Appeal from Order of the Court of Common Pleas, Civil Division, of Chester County, No. 84-08568.
James C. Sargent, Jr., West Chester, for appellant.
Dominic T. Marrone, West Chester, for appellees.
Rowley, Wieand and Beck, JJ.
[ 384 Pa. Super. Page 101]
The issue in this appeal is whether a life insurance company can maintain an action against former officers and directors of the company under Section 406.1(r) of The Insurance Company Law of 1921, as amended, 40 P.S. § 506.1(r), for losses caused by investments made in violation of the statute. The trial court held that the provisions of section 406.1(r) did not create a separate cause of action and entered summary judgment in favor of the former officers and directors. After careful consideration, we reverse.
Prior to January, 1984, Steve and Violet Ondek, husband and wife, owned a controlling interest in Corporate Investment Company, the parent corporation of Corporate Life Insurance Company. In their capacity as officers and directors,
[ 384 Pa. Super. Page 102]
the Ondeks purchased certain investments on behalf of the life insurance company which, it is alleged, were in violation of Section 406.1(g) of the Act, 40 P.S. § 506.1(g).*fn1 In January, 1984, Donald Goebert purchased from the Ondeks a controlling interest in the parent corporation and thereafter became a director of the parent corporation and its subsidiary, Corporate Life Insurance Company. According to the averments of the complaint, Goebert became aware thereafter that the life insurance company had made unauthorized investments. Consequently, it is alleged, the caused almost all of the life insurance company's investments
[ 384 Pa. Super. Page 103]
to be liquidated. In so doing, the insurance company allegedly realized nine hundred thousand ($900,000.00) dollars less than it had paid for the same investments. Goebert then caused the instant action to be filed on behalf of himself, the parent corporation, and the life insurance company to recover from the Ondeks the alleged loss. The trial court dismissed Goebert and the parent corporation as plaintiffs, and the action continued in the name of Corporate Life Insurance Company.
The plaintiff insurance company expressly disavows any claim against the Ondeks under the Business Corporation Law or at common law for breach of the duties owed by an officer or director to his or her corporation. Instead, the insurance company's claim is based solely on an alleged violation of Section 406.1(g) of the Insurance Company Law of 1921, as amended, 40 ...