Court Opinion

ID: 9751532
Source: CourtListenerOpinion
Date Created: 2023-08-28 16:34:19.105398+00
Date Added: 2024-06-11T07:26:50.828958
License: Public Domain

CONCURRING AND DISSENTING OPINION BY
Judge LEAVITT.
I concur in the majority’s dismissal of the Statutory Liquidator’s complaint. I concur also in the majority’s dismissal of the counts in the Intervenors’ Complaint presented by the out-of-state intervening guaranty associations.1 However, I would also dismiss the two counts presented by the intervenor, the Pennsylvania Workers’ Compensation Security Fund (Pennsylvania Fund), without prejudice to its filing an amended complaint with a new jurisdictional statement.
Aramark purchased a series of insurance policies from Reliance Insurance *971Company over the course of several years.2 To prevent Aramark from moving those policies to an insurer with a stronger financial rating, Reliance arranged to have a contingent liability policy issued to Ara-mark that would cover whatever losses Aramark might suffer in the event Reliance would become insolvent. The policy was issued by Inter-Ocean Reinsurance Company Ltd.; provided Aramark up to $25 million in coverage; and was 100 percent reinsured by Reliance. In 2001, Reliance became insolvent and was placed into receivership by this Court in accordance with Article V of The Insurance Department Act of 1921, Act of May 17, 1921, P.L. 789, as amended\ added by the Act of December 14, 1977, P.L. 280, 40 P.S. §§ 221.1-221.63. In accordance with Article V, the Court appointed the Insurance Commissioner as Statutory Liquidator of Reliance.
One of the principal undertakings of any insurance company receivership is to determine the amount and order of payments that will be made to the creditors out of the estate of the insolvent insurer. Policyholder creditors receive the highest priority of payment after estate administration expenses are paid. The Statutory Liquidator filed the instant declaratory judgment action to request the Court to fix the amount and priority of payment to be assigned to the claims filed by Aramark against the estate of Reliance. The Statutory Liquidator asserts that the coverage provided by Inter-Ocean has transformed Aramark from a policyholder creditor to a general creditor, a class of creditor that is not expected to receive any payment from the Reliance estate.
Thereafter, nine state guaranty funds, including the Pennsylvania Fund, intervened and filed their own complaint. They seek a declaratory judgment that they have paid claims to residents of their states that were not owed under the laws of their states because of Aramark’s contingent liability policy from Inter-Ocean. They seek a declaratory judgment from this Court that Aramark has been unjustly enriched by the payments made by the guaranty funds. The intervenors make no claim against Reliance or the Statutory Liquidator.3
The majority dismisses the Statutory Liquidator’s complaint, correctly I believe, because the proof of claim procedure in Article V for disposing of claims against the Reliance estate should be followed to decide the amount and priority of Ara-mark’s claim against the Reliance estate. The next question is whether the Interve-nors’ Complaint can proceed on its own, without the Statutory Liquidator’s claims.
The intervenors asserted the following as the basis for this Court’s subject matter jurisdiction over their complaint:
Jurisdiction and venue are proper in this Court pursuant to 42 [Pa.C.S.] § 761(a)(3) and Article V of the Insurance Act.
Intervenors’ Complaint, ¶ 14. Section 761(a)(3) of the Judicial Code states as follows:
*972(a) The Commonwealth Court shall have original jurisdiction of all civil actions or proceedings:
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(3) Arising under Article V. of the [A]ct of May 17, 1921 (P.L. 789, No. 285), known as “The Insurance Department Act of 1921.”
42 Pa.C.S. § 761(a)(8). The intervenors have not identified any other basis for our jurisdiction to decide their complaint.
Intervenors’ Complaint, with 18 counts, does not arise from Article V. Further, the complaint was filed against Aramark, not the Statutory Liquidator. Their complaint raises claims arising from the laws of nine different states that have set up guaranty funds to pay the claims of insolvent insurance companies, such as Reliance, for residents of their states. The intervenors seek a judgment from this Court that they have paid claims of residents of their states mistakenly, they believe, because under their respective laws, Aramark, not the guaranty fund, was liable. The relevant guaranty fund statutes, not Article V, govern these claims.4
