Appeal from the Order of the Insurance Commissioner of the Commonwealth of Pennsylvania in case of In the Matter of: William and Deborah Prindle -- Appeal of J.C. Penney Casualty Insurance Company, Docket No. P77-8-4.
William R. Balaban, with him Thomas R. Balaban, and Robert J. Demer, for appellant.
Paul A. Adams, with him Barbara Anne Brown, Assistant Attorney General, and John H. Isom, Chief Counsel, 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 Mencer.
[ 43 Pa. Commw. Page 362]
This is an appeal by J.C. Penney Casualty Insurance Company (Penney) from an order of the Insurance Commissioner (Commissioner). Two important questions are raised: (1) whether the occurrence of two theft losses in an 18-month period is sufficient evidence of a "substantial change or increase in hazard" so as to justify the non-renewal of an insurance policy pursuant to Section 5(a)(9) of the Unfair Insurance Practices Act (Act), Act of July 22, 1974, P.L. 589, as amended, 40 P.S. § 1171.5(a)(9); and (2) whether due process is denied when one assistant attorney general acts as prosecuting attorney and another, assigned to the same office, acts as hearing examiner.*fn1
The facts are undisputed. On February 8, 1974, Penney issued a standard "renters" insurance policy to William Prindle and Deborah Prindle. Between January 7, 1975 and August 10, 1976, the Prindles suffered two theft losses for which Penney paid a total of $1721. On November 24, 1976, Penney notified the Prindles that it would not renew their policy because of the two losses.
[ 43 Pa. Commw. Page 363]
The Prindles, pursuant to Section 5(a)(9)(iv) of the Act, 40 P.S. § 1171.5(a)(9)(iv), requested the Department of Insurance (Department) to review Penney's action. The Department determined that there was reason to believe Penney had violated the Act, and a hearing was therefore scheduled pursuant to Section 8 of the Act, 40 P.S. § 1171.8.*fn2 An assistant attorney general attached to the Department was assigned by the Commissioner to act as hearing examiner. Another assistant attorney general attached to the same office was assigned to prosecute the case on behalf of the Department.
At the hearing, the only evidence presented to justify Penney's non-renewal of the Prindles' policy was the occurrence of the two theft losses. Concluding that this was insufficient to establish an "increase in hazard" within the meaning of the Act, the Commissioner ordered Penney to offer to renew the policy and to cease and desist from refusing to renew other policies solely on the basis of loss frequency.*fn3 Penney's appeal to this Court follows.
[ 43 Pa. Commw. Page 364]
Section 4 of the Act, 40 P.S. § 1171.4, makes it unlawful for insurance companies to engage in "an unfair or deceptive act or practice." Unfair or deceptive acts or practices are defined in Section 5(a)(9) to include, inter alia,
[c]ancelling any policy of insurance covering owner-occupied private residential properties or personal property of individuals that has been in force for sixty days or more or refusing to renew any such policy unless. . . there has been a substantial change or increase in hazard in the risk assumed by the ...