Insurance Commissioner Has No Authority to Require UM/UIM Arbitrations

Insurance Federation of Pennsylvania, Inc. v. Commonwealth of Pennsylvania, Department of Insurance, Diane Koken, Insurance Commissioner

(Decided December 30, 2005)

The Pennsylvania Supreme Court, in a 5-2 decision, holds that the Insurance Commissioner has neither the express nor the implied authority under Pennsylvania’s Motor Vehicle Law to require arbitration of Uninsured/Underinsured Motorist disputes.

In a decision that could have significant impact on insurance policies in Pennsylvania, the Pennsylvania Supreme Court issued its decision in the Insurance Federation v. Koken case, which addressed the issue of “whether the Insurance Department possesses the statutory authority to require that all UM and UIM disputes be submitted to mandatory, binding arbitration.” The Federation had challenged the Insurance Commissioner’s authority requiring arbitration of underinsured and uninsured motorist auto claims. Commonwealth Court had found that the Commissioner had the inherent authority to require arbitration. The Supreme Court in a 5-2 decision, reversed Commonwealth Court, holding that the Commissioner has neither the express nor the implied authority under Pennsylvania’s Motor Vehicle Law to require arbitration of UI/UM disputes.

The majority opinion is available at: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-95-2004mo.pdf

and the dissenting opinion at: http://www.courts.state.pa.us/OpPosting/Supreme/out/J-95-2004do.pdf.