Skotnicki, G., Aplt. v. Insurance Department

[J-76-2017]
IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
GREGORY G. SKOTNICKI, : No. 12 MAP 2017
:
Appellant : Appeal from the Order of the
: Commonwealth Court at No. 156 CD
: 2015, dated August 17, 2016 Affirming
v. : the PA Insurance Commissioner's
: Adjudication and Order dated January
: 15, 2015 at No. P14-07-019.
INSURANCE DEPARTMENT, :
: SUBMITTED: August 25, 2017
Appellee :
OPINION
JUSTICE BAER DECIDED: December 19, 2017
Pursuant to the regulations that implement The Unfair Insurance Practices Act
(“Act 205”), 40 P.S. §§ 1171.1-1171.15, an insured can appeal to the Insurance
Commissioner (“Commissioner”) of Appellee Pennsylvania Insurance Department
(“Department”) when an insurer decides to cancel or not renew the insured’s
homeowners’ insurance policy.1 31 Pa.Code § 59.7. When an insured pursues such an
appeal, the Commissioner, through the Department’s Bureau of Consumer Services
(“Consumer Services”), initially investigates the matter and issues an investigative
1
Act 205 “prohibits persons from engaging in an unfair method of competition or an
unfair or deceptive act or practice in the business of insurance.” Toy v. Metro. Life Ins.
Co., 928 A.2d 186, 191 n.6 (Pa. 2007) (citing 40 P.S. § 1171.4). The Commissioner
enforces Act 205 and “is empowered to impose administrative and civil penalties and
injunctions upon insurers who violate its provisions.” Id. The regulations that implement
Act 205 can be found at 31 Pa.Code § 59.1-59.13. For ease of discussion, we will refer
to these regulations generally as “the Regulations.”
report to the parties. 31 Pa.Code § 59.7(b) & (c). The parties then can submit written
comments to the Commissioner or request a formal administrative hearing. Id. at
§ 59.7(c) & (d). Ultimately, the Commissioner disposes of the appeal by entering an
order. Id. at § 59.7(f).
This matter requires the Court to consider whether, in the context of such an
appeal, an insurer is collaterally estopped from litigating issues that were previously
discussed in an investigative report that Consumer Services supplied in an earlier and
separate appeal involving the same parties, when the Commissioner never entered a
final order in the earlier appeal. For the reasons that follow, we hold that, for purposes
of the doctrine of collateral estoppel, an investigative report does not constitute a final
adjudication on the merits of any issue. Accordingly, an insurer is not collaterally
estopped from litigating issues in the scenario described above. Because the
Commonwealth Court reached the proper result in this case, we affirm that court’s
order.
The background underlying this matter can be summarized as follows. 2
Appellant Gregory G. Skotnicki (“Skotnicki”) owns a home which he has insured since
2003 with a policy he purchased from Phoenix Insurance Company (“Phoenix”).3 In
July of 2013, Skotnicki’s dog bit a neighbor. Phoenix accepted liability for the
neighbor’s claim and paid $42,500 in damages.
2
At the outset, it is worth noting that the regulation which governs the procedure for
appealing an insurer’s decision to cancel or not renew a policy is rather straight-forward.
In this matter, two such appeals occurred, but they did not proceed in a way that
comports with the regulation. The parties’ arguments, as well as the decisions of the
Commissioner and Commonwealth Court, align with the appeal process that actually
occurred in this case, not with the procedure contemplated by the regulation, which
makes it challenging to provide a comprehensible summary of the background
underlying this matter.
3
Skotnicki has proceeded pro se throughout the litigation of this matter. He continues
to represent himself in this appeal.
[J-76-2017] - 2
In a notice dated April 22, 2014, Phoenix informed Skotnicki that his
homeowners’ policy would not be renewed effective May 29, 2014. The notice
explained the reason for non-renewal as follows: “There is a substantial change or
increase in hazard in the risk assumed by the company subsequent to the date the
policy was first issued, as described below: There is an animal or pet that has bitten or
injured.” N.T., 9/30/2014, Exhibit S1. Skotnicki appealed the non-renewal, requesting
that the Commissioner review the matter pursuant to the Regulations.
