Opinion ID: 6261810
Heading Depth: 2
Heading Rank: 3

Heading: safeguard’s cross -appeal

Text: The remaining issues to be dealt with are those raised by Safeguard in its cross-appeal. One concerns a requirement that insurers maintain reserves for outstanding losses to insure the availability of funds to cover the losses. Safeguard disputes the finding that it must adhere to the requirement. The act imposes the requirement on casualty insurers, 40 P.S. § 112. It is similarly imposed on mutual insurers other than life insurers who handle casualty insurance, 40 P.S. § 917. The latter section does not exempt issuers of assessable policies from this requirement as it does from the unearned premium reserve requirement, nor does any other provision provide an exemption. Safeguard was properly required to maintain a loss reserve. The Department has stated that it is unable to determine the amount of Safeguard’s liabilities under this requirement. It therefore did not take it into account in computing Safeguard’s liabilities. The Commonwealth Court found that Safeguard maintained certain reserves that satisfied the requirement. We accept this finding and will not impose any additional liability on Safeguard. The Commonwealth Court did not allow all of the items claimed by Safeguard as assets. One disallowed item is an interest Safeguard claims to have in a building at 1321 Arch Street in Philadelphia, two floors of which it occupies as business premises. The Clark Agency, not Safeguard, is the title holder of record. Safeguard bases its claim on an agreement that allows it to consider itself the owner, but that is insufficient for marketable title. The disallowance was proper. Safeguard also claimed as an asset the cost of sustaining its license after its 1967 suspension. It did so because it considered the Commonwealth liable for these expenses. It has partially offset them by withholding certain taxes. In Safeguard’s view we should increase its assets by $638,765.05, the amount it claims to have expended and not recouped by withholding taxes, and reduce its liabilities by the amount of the unpaid taxes, which is $110,588.95. We reject this view. Safeguard has not brought any action against the Commonwealth for damages, nor has the Commonwealth brought any action to collect the unpaid taxes. Consequently, there has been no judicial determination of the merits of Safeguard’s claim nor is the question now before us. Safeguard’s rights not having been established, the claim will not be considered an asset for the purposes of determining solvency. At best Safeguard has an unliquidated claim for damages. The claim does not represent funds that are now or will in the near future be available to pay debts. See In re Bichel Optical Laboratories, Inc., 299 F.Supp. 545 (D.Minn., 1969). The Commonwealth Court’s decision would give Safeguard assets of $2,435,533.66 and liabilities of $1,859,541.61, yielding a surplus of $575,992.05. However, we disallowed the following assets which Commonwealth Court admitted: Clark debenture, $220,347.79; stock, $103,280.34; and mortgages, $10,131.64. Even disallowing these items, Safeguard still has a surplus of $242,322.28. Safeguard is still left with a surplus of assets over liabilities that renders it solvent. It was, therefore, not proper to suspend Safeguard, and the Department’s order was properly vacated. The order of the Commonwealth Court is affirmed as modified. JONES, former C. J., took no part in the consideration or decision of this case. POMEROY, NIX and MANDERINO, JJ., concur in the result. ROBERTS, J., files a dissenting opinion in which EAGEN, C. J., joins.