Appeal from the Order of the Insurance Commissioner of the Commonwealth of Pennsylvania in case of In Re: Erie Insurance Exchange, Docket No. P76-6-4.
Irving Murphy, with him David E. Holland, and MacDonald, Illig, Jones & Britton, for appellant.
Barbara Anne Brown, Assistant Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Mencer, Rogers, Blatt, DiSalle and Craig. Judges Wilkinson, Jr. and MacPhail did not participate. Opinion by Judge Rogers. Dissenting Opinion by Judge Mencer.
Erie Insurance Exchange (Erie) has appealed from an order of the Insurance Commissioner requiring it to stop its practice of subtracting the amount of sick leave paid to a government employe by his employer from the employe's loss benefits established and required to be paid by the Pennsylvania No-fault Motor Vehicle Insurance Act, Act of July 19, 1974, P.L. 489, 40 P.S. § 1009.101 et seq. (Act).
The facts of the case are undisputed. Erie is a reciprocal exchange authorized to write automobile insurance in the Commonwealth. In calculating the no-fault loss benefits owed to claimants employed by any government, Erie deducted sick leave benefits received by or available to these claimants from their employers. This practice, it says, is authorized by Section 206(a) of the Act, 40 P.S. § 1009.206(a), which provides as follows:
Except as provided in section 108(a)(3) of this act, all benefits or advantages (less reasonably incurred collection costs) that an individual receives or is entitled to receive from social security (except those benefits provided under Title XIX of the Social Security Act and except those medicare benefits to which a person's entitlement depends upon use of his so-called 'life-time reserve' of benefit days) workmen's compensation, any State-required temporary, non-occupational Page 33} disability insurance, and all other benefits (except the proceeds of life insurance) received by or available to an individual because of the injury from any government, unless the law authorizing or providing for such benefits or advantages makes them excess or secondary to the benefits in accordance with this act, shall be subtracted from loss in calculating net loss. (Emphasis added.)
Erie says that sick pay paid to government employes is a benefit received "from any government."
The Commonwealth's Insurance Department, believing Erie's practice to be unlawful, charged it with violation of Sections 5(a)(7)(ii) and 5(a)(10)(vi) of the Unfair Insurance Practices Act, Act of July 22, 1974, P.L. 589, 40 P.S. §§ 1171.5(a)(7)(ii), 1171.5(a)(10)(vi). After a hearing, the Insurance Commissioner found Erie blameless of offending Section 5(a)(10)(vi) making it an unfair claim settlement practice not to settle claims fairly, because he concluded that Erie was sincere in its belief that its practice was authorized by the statute. The Insurance Commissioner concluded, however, that Erie had violated Section 5(a)(7)(ii). That provision prohibits insurers from unfairly discriminating between individuals of the same class and essentially the same hazard in the amount of premium charged or in benefits payable. In order to understand the Insurance Commissioner's conclusion in this regard, it is necessary to advert to Section 203 of the Pennsylvania No-Fault Motor Vehicle Insurance Act, 40 P.S. § 1009.203. This provision gives the owner or operator of a motor vehicle an election to provide security in partial substitution for loss benefits under no-fault through other means, including sick pay. It further requires, where such security is elected by the insured to be applied in substitution
for no-fault benefits, that the insured's premiums for no-fault insurance should be reduced. The Insurance Commissioner pointed out that Erie's interpretation of the phrase "benefits . . . received by or available to an individual . . . from any government" as including sick pay discriminated against government employees who, although they did not elect to have their sick pay deducted from their no-fault loss and therefore received no reduction in no-fault premium nevertheless had their no-fault benefits reduced by the amount of their sick pay. Erie does not dispute that this was a result of its interpretation and its practice based thereon, nor does it dispute that persons in private employment who did not make the election to substitute sick pay for no-fault benefits have received from it the full amount of their no-fault benefit without reduction on account of sick pay. The Insurance Commissioner ordered Erie to discontinue deducting sick pay from the claims of government employees who had not ...