. Lyness, supra; Dussia v. Barger, 466 Pa. 152, 351 A.2d 667 (1975). Due process rights not only can be violated when there is actual commingling, but even when an appearance that commingling of functions may have taken place within the agency exists. As our Supreme Court stated in Lyness:
Whether or not actual bias existed as a result of the board acting as both prosecutor and judge is inconsequential; the potential bias and the appearance of non-objectivity is sufficient to create a fatal defect under the Pennsylvania Constitution.
Id. 529 Pa. at 548, 605 A.2d at 1210 (citations omitted). See also Copeland v. Township of Newtown, 147 Pa.Commonwealth Ct. 463, 608 A.2d 601 (1992). However, a single administrative agency may exercise both prosecutorial and adjudicative functions if "walls of division" are constructed within an agency that clearly separates those two functions. Lyness 529 Pa. at 546, 605 A.2d at 1209. 13
The "walls of division" necessary to prevent commingling appears to have been breached by Sections 7, 14 8 15 and 9 16 of UIPA 17 by authorizing the Insurance Commissioner to both prosecute (allowing her to examine and investigate insurance agents and initiate proceedings against those agents for alleged violations of UIPA), and then adjudicate by holding hearings on the charges, determining the charged individual's liability and administering the remedial action. However, it must be remembered that UIPA is no different than most regulatory statutes that provide that a single entity, a board or a person, has the power to investigate, prosecute and adjudicate violations of the statutes they are charged to enforce.
Like most statutes that appear to facially allow commingling 18, UIPA has been implemented by the Department so that there is no commingling of prosecutorial and adjudicatory functions. Especially since Lyness, regulatory agencies have established "walls of division" between those performing prosecutorial and those performing adjudicatory functions. In implementing UIPA, the Commissioner has delegated all prosecutorial functions to the Deputy Commisioner--Enforcement, who is ultimately responsible for the initiation of UIPA prosecutions. 19 In deciding whether to initiate an enforcement action under UIPA, the Deputy Commissioner has no interaction with the office of the Commissioner nor with the Office of Administrative Hearings, the Commissioner's adjudicative arm. 20 Department procedures dictate that the prosecutorial functions performed by the Deputy Commissioner--Enforcement remain outside the Commissioner's purview. 21 The uncontroverted evidence establishes that in practice, a wall of division between the Commissioner, the adjudicator, and that of the Deputy Commissioner--Enforcement, the prosecutor, exists with regard to prosecutions under UIPA, and there is no impermissible commingling.
Not challenging that there is indeed a "wall of division" between the adjudicatory and prosecutorial functions within the Department, Petitioners contend that it is insufficient to merely provide them with due process in practice. They contend that because UIPA facially permits an unconstitutional commingling of the prosecutorial and adjudicatory functions in the Commissioner, that alone deprives them of a right to the appearance of a fair and impartial hearing concerning the charges lodged...
To continue reading
Request your trial
-
Com. v. Martin
...entity or individual participates in both the prosecutorial and adjudicatory aspects of a proceeding. Stone & Edwards v. Dept. of Ins., 161 Pa. Cmwlth. 177, 636 A.2d 293, 297 (1994),aff'd,538 Pa. 276, 648 A.2d 304 (1994). In criminal proceedings, due process requires that the defendant be g......
-
Pennsylvania Social Services Union, Local 668 v. Com., Dept. of Public Welfare, Office of Inspector General
...92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); Sweeney v. Tucker, 473 Pa. 493, 375 A.2d 698 (1977); Stone and Edwards Insurance Agency v. Department of Insurance, 161 Pa.Cmwlth. 177, 636 A.2d 293 (1994). In order to have a property interest, a litigant must have an enforceable expectation created ei......
-
Dantzler v. Wetzel
...the Pennsylvania Constitution and the United States Constitution are "substantially coextensive." Stone & Edwards Ins. Agency, Inc. v. Dep't of Ins. , 161 Pa.Cmwlth. 177, 636 A.2d 293, 297, aff'd 538 Pa. 276, 648 A.2d 304 (1994) ; accord R. v. Dep't of Public Welfare , 535 Pa. 440, 636 A.2d......
-
Capital Bluecross v. Pa Ins. Dept.
...new corporation. Generally, licenses issued by the Department are considered property. See, e.g., Stone & Edwards Ins. Agency, Inc. v. Dep't of Ins., 161 Pa.Cmwlth. 177, 636 A.2d 293 (1994). As a result, the certificates of authority of Blue Shield and Western Blue Cross passed to Highmark ......