           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Crosby Valve, LLC, ITT Corporation,            :
and The Procter and Gamble                     :
Company,                                       :
                       Petitioners             :
                                               :
                      v.                       :    No. 78 C.D. 2015
                                               :    Argued: October 6, 2015
Department of Insurance,                       :
                             Respondent        :


BEFORE:       HONORABLE BONNIE BRIGANCE LEADBETTER, Judge
              HONORABLE P. KEVIN BROBSON, Judge
              HONORABLE ANNE E. COVEY, Judge


OPINION BY
JUDGE LEADBETTER                                   FILED: January 14, 2016


              Petitioners, Crosby Valve, LLC, ITT Corporation, and The Procter
and Gamble Company,1 petition for review of two orders of the Insurance
Commissioner. The first order denied Petitioners’ petitions to intervene at the
agency level. The second order approved the acquisition of OneBeacon Insurance
Company, OneBeacon America Insurance Company, Potomac Insurance Company
and Employers Fire Insurance Company (Runoff Subsidiaries) by Armour Group
Holdings Limited, through its subsidiary Trebuchet US Holdings, Inc. (Armour).2



    1
       By order dated December 2, 2015, the above-captioned matter was discontinued solely as
to The Procter & Gamble Company.
     2
       By order dated March 26, 2015, Judge Leadbetter directed the parties to submit briefs
addressing only the denial of the petitions to intervene. The Court stayed briefing and argument
on the merits appeal pending disposition of the intervention appeal.
               Petitioners purchased general liability insurance policies from the
predecessors of the Runoff Subsidiaries covering claims and liabilities for bodily
injury and property damage (the OneBeacon Policies). Petitioners have sought
coverage under the OneBeacon Policies for underlying asbestos, environmental
and other third-party liability claims, which continue to be asserted against
Petitioners.
               On February 7, 2013, Armour filed an application to acquire
OneBeacon Insurance Company and Potomac Insurance Company with the
Department of Insurance under the Insurance Holding Company Act (IHCA),
Article XIV of the Insurance Company Law of 1921, Act of May 17, 1921, P.L.
682, as amended, 40 P.S. §§ 991.1401-991.1413, by submitting what is commonly
called a “Form A” application. The Department published notice of this proposed
transaction in the Pennsylvania Bulletin on February 13, 2013. The Form A
application was subsequently amended to include two subsidiaries of OneBeacon
Insurance Company, OneBeacon America Insurance Company and Employers Fire
Insurance Company, after they were re-domesticated from the Commonwealth of
Massachusetts to Pennsylvania.
               On April 23, 2013, Petitioners filed applications to intervene in the
proceeding before the Department, on the basis that they were policyholders of the
Runoff Subsidiaries whose rights to access the OneBeacon Policies and to obtain
coverage for asbestos and environmental exposures would be impaired if the
proposed transaction was approved. Petitioners averred that the purpose and effect
of the proposed transaction was to allow the Runoff Subsidiaries’ parent company,
OneBeacon Insurance Group Ltd. (OneBeacon), to shed asbestos, environmental
and other legacy liabilities and that the Runoff Subsidiaries were grossly under-



                                          2
reserved for legacy asbestos and environmental exposures because OneBeacon had
stripped capital out of the Runoff Subsidiaries before announcing the proposed
transaction.     Petitioners further alleged that the proposed transaction would
prejudice them and other policyholders by transferring control of the now-depleted
Runoff Subsidiaries from OneBeacon, a large, well-capitalized parent company
with ongoing, profitable underwriting operations, to Armour, a poorly capitalized
arbitrageur of runoff businesses that would be unable to raise any capital in the
likely event that the Runoff Subsidiaries’ reserves and reinsurance assets proved
insufficient to satisfy their asbestos, environmental and other legacy liabilities
under OneBeacon Policies.
               Petitioners asserted that they wished to intervene to oppose the
proposed transaction and to obtain access to information Armour and OneBeacon
had designated as confidential, which the Department had refused to release.
Petitioners sought access to analyses of the financial condition of the Runoff
Subsidiaries and Armour, modeling performed by actuaries retained by OneBeacon
to assess the adequacy of its reserves for asbestos and environmental claims, and
projections of whether, under various unexplained assumptions, the Runoff
Subsidiaries would have sufficient assets to pay legacy claims or would require
additional capital infusions in the future. The Department provided access to
summary versions of these reports to the public.
               On July 23, 2014, while the petitions to intervene were still pending,
the Department held a public informational hearing, at which Armour and
OneBeacon made presentations and Petitioners and others were permitted to
comment.       Experts retained by Petitioners and other policyholders seeking to
intervene testified at the hearing that the proposed transaction served no legitimate



