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decided: May 8, 1980.


Original jurisdiction in case of American Family Life Assurance Company of Columbus v. Commonwealth of Pennsylvania, Insurance Department and Harvey Bartle, III, Insurance Commissioner.


Thomas N. O'Neill, Jr., with him David N. Hofstein, and Robert M. Goldich, Montgomery, McCracken, Walker & Rhoads, for petitioner.

J. Sinclair Long, with him Albert J. Strohecker, III, Assistant Attorneys General and Edward Biester, Jr., Attorney General, for respondent.

President Judge Crumlish and Judges Wilkinson, Jr., Mencer, Rogers, Craig and Williams, Jr. Judge Blatt did not participate. Opinion by Judge Craig.

Author: Craig

[ 51 Pa. Commw. Page 248]

Petitioner American Family Life Assurance Company of Columbus, in an equity action addressed to our original jurisdiction, has asked us to enjoin the Insurance Commissioner from enforcing regulations which establish minimum standards for individual accident and sickness insurance policies*fn1 promulgated under the Individual Accident and Sickness Insurance Minimum Standards Act (Act),*fn2 and to declare portions of that Act void, on the ground that the regulations are a product of an unconstitutional delegation of legislative power by the Act.

Presently before us for decision are the preliminary objections of the Commissioner, primarily seeking to have the complaint dismissed on the ground that our original jurisdiction in equity is not appropriate because an adequate and useful statutory remedy is available and has not been pursued.

[ 51 Pa. Commw. Page 249]

The Commissioner adopted the questioned regulations on June 24, 1978, making them effective on July 24, 1979, one year and thirty days later.

Petitioner's averments admit that it was not until July, 1979, shortly before the effective date of the regulations, that petitioner mailed its proposed cancer insurance policy forms to the Commissioner for approval. When approval was not granted by July 24, 1979, petitioner brought this action and also presented a motion for preliminary injunction, asking this court to enjoin enforcement of the regulations against those policy forms. After hearing, a preliminary injunction was denied primarily because petitioner's failure to submit its policy forms for consideration during the one-year grace period had demonstrated that such immediacy of need as would warrant a preliminary injunction was not present.*fn3

The purpose of the Act, as stated in Section 1, is to provide standardization and simplification of terms

[ 51 Pa. Commw. Page 250]

    and coverages in individual accident and health insurance policies, to eliminate misleading provisions and to provide for full disclosure in sale. 40 P.S. § 776.1.

Section 3(b) of the Act, 40 P.S. § 776.3(b), expressly authorizes the Commissioner to make regulations to specify prohibited policy provisions, not otherwise prohibited by statute, which "in the opinion of the Insurance Commissioner are unjust, unfair, or unfairly discriminatory."

Section 4(a), 40 P.S. § 776.4(a), authorizes regulations to establish minimum standards for accident and health insurance benefits, with no mention of guidelines for the regulations, but subsection 4(c), 40 P.S. § 776.4(c), does state that "[n]o policy . . . shall be delivered" which does not meet the regulations' standards "unless the Insurance Commissioner finds that such policy or contract will not be unjust, unfair or unfairly discriminatory."

Subsection 4(d), 40 P.S. § 776.4(d), is an exemption provision that, notwithstanding any other provision of law or regulations, allows the Insurance Commissioner to approve a contract as to benefit standards, even if it does not meet the regulations, if in his "opinion . . . such policy or contract is not unjust, unfair or unfairly discriminatory."

These subsections, the only ones attacked by petitioner,*fn4 thus present, perhaps rather awkwardly, an expression of guideline standards for the Commissioner in making regulations concerning what policy provisions are to be prohibited, and in making regulations and exemptions concerning benefits; in all three instances, the standard refers to that which is

[ 51 Pa. Commw. Page 251]

"unjust, unfair or unfairly discriminatory", and, in two of those instances, refers to the "opinion of the Insurance Commissioner" as the determinant.

Thus reviewing the statute's terms, we can see that petitioner's claim, that the Act embodies an unconstitutional delegation of legislative power, does pose a substantial and direct constitutional question as to the validity of the statute.*fn5

Section 354 of The Insurance Company Law,*fn6 40 P.S. § 447b, provides that an insurer may file proposed forms with the Insurance Commissioner, and if the forms are disapproved, may obtain a hearing, an adjudication and ultimate judicial review. As of June 24, 1978, such review was available under the Administrative Agency Law*fn7 and, shortly thereafter, as of June 27, 1978, under the Judicial Code, 42 Pa. C.S. § 5105 also.

[ 51 Pa. Commw. Page 252]

Clearly the present issue -- as to pursuing the administrative remedy rather than our equity jurisdiction*fn8 -- depends upon a determination of whether or not the administrative process in this situation has anything to contribute to the decision of the issue. That doctrine, permitting a constitutional attack on the statute to be pursued directly in equity "'[w]here the administrative process has nothing to contribute to the decision of the issue,'" was clearly expressed in Borough of Greentree v. Board of Property Assessments, 459 Pa. 268, 279, 328 A.2d 819, 824 (1974). Greentree affirmed that the adequacy of the administrative remedy remains a consideration in a constitutional case, to the extent stated above, rejecting the proposition in Lynch v. Owen J. Roberts School District, 430 Pa. 461, 244 A.2d 1 (1968) that equity has jurisdiction over any constitutional attack on a statute regardless of the adequacy of the administrative remedy.

However, stating the doctrine is easier than applying it. At first glance the constitutional attack here may seem to involve merely a study of the semantics of the statute, considering whether terms such as "unjust" and "unfair" and "unfairly discriminatory" are capable of serving as guidelines for administrative rule-making and decisions, and sufficient to enable the courts to review such executive actions.

On the other hand, in this situation it is apparent that judicial review of the effectiveness of the statutory criteria can be markedly more intelligent and functional if the standards can be examined, not only against the background of the regulations which have

[ 51 Pa. Commw. Page 253]

    been developed, but also by viewing a prototype of the Commissioner's implementation of the statute through the actual review and disapproval of real and specific policy proposals.

When forced to consider the effectiveness of statutory guidelines in a vacuum, a court must necessarily feel that it is groping among generalities, whereas a review of the constitutionality of the delegation here can be better conducted in the context of an actual case involving, in this instance, specific policy provisions as well as specific regulations to show what is, or can be seen as, "unjust" or "unfair" or "unfairly discriminatory."

Certainly the expertise of the administrative agency is a factor which affects the propriety of a questioned standard (as well as a reason for the conferring of administrative rule-making powers); an actual case permits a demonstration of that expertise, as well as an indication of the complexity of the subject matter.

We therefore conclude that, under the Greentree doctrine, the present situation falls in the area in which the administrative process has distinct utility, and equity jurisdiction is not appropriate.*fn9

Therefore, making it unnecessary to consider the other preliminary objections, we will sustain the preliminary objections based upon failure to pursue the available administrative remedy.

[ 51 Pa. Commw. Page 254]


And Now, this 8th day of May, 1980, the preliminary objections of respondents Insurance Department and Insurance Commissioner, Nos. 1, 2, 3 and 4, are sustained, and the petition is dismissed.


Preliminary objections sustained. Petition dismissed.

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