On May 28, 2014, Consumer Services issued an “Investigation Report Order.”4
In the report, it found that Phoenix violated Act 205, declaring, in pertinent part, as
follows:
It is our finding that the company, by its actions, is in violation of Act
205. The consumer provides a narrative explaining how this dog bite
occurred. Phoenix did not comment on the circumstances surrounding
this dog bite in the response dated May 12, 2014. Our Department
requested the company’s narrative and details of the claim on May 21,
2014 and to date we have no record of a response.
Based on the insured’s narrative this appears to have been a
provoked dog bite incident[.] As the company has not justifiably proven
any increase in hazard, the company is directed to continue the policy with
no lapse in coverage.
N.T., 9/30/2014, Exhibit S2, at 1.
The report also informed Phoenix that, if it wished to dispute the determination,
then Phoenix could request a formal administrative hearing within 10 days of the
issuance of the report. Id. at 2; see 31 Pa.Code § 59.7 (c) & (d) (stating that, if the
insurer or insured desires a formal administrative hearing, such request shall be made
4
It is unclear why Consumer Services characterized the report as an order. As
previously noted, the Regulations require the Commissioner initially to respond to an
insured’s appeal by issuing an “investigative report,” not an order. See 31 Pa.Code
§ 59.7(c) (explaining that “[u]pon completion of the investigation, a copy of the
investigative report will be supplied to both the insured and the insurer”). We further
observe that the investigative process is delegated to Consumer Services.
[J-76-2017] - 3
within 10 days of receipt of the investigative report). The footer on the second page of
the report noted, “[B]e advised that this communication does not constitute an
adjudication under the Administrative Agency Law.” N.T., 9/30/2014, Exhibit S2, at 2.
Phoenix requested a formal hearing with the Commissioner, and Melinda Fisher
Kaufman was appointed to act as the presiding officer. However, a hearing did not
occur. Instead, on June 19, 2014, Presiding Officer Kaufman entered an “order” stating
that Phoenix requested to withdraw the appeal.5 Presiding Officer Kaufman’s “order”
granted that request and further noted that the matter would be marked closed and
discontinued.6 No formal order thereafter was entered by the Commissioner.
On June 18, 2014, Phoenix provided Skotnicki with a second notice, informing
him that his homeowners’ policy would be cancelled effective July 25, 2014 (as opposed
to non-renewal of the policy, which was the gist of the initial proceedings between the
parties).7 This notice explained the reason for cancellation as follows: “There is a
substantial change or increase in hazard in the risk assumed by the company
subsequent to the date the policy was first issued, as described below: There is an
5
The Regulations do not expressly grant presiding officers the authority to enter orders
or allow insurers to withdraw appeals. Instead, the Regulations contemplate that only
the Commissioner can enter final orders disposing of these appeals. See 31 Pa.Code
§ 59.1(f) (“Upon completion of a hearing, if held, or upon receipt of the written
comments, the Insurance Commissioner will issue an Order in conformance with his
findings.”); see also id. at § 59.7(e)(2) (explaining that, if a hearing is held, it will be
recorded and that “[s]uch tape will be retained for a period of 90 days following issuance
of the Insurance Commissioner’s final order in the case”).
6
A representative from Phoenix would later explain that Phoenix purported to withdraw
the appeal because it recognized that its notice of non-renewal was insufficient, as it
made no reference to the fact that Skotnicki’s dog had bitten the neighbor without
provocation. N.T., 9/30/2014, at 39.
7
In the interim, for reasons that do not impact this appeal, Phoenix did not extend
Skotnicki’s original policy; rather, it provided him with a new policy. The parties do not,
however, appear to dispute that a continuation in coverage occurred.
[J-76-2017] - 4
animal or pet on the residence premises that has exhibited dangerous propensities by
biting a person without provocation.” N.T., 9/30/2014, Exhibit T-1. Skotnicki again
appealed, requesting the Commissioner’s review of the cancellation of his policy.
On July 14, 2014, Consumer Services issued an investigative report,8 addressing
Skotnicki’s second appeal which challenged Phoenix’s cancellation of his policy. In this
report, Consumer Services stated that, following its investigation, it determined that
Phoenix met the requirements of Act 205 and that Phoenix, therefore, could cancel the
policy. Investigative Report, 7/14/2014, at 1. The report informed Skotnicki that he
could request a formal administrative hearing. Id. Further, like the report issued in
response to Skotnicki’s appeal involving the non-renewal of his policy, this report
contained a footer stating, “[B]e advised that this communication does not constitute an
adjudication under the Administrative Agency Law.” Id. at 2.