                                           3
business purpose, was an improper attempt by OneBeacon to dump legacy liability
exposures under hundreds of outstanding policies, and would leave the Runoff
Subsidiaries in a weakened financial condition that inevitably would culminate in
their insolvency. In follow-up written submissions to the Department, Petitioners’
experts stated that while the proposed transaction should not be approved, any
approval order should be accompanied by various conditions, including a direct
capital infusion of $520 million by OneBeacon or the purchase of $1.6 billion in
additional retroactive reinsurance for the Runoff Subsidiaries.
             On December 23, 2014, the Insurance Commissioner denied
Petitioners’ motion to intervene. In a separate order, the Insurance Commissioner
granted the Form A application and approved the proposed transaction. Petitioners
filed a petition for review, asserting that the Department’s legal conclusions were
not in accordance with law, and its factual findings were not supported by
substantial evidence. Additionally, they assert that the Department’s denial of the
motion to intervene was an abuse of discretion and contrary to law because it
disregarded Petitioners’ due process rights, the Administrative Agency Law
(AAL), 2 Pa. C.S. §§ 101, 501-508, and 701-704, and its own regulations.
             Petitioners also challenge the Department’s decision to withhold from
them a large volume of financial data and actuarial analyses of the adequacy of the
Runoff Subsidiaries’ reserves and surplus. Petitioners assert that by depriving
them of a meaningful opportunity to participate in the administrative proceeding
and relying on documents and analyses that were not disclosed to Petitioners and
never made part of the administrative record, the Department violated their right to
due process in a matter that directly impacted their interests. Petitioners request
that this Court vacate the Commissioner’s decisions denying their petitions to



                                         4
intervene and approving the transaction and remand for further proceedings
consistent with the requirements of due process and the AAL.
                 Pursuant to Pennsylvania Rules of Appellate Procedure 123, 1541,
and 1951, Pa. R.A.P. 123, 1541 and 1951, Petitioners filed with this Court an
application to strike certified list of the record. The Department’s certified list of
the record is split into two parts. The first part lists and describes 149 documents
upon which it relied. The second part lists 29 documents as “confidential – for
court review in camera.”3 Petitioners assert that this action violates due process
and request that this Court strike the certified list and require the Department to file
a new certified list that includes all the documents it relied upon. In the alternative,
Petitioners request that this Court vacate the Commissioner’s order approving
Armour’s acquisition of the Runoff Subsidiaries and remand to the Department
with directions to reconsider the decision based solely on the non-confidential
documents made available to the public.                      Petitioners also assert that the
Department violated their right to due process by denying them access to certain
documents submitted by OneBeacon and Armour on the basis that the documents
contained confidential information.



    3
        In the certified list of record, the Department states:
                       Certain documents submitted to the Department are highly
                  confidential, and the Department has kept them entirely private.
                  The appellants were not parties to the proceedings…and are
                  challenging their non-party status before this Court.
                  Accordingly, the documents on the Confidential List are
                  maintained as CONFIDENTIAL. Because they were relied on
                  by the Department in reaching its decision, they will be made
                  available to the Court for in camera review upon request. They
                  will not be quoted in publicly filed briefing or at oral argument.



                                                   5
                Petitioners argue that the denial of their request to intervene was
contrary to the law and an abuse of discretion. Petitioners contend that they are
eligible to intervene under Section 35.28(a)(2), (a)(3) of the General Rules of
Administrative Practice and Procedure (GRAPP) as customers of the applicant and
because it would be in the public’s interest.4 1 Pa. Code § 35.28(a)(2), (a)(3).
Petitioners further assert that they have a direct pecuniary interest in the outcome
of the proposed transaction, an interest of the sort expressly recognized by Section
1402(f)(1) of the IHCA, 40 P.S. § 991.1402(f)(1).                     Specifically, Petitioners
collectively purchased billions of dollars’ worth of general liability insurance
policies covering long-tail asbestos and environmental contamination claims from
OneBeacon’s predecessors. Further, Petitioners’ participation in the proceeding
would be in the public interest, because it would assist rather than impede the
Department’s decision-making process.
                Second, Petitioners assert that the Department violated their right to
due process by denying them access to documents submitted to the Department by
OneBeacon and Armour as “confidential.” Petitioners seek access to (1) data and

   4
       Section 35.28(a)(2), (a)(3) provides, in relevant part
                (a) Persons. A petition to intervene may be filed by a person
                claiming a right to intervene or an interest of such nature that
                intervention is necessary or appropriate to the administration of
                the statute under which the proceeding is brought. The right or
                interest may be one of the following:
                     ***
                    (2) An interest which may be directly affected and which is
                not adequately represented by existing parties, and as to which
                petitioners may be bound by the action of the agency in the
                proceeding. The following may have an interest: consumers,
                customers or other patrons served by the applicant….
                    (3) Other interest of such nature that participation of the
                petitioner may be in the public interest.




