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ABSTRACT
The New Jersey Appellate Division has held that in long-tail allocation cases, the policyholder remains responsible for amounts allocable to insurers who became insolvent before December, 2004, and that the rule announced in Farmers Mutual Fire Ins. Company of Salem v. N.J.P.L.G.A. does not apply to such insolvencies because the Legislature specifically provided that the statutory amendments that formed the basis for the Farmers Mutual decision applied prospectively from their effective date. The decision confirms that for insolvencies that took place before the amendments' effective date, New Jersey's common law rule that the policyholder bears the risk of insolvencies and is responsible for shares allocable to them still applies. The Court's decision strengthens insurers' arguments that Farmers Mutual did not alter the common law rule for policies that are not subject to the 2004 amendments to New Jersey's Property-Liability Insurance Guaranty Association Act or Surplus Lines Insurance Guaranty Fund Act.
About the authors
Lorraine M. Armenti is a partner, and Christopher S. Frangeš is of counsel, at Coughlin Duffy LLP, where they practice in the firm's Insurance and Reinsurance Services group. They represent and counsel domestic and international insurers and reinsurers on complex coverage matters. The views expressed in this article are those of the authors, and do not necessarily reflect the opinions of Coughlin Duffy LLP, or any of its clients.
Notes
1 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, Docket No. A-1479-13T1 (App. Div. January 12, 2016).
2 215 N.J. 522 (2013).
3 NJSA 17:30A-1 et seq.
4 215 N.J., 543.
5 SLIGF provides statutory benefits for certain claims insured by an insolvent surplus lines insurer. See generally, NJSA 17:22–6.70 et seq.; PLIGA provides similar benefits for certain claims insured by authorized property and liability insurers on the admitted market. See generally, NJSA 17:30A-1 et seq.
6 Owens-Illinois, Inc. v. United Ins. Co., 138 N.J.437 (1994).
7 Id., 478–479.
8 Id., 475–476.
9 Id., 479.
10 Id.
11 Carter Wallace v. Admiral Ins. Co. 154 N.J. 312 (1998).
12 Benjamin Moore & Co. v. Aetna Cas. & Sur. Co., 179 N.J. 87, 101 (2004); Spaulding Composites Co. v. Aetna Cas. & Sur. Co., 176 N.J. 25, 36 (2003), cert. denied sub nom. Liberty Mut. Ins. Co. v. Caldwell Trucking PRP Grp., 540 U.S.1142, 124 S. Ct. 1061, 157 L. Ed. 2 d 953 (2004).
13 112 N.J. 30 (1988).
14 Id., 32.
15 In fact, it was the pending insolvency of Ambassador that spurred the legislature to pass the SLIGF Act. Introductory Statement, Assembly No. 2273, L. 1984, c. 101.
16 112 N.J., 33.
17 Id.
18 Id., 33–34.
19 Id., 36.
20 Id., 33, fn 1.
21 Chemical Leaman Tank Lines v. Aetna Cas. & Sur. Co., 978 F.Supp. 589 (D.N.J. 1997) (rev'd on other grounds, 177 F.3 d 210).
22 Id., 609.
23 Id. (quoting Owens-Illinois, 138 N.J., 475).
24 Id., 36.
25 Benjamin Moore & Co. v. Aetna Cas. & Sur. Co., 179 N.J. 87 (2004).
26 Benjamin Moore, 179 N.J., 101.
27 Sayre v. Insurance Company of North America, 305 N.J. Superior Court Reports 209 (App. Div. 1997).
28 NJSA 17:22–6.79. The SLIGF Act further requires that any amount payable by SLIGF on a “covered claim” be reduced by the amount the claimant or insured recovers from other insurance policies. Id. The PLIGA Act contains similar provisions. NJSA 17:30A-12.
29 See, e.g., Spaulding Composites, supra, 176 N.J., 44; Benjamin Moore, supra 179 N.J., 100–101.
30 179 N.J., 105.
31 L. 2004, c. 175 (amending the PLIGA Act); Law 2004, c. 165 (amending the SLIGF Act).
32 NJSA 17:30A-5 (emphasis supplied); The SLIGF Act's definition is slightly different, substituting “except that” with “provided, however.” NJSA 17:22–6.72.
33 215 N.J. 522, 527.
34 Id., 544–545.
35 Id., 528–529.
36 Id., 530.
37 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, *3.
38 NJSA 58:10–23.11 to −23.24.
39 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, *3.
40 Id.
41 Id., *6.
42 Id., *5–*6.
43 Id.
44 Id., *4.
45 Id., *4–*5.
46 Id., *6.
47 Id., *7.
48 Id., *7. For reasons not made clear in the opinion, Integrity was not included in the settlement. Id., note 3.
49 Id., *7.
50 Id., *8.
51 Id.
52 215 N.J. 522.
53 November 13, 2013 Letter Decision, Docket No. CAM-L04130-09, 4–5.
54 Id.
55 Plaintiff/Appellant, Ward Sand & Material Co.'s Brief and Appendix, Docket No. A-1479-13,, 19.
56 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, *8–*9, *17–*18.
57 Id., *14.
58 Id., *18, quoting L. 2004, c. 175, § 9.
59 187 N.J. 197 (2006).
60 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, *16, citing Thomsen, supra, 187 N.J., 204, fn.2.
61 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, *16–*17 (citing R. 2:11–3(e)(1)(E)).
62 Id, * 18, quoting Farmers Mutual, 215 N.J., 528.
63 Id., *18–*19.
64 Farmers Mutual, supra, 215 N.J., 528.
65 L. 2004, c. 175, §9 (amending the PLIGA Act effective December 22, 2004); L. 2004 c. 165 § 8 (amending the SLIGF Act effective December 7, 2004).
66 2016 N.J. Superior Court Reports Unpublished. LEXIS 59, *18.
67 See Armenti and Frangeš, “Just When You Thought You Understood New Jersey Allocation Law: Implications, Limitations and Complications In Applying Farmers Mutual Fire Ins. Co. of Salem v. New Jersey Property-Liability Ins. Guar. Ass'n.” Environmental Claims Journal 26 (3): 216, for a discussion of some of those limitations.
68 Id.
69 Farmers Mutual, 215 N.J., 545, fn 6.
70 As of this writing, seventy-three of the eighty-eight NJ PLIGA insolvencies took place before December 22, 2004. See http://www.njguaranty.org/Insolvencies/pliga.aspx (accessed April 29, 2016). None of the insolvencies covered by the New Jersey Surplus Lines Insurance Guaranty Fund took place on or after December 22, 2004. http://www.njguaranty.org/Insolvencies/sligf.aspx (accessed April 29, 2016).
71 See Armenti and Frangeš, supra, Environmental Claims Journal 26 (3): 281–285.