Appeal from order of Court of Common Pleas of Dauphin County, Commonwealth Docket No. 424 of 1963, in case of Commonwealth ex rel. Audrey R. Kelly, Insurance Commissioner v. Commonwealth Mutual Insurance Company.
David A. Scholl, with him Harold I. Goodman, Jonathan M. Stein, Laurence M. Lavin, Arnold P. Borish, Jane Greenspan, and Consuelo S. Woodhead, for appellants.
Arthur A. Kusic, Assistant Attorney General, with him Gerald Gornish, Deputy Attorney General, and J. Shane Creamer, Attorney General, for Commonwealth, appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Roberts. Dissenting Opinion by Mr. Justice O'Brien. Mr. Justice Eagen joins in this dissenting opinion.
On February 28, 1964, the Commonwealth Mutual Insurance Company [hereinafter CMIC] was dissolved by order of the Court of Common Pleas of Dauphin County, sitting as the Commonwealth Court. Pursuant to the Act of May 17, 1921, P. L. 789, art. V, § 506, as amended, 40 P.S. § 206 (1971), the Insurance Commissioner of Pennsylvania was appointed statutory liquidator.
Over six years later, on May 1, 1970, the Commissioner filed a petition for an assessment order,*fn1 which sought permission for a total assessment of $19,465,504.62 to be divided among the individual policyholders.*fn2 Appellants, CMIC policyholders, interposed objections on their own behalf and on behalf of all CMIC policyholders residing in Philadelphia. A hearing was held on June 11, 1970 and, subsequently, an order was issued by the court granting appellee's petition and dismissing appellants' objections. This appeal followed.
The principal issue presented is whether the Insurance Commissioner, after approving an insurance policy containing a one year limitation on the imposition of contingent liability, can now, as statutory liquidator, completely disregard that specific policy provision and levy an assessment six years after the expiration of the policy. The relevant provision of the insurance policy
provides: "Limit of Liability: The contingent liability of the insured shall not exceed an additional amount equal to the premium written in this policy. Any such additional premium, as so limited, shall be levied within one year from the date of expiration or cancellation of this policy, and not later." (Emphasis added.)
We conclude that the statutory liquidator is bound by the explicit language of the contract and may not here impose an assessment upon the policyholders. To hold otherwise would extravagantly expand a one year contractual limitation to mean six years.
It is beyond doubt that when additional funds are needed to pay losses and expenses of a dissolved mutual insurance company, the right to assess the policy-holders rests on the terms of the contract of insurance. See Taggart, Ins. Com. v. Graham, 108 Pa. Superior Ct. 320, 165 Atl. 68 (1933), aff'd, sub nom. Taggart, Ins. Com. v. De Fillippo, 315 Pa. 438, 173 Atl. 423 (1934). Here, the right to assess, by the specific terms of the policy, is limited to one year after the expiration of the policy.
Appellee, however, relying on Commonwealth ex rel. Schnader v. Keystone Ind. Exchange, 335 Pa. 333, 6 A.2d 821 (1939), aff'd on rehearing, 338 Pa. 405, 11 A.2d 887 (1940), contends that he is not bound by the contractual one year limitation in the policy. Keystone is readily distinguishable. There, the "subscriber's agent, the Indemnity Company, issued policies which not only did not contain the contingent liability ...