                                                 6
analyses about the financial condition and assets of the Runoff Subsidiaries and
Armour, (2) modeling, including non-public assumptions, performed by Towers
Watson to determine whether the Runoff Subsidiaries would have sufficient assets
to pay legacy claims, and (3) commentary on Towers Watson’s report by the
Department’s independent expert, Risk & Regulatory Consulting.             Petitioners
argue that they need full access to these documents to accurately assess the
transaction to ensure that the Runoff Subsidiaries will have sufficient capital.
             Third, Petitioners argue that the Department’s certified list of record,
which designates certain documents as confidential and available for in camera
review only, violates the Pennsylvania Rules of Appellate Procedure. Meaningful
appellate review requires the inclusion of all materials upon which the agency
relied in making the determination under review.
             The question before this Court is what level of due process is owed to
non-parties to a transaction under review by the Department. Petitioners argue that
they have standing to intervene under the GRAPP and that due process requires
that the Department conduct a full hearing consistent with the AAL.                The
Department asserts that the GRAPP is not applicable to its review of the
transaction and that it is required only to follow the procedures set forth in Section
1402 of the IHCA.
             The GRAPP govern the practice and procedure before agencies of the
Commonwealth under the AAL. 1 Pa. Code § 31.1(a). The GRAPP are not
applicable to a proceeding before an agency to the extent that the applicable statute
governing or authorizing the proceeding sets forth inconsistent rules on the same
subject. 1 Pa. Code § 31.1(b).




                                          7
                The proposed acquisition by Armour is governed by the IHCA.
Section 1402(a)(1) of the IHCA, 40 P.S. § 991.1402(a)(1), requires insurers to file
a Form A application with the Department whenever an acquisition is proposed.
See 31 Pa. Code Part I, Subpt B, Ch 25, Appendix A. Section 1402(b) of the
IHCA, 40 P.S. § 991.1402(b), lays out the information the insurers must provide to
the Department. Section 1402(f)(1) lists the bases upon which the Department
could deny approval of the proposed acquisition.5 Section 1402(f)(2), 40 P.S. §
991.1402(f)(2), states that the Department is required to hold a hearing regarding


   5
       Petitioners rely upon Section 1402(f)(1)(i)(iii), (iv), (v) and (vi), which provide:
                (f)(1) The department shall approve any merger, consolidation
                or other acquisition of control referred to in subsection (a)
                unless it finds any of the following:
                     (i) After the merger, consolidation or other acquisition of
                control, the domestic insurer referred to in subsection (a)
                would not be able to satisfy the requirements for the issuance
                of a license to write the line or lines of insurance for which it is
                presently licensed.
                     ***
                     (iii) The financial condition of any acquiring party is such
                as might jeopardize the financial stability of the insurer or
                prejudice the interest of its policyholders.
                      (iv) The plans or proposals which the acquiring party has to
                liquidate the insurer, sell its assets or consolidate or merge it
                with any person, or to make any other material change in its
                business or corporate structure or management, are unfair and
                unreasonable and fail to confer benefit on policyholders of the
                insurer and are not in the public interest.
                     (v) The competence, experience and integrity of those
                persons who would control the operation of the insurer are
                such that it would not be in the interest of policyholders of the
                insurer and of the public to permit the merger, consolidation or
                other acquisition of control.
                     (vi) The merger, consolidation or other acquisition of
                control is likely to be hazardous or prejudicial to the insurance
                buying public.



                                                   8
the proposed acquisition if the acquirer or the target insurer requests such a hearing
within 10 days of the filing of the Form A application. If no such request is
received, it is within the Department’s discretion whether to hold such a hearing.
Id. If the Department holds a hearing, the Department must provide notice to the
insurers and to “such other persons, if any, as the department may determine.” Id.
If the Commissioner approves the proposed transaction (approving determination),
the Department must provide notice to the acquirer and the target firm and the
transaction may proceed in the manner described in the Form A application subject
to any conditions imposed by the Department. Id. If the Commissioner does not
issue an approving determination, the Department must then provide notice of this
action to the acquirer and the target firm. Id. The IHCA does not mandate any
other procedures and does not provide for appellate review of the transaction.
             In LaFarge Corporation v. Pennsylvania Insurance Department, 690
A.2d 826 (Pa. Cmwlth. 1997) (LaFarge I), reversed by LaFarge Corporation v.
Insurance Department, 735 A.2d 74 (Pa. 1999) (LaFarge II), an en banc panel of
this Court considered whether the Department was required to conduct a hearing in
compliance with the AAL, when reviewing an application to restructure and divide
an insurance company. In 1995, CIGNA Insurance Company and its subsidiary
INA Financial decided to allocate previously written policies dealing with asbestos
and environmental liabilities to a separate operating entity known as Century
Indemnity Company.       The policyholders having asbestos and environmental
liability policies would look only to Century Indemnity for coverage, and INA
Financial would not be liable for any excess amount of liability exceeding the $500
million capital infusion and $800 million reinsurance coverage that it provided to
Century Indemnity. As a result of the plan for restructure and division, CIGNA