A review of the legal claims of one non-Pennsylvania guaranty fund illustrates the jurisdictional problem with the Interve-nors’ Complaint. In Count V, the complaint alleges that the New Jersey Association has paid $370,503.59 to New Jersey residents with a third-party claim (against Aramark) under a Reliance policy. Inter-venors’ Complaint, ¶ 77. It then notes that a New Jersey claimant
shall be required to exhaust first his right under that other policy. See N.J. Stat. § 17:30A-12(b)(2009). The New Jersey Association paid claims under Reliance policies without exhaustion of the [Contingent Liability Policy issued by Inter-Ocean].
Intervenors’ Complaint, ¶ 78. The New Jersey Association requests a judicial declaration that Aramark must reimburse it for the $370,503.59 it has paid under the laws of the state of New Jersey. Each intervenor lodges a similar charge, i.e., that its “applicable guaranty law” requires a judicial declaration that Aramark must reimburse the intervening state guaranty fund for claims it paid that should have been paid by Aramark. Each guaranty fund acknowledges in the complaint that its operations are “governed” by the laws of its state of domicile. Intervenors’ Complaint, ¶¶ 4, 5, 6, 7, 8, 9, 10, and 12. For this Court to determine whether a claim was properly paid to an out-of-state claimant under the terms of an out-of-state statute would be akin to this Court deciding, for example, whether a Texas employee of Aramark is entitled to workers’ compensation benefits under the Texas workers’ compensation statute.
The out-of-state guaranty fund is not the Commonwealth government and neither is Aramark. For that reason, this Court lacks jurisdiction over the claims of the out-of-state guaranty funds. Accordingly, I agree with the majority’s decision to dismiss the claims of the out-of-state guaranty associations.
However, I disagree with the majority’s decision to allow the claims of the Pennsylvania Fund, set forth in Counts VIII and *973XVII of the Intervenors’ Complaint, to go forward. The majority reasons, based on its review of the applicable statutes, that the Pennsylvania Fund is an instrumentality of the Commonwealth and, thus, this Court has jurisdiction.5 The pleading does not support the majority’s conclusion.
First, the Intervenors’ Complaint does not allege that the Pennsylvania Fund is the Commonwealth. Rather, it describes itself as follows:
The Pennsylvania Workers’ Compensation Security Fund (the “Pennsylvania Fund”) is a non-profit, unincorporated legal entity created and governed by Pennsylvania law. The Pennsylvania Fund is authorized to bring suit in its own name.
Intervenors’ Complaint, ¶ 11 (emphasis added). The complaint goes on to assert:
The Guaranty Associations obtain the funds needed to pay claims by assessing member insurers. Each insurer writing business in a particular state is required to be a member of that state’s guaranty association. Member insurers recoup assessments through increased rates and premiums, and in certain states through premium tax offsets or policy surcharges.
Intervenors’ Complaint, ¶ 20 (emphasis added) (citations omitted). In short, the complaint identifies the Pennsylvania Fund as an association of “member insurers,” which are private insurance companies.
The Judicial Code does not give this Court jurisdiction over civil actions brought by private parties. Rather, our jurisdiction is limited to civil actions initiated:
(2) By the Commonwealth government, including any officer thereof, acting in his official capacity, except eminent domain proceedings.
42 Pa.C.S. § 761(a)(2). The complaint does not allege that the Pennsylvania Fund is the Commonwealth government, and it does not assert that this Court’s jurisdiction over the complaint of the Pennsylvania Fund arises from Section 761(a)(2) of the Judicial Code.
Second, as noted, the pleading of the Pennsylvania Fund offers a totally different basis for our jurisdiction, ie., 42 Pa. C.S. § 761(a)(3), which gives this Court jurisdiction over claims arising from Article V. The claim of the Pennsylvania Fund has nothing to do with Article V but, rather, the terms of its governing statute.
Because the facts as pled by the Pennsylvania Fund do not support the conclusion that it is an instrumentality of the Commonwealth, the Pennsylvania Fund should be directed to file a new complaint in which it states, with particularity, what it is and why this Court has jurisdiction over the claim that it has brought against a private party, ie., Aramark.6
