Original jurisdiction in case of Commonwealth of Pennsylvania v. Insurance Company of North America.
Robert B. Hoffman, Deputy Attorney General, with him, Allen C. Warshaw, Deputy Attorney General, and LeRoy S. Zimmerman, Attorney General, for plaintiff.
Michael P. Kerrigan, Pepper, Hamilton & Scheetz, for defendant.
President Judge Crumlish, Jr. and Judges Blatt and MacPhail, sitting as a panel of three. Opinion by Judge MacPhail. President Judge Crumlish dissents.
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The Commonwealth of Pennsylvania (Commonwealth) has instituted an action in assumpsit addressed to our original jurisdiction*fn1 to recover $72,000 plus interest and costs from the Insurance Company of North America (INA) under the terms of a fidelity bond issued by INA covering certain Commonwealth employees. More specifically, the Commonwealth alleges that Anthony J. Trucco, while a Commonwealth employee, was involved in a kickback scheme during the years 1972-1974 which resulted in financial loss to the Commonwealth, and that the loss is insured by the fidelity bond. The matter is presently before this Court on the parties' cross motions for summary judgment. For the reasons which follow, we deny both motions.
From the pleadings, affidavits and depositions before us, it appears that the following facts are undisputed.*fn2 Anthony J. Trucco was employed by the then Department of Property and Supplies (PDS)*fn3 from October 15, 1971 to January 16, 1975. Trucco
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served as Director of the Bureau of Insurance beginning July 1, 1972 and was responsible, under the direction of the Secretary of DPS, Frank Hilton (Hilton) for the placement of insurance policies for the Commonwealth. At issue here is an automobile liability insurance policy procured pursuant to Section 2404(b) of The Administrative Code of 1929 (Code).*fn4 The insurance policy was placed with the Reserve Insurance Co. for a total of three years, beginning July 1, 1972 through June 30, 1975. In the spring of 1973 Charles W. Ohle and Ronald Jackson (Ohle and Jackson) were selected by Hilton on Trucco's recommendation as brokers of record on the policy. In return for their assignment as brokers, Ohle and Jackson agreed to remit to Trucco and Hilton 6% of the gross premiums paid by the Commonwealth. The kickbacks were paid out of Ohle and Jackson's commission. During the three-year policy period Trucco received a total of $72,000 in kickbacks.*fn5
In considering the motions now before this Court, we note that summary judgment may be entered only where the case is clear and free from doubt, that we must view the record in the light most favorable to the nonmoving party and that doubts as to the existence of a genuine issue of material fact must be resolved in favor of the nonmoving party. J. Berman & Sons, Inc. v. Department of Transportation, 21 Pa. Commonwealth Ct. 317, 345 A.2d 303 (1975). A fact is material if it has a direct affect on the disposition of the case. Allen v. Colautti, 53 Pa. Commonwealth Ct. 392, 417 A.2d 1303 (1980). It must also be observed that before judgment can be entered for
[ 62 Pa. Commw. Page 383]
the Commonwealth in the instant case two elements must be established: first, that the Commonwealth has sustained a loss "by virtue of" the kickback scheme and second, that Trucco's actions were within the fidelity bond's coverage. Similarly, for INA to prevail it must be clear that the Commonwealth has suffered no loss as a result of Trucco's actions or that the actions are not within the bond's coverage.
The Commonwealth advances two arguments in support of its position that the kickbacks constituted a loss to the Commonwealth within the bond coverage: 1) the kickbacks, which were diverted to Mr. Trucco's personal use, should have been deposited in the Higher Education Assistance Fund pursuant to Section 2404.1 of the Code, 71 P.S. § 634.1 and the failure to do so constituted a loss to the Commonwealth, and 2) the kickback ...