                                          9
would be able to cap its exposure for asbestos and environmental liability at the
amount of capital and reinsurance that it provided to Century Indemnity.
             INA submitted actuarial reports analyzing the plan of restructure and
CIGNA’s asbestos and environmental liability reserves, a fairness opinion, a
solvency opinion, a reinsurance recoverable analysis, pro forma balance sheets, a
Tillinghast Towers-Perrin reserve review report, and a reconciliation of reserve
activity and a model for testing the sufficiency of the assets to pay the asbestos and
environmental liabilities of Century Indemnity, as well as information regarding
CIGNA’s asbestos and environmental exposures. The Department engaged
Deloitte & Touche to assist in the examination of CIGNA and Tillinghast Towers-
Perrin to perform a review of CIGNA’s reserves.
             The Department published a notice of the plan of restructure in the
Pennsylvania Bulletin, inviting comments from the public regarding the plan and a
notice of public hearing, requesting written comments. Policyholders and
reinsurers filed objections to the plan. The policyholders and reinsurers were
granted fifteen minutes to make their oral presentation at the public hearing and the
Department granted limited intervention to the policyholders and reinsurers solely
for the purpose of submitting written comments and making oral presentations.
Although granted limited intervention, the policyholders and reinsurers were not
permitted to cross-examine INA’s witnesses. The Department held three public
hearings and thereafter allowed CIGNA, the policyholders and reinsurers to submit
additional written comments. Pursuant to the IHCA, the Business Corporation
Law of 1988 (commonly known as the General Association Act of 1998 (GAA)),
Act of December 21, 1988, P.L. 1444, 15 P.S. §§ 20101-20304, and the General
Association Act Amendments Act of 1990, (GAAAA), Act of December 19, 1990,



                                         10
P.L. 864, 15 P.S. §§ 21101-21404, the Commissioner approved INA’s plan for
restructure and division with conditions imposed thereon.                See Exhibit K to
Petitioners’ Brief, January 7, 1996 Order of Linda S. Kaiser, Insurance
Commissioner.6
              The policyholders and reinsurers filed an appeal with this Court
arguing that the procedures the Department employed in allowing the restructuring
and division of INA violated their statutory and constitutional due process rights
and that because their interests were so substantial they were entitled to a due
process hearing under the AAL that would allow them to cross-examine INA’s
witnesses and present their own witnesses as to the advisability of the division and
restructuring.
              This Court first looked to Section 207(c) of the GAAAA, 15 P.S. §
21207(c), which provides that the Department shall afford reasonable notice and a
public opportunity to be heard, and the Department may make such inquiries,
audits and investigations and require submission of supplemental studies and
information that it deems necessary. The Court concluded that Section 207(c)
requires the Department to hold a public hearing only, without the production of a
formal record, including a trial-type due process hearing. The Court then noted
that Section 207(d) provides that the Department’s decision shall be “subject to
judicial review in the manner and within the time provided or prescribed by law.”
15 P.S. § 21207(d). The Court determined that there was a conflict between
Section 207(c)’s requirement for a public hearing only and Section 207(d)’s


    6
      It is unclear why the GAAAA was the only statute at issue before Commonwealth Court
and the Supreme Court when the IHCA also served as a basis for approval of the plan of division
and restructure.



                                              11
requirement for judicial review. LaFarge I, 690 A.2d at 833. The Court posited
that if the Department had denied INA’s application that decision would have
constituted an adjudication and INA as an aggrieved party would be entitled to
seek review. Id. The Court concluded that “the General Assembly intended to
interpose the procedures of the AAL between the determination after the
informational hearing and judicial review.” Id. The Court reasoned that the only
law that provides for the manner in which a court is to conduct judicial review of
an administrative agency decision is the AAL, and the only means by which a
court can conduct that review is upon a full and complete record of the proceedings
before the agency. Accordingly, the requirement in Section 207(d) of the GAAAA
for judicial review “in a manner prescribed by law” necessarily makes the AAL
applicable. Id. at 833-34. The Court vacated the Department’s approval of the
transaction, and remanded with orders to the Department to conduct a hearing
compliant with the AAL.7
              The Court went on to consider whether the Department’s decision was
an adjudication as to the policyholders. The Court noted that Section 205(b) of the
GAAAA, 15 P.S. § 21205(b), specifies that the Department’s approval of a transfer
of assets or division of an insurance company “shall be approved if it is in
accordance with law and not injurious to the interests of the policyholders and


    7
       The Court stated that the GAAAA requires the Department to make an initial
determination regarding division and restructuring. 690 A.2d at 834. The Court suggested that
the Department collect information and make a determination at the deputy commissioner level.
Id. Under the GAAAA the Department could hold a hearing if it wished. Id. at 835. The
Department’s decision could then be appealed to the Insurance Commissioner and a full AAL
due process hearing could be held and all parties would have the opportunity to create a full and
complete record. Id. The Insurance Commissioner could then render a final decision upon the
record, which could be appealed to the Commonwealth Court by an aggrieved person.



