Appeal from the Order of the Insurance Commissioner of the Commonwealth of Pennsylvania in the case of In Re: Appeal of Metropolitan Property and Liability Insurance Company, No. P186-1-2.
Harvey Bartle, III, Dechert, Price & Rhoads, for petitioner.
Arthur Selikoff, Assistant Counsel, with him, Linda J. Wells, Chief of Litigation, and M. Hannah Leavitt, Chief Counsel, for respondents.
Judges Barry and Colins, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Judge Colins.
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Metropolitan Property & Liability Insurance Company (Metropolitan) petitions for review of an order of the Insurance Commissioner (Commissioner) which found Metropolitan's rescission of the homeowners insurance policy of Edgar Miller (Miller) to be in violation of Section 5(a)(9) of the Unfair Insurance Practices Act (Act or Act 205),*fn1 and ordered the reinstatement of Miller's homeowners policy.
In October of 1984, Miller contacted a sales agent at Metropolitan about obtaining a homeowners insurance policy. A meeting was held with the agent at Miller's home in Ruffsdale, Pennsylvania, and on November 26, 1984, Miller visited Metropolitan's offices and completed an application for homeowners insurance. This application was completed by the agent based upon information supplied by Miller. In completing the application, the agent inquired if Miller had had any losses during the past five (5) years and if so, the loss date, time and amount. Miller advised the agent that he had not had any losses in the past five years and the application was so marked. Thereafter, Miller signed the completed application indicating that the statements contained thereon were correct and paid Metropolitan a premium of $438.00 for the policy.
On December 5, 1984, Metropolitan, in accordance with established procedures, made a "spot check" call to Miller to verify the information contained on the application concerning prior losses. Miller indicated that he had suffered a fire loss of $2000.00 when a shed on his Ruffsdale property burned down. Accordingly, Metropolitan changed the response on the application regarding losses from "no" to "yes" and listed the loss date,
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type and amount. Under Metropolitan's underwriting rules, the loss described by Miller was not material to Metropolitan's acceptance of the risk insured. Miller's homeowners policy with Metropolitan became effective on December 18, 1984.
In May, 1985, Miller submitted a claim for fire loss as a result of damages to an out-building with an estimated loss of $8000.00. In conducting a claims investigation of this incident, Metropolitan discovered that Miller had falsely reported that he had not had any losses in the previous five (5) years. Metropolitan learned that Miller had experienced three previous fire losses under his prior homeowners policy. Miller filed claims for fire losses in December, 1982 for an estimated loss of $3500.00; a claim in July, 1984 for a loss in excess of $3800.00; and a claim in August, 1984 for a loss in excess of $10,000.00. These prior fire losses were material to acceptance of the risk under Metropolitan's underwriting standards.
Metropolitan notified Miller by letter dated November 1, 1985 that his homeowners policy was rescinded effective December 18, 1984, i.e. ab initio . This notice failed to advise Miller: of any procedures to be followed in prosecuting an appeal; of a right to request a review of Metropolitan's action by the Commissioner; of his possible eligibility of insurance from the Fair Plan; or of a day on which the termination of his homeowners policy would be effective not less than thirty (30) days from the notice's date of delivery or mailing.
Miller requested review by the Insurance Department (Department) to determine whether Metropolitan's rescission of the policy was in compliance with Act 205. The Department conducted an investigation and determined that Metropolitan was, in fact, in violation of Act 205 by rescinding coverage ab initio. Metropolitan requested a formal administrative hearing on the
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matter which was held on June 10, 1986. Thereafter, the Commissioner issued his order and adjudication which affirmed the decision of the Department. Metropolitan petitions for review of that order.
The decision of the Commissioner was based upon his conclusion that Act 205 provides the exclusive means by which an insurer may terminate a homeowners insurance policy which has been in effect for more than sixty (60) days, superseding all other methods of termination. Because Act 205 is silent with regard to rescission of a homeowners policy, the Commissioner concluded that Metropolitan had violated the Act by improperly rescinding Miller's policy. Therefore, the Commissioner ordered Metropolitan to cease and desist from rescinding Miller's policy and to reinstate the policy. The issue before this Court is whether Act 205 supersedes all methods of termination of homeowners insurance not contained in the Act.
This Court addressed a similar issue with respect to an insurer's rescission of an automobile insurance policy in its recent decision in Metropolitan Property & Liability Insurance Company v. Pennsylvania Insurance Commissioner, 97 Pa. Commonwealth Ct. 219, 509 A.2d 1346 (1986), affirmed in a plurality opinion by our Supreme Court at Pa. , 535 A.2d 588 (1987). An examination of the sound reasoning applied in our decision in that case will aid in our analysis of the issue at hand.
In Metropolitan, we held that the General Assembly, in enacting what is commonly known as Act 78,*fn2 intended that it supersede all common law rights and
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remedies and that, therefore, the insurer was able to terminate an automobile insurance policy solely by the means provided under that statute. In reaching this conclusion, we noted that Act 78 was void of explicit language which indicated that the statute was meant to supersede the common law or previous statutory methods of termination.
Such is the case with Act 205, which is before the scrutiny of this Court today. It contains no specific language indicating that all common law or previous statutory remedies of termination are superseded by the Act. Therefore, as in Metropolitan, we must, where the language of the statute is not explicit, ascertain and effectuate the intention of the General Assembly by applying our rules of statutory construction. See Section 1921(a) of the ...