decided: April 18, 1988.
CONSTANCE B. FOSTER, INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, PLAINTIFF
WESTMORELAND CASUALTY COMPANY, DEFENDANT
Original Jurisdiction in the case of Constance B. Foster, Insurance Commissioner of the Commonwealth of Pennsylvania v. Westmoreland Casualty Company.
Jean M. Callihan, Assistant Counsel, with her, Terrance J. Fitzpatrick, Chief of Litigation, Linda J. Wells, Chief Counsel, for plaintiff.
Wayne M. Pecht, Keefer, Wood, Allen & Rahal, for defendant.
President Judge Crumlish, Jr., and Judges McGinley and Smith, sitting as a panel of three. Opinion by President Judge Crumlish, Jr. Judge Smith concurs in the result only.
[ 115 Pa. Commw. Page 394]
The Insurance Commissioner has filed a petition for liquidation in our original jurisdiction*fn1 seeking an involuntary dissolution of Westmoreland Casualty Company and a formal liquidation order pursuant to Article V of the Insurance Department Act of 1921 (Act).*fn2 Westmoreland has filed preliminary objections which are now before us.
An independent actuarial firm analyzed Westmoreland's financial condition and found significant reserve deficiencies and operating losses which threatened its financial integrity. Thereafter, a formal agreement was reached between the Insurance Department and Westmoreland under which Westmoreland would be permitted to continue operations provided certain written commitments for funds were obtained. Westmoreland agreed to waive its right to contest a liquidation petition if it did not obtain these funds. Despite these events, two top Westmoreland officers were issued bonuses in excess of $30,000 and guaranteed $100,000 salaries.
[ 115 Pa. Commw. Page 395]
When the deadline for obtaining the funds expired, the Commissioner ordered Westmoreland to suspend business. These facts, as averred in the Commissioner's petition, constitute the basis for the requested dissolution and liquidation of Westmoreland.
Westmoreland's initial preliminary objection alleges that the instant petition lacks specificity because it fails to identify what acts constitute grounds for liquidation. This contention is clearly without merit.
Section 520(a) of the Act, 40 P.S. § 221.20(a), provides:
(a) The commissioner may apply by petition to the Commonwealth Court for an order directing him to liquidate a domestic insurer, domiciled in this Commonwealth, alleging that the insurer has committed one or more acts which may constitute grounds for liquidation as set forth in sections 514 and 519 of this article.
The petition in question not only avers insolvency and hazardous financial condition as general grounds for liquidation*fn3 but it also refers specifically to the results of the investigation conducted by the independent actuarial firm as well as the allegedly improper actions of key company officers. Such averments clearly satisfy the requirements of Section 520(a).
Westmoreland also preliminarily objects to the filing of a liquidation petition prior to an administrative hearing.
[ 115 Pa. Commw. Page 396]
Westmoreland contends that the petition's averments, as well as the entry of the suspension order, constitute adjudications thereby mandating a hearing pursuant to the Administrative Agency Law.*fn4 Westmoreland also relies on Section 520(f) of the Act as support for the alleged necessity of such hearing. Again, we disagree.
Section 520(f), 40 P.S. § 221.20(f), states:
(f) At the time of petitioning for an order of liquidation, or at any time thereafter, the commissioner, after making appropriate findings of an insurer's insolvency, following an administrative hearing, may petition the court for a judicial declaration of such insolvency. After providing such notice and hearing as are permitted for appeals from administrative agencies, the court may make the declaration.
We interpret this section to provide for an administrative hearing and appropriate findings only where the Commissioner requests a judicial declaration of insolvency in conjunction with a pending liquidation proceeding. In contrast, Section 520(a) and (b)*fn5 state that the Commissioner may directly petition this Court for a liquidation order pursuant to which court hearings would then be held.*fn6 The distinction as to the form of proceeding is clearly delineated in Section 520 and, as such, is not to be disregarded.*fn7
[ 115 Pa. Commw. Page 397]
Lastly, we reject Westmoreland's contention that the averments contained in the liquidation petition, whether considered alone or in combination with the suspension order, constitute in any respect an adjudication subject to the notice and hearing provisions of the Administrative Agency Law. Westmoreland misapprehends the fundamental distinction between mere averments which may or may not be credited by a fact-finding body and a final agency determination which has a direct and substantial effect on personal or property rights. We also note that the suspension order entered in this matter was properly accompanied by a hearing notice. Although the record does not disclose why a hearing, twice continued, was not held, it is apparent that Westmoreland has yet to avail itself of that right.
Accordingly, we overrule the preliminary objections.
Defendant's preliminary objections are overruled. We direct defendant to file responsive pleadings within thirty (30) days of the date of this Order.
Preliminary objections overruled.