                                               12
creditors.” Id. at 837. The Court concluded that Section 205(b) creates an interest
in the policyholders because they have specific interest in assuring that any
restructure of an insurance company will result in the insurer’s ability to fulfill its
responsibilities under the policies. Id. The Court concluded that because the
policyholders’ interests were affected by the Department’s approval of INA’s plan
for restructure and division, and because they intervened in the proceedings before
the Department, they had standing to appeal the Department’s order. Id. at 837-38.
             The Department appealed to the Pennsylvania Supreme Court, which
reversed this Court’s decision. LaFarge II. The Supreme Court undertook to
interpret the GAAAA to determine the type of hearing the Department must
conduct when reviewing a plan for restructure and division of an insurance
company.     LaFarge II, 735 A.2d at 75.         Specifically, whether the General
Assembly when it enacted the GAAAA, making the GAA applicable to insurance
companies, intended to incorporate the stringent procedural due process
requirements of the more general AAL or whether the GAAAA was intended to
create an entirely distinct procedure providing for less restrictive control over
reorganization of insurance companies. Id.
             The Supreme Court relied upon Drain v. Covenant Life Insurance
Company, 712 A.2d 273 (Pa. 1998).           In Drain, which involved post-merger
litigation between insureds and insurance companies, the Supreme Court ruled that
policyholders, creditors, and shareholders retain standing to pursue tort remedies
arising out of the corporate transaction even when that transaction has been
approved by the insurance department because Department approval does not
insulate the insurer from liability. The Supreme Court found that policyholders,
creditors, and shareholders did not suffer per se injury simply by operation of the



                                          13
statute and judicial remedies were not foreclosed by the Department’s approval of
the plan. LaFarge II, 735 A.2d at 77. The Supreme Court also relied upon
Pennsylvania Coal Mining Association v. Insurance Department, 370 A.2d 685
(Pa. 1977), which held that in a rate-making proceeding, the insurers must be given
reasonable notice of the proposed rates, the opportunity to present written views on
the rates and written objections. LaFarge II, 735 A.2d at 77 (citing Pa. Coal
Mining Assn., 370 A.2d at 693).
              In overruling the Commonwealth Court, the Supreme Court held that
the procedures followed by the Department were adequate to satisfy the
requirements of due process. Id. at 78. The Supreme Court rejected imposition of
additional procedures such as sworn testimony, cross-examination, a full
stenographic record, and opportunity to submit briefs because such procedures
would have entailed extensive delay, would not have materially enhanced the
interests of policyholders and reinsurers, and would have required the Department
to engage in evaluation of speculative future harm.8 Id. The Supreme Court
concluded that:

              The issue before the department was a statistical and
              economic one, an area indisputably within the
              expertise of the department. The department solicited
              independent expert reports and evaluations concerning
    8
       In Philadelphia County Medical Society v. Kaiser, 699 A.2d 800 (Pa. Cmwlth. 1997),
another en banc panel of this Court ordered the Department to follow the procedure
recommended by Judge Pellegrini in LaFarge I when it reviewed the transaction that created
Highmark. On remand, the Insurance Commissioner permitted a non-insurer petitioner to
intervene before the Department. Following the grant of intervention in Philadelphia County
Medical Society, the Supreme Court overruled LaFarge I. Philadelphia County Medical Society,
then known as Capital BlueCross v. Pennsylvania Insurance Department, 937 A.2d 552 (Pa.
Cmwlth. 2007), was not reviewed again until eight years after the grant of intervention, and due
process and intervention at the agency level were not a consideration.



                                              14
            the solvency and financial integrity of the proposed
            restructuring, and the department also received the
            reports and evaluations prepared by the financial and
            actuarial experts of the objecting parties.
Id. The Supreme Court concluded that the Department properly analyzed the
materials it had gathered and provided a comprehensive written decision stating
why the transaction was not injurious to the interest of policyholders and creditor
under Section 205(b) of the GAAAA. Id. at 78-79.
            In LaFarge II, the Supreme Court examined the procedures set forth
in Sections 205 and 207 of the GAAAA and rejected the interveners’ contention
that the Department’s approval of a transaction under the GAAAA is an
adjudication requiring a full AAL hearing and the intervention of non-parties to the
transaction. The transaction in the case at hand is very similar to LaFarge. The
duties imposed on the Department prior to issuance or denial of an approving
determination under Section 1402 of the IHCA are even fewer than those imposed
by Sections 205 and 207 of the GAAAA. Section 1402(f) of the IHCA charges the
Department with determining whether the proposed transaction transgresses upon
any of the seven listed bases for denial of approval. The IHCA does not mandate
that the Department provide a public hearing, unless requested by the insurers, and
does not require it to obtain any information beyond that which is submitted on the
Form A application. The Department, at its discretion, may hold a public hearing
and may retain any attorneys, actuaries, accountants and other experts it may feel
necessary to assist in review the proposed transaction. Section 1402(f)(2) and
(f)(3) of the IHCA, 40 P.S. § 991.1402(f)(2) and (f)(3). Nothing in the IHCA
indicates that the General Assembly intended that review of a proposed transaction
under this section would constitute an adjudication which could be subject to a full
AAL hearing and intervention by non-parties to the transaction. If the General


