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decided: August 12, 1974.


Appeal from the Order of the Commissioner of the Insurance Department in case of Rate Filing of Nationwide Mutual Insurance Company, for Private Passenger Automobile Rates, filed April 25, 1973.


Francis J. O'Gorman, Jr., with him Robert L. Rubendall and, of counsel, Metzger, Hafer, Keefer, Thomas and Wood, for appellant.

Andrew F. Giffin, Assistant Attorney General, with him Barton Isenberg, Assistant Attorney General, for appellees.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Kramer.

Author: Kramer

[ 15 Pa. Commw. Page 26]

This is an appeal filed by Nationwide Mutual Insurance Company (Nationwide) from a "final determination" (order), wherein Herbert S. Denenberg, Insurance Commissioner of the Insurance Department of the Commonwealth of Pennsylvania (Commissioner), disapproved Nationwide's rate filing for private passenger automobile premiums to be charged for such insurance coverage in the Commonwealth of Pennsylvania. The filing was made on April 25, 1973 with a request for approval of the proposed rates to become effective July 1, 1973. The filing was made under the provisions of The Casualty and Surety Rate Regulatory Act (Act), Act of June 11, 1947, P.L. 538, 40 P.S. § 1181 et seq. The filing proposed certain increases in the premiums for certain classes of coverage and

[ 15 Pa. Commw. Page 27]

    decreases in others.*fn1 The filing proposed a net increase in premiums of 9.2% for some 573,000 Pennsylvania policyholders which represented an increase of $7,065,000 in additional revenues for Nationwide. In addition to the required statistical data contained in the "filing memorandum" submitted with the rate filing, Nationwide supplied all of the additional information requested by the Commissioner. A public hearing was held on August 31, 1973 at which testimony was received from witnesses for Nationwide and the Insurance Commission. In addition, the Commissioner received testimony of representatives of the Citizens Committee for Ethical Insurance and the Consumers Education and Protective Association, the latter being via a telephonic message which was later confirmed by letter. Based upon the record thus made, the Commissioner issued his adjudication*fn2 from which this appeal was taken.

Initially we should note that this is the first insurance rate case involving automobile casualty insurance to reach our appellate courts,*fn3 and we have little

[ 15 Pa. Commw. Page 28]

    precedent at our disposal to help in our evaluation of the record of testimony submitted to the Commissioner. However, it is our observation that for such a highly technical and complex matter involving voluminous statistical data, the record of testimony appears to be inadequate to fully explain to anyone not a party to the proceedings the basis upon which the adjudication was made. It is also apparent that in his approach to insurance rate evaluation, the Commissioner relied more upon the statistical data than testimony describing, supporting or explaining it.

The record indicates that Nationwide made its last prior rate filing in 1969, which became effective January 25, 1970. Since that time, Nationwide has experienced underwriting losses in Pennsylvania as follows:

1969 $6,544,000

1970 5,644,000

1971 2,130,000

1972 1,761,000

1973 (first six months) 1,594,000

In determining underwriting losses, Nationwide followed the Insurance Department's guidelines for rate filings by including investment income on unearned premiums and loss reserves together with premiums received on the debit side and crediting against such income the dollars expended on claims payments and other expenses. Nationwide, however, did not include investment income derived from total company assets or surplus on the debit side in its determination of underwriting losses, which matter became an issue in this case.

[ 15 Pa. Commw. Page 29]

The Commissioner's adjudication is broken down into twelve categories (which will be discussed infra), each of which contains findings of fact and conclusions of law. Generally speaking, the Commissioner essentially concluded that the "filing resulted in an excessive rate request." In its appeal to this Court, Nationwide contends that the findings and conclusions are not supported by substantial evidence, that the disapproval of its rate filing is contrary to law because the Commissioner has not provided a reasonable margin for underwriting profit and lastly, that because of its proof of underwriting losses, the disapproval of the rate filing has violated its constitutional rights in that its property is being taken without due process of law.

Both the hearings before the Commissioner and the scope of review of this Court are controlled by Section 17 of the Act, 40 P.S. § 1197, wherein it is provided that the provisions of the Administrative Agency Law, Act of June 4, 1945, P.L. 1388, as amended, 71 P.S. § 1710.1 et seq. are applicable. With respect to our scope of review, Section 44 of the Administrative Agency Law, 71 P.S. § 1710.44 states: "The court to which the appeal is taken shall hear the appeal without a jury on the record certified by the agency. After hearing, the court shall affirm the adjudication unless it shall find that the same is in violation of the constitutional rights of the appellant, or is not in accordance with law, or that the provisions of sections thirty-one to thirty-five inclusive of this act have been violated in the proceeding before the agency, or that any finding of fact made by the agency and necessary to support its adjudication is not supported by substantial evidence. If the adjudication is not affirmed, the court may set aside or modify it, in whole, or in part, or may remand the proceeding to the agency for

[ 15 Pa. Commw. Page 30]

    further disposition in accordance with the ...

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