Appeal from the Order of the Insurance Commissioner of the Commonwealth of Pennsylvania in case of In Re: Security of America Life Insurance Company, No. R-75-12-11, dated April 29, 1976.
Walter L. Foulke, with him Drinker, Biddle & Reath, for appellant.
John H. Isom, Assistant Attorney General, with him Guy J. DePasquale, Assistant Attorney General, and Robert P. Kane, Attorney General, for appellee.
Judges Kramer, Rogers and Blatt, sitting as a panel of three. Opinion by Judge Rogers.
[ 29 Pa. Commw. Page 327]
Security of America Life Insurance Company (Security) is engaged in Pennsylvania in the business of writing Group Credit Life Insurance and Group Credit Accident and Health Insurance. Security issues its policies to lending institutions which in turn offer to their debtors the option to have life and total disability insurance under the lending institution's policy -- life in the amount of their debt and disability in the amount of their periodic payments due. In the event of death or total disability, the proceeds of certificates issued to debtors under the group policy are paid to the lending institution to discharge the debts
[ 29 Pa. Commw. Page 328]
or, in the case of disability, the monthly payments due, with any excess being paid to the debtors or their beneficiaries. The premiums on certificates of insurance issued by Security are paid in full at the time the certificates are applied for and are often financed by the lending institutions.
Security's forms for certificates delivered to debtors have provided that the maximum age for eligibility for insurance is 65, and that, if the age of the debtor is found to have been misstated and the debtor's actual age would have made him ineligibile, Security will refuse to pay the proceeds but will refund the premiums paid and the lending institution will repay the debtor any charges it made for the insurance. The record made in the hearing conducted by the Insurance Department establishes that Security does not require its policy holder, the lending institution, to require any proof of age to be provided by the debtor when the insurance is applied for; but that when, in a death case, a claim is made Security requires submission of a death certificate which shows date of birth. If the birth date shows that the debtor misstated his age, Security denies liability on the policy and refunds premiums. Of 2100 death claims made during 1975, Security denied 20 claims because of misstatement of age.
Security's application and certificate have further provided that the aggregate maximum amount of life insurance which may be provided to an individual debtor under the group policy with respect to all indebtedness of the debtor to the creditor should be $15,000. The record is not clear as to what, if anything, Security requires the lending institutions holding its policies to do with respect to ascertaining whether a loan applicant when applying for a new debt and an insurance certificate has or has not exceeded the $15,000 maximum. If, when a death claim
[ 29 Pa. Commw. Page 329]
is made, it is ascertained that the total amount of insurance taken out by the debtor under the group policy exceeds $15,000, Security will not pay proceeds in excess of that amount but will refund excess premiums. In practice, during the two calendar years of 1974 and 1975 there was only one instance of a debtor holding Security's certificates aggregating more than the $15,000 limit.
The provisions of Security's maximum age eligibility requirement and its practices with respect to the consequences of a misstatement have been, and it says still are, authorized by two Acts of the General Assembly. First, with respect to Group Credit Life Insurance, Security cites Section 6(5) of the Act of May 11, 1949, P.L. 1210, as amended, 40 P.S. § 532.6(5) (hereinafter referred to as Act 367), providing:
No policy of group life insurance shall be delivered in this State unless it contains in substance the following provisions. . . .
(5) A provision specifying an equitable adjustment of premiums or of benefits or of both to be made in the event the age of a person insured has been misstated, such provision to contain a clear ...