                                        15
Assembly intended for the AAL to apply to review of a proposed transaction under
this section, it could have simply done so. Instead it provided the procedures set
forth in Section 1402 of the IHCA.
            Similar to the LaFarge transaction, this transaction required the
Department to conduct a statistical and economic analysis well within its expertise.
While the policyholders and reinsurers in LaFarge were granted limited
intervention, the Petitioners in this case received the same type of notice and
opportunity to be heard as the policyholders and reinsurers in LaFarge.
Additionally, the Department allowed Petitioners to submit reports from their own
experts, which did not occur in LaFarge. These actions fully complied with
Section 1402 of the IHCA.
            Review of a proposed transaction under the IHCA is intended to be a
regulatory act, not subject to intervention or opposition of entities who are not
parties to the transaction. The Department is the public’s and policyholders’
representative and charged with evaluating the risks and consequences of the
transaction. The Court concludes that based on the Supreme Court’s analysis in
LaFarge II, the procedures followed by the Department satisfied the requirements
of Section 1402 of the IHCA and that policyholders are not due any further
process. Thus, denial of intervention was not error.
            Having concluded that the Department was not required to conduct its
review of the transaction in compliance with the AAL because Section 1402 of the
IHCA sets forth procedures that are inconsistent with the rules and procedures of
the AAL and the GRAPP, the Court need not reach an analysis under the AAL or
the GRAPP. However, for the sake of thoroughness, the Court concludes that
Petitioners do not satisfy the requirements for intervention under GRAPP.



                                        16
              The GRAPP define “Interveners” as:

              Persons intervening or petitioning to intervene as
              provided by §§ 35.27 -- 35.31, when admitted as a
              participant to a proceeding. Admission as an intervener
              may not be construed as recognition by the agency that
              the intervener has a direct interest in the proceeding or
              might be aggrieved by an order of the agency in the
              proceeding.

1 Pa. Code § 31.3. Sections 35.27-35.31 of the GRAPP, 1 Pa. Code §§ 35.27-
35.31, provide the procedures and standards for intervention before an agency.
Section 35.28(2) of the GRAPP, 1 Pa. Code § 35.28(2), provides that an entity may
intervene when it has:

              An interest which may be directly affected and which is
              not adequately represented by existing parties, and as to
              which petitioners may be bound by the action of the
              agency in the proceeding. [Emphasis added.]

              Petitioners assert that they possess a direct interest because at some
future point the Runoff Subsidiaries under Armour’s control may run out of money
to pay the long-tail claims or may attempt to slow-pay claims because of alleged
poor capitalization. These assertions are simply speculative and do not constitute a
direct or immediate interest. Approval of the proposed transaction will not result
in a per se injury to Petitioners.9 The proposed transaction involves the property
rights of OneBeacon and Armour’s right to acquire property in a market
transaction. Petitioners’ contract rights are subsidiary to the rights of the parties to


    9
      Even if the Runoff Subsidiaries are not acquired by Armour, there is no guarantee that they
will not run out of money in the future or engage in slow-pay tactics.



                                               17
the transaction. Petitioners’ contract rights are not affected or diminished in any
direct way by the proposed transaction. Petitioners also retain their right to any
and all judicial remedies relating to the administration of their claims.
             Further, Petitioners do not satisfy the requirements of Section
35.28(3) of the GRAPP, 1 Pa. Code § 35.28(3), which provides for intervention
when a non-party “has some other interest of such nature that participation of the
petitioner may be in the public interest.” Petitioners assert that their experts, if
given full access to all of the insurers’ data and information, would be able to help
the Department assess the proposed transaction. Both the Department and the
insurers engaged experts to assess and analyze the proposed transaction. It is
unclear how a third set of expert reports would be in the public interest.
             Because Petitioners are not entitled to intervention, we hold that the
Department properly denied access to the confidential documents. Section 1407(a)
of the IHCA, 40 P.S. § 991.1407(a), provides for strict standards of confidentiality
surrounding documents submitted to the Department. Section 1407(a) provides
that:

             (a) All information, documents, materials and copies
             thereof in the possession or control of the department
             that are produced by, obtained by or disclosed to the
             department or any other person in the course of an
             examination or investigation made pursuant to section
             1406 or investigation made pursuant to section 1406.1
             or 1406.2 and all information reported pursuant to
             sections 1402(b)(11.1) and (11.2), 1404 and 1405 shall
             be privileged and given confidential treatment and
             shall not be:
                  (1) Subject to discovery or admissible in evidence
             in a private civil action.
                 (2) Subject to subpoena.



                                          18
                (3) Subject to the act of February 14, 2008 (P.L. 6,
             No. 3), known as the “Right-to-Know Law.”
                4) Made public by the department or any other
             person, except to regulatory or law enforcement
             officials of other jurisdictions or group supervisors or
             members of a supervisory college in accordance with
             subsection (c), without the prior written consent of the
             insurer to which it pertains unless the department, after
             giving the insurer and its affiliates who would be
             affected thereby notice and opportunity to be heard,
             determines that the interest of policyholders,
             shareholders or the public will be served by the
             publication thereof, in which event it may publish all
             or any part thereof in such manner as it may deem
             appropriate.
The Department may make confidential documents public at its discretion. In this
case, the Department has declined to make the confidential documents public and,
generally, such a discretionary decision is given much deference. UGI Utils., Inc.-
Gas Div. v. Pub. Util. Comm’n, 878 A.2d 186 (Pa. Cmwlth. 2005).
             Finally, Petitioners assert that the certified list of record filed by the
Department is not in compliance with the Pennsylvania Rules of Appellate
Procedure. Petitioners assert that the Department is improperly denying them
access to the full appellate record comprising all of the evidence considered and
relied upon by the Department in reaching its decision.
             Pennsylvania Rule of Appellate Procedure 1952(b), Pa. R.A.P.
1952(b), governs the filing of the certificate of record and provides in relevant part:

