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Allstate Life Insurance Company v. Commonwealth of Pennsylvania


August 2, 2012


Appeal from the Order of Commonwealth Court at No. 89 FR 1997 dated 10-15- 2010 overruling the exceptions and vacating the resettlement order of 11-19-: 1996 and remanding to the Board of Finance & Revenue at No. 9545550.

The opinion of the court was delivered by: Mr. Justice Baer

ARGUED: November 29, 2011


This Court should not disregard the plain language of a statute merely because we think the legislature meant something different. Similarly, we should exercise the necessary restraint to decline to fill an omission in a statute when the plain language of that statute is otherwise clear and does not require supplementation. Respectfully, when statutes are clear and unambiguous, this Court is bound by the words on the page. Thus, in our role as a reviewing court, it is inappropriate to theorize what the legislature intended when a statute plainly says what it says.

These are not just rules that jurists follow when confronted with a statutory challenge; these are the foundation upon which the guiding principles of statutory construction are built. In our respectful view, the Opinion in Support of Affirmance ("OISA") disregards these precepts by finding portions of the Pennsylvania Guaranty Association Act, 40 P.S. §§ 991.1701, et seq. ("Guaranty Act"), ambiguous because of an omitted term. Instead, for the reasons that follow, we would find that the plain language of the Guaranty Act is unambiguous and controls, reverse the order of the Commonwealth Court, and remand this appeal for further proceedings.

In 1992, amid growing concern regarding the insolvency of insurance companies, the General Assembly passed wide-ranging amendments to the Insurance Act of 1921. As part of those amendments, the legislature formed the Pennsylvania Life and Health Insurance Guaranty Association ("Guaranty Association") to protect Pennsylvania insureds "against failure in the performance of contractual obligations, under life and health insurance policies and annuity contracts . . . because of the impairment or insolvency of the member insurer that issued the policies or contracts." 40 P.S. § 991.1701; see also id. § 991.1704(a) (entitled "Creation of Association"). Insurance companies doing business in Pennsylvania, i.e. "member insurers," pay assessments to the Guaranty Association, which, in turn, uses the money collected through those assessments "to pay benefits and to continue coverages" should a member insurer become insolvent. Id. § 991.1701. This appeal concerns a provision of these amendments to the Insurance Act which permits member insurers, such as Appellee, Allstate Life Insurance Company, to recoup payments made to the Guaranty Association.

Under Section 991.1704, the Association maintains two accounts into which member insurers pay their assessments: life insurance and annuity, and health insurance. Id. § 991.1704(a)(1)-(2). The life insurance and annuity account is further broken into three separate sub-accounts: life insurance, annuity, and unallocated annuity. Id. § 991.1704(a)(1)(i)-(iii).*fn1 These assessments are collected based upon the premiums received by member insurers on account of "business in this Commonwealth." Id. § 991.1707(c)(2). For the life insurance and annuity accounts and subaccounts, the Guaranty Association assesses each member insurance at a rate of no more than two percent of premiums received. Id. § 991.1707(e)(1).

The heart of this matter lies in the next relevant statutory provision, Section 991.1711, which permits a member insurer to offset its Section 991.1707 assessment by twenty percent annually over the five-year span immediately following the payment of the assessment. Specifically, Section 991.1711 provides, in relevant part:

(a) A member insurer may offset against its premium tax liability to this Commonwealth a proportionate part of the assessments described in section 1701 to the extent of twenty per centum (20%) of the amount of such assessment for each of the five (5) calendar years following the year in which such assessment was paid. In the event a member insurer should cease doing business, all uncredited assessments may be credited against its premium tax liability for the year it ceases doing business.

(b) The proportionate part of an assessment which may be offset against a member company's premium tax liability to the Commonwealth shall be determined according to a fraction of which the denominator is the total premiums received by the company during the calendar year immediately preceding the year in which the assessment is paid and the numerator is that portion of the premiums received during such year on account of policies of life or health and accident insurance in which the premium rates are guaranteed during the continuance of the respective policies without a right exercisable by the company to increase said premium rates.

Id. § 991.1711(a)-(b) (emphasis added).

