Appeal from the Order of the Commonwealth of Pennsylvania Insurance Department in case of Andrew Sullivan and Edward Sullivan v. Pacific Indemnity Company, No. C76-11-3.
John J. O'Brien, Jr., with him John F. McDevitt, Jr., and O'Brien and O'Brien, for petitioners.
Lawrence T. Hoyle, Jr., with him Wilbur L. Kipnes, and, of counsel, Schnader, Harrison, Segal & Lewis, for respondent, Pacific Indemnity Company.
Paul A. Adams, Assistant Attorney General, with him Kathleen Walsh Cramer, Assistant Attorney General, Norman J. Watkins, Chief of Civil Litigation, and Edward G. Biester, Jr., Attorney General, for respondents, Commonwealth of Pennsylvania Insurance Department and Insurance Commissioner.
President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Rogers, Blatt, DiSalle and MacPhail. Judges Mencer and Craig did not participate. Opinion by Judge Blatt.
Andrew and Edward Sullivan (petitioners) appeal here from an order of the Insurance Commissioner (Commissioner) which dismissed their complaint against the Pacific Indemnity Company (Pacific).
The petitioners are associated obstetricians and gynecologists licensed to practice medicine in Pennsylvania, and in 1975, while they held a medical malpractice policy issued by Pacific, the Insurance Service*fn1 filed a proposal to increase medical malpractice rates by approximately 250 percent. This rate filing
was disapproved by the Commissioner in 1976 after a formal hearing on the request. In the meantime, Pacific had instituted the use of the "consent-to-rate" procedure permitted by Section 4(g) of the Casualty and Surety Rate Regulatory Act (Act),*fn2 40 P.S. § 1184(g), which provides:
Upon the written consent of the insured stating his reasons therefor, filed with and approved by the Commissioner, a rate in excess of that provided by a filing otherwise applicable may be used on any specific risk. The rate shall become effective when such consent is filed and shall be deemed to meet the requirements of this Act until such time as the Commissioner reviews the filing and so long thereafter as the filing remains in effect.
Consequently, the petitioners, and all other obstetricians and gynecologists who held policies with Pacific, received a consent-to-rate form which proposed to increase their premium well above the rates then approved, but below the filing rejected, by the Insurance Department. Although malpractice insurance was available from other sources, it could not be obtained at rates equivalent to or lower than Pacific's; therefore, the petitioners signed the form. When the Department learned of Pacific's widespread use of the consent-to-rate form, however, it informed Pacific that it did not approve of the use of consent-to-rate forms on a mass basis because such a practice circumvented the normal rate-approval procedure. But, after a meeting between officials of the ...