             (b) Certificate of record.--The government unit shall
             certify the contents of the record and a list of all
             documents, transcripts of testimony, exhibits and other
             material comprising the record…Instead of filing the
             record or designated parts thereof, the government unit
             may file a certified list of all documents, transcripts of
             testimony, exhibits and other material comprising the

                                          19
             record, or a certified list of such parts thereof as the
             parties may designate, adequately describing each, and
             the filing of the certified list shall constitute filing of
             the record…If a certified list is filed…the government
             unit shall retain the record or parts thereof. Upon
             request of the court or the request of a party, the record
             or any part thereof thus retained shall be transmitted to
             the court notwithstanding any prior stipulation. All
             parts of the record retained by the government unit
             shall be a part of the record on review for all
             purposes. [Emphasis added.]
             The Department filed a certified list of record that contained
descriptions of all documents in the record, including confidential documents. The
confidential documents include the seller’s disclosure schedules to the stock
purchase agreement, a business plan, Towers Watson’s presentations and reports,
Risk & Regulatory Consulting’s presentations and reports, and correspondence
from Cozen O’Conner. The Department retained possession of the confidential
documents and stated that the confidential documents would be made available to
this Court for in camera review. Contrary to Petitioners’ assertions, this procedure
is in full compliance with the Rules of Appellate Procedure. The entirety of the
record is available to the parties and this Court. Accordingly, the motion to strike
is denied.
             For all of the foregoing reasons, we affirm the Insurance
Commissioner’s denial of Petitioners’ petitions to intervene. Having affirmed the
Insurance Commissioner’s denial of intervention, Petitioners’ petition for review is
dismissed as moot. Additionally, Petitioners’ motion to strike the certified list of
record is denied.

                                        _____________________________________
                                        BONNIE BRIGANCE LEADBETTER,
                                        Judge


                                          20
        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Crosby Valve, LLC, ITT Corporation,       :
and The Procter and Gamble                :
Company,                                  :
                       Petitioners        :
                                          :
                  v.                      :     No. 78 C.D. 2015
                                          :
Department of Insurance,                  :
                           Respondent     :


                                   ORDER


            AND NOW, this 14th day of January, 2016, the order of the Insurance
Commissioner, Michael F. Consedine, denying intervention is hereby AFFIRMED.
Petitioners’ motion to strike the certified list of record is DENIED. Petitioners’
petition for review is DISMISSED as moot.




                                        _____________________________________
                                        BONNIE BRIGANCE LEADBETTER,
                                        Judge
           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Crosby Valve, LLC, ITT Corporation,     :
and The Procter and Gamble              :
Company,                                :
                       Petitioners      :
                                        :
            v.                          :   No. 78 C.D. 2015
                                        :   Argued: October 6, 2015
Department of Insurance,                :
                           Respondent   :



BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge
        HONORABLE P. KEVIN BROBSON, Judge
        HONORABLE ANNE E. COVEY, Judge


DISSENTING OPINION
BY JUDGE BROBSON                            FILED: January 14, 2016



            As the majority notes, Petitioners in this matter challenge two orders
issued by the Pennsylvania Insurance Commissioner (“Commissioner”), both dated
December 23, 2014. The first denied Petitioners’ motion to intervene (Intervention
Order) in the Pennsylvania Insurance Department’s (Department) consideration of
the “Form A” filing of Armour Group Holdings Limited, through its subsidiary
Trebuchet US Holdings, Inc. (Armour), by which Armour sought Department
approval of its acquisition of certain Pennsylvania domestic insurance companies
pursuant to Article XIV of the Insurance Company Law of 1921, commonly
referred to as the Insurance Holding Companies Act (IHCA).1 The other order
approved the acquisition (Approving Determination).2
                The majority affirms the Intervention Order. I agree with the majority
that under the Pennsylvania Supreme Court’s decision in LaFarge Corporation v.
Commonwealth of Pennsylvania, Insurance Department, 735 A.2d 74 (Pa. 1999)
(LaFarge II), the procedures set forth in the IHCA govern the Department’s review
and consideration of Form A filings. The more stringent procedural requirements
of the Administrative Agency Law (AAL), 2 Pa. C.S. §§ 101, 501-508, and 701-
704, and, as a consequence, the General Rules of Administrative Practice and
Procedure (GRAPP),3 do not apply to the Department’s consideration of Form A
filings under the IHCA. Accordingly, Petitioners’ motion to intervene cannot be
considered a motion to intervene under GRAPP. At best, the motion was nothing
more than an informal request by Petitioners to play a more active role in the
Department’s regulatory review of the Form A filing under the IHCA. Because,
for reasons explained by the majority and in LaFarge II, Petitioners had no right to
participate as a full party in the Form A filing process, the decision denying the
motion to intervene cannot be considered an “adjudication” under the AAL over
which this Court has appellate jurisdiction. See Baker v. Pennsylvania Human
Relations Comm’n, 489 A.2d 1354, 1357-58 (Pa. 1985) (holding that agency action
that is not adjudication is not appealable under AAL); Mansfield v. State Civil

       1
           Act of May 17, 1921, P.L. 682, as amended, 40 P.S. §§ 991.1401-.1413.
       2
        The IHCA expressly refers to decisions approving a Form A filing as an “approving
determination.” Section 1402(f)(2) of the IHCA, 40 P.S. § 991.1402(f)(2).
       3
         1 Pa. Code. Chs. 31-35. The Department has adopted portions of GRAPP, including the
rules governing intervention. 31 Pa. Code § 56.1.



