decided: May 22, 1979.
LITITZ MUTUAL INSURANCE COMPANY, PETITIONER
COMMONWEALTH OF PENNSYLVANIA, WILLIAM J. SHEPPARD, INSURANCE COMMISSIONER, INSURANCE DEPARTMENT, RESPONDENT
Appeal from the Order of the Insurance Commissioner in case of In the Matter of: Donna R. Dorman and Lititz Mutual Insurance Company, Docket No. P77-6-2.
Donald W. Bebenek, with him John E. Kunz, and Meyer, Darragh, Buckler, Bebenek & Eck, for petitioner.
Kathleen Walsh Cramer, Assistant Attorney General, with her John H. Isom, Assistant Attorney General, and Robert P. Kane, Attorney General, for respondent.
Judges Crumlish, Jr., Blatt and MacPhail, sitting as a panel of three. Opinion by Judge Crumlish, Jr.
[ 43 Pa. Commw. Page 10]
Lititz Mutual Insurance Company appeals a decision of the Insurance Commissioner who in response to a complaint filed by one of its insureds, Donna Dorman, determined that its attempted non-renewal of her homeowner's policy violated the standards of the Unfair Insurance Practices Act.*fn1
[ 43 Pa. Commw. Page 11]
At issue is whether Dorman's acquisition of a large dog constitutes a substantial increase in the insured hazard so as to justify Lititz's refusal to renew her policy.
The essential facts are undisputed. Dorman had sustained two burglary losses since she first obtained homeowner's coverage from Lititz in May, 1976. After the second burglary, a claims adjuster visited Dorman's home to investigate the loss and discovered she had obtained a dog which is at least part German Shepherd. Thereafter, Lititz mailed her a "Notice of Cancellation or Refusal to Renew" which stated that her coverage would terminate on May 3, 1977, and which gave the following explanation:
Increase in hazard: Due to loss frequency Insured has purchased German Shepherd guard dog which creates potentially dangerous liability exposure.
Lititz took this action pursuant to a directive it had sent to all its agents and which had been in effect since April, 1971:
NO NEW or RENEWAL Homeowners policies will be acceptable for an insured who owns a potentially fierce or unmanageable dog. This restriction applies to any dog of a size and/or disposition whose breed or mixture represents the possibility of attack upon human being. Past cases have involved German Shepherds and Doberman pinshers [sic] as well as mixed breeds of comparable nature.
On April 6, 1977, Dorman appealed to the Insurance Commissioner, who, after a preliminary investigation, notified Lititz that he believed it was in violation of the Act and, at Lititz's request, the Commissioner held a hearing on the matter on May 27, 1977. Thereafter, he determined that Lititz's cancellation
[ 43 Pa. Commw. Page 12]
of the policy had been improper under Section 5(a)(9) of the Act, 40 P.S. § 1171.5(a)(9),*fn2 and ordered Lititz to reinstate Dorman's policy retroactive to the date of cancellation.
Section 5(a)(9)'s definition of unfair insurance practices effectively limits an insurance company's ability to cancel or to refuse to renew insurance policies covering owner-occupied private residential properties to ascertain prescribed circumstances which include situations where "there has been a substantial change or increase in hazards insured against by reason of willful or negligent acts or omissions by the insured." (Emphasis added.)
We are without the benefit of prior decisional law interpreting this statute's use of the phrase "substantial increase or change in hazard." However, interpretation of the same or similar phraseology in the context of other insurance statutes*fn3 has led to the
[ 43 Pa. Commw. Page 13]
conclusion that a "mere trifling increase" in risk will not justify the insurer's removal from liability; "rather there must be a substantial and material increase, such as the insurer, in view of the terms of the policy, could not reasonably be presumed to have contracted to assume." 8 Couch on Insurance 304 (2d ed. 1961).
Lititz adduced evidence of the dangerous propensities of German Shepherds who, as a breed, account for a disproportionate amount of dog bite injuries. Lititz did not introduce any evidence of dangerous propensities in the insured's dog in particular. The Commissioner found, as fact, that Dorman's acquisition of the dog had increased Lititz's risk to "some degree" but would not characterize that degree as "substantial" so as to bring this refusal to renew within the purview of Section 5(a)(9)'s exceptions.
Our scope of review of the Insurance Commissioner's decision is limited to a determination of whether the Commissioner abused his discretion or committed an error of law.*fn4 The record does not reveal either of these defects in the Commissioner's decision.
We are unwilling to conclude that the Commissioner erred as a matter of law absent evidence that German Shepherd dogs in general or this dog in particular so magnified Lititz's risk of potential liability that Dorman would be receiving more than her share of the bargain were Lititz forced to renew her policy. See, The Increase-of-Hazard Clause in the Standard Fire Insurance Policy, 76 Harvard L. Rev. 1472 (1963).
To hold that the mere acquisition of a large dog is such a substantial increase of hazard that an insurance company may cancel or refuse to renew a homeowner's policy would jeopardize the coverage of every homeowner who, for purposes of security or pleasure, acquires a canine companion.
[ 43 Pa. Commw. Page 14]
And Now, this 22nd day of May, 1979, the decision of the Insurance Commissioner in the above captioned matter dated July 19, 1977, is hereby affirmed.