Skotnicki requested a formal administrative hearing, and the Commissioner again
appointed Melinda Fisher Kaufman as the presiding officer. The hearing took place on
September 30, 2014. At the hearing and in his subsequently submitted brief, Skotnicki
presented several arguments in support of his position that Phoenix wrongfully
cancelled his homeowners’ policy. Relevant to the appeal currently before this Court,
Skotnicki contended that the doctrine of collateral estoppel barred Phoenix from
relitigating whether: (1) Phoenix violated Act 205; (2) the dog bite was provoked; and
(3) an increase in hazard occurred. Skotnicki’s Memorandum in Support of his Appeal
for the Wrongful Termination of his Homeowners’ Insurance Policy (“Skotnicki
Memorandum”), 12/1/2014, at 9.
Skotnicki pointed out that the elements of collateral estoppel are:
8
Interestingly, Consumer Services labeled this report as an “Investigative Report,” not
an “Investigative Report Order.” See, supra, n.4.
[J-76-2017] - 5
(1) the issue decided in the prior adjudication was identical with the one
presented in the later action; (2) there was a final judgment on the merits;
(3) the party against whom the plea is asserted was a party or in privity
with a party to the prior adjudication; and (4) the party against whom it is
asserted has had a full and fair opportunity to litigate the issue in question
in a prior action.
Skotnicki Memorandum at 9 (quoting Safeguard Mut. Ins. Co. v. Williams, 345 A.2d 664,
668 (Pa. 1975)). In arguing that all of the elements of collateral estoppel were met in
this case, Skotnicki insisted that Phoenix had a full and fair opportunity to litigate all of
the issues that it raised in this matter during the litigation of Skotnicki’s first appeal from
Phoenix’s notice of non-renewal. Id. According to Skotnicki, Consumer Service’s May
18, 2014 “Investigative Report Order” became a final adjudication and judgment on the
merits when Presiding Officer Kaufman entered her order on June 19, 2014, which
granted Phoenix’s motion to withdraw the appeal of the non-renewal of his policy. Id. at
9-10.
Regarding the merits of Phoenix’s decision to cancel Skotnicki’s policy, the
parties presented competing evidence at the hearing as to whether the dog bite was
provoked. In support of his position that the dog bite was provoked, Skotnicki presented
testimony from his wife, as well as his own testimony. In support of its position that the
dog bite was unprovoked, Phoenix presented testimony from the claims adjuster who
handled Skotnicki’s dog-bite claim and from one of its senior product specialists.
On January 15, 2015, the Commissioner entered an “Adjudication and Order.”
See 31 Pa.Code § 59.7(f) (“Upon completion of a hearing, if held, or upon receipt of the
written comments, the Insurance Commissioner will issue an Order in conformance with
his findings.”). Relevant to Skotnicki’s assertion of the collateral estoppel doctrine, the
Commissioner initially stated that, by regulation, the “formal record” in this setting is
defined as:
The filings and submittals in a matter or proceeding, a notice or agency
order initiating the matter or proceeding, and if a hearing is held, the
[J-76-2017] - 6
following: the designation of the presiding officer, transcript of hearing,
exhibits received in evidence, exhibits offered but not received in
evidence, offers of proof, motions, stipulations, subpoenas, proofs of
service, references to the agency head and determinations made by the
agency head thereon, certifications to the agency head and anything else
upon which action of the presiding officer or the agency head may be
based; but not including a proposed testimony or exhibits not offered or
received in evidence.
Adjudication and Order, 1/15/2015, at 10-11 (quoting 1 Pa.Code § 31.3). The
Commissioner then emphasized that “the administrative hearing held in response to an
appeal from an Investigative Report is a de novo proceeding.”9 Id. at 11.
In explaining its reasons for rejecting Skotnicki’s collateral estoppel claim, the
Commissioner concluded that Consumer Services’ May 28, 2014 “Investigative Report
Order” did not create a formal record, did not constitute a separate cause of action in
which any issues were litigated, and did not result in a final judgment on the merits. Id.