As noted by the parties to this appeal, the proportionate part fraction described in subsection (b) is calculated separately for each account and subaccount. The result of the calculation is found by dividing the amount of guaranteed premiums a member insurer collects "on accounts of policies of life or health and accident insurance" by the total premiums received for that account or subaccount.*fn2 This case concerns exclusively whether annuities are included in the numerator of the proportionate part fraction, despite that the above-emphasized language of subsection (b) does not reference annuities. Practically, because premiums for annuities are always guaranteed, if annuities are not included, member insurers will not receive any offset for assessments related to annuities; conversely, if annuities are included, insurers will receive the maximum offset for all annuities-related assessments.

The OISA concludes that annuities are included in the numerator as defined by subsection (b). In so doing, it finds subsection (b) to be ambiguous and thus engages in statutory interpretation to reach this holding. In our view, the plain language of subsection (b) is unambiguous and controls; thus, a statutory interpretation analysis is improper.

In justifying the venture into statutory interpretation, however, the OISA curiously determines that the alleged ambiguity in subsection (b) is due to "a disparity between what the statute says is the desired result and a flaw in the methodology that would prevent accomplishment of that result." OISA Slip Op. at 7. This logic, however, ignores the plain, statutory language in order to pursue the alleged spirit of the statute and a desired result, which, of course, this Court should not do. Koken v. Reliance Ins. Co., 893 A.2d 70, 82 (Pa. 2006); 1 Pa.C.S. § 1921(b) ("When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.").

Here, it may seem harsh that member insurers are required to pay assessments on annuity premiums and not receive a twenty percent offset on those assessments, when the offset is available for life, health, and accident insurances. Nonetheless, the plain language of subsection (b) does not include annuities in the numerator of the proportionate part fraction. The OISA disregards language that is present, arguing that if the General Assembly "intended to exclude recoupment of annuity assessments, it would not have referenced § 991.1711 in § 991.1707 in the manner that it did." OISA Slip Op. at 7-8.

Such a justification for delving into statutory interpretation in the face of plain language, in our respectful view, sets a dangerous precedent. The OISA cites to what it believes the General Assembly's intent was when enacting the Guaranty Act and fashioning Sections 991.1707 and 991.1711 in 1992. However, "only when the words of a statute are ambiguous should a court seek to ascertain the intent of the General Assembly through consideration of statutory construction factors." Commonwealth v. Davidson, 938 A.2d 198, 216-17 (Pa. 2007). The OISA seemingly acts in the reverse: it examines the alleged intent to rationalize the disregard of the statute's clear language and plain meaning.

Moreover, this Court should not "supply omissions in a statute, especially where it appears that the matter may have been intentionally omitted. It makes no difference that the omission resulted from inadvertence, or because the case in question was not foreseen or contemplated." Commonwealth v. Shafer, 202 A.2d 308, 312 (Pa. 1964); see also Mohamed v. Commonwealth, Dep't of Transp., Bureau of Motor Vehicles, 40 A.3d 1186, 1193 (Pa. 2012) (noting that a lack of symmetry between two statutes does not create a latent ambiguity that this Court must resolve through the rules of statutory interpretation). Simply put, this Court may not insert terms into a statute, which plainly are not present. It is perilous indeed if this Court countenances a mechanism by which we can forego the "best indication of legislative intent," i.e. the plain language of a statute, simply because, in a court's view, the statutory design may be flawed. See e.g. Commonwealth v. Shiffler, 879 A.2d 185, 189 (Pa. 2005). It could well be that the General Assembly purposefully kept annuities out of the numerator of the proportionate part factor.*fn3 With the plain language of Section 991.1711(b) as our benchmark, this Court should come to no other conclusion.

Accordingly, we would hold that based upon the plain language of Section 991.1711(b), guaranteed premiums from annuities are not included in the numerator of the proportionate part fraction. Thus, while member insurers are unquestionably subject to an assessment on all annuity premiums, the mathematical calculation of the available offset of any such annuity, under the unambiguous language of Section 991.1711(b), is zero. Based upon this plain and unambiguous language, we would reverse the order of the Commonwealth Court.*fn4

Mr. Justice Saylor and Madame Justice Todd join this opinion.

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