*974Further, I do not agree with the majority’s analysis of Aramark’s demurrer to the Pennsylvania Fund’s claims. In disposing of the demurrer, the majority construes the Workers’ Compensation Security Fund Act, Act of July 1, 1937, P.L. 2532, as amended, 77 P.S. § 1051-1066, in a way that I do not accept. Effectively, the majority decides the merits of the dispute at a very early stage in the proceeding, and it is not necessary to do so.
The majority dismisses the objection raised by Aramark that it cannot be required to reimburse the Pennsylvania Fund for payments the fund made to injured workers residing in Pennsylvania. However, the statute could not be clearer on this point. Section 11(2) of the Act states:
(2) Payment of an award from the fund shall not give the commissioner of such fund any right of recovery against the employer.
77 P.S. § 1061(2).
The Pennsylvania Fund, created in 1937, is one of the oldest in the nation. It predates the other intervening guaranty funds that were created by statutes based upon a model law of the National Association of Insurance Commissioners. The Pennsylvania Fund was established to ensure the uninterrupted flow of benefits to injured workers. The Pennsylvania Fund pays the first dollar of every claim of an injured worker, and it pays the entire lifetime benefit owed to an injured worker under the Workers’ Compensation Act.7 There is no policy limit on the amount owed by the insurer, and there is no limit on the amount paid by the Pennsylvania Fund on behalf of an insolvent insurer.
The Pennsylvania Fund did not, as stated by the majority, pay “claims to Ara-mark.” Op. at 968. The Intervenors’ Complaint does not so allege. The only claim that could be paid by the Pennsylvania Fund is one presented by an injured employee, not an employer.
When an employer in Pennsylvania purchases a policy of workers’ compensation insurance, it transfers to the insurer all liability for the payment of workers’ compensation claims covered by that policy. The employei'’s liability is not revived when the insurer becomes insolvent. Further, the employer that transferred its liability for workers’ compensation benefits to an insolvent insurer does not participate, in part or in whole, in the Pennsylvania scheme of protection for injured workers whose claims were expected to be paid by an insolvent insurer.8
By contrast, other states, such as Texas, do require employer participation in the guaranty fund scheme. Texas pays all workers’ compensation claims upon the insurer’s insolvency, but it expects reimbursement in some cases. The Texas Insurance Code provides:
(a) The [Texas Property and Casualty Insurance Guaranty Association] is entitled to recover:
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(2) the amount of a covered claim for workers’ compensation insurance benefits and the costs of administration and defense of the claim paid under this chapter from an insured employer whose net worth on December 31 of the year preceding the *975date the insurer becomes an impaired insurer exceeds $50 million.
Tex. INSURANCE Code Ann. § 462.308(a) (West 2011). Thus, if Aramark’s net worth exceeds $50 million, then it will have to reimburse the Texas guaranty fund for every workers’ compensation claim paid to an Aramark employee in Texas. This would be an Aramark loss caused by the Reliance insolvency, and it is a loss for which Inter-Ocean would have liability to Aramark under the contingent liability policy.
Aramark could not have a loss in Pennsylvania caused by the Reliance insolvency, at least with respect to the workers’ compensation claims of its Pennsylvania employees. This is because those claims will be paid in the exact amount they would have been paid by Reliance. Reliance’s total liability for Aramark’s workers’ compensation claims was transferred to the Pennsylvania Fund, which cannot recover from Aramark under 77 P.S. § 1061(4).9 Likewise, Aramark should not have a claim against the Reliance estate with respect to workers’ compensation claims in Pennsylvania.
I would sustain Aramark’s preliminary objection to the complaint of the Pennsylvania Fund without prejudice to its filing a new or amended complaint that provides a new jurisdictional statement. At present, the allegations in the Intervenors’ Complaint defeat any possibility of holding the Pennsylvania Fund’s complaint to be one filed by “the Commonwealth government.” 42 Pa.C.S. § 761(a)(2). The new pleading could better explain the Pennsylvania Fund’s theory for recovering from Ara-mark the amount it has paid to Aramark employees residing in Pennsylvania as a result of the Reliance insolvency.
Judge McGINLEY joins in this concurring and dissenting opinion.