The Commissioner further suggested that, even though the April 22, 2014 notice of non-
renewal and the June 18, 2014 notice of cancelation contain similar language, “the
review of the first does not impact review of the latter.” Id. Thus, in the Commissioner’s
view, Skotnicki failed to establish that collateral estoppel applied to his second appeal.
Id. Regarding the merits of the appeal, it is sufficient to note that the Commissioner
determined that the dog bite was unprovoked and, therefore, that Phoenix’s cancellation
of Skotnicki’s homeowners’ policy did not violate Act 205.
Skotnicki filed a petition for review in the Commonwealth Court. In that petition,
Skotnicki, inter alia, renewed his claim regarding the doctrine of collateral estoppel.
Skotnicki maintained that the Commissioner’s holding that no formal record was created
9
The Regulations make no mention of parties being able “to appeal” from an
investigative report. Rather, according to the Regulations, after the parties receive the
investigative report, they can submit comments to the Commissioner or request a formal
administrative hearing. 31 Pa.Code § 59.7(c) & (d). The Commissioner ultimately must
dispose of the matter by order. Id. at § 59.7(f).
[J-76-2017] - 7
in the first appeal from the notice of non-renewal is belied by the facts and law. Petition
for Review, 2/11/2015, at 6. Skotnicki also took the position that, by withdrawing the
appeal before a formal hearing occurred, Phoenix agreed to be bound by the terms and
conditions of the May 28, 2014 “Investigative Report Order,” which concluded that the
dog bite incident was provoked and that Skotnicki’s homeowners’ policy should continue
to provide coverage without a lapse (i.e., Phoenix’s non-renewal of the policy was
disallowed). Id.
Skotnicki later filed a brief in support of his petition for review further developing
his argument that the Commissioner erred by rejecting his claim regarding the doctrine
of collateral estoppel. Skotnicki pointed out that the General Rules of Administrative
Practice and Procedure (“GRAPP”), 1 Pa.Code §§ 31.1-35.251, defines “Adjudication”
as an “order, decree, decision, determination or ruling by an agency affecting personal
or property rights, privileges, immunities, duties, liabilities or obligations of the parties to
the proceeding in which the adjudication is made.” Skotnicki’s Amended Brief to the
Commonwealth Court at 17 (quoting 1 Pa.Code § 31.3). Skotnicki contended that this
definition bolsters his position that everything the parties filed in his first appeal from the
notice of non-renewal created a record from which Phoenix could have fully exercised
its rights; yet, according to Skotnicki, Phoenix chose to withdraw the appeal and allow
the May 28, 2014 “Investigative Report Order” to stand “not by itself but by the June 19,
2014 Order issued by the Presiding Officer.” Id. at 17.
In its responsive brief, the Department insisted that the essential elements of
collateral estoppel were not met. First, the Department asserted that the initial
proceeding involved the non-renewal of a policy and that the second proceeding
concerned a different matter - cancellation of a policy. Department’s Commonwealth
Court Brief at 24-26. Second, the Department suggested that neither the May 28, 2014
[J-76-2017] - 8
“Investigative Report Order” nor Presiding Officer Kaufman’s June 19, 2014 order
constituted a final judgment on the merits. Id. at 26.
The Commonwealth Court affirmed the Commissioner’s Adjudication and Order,
rejecting Skotnicki’s collateral estoppel claim and concluding that the Commissioner’s
decision on the merits was correct. Skotnicki v. Ins. Dep’t, 146 A.3d 271 (Pa. Cmwlth.
2016). Regarding the issue of collateral estoppel, the court began its analysis by
explaining that, pursuant to 31 Pa.Code § 59.7(e)(4),10 the Department’s formal
administrative hearings are de novo. Id. at 283. The court then asserted that “nothing
in the Department’s Regulations or GRAPP makes the Commissioner bound solely by
the May 28, 2014 Investigative Report Order.” Id.
Next, the Commonwealth Court concluded that the doctrine of collateral estoppel
does not apply in this case. After reiterating the elements of that doctrine, the court
stated that it is undisputed that both reviews conducted by Consumer Services involved
Phoenix and Skotnicki and that both parties had a full and fair opportunity to litigate
Phoenix’s termination of homeowners’ coverage following the July 3, 2013 dog bite
incident. However, according to the court, “the decisions differed in that one action
progressed only through a first-level [Consumer Services’] review, while the other was
subjected to a de novo hearing at which additional evidence was accepted.” Id.