                                             PKB-2
Serv. Comm’n (Dep’t Labor & Indus.), 68 A.3d 1062 (Pa. Cmwlth. 2013)
(quashing appeal from agency determination that was not adjudication); 2 Pa. C.S.
§ 101 (definition of “adjudication”).4 Accordingly, unlike the majority, I would
quash Petitioners’ appeal of the Intervention Order for lack of jurisdiction.
                As for the appeal from the Approving Determination, I would follow
this Court’s en banc decision in Philadelphia County Medical Society v. Kaiser,
699 A.2d 800 (Pa. Cmwlth. 1997) (en banc) (PCMS). Like this case, PCMS
involved a direct appeal by opponents to an approving determination under the
IHCA where no formal administrative proceeding preceded the Department’s
approving determination.           This Court held that the direct appeal, under the
circumstances, was “premature”:
                       Because, by definition, an agency action only
                results in an adjudication when there is a final order, only
                when those administrative appeals have been exhausted
                will the agency action become an adjudication subject to
                judicial review. Of course, if a party does not timely
                seek to have a hearing from an adverse agency
                adjudication, the adjudication becomes final and
                unappealable.
                       Even though the agency action has a direct impact
                on the person’s rights or privileges, and is final so as to
                fall within the definition of an “adjudication”, the action
                is not “valid as to any party unless he shall have been

       4
           An “adjudication” is defined as follows:
               Any final order, decree, decision, determination or ruling by an agency
       affecting personal or property rights, privileges, immunities, duties, liabilities or
       obligations of any or all of the parties to the proceeding in which the adjudication
       is made.

2 Pa. C.S. § 101.



                                              PKB-3
              afforded reasonable notice of a hearing and an
              opportunity to be heard.” 2 Pa. C.S. § 504. Until a
              hearing is held before the administrative agency and a
              record of that hearing made, Section 504 of the
              Administrative Agency Law provides that the
              adjudication is not valid or effective. The reason behind
              this requirement is that judicial review, absent a valid
              administrative adjudication or proper record, is a
              “premature interruption of the administrative process.”
              Moreover, until a hearing, and, if necessary, the taking of
              evidence where facts are disputed, the issues cannot be
              properly clarified, whether there is a direct interest of the
              party taking the appeal and questions of fact sufficiently
              resolved to create a record upon which judicial review
              can be conducted.
PCMS, 699 A.2d at 806 (citations omitted) (footnotes omitted).                Rather than
dismiss the appeal for lack of jurisdiction, the Court transferred the matter to the
Department with the following instructions:
              [W]e will transfer this case back to the Department to
              consider whether Opponents’ interests are sufficiently
              direct so as to be a “party” and, if so, conduct sufficient
              hearings to resolve any factual disputes. Because in the
              absence of a hearing before the Department, no “final
              order” of the Department is before us, Opponents’
              judicial review is premature and we will transfer the case
              to the Department for such a hearing.
Id. at 807.
              The majority briefly mentions PCMS in footnote 8 of the majority
opinion, but it dismisses its importance in light of the Supreme Court’s decision in
LaFarge II, overruling this Court’s decision in LaFarge Corporation v.
Commonwealth of Pennsylvania, Insurance Department, 690 A.2d 826 (Pa.
Cmwlth. 1997) (LaFarge I). The Court’s decision in PCMS, however, was not
based on LaFarge I. Indeed, LaFarge I is not even cited in the Court’s opinion in


                                        PKB-4
PCMS. That is because the two cases addressed two different questions. LaFarge
I and LaFarge II focused on the procedures that the Department must follow prior
to approving certain corporate transactions by and between insurance companies in
order to afford the public “due process.”       PCMS, by contrast, addressed the
questions of whether an approving determination under the IHCA, once issued, is
an adjudication appealable to this Court and the availability of post-approval
formal proceedings within the Department to challenge an approving
determination. The Supreme Court did not disapprove of this Court’s disposition
in PCMS in LaFarge II (nor did it cite it at all), and this Court has never overruled
it.
             For these reasons, I would quash the appeal of the Intervention Order
and transfer the appeal of the Approving Determination to the Department in
accordance with PCMS. Upon transfer, the Department would conduct a formal
proceeding in accordance with the AAL and GRAAP to determine Petitioners’
standing to challenge the Approving Determination. If the Department would
conclude that Petitioners had standing, the Department would then proceed to
adjudicate Petitioners’ challenge to the approving determination.       I, therefore,
respectfully dissent.




                                P. KEVIN BROBSON, Judge




                                      PKB-5