. The Guaranty funds in California, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Pennsylvania and Texas intervened. The State of New York has two guaranty funds: the New York Property/Casualty Insurance Security Fund and the New York Workers' Compensation Security Fund. Intervenors' Complaint, ¶¶ 9, 10. Both New York funds have intervened.
Pennsylvania also has two funds. Article XVIII of The Insurance Company Law of 1921, Act of May 17, 1921, P.L. 682, added by the Act of December 12, 1994, P.L. 1005, as amended, 40 P.S. §§ 991.1801-1820, creates the Pennsylvania Insurance Guaranty Association for the payment of covered claims arising from property and casualty insurance policies, other than workers’ compensation insurance. The Pennsylvania Insurance Guaranty Association has not intervened in this action. The Pennsylvania Workers’ Compensation Security Fund, which pays claims under workers' compensation policies to Pennsylvania residents, has intervened.

. The Reliance policies covered Aramark for its workers' compensation liability, automobile liability and general liability for its United States operations. Intervenors' Complaint, ¶ 24.

. When the intervenors were granted leave to participate in the proceeding initiated by the Statutory Liquidator, this Court’s subject matter jurisdiction over the Statutory Liquidator's claim against Reliance was not in doubt. The Judicial Code provides, expressly, that this Court has jurisdiction over matters arising under Article V, such as the Statutory Liquidator's instant action.

. Each guaranty fund law is different. Some provide unlimited coverage, coextensive with policy limits, and some cap their payments at $100,000, regardless of the actual loss or the amount of coverage provided in the policy. Some funds are triggered by an order of liquidation, and others are triggered by an insurer's mere financial "impairment.” Some funds do not pay anything if the claimant or policyholder has substantial net worth, as defined in the applicable statute. Each guaranty fund is independent from the other and is governed solely by its own state's laws.

. It does not follow, necessarily, that the administrator, i.e., the Insurance Department, and the Pennsylvania Fund are one and the same. Insurance companies use third party administrators to act on their behalf, but they are distinct entities. Notably, in Miles v. Van Meter, 427 Pa.Super. 278, 628 A.2d 1159 (1993), a case cited by the majority, the Pennsylvania Fund was sued in the Court of Common Pleas of Philadelphia County, as one would expect for a private actor defendant, and not in the Commonwealth Court.

. The majority asserts that this Court has concurrent jurisdiction over the Pennsylvania Fund along with the courts of common pleas. This is an issue that should be addressed in a new pleading. I do not know whether or not the majority’s premise is correct. The majority dismisses Aramark’s assertion that the Pennsylvania Fund is a bank account, not a legal person, but without analysis. The nature of the Pennsylvania Fund and its governance could be addressed in a new pleading.

. Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708.

. By contrast, coverage provided by Pennsylvania Insurance Guaranty Association is limited to $300,000 on a policyholder claim. The policyholder must pay any remainder owing to the third party claimant.

. Aramark is liable for premium and for deductibles, but this was true even if Reliance had not become insolvent. Those would not be "losses” payable under the Inter-Ocean contingent liability policy.