(footnote omitted).
The Commonwealth Court further highlighted that, in the May 28, 2014
“Investigative Report Order,” Consumer Services made clear that limited information
informed its decision that the dog bite was provoked. Id. at 283-84. Thus, the court
10
Subsection 59.7(e)(4) of the Regulations provides, “All relevant evidence of
reasonable probative value will be admitted into the record of the proceeding and
reasonable examination and cross-examination shall be permitted.” 31 Pa.Code
§ 59.7(e)(4).
[J-76-2017] - 9
concluded, collateral estoppel did not bar the Commissioner from reaching a different
result after a formal hearing, which included additional evidence and credibility
determinations. Id. at 284.
In closing, the Commonwealth Court opined that, contrary to Skotnicki’s
contention that the May 28, 2014 “Investigative Report Order” was an adjudication,
Consumer Services clearly stated therein: “[B]e advised that this communication does
not constitute an adjudication under the Administrative Agency Law.” Id. The court
asserted, “Certainly, if the Commissioner was bound by [Consumer Services’]
investigative reports, the second-level de novo review afforded by Section 59.7(e)(4) of
the Department’s Regulations would have little value. Accordingly, Skotnicki’s
argument cannot stand.” Id.
Skotnicki subsequently filed a petition for allowance of appeal, which this Court
granted, limited to the following issue: “Whether the Commonwealth Court erred in its
conclusion that the Department is not bound by the May 28, 2014 Department
Investigative Report Order directing [Phoenix] to continue [Skotnicki’s] coverage without
a lapse in coverage?” Skotnicki v. Ins. Dep’t, 169 A.36 24 (Pa. 2017).
In his brief to this Court, Skotnicki contends that, in concluding that the
Commissioner was not bound by Consumer Services’ initial “Investigative Report
Order,” the Commonwealth Court overlooked that this report was part of the “formal
record” in the appeal from the notice of non-renewal. Skotnicki’s Brief at 9-10. Citing to
1 Pa.Code 31.3, Skotnicki submits that a formal administrative hearing is unnecessary
to establish a formal record for purposes of the Commissioner’s review of an insurer’s
decision not to renew a policy. Id. at 10. Skotnicki further suggests that the May 28,
2014 “Investigative Report Order” was an “adjudication,” as that term is defined in
GRAPP, regardless of the fact that the report contains language stating that it does not
constitute an adjudication under the Administrative Agency Law. Skotnicki maintains
[J-76-2017] - 10
that, despite this language, investigative reports clearly impact parties’ substantive
rights and that parties are afforded due process to protect those rights. Id. at 10-11. In
Skotnicki’s view, because Phoenix was afforded due process leading up to the issuance
of the “Investigative Report Order,” Phoenix was bound by the findings of the report
when it abandoned the initial appeal. Id. at 11.
Next, Skotnicki contends that the Commonwealth Court erred by holding that the
doctrine of collateral estoppel does not apply in this case because the court’s
conclusion was based on the mistaken belief that Phoenix did not appeal the initial
“Investigative Report Order,” dated May 28, 2014, to the Commissioner. Id. at 11.
According to Skotnicki, Phoenix’s appeal, in seeking a formal hearing, of the
“Investigative Report Order” made the report a final adjudication when Phoenix
withdrew the appeal. Id. at 11-12. Skotnicki suggests that Phoenix “had a right to a
formal administrative hearing and it took advantage of that right when it appealed the
[‘Investigative Report Order’].” Id. at 12. Skotnicki asserts that, because Phoenix
decided to forgo that hearing, the matter should have been decided on the basis of the
parties’ written comments and the investigative report. Id. at 12 (quoting 31 Pa.Code
§ 59.7(d) (stating that, if no formal hearing is held, then “the matter will be decided on
the basis of the written comments and investigative report”)).
Lastly, Skotnicki renews his argument that all of the traditional elements of the
doctrine of collateral estoppel were met in this case. Specifically, Skotnicki maintains
that: (1) the same issue of fact, i.e., whether the dog bite was provoked, was litigated in
both appeals; (2) the parties were identical in both appeals; (3) the initial appeal ended
with a final judgment on the merits of the issue of fact; and (4) Phoenix had a full and
fair opportunity to litigate the merits of that issue. Id. at 12-13. For these reasons,
Skotnicki asks this Court to reverse the Commonwealth Court’s order.
