Appeal from the Order of the Insurance Commissioner of the Commonwealth of Pennsylvania in case of Appeal of Life Insurance Company of North America, Docket No. R76-11-9.
S. Walter Foulkrod, III, with him Foulkrod, Peters & Frank, for petitioner.
Barbara Anne Brown, Assistant Attorney General, with her Gerald R. Gornish, Acting Attorney General, for respondent.
President Judge Bowman and Judges Wilkinson, Jr., Mencer, Rogers, Blatt, DiSalle and MacPhail. Judges Crumlish, Jr. and Craig did not participate. Opinion by Judge Blatt.
[ 43 Pa. Commw. Page 283]
The Life Insurance Company of North America (petitioner) seeks review here of an adjudication and order of the Insurance Commissioner (Commissioner) rejecting its application for approval of two policy forms for group long-term salary-continuance insurance. The rejection was ordered because these forms contained an unacceptable pre-existing-conditions exclusion, and the petitioner contends that the Commissioner's disapproval was (1) contrary to legislative intent, (2) arbitrary and capricious, and (3) violative of equal protection and due process.
The pre-existing-conditions exclusion is that:
'Sickness' as used herein means sickness or disease which causes total disability, as defined herein, which commences while the policy is in force as to the Individual except that the policy does not cover any period of total disability which commences during the first 365 days the Individual is insured hereunder if such total disability is caused by or results from any condition existing prior to the effective date of individual insurance, unless immediately prior to the commencement of such disability a period of at least 365 consecutive days has elapsed
[ 43 Pa. Commw. Page 284]
during which the individual has received no medical treatment or advice for such condition.
The Commissioner found as a fact, based on competent expert testimony, that exclusionary clauses for pre-existing conditions are designed for individual and not group policies, because the chances of adverse selection in a group policy are minimal. He also found that the petitioner had not presented evidence which demonstrated a need for such an exclusionary clause in its group policy. He concluded, therefore, that the forms violated Section 621.2 of The Insurance Company Law of 1921 (Law),*fn1 which makes no provision for exclusionary clauses for pre-existing conditions in group policies.
The petitioner argues that the Commissioner's ruling is contrary to the intent of the legislature because, while the legislature has acted to restrict and regulate the use of such exclusionary clauses in individual policies, it has not legislated concerning their use in group policies. The petitioner asserts, therefore, that the legislature did not intend to regulate or restrict the use of pre-existing-conditions exclusionary clauses in group policies.
On his part, the Commissioner asserts a more plausible explanation for the legislature's silence on this point is in the statements of experts and texts on the subject of group insurance that an exclusion for pre-existing conditions is generally inconsistent with the standard theory of group underwriting, which is that the insured group will have a normal and predictable morbidity because it is not formed for the ...