[J-76-2017] - 11
In its brief to this Court, the Department explains that Consumer Services’ first-
level review of an insured’s appeal results in an investigative report. Department’s Brief
at 8-10. According to the Department, regardless of the outcome of this report, the
Commissioner must ultimately decide the merits of the insured’s appeal de novo when a
hearing is requested and occurs. In other words, the Commissioner owes no deference
to Consumer Services’ findings and conclusions when a hearing takes place. Id. at 10-
13. Indeed, the Department asserts that Consumer Services does not create a formal
record during its review and that its reports specifically state that they do not constitute
adjudications. Id. at 14.
The Department next avers that the Commonwealth Court correctly concluded
that collateral estoppel does not apply to Consumer Services’ investigative reports. Id.
at 20-29. As to this case, the Department suggests that the issue decided in Skotnicki’s
first appeal was not identical to the issue decided in Skotnicki’s second appeal because
the appeals addressed different notices issued by Phoenix and these notices contained
different language. Id. at 22-23. Further, the Department takes the position that neither
the May 28, 2014 “Investigative Report Order” nor the June 19, 2014 order granting
Phoenix’s request to withdraw the initial appeal amount to a final judgment on the merits
of whether the dog bite was provoked. In this regard, the Department is of the opinion
that, because the Commissioner had not received any response from Phoenix at that
point in the appeal process, the provocation issue had not actually been litigated. Id. at
23-29. In the Department’s view, Phoenix “did not have a full and fair opportunity to
litigate an issue before [Consumer Services], and therefore, the May 28, 2014
Investigative Report Order . . . is not binding on the Commissioner in any future de novo
hearings.” Department’s Brief at 29. Accordingly, the Department requests that this
Court affirm the order of the Commonwealth Court.
[J-76-2017] - 12
It is well-settled that the doctrine of collateral estoppel precludes relitigation of an
issue settled in a previous action if:
(1) the issue decided in the prior case is identical to the one presented in
the later action; (2) there was a final adjudication on the merits; (3) the
party against whom the plea is asserted was a party or in privity with a
party in the prior case; (4) the party or person privy to the party against
whom the doctrine is asserted had a full and fair opportunity to litigate the
issue in the prior proceeding; and (5) the determination in the prior
proceeding was essential to the judgment.
Office of Disciplinary Counsel v. Kiesewetter, 889 A.2d 47, 50-51 (Pa. 2005).
“Collateral estoppel relieves parties of the cost and vexation of multiple lawsuits,
conserves judicial resources, and, by preventing inconsistent decisions, encourages
reliance on adjudication.” Id. at 51.
To determine whether Consumer Services’ investigative report triggered
application of collateral estoppel, we begin and end our analysis by examining whether
the report constitutes a final adjudication of the merits of an insured’s appeal, when the
Commissioner did not enter an order disposing of the appeal. Such an issue presents a
question of law. Like all questions of law, our standard of review is de novo, and our
scope of review is plenary. In re Vencil, 152 A.3d 235, 241 (Pa. 2017). To the extent
that the answer to this question can be found in the Regulations which implement Act
205, we observe that, generally speaking, the best indicator of the intent of regulations
is the plain language thereof. Freedom Med. Supply, Inc. v. State Farm Fire & Cas.
Co., 131 A.3d 977, 983 (Pa. 2016). Accordingly, we begin by examining the language
of the Regulations.
Section 59.6 of the Regulations outlines the items that insurers must include in
their notices of cancelation and non-renewal of homeowners’ insurance policies. 31
Pa.Code § 59.6. The next section of the Regulations is entitled “Appeal procedure.” Id.
at § 59.7. Subsection 59.7(a) states that an insured may request in writing that the
Commissioner review an insurer’s act of cancelling or refusing to renew the insured’s
[J-76-2017] - 13
policy. Id. at § 59.7(a). When the Commissioner receives such a request, the insured
and the insurer receive notification that an investigation has begun and that they may be
contacted to secure additional information. Id. at § 59.7(b).
Importantly, Subsection 59.7(c) of the Regulations explains, “Upon completion of
the investigation, a copy of the investigative report will be supplied to both the insured
and the insurer. Within ten days of receipt of the report either party may submit written
comments for consideration by the Insurance Commissioner.” Id. at § 59.7(c). At that
point, the insurer or insured can request a formal administrative hearing. If a party asks
for a hearing, then a hearing is scheduled as soon as possible. Id. at § 59.7(d).
However, if a hearing is not requested, then the matter will be decided by the
Commissioner on the basis of the written comments and investigative report. Id.
The next provision of the Regulations explains the procedures to be followed at a
formal administrative hearing. Id. at § 59.7(e). For purposes of this appeal, it is
sufficient to note that the procedures allow the parties to admit relevant evidence into
the record and to engage in cross-examination. Id. at § 59.7(e)(4). The procedures
also provide that GRAPP “may be used where conducive to speedy and fair
proceedings.” Id. at § 59.7(e)(5). Lastly, the Regulations expressly state, “Upon
completion of a hearing, if held, or upon receipt of the written comments, the Insurance
Commissioner will issue an Order in conformance with his findings.” Id. at 59.7(f).
This regulatory scheme grants to an insured a mechanism to appeal to the
Commissioner when an insurer issues notice that it intends to not renew or cancel the
insured’s policy. When an insured takes advantage of this appeal procedure, the
Commissioner should initiate an investigation and, after completing that investigation,
provide the parties with “the investigative report.” At that point, the parties are faced
with a choice before the Commissioner issues an order deciding the fate of the appeal:
[J-76-2017] - 14
(1) submit comments for the Commissioner’s consideration; or (2) request a formal
administrative hearing.
If no formal hearing is requested, then the Commissioner will enter an order
which decides the matter based upon the parties’ written comments and the
investigative report. If a hearing occurs, then the Commissioner will enter an order
which decides that matter based upon the evidence submitted at the hearing. Thus,
regardless of whether a hearing is held, it is not until the Commissioner enters an order
that any issue implicated in the appeal is finally adjudicated on its merits.
Despite Consumer Services’ apparent practice of labeling some of its
investigative reports as orders, the Regulations indicate that “the investigative report”
provided by the Commissioner, through Consumer Services, appears to be simply what
it purports to be - a report explaining the outcome of an investigation. These
investigative reports perhaps arguably fall within the Administrative Code’s definition of
“Adjudication” insomuch as the reports represent an agency’s tentative “decision” or
“determination” affecting the “obligations of the parties to the proceeding in which the
adjudication is made.” 1 Pa.Code § 31.3. However, even to the extent that an
investigative report would fall within this definition of “adjudication,” the Regulations
make clear that, within this scheme, a final adjudication on the merits of an appeal does
not occur until the Commissioner enters his or her final order in the matter.
As noted above, the doctrine of collateral estoppel precludes relitigation of an
issue if, inter alia, “there was a final adjudication on the merits[.]” Kiesewetter, 889 A.2d
47, 50-51 (Pa. 2005). Here, the issues in Skotnicki’s initial appeal from the notice of
non-renewal of his policy were tentatively decided in his favor in the “Investigative
Report Order” issued by Consumer Services on May 28, 2014. However, the merits of
those issues were not adjudicated to finality because the Commissioner never entered
[J-76-2017] - 15
an order as contemplated by the Regulations.11 Rather, Presiding Officer Kaufman
permitted Phoenix to withdraw the appeal and entered an “order” discontinuing and
closing the matter.
Neither the “Investigative Report Order” nor Presiding Officer Kaufman’s “order”
constituted a final adjudication of the merits of the issues presented in Skotnicki’s initial
appeal; accordingly, they did not operate to estop collaterally Phoenix from litigating any
issue in the appeal from the notice of cancellation. Thus, the Commonwealth Court
reached the correct result in this matter. Consequently, we affirm that court’s order,
which allowed to stand the Commissioner’s determination that Phoenix did not violate
Act 205 by cancelling Skotnicki’s homeowners’ insurance policy.
Chief Justice Saylor and Justices Todd, Donohue, Dougherty, Wecht and Mundy
join the opinion.
11
As mentioned above, in the “Investigative Report Order,” Consumer Services
explicitly informed Skotnicki that its tentative decision regarding his appeal did not
constitute an adjudication. N.T., 9/30/2014, Exhibit S2, at 2 (“[B]e advised that this
communication does not constitute an adjudication under the Administrative Agency
Law.”).
[J-76-2017] - 16