On consolidated appeals from decision, determination, and judgment of the Department of Banking and Insurance of the State of New Jersey.
For remandment: Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. Opposed -- None.
The Commissioner of Banking and Insurance denied approval of rate filings for increases for (1) automobile liability insurance and (2) collision and other physical damage coverage. We certified the appeal before argument in the Appellate Division.
After a consideration of the briefs and the argument before us, the matter remained obscure, especially as to the precise findings of the Commissioner. Shortly after the argument we called for a conference in the hope that light would be shed. At the meeting the parties tentatively agreed that a remand to the Commissioner would be desirable, with the possibility that a new filing might be made. During the summer
recess we were advised that the parties were unable to crystallize the agreement.
There were two subjects upon which we wanted more information. One was the amount an insurer should receive as a reasonable profit. The parties used a figure of five percent of premiums for underwriting profit and contingencies but quarrelled over whether there should be deducted the earnings from investments of (a) the reserve for unearned premiums and (b) the reserve for losses. We wanted to know the origin of the five percent figure and its justification, as to which the record was silent. The second subject upon which we sought light was still more basic to our decision, to wit, the meaning of the Commissioner's determination. We could not comprehend some of the findings nor how the findings led to the result. In this regard, we could not tell whether the carriers were found to be entitled to something less than what they sought but failed completely because the Commissioner conceived they had to succeed in full or not at all.
After the breakdown of the proposal for a remand, the Commissioner asked that we decide the proper rate of profit upon the basis of literature the parties might submit, and such materials have been submitted sporadically on behalf of the Commissioner. We heretofore indicated our view that the proper course would be a hearing upon that subject before the Commissioner, findings by him, and thereupon a judicial review if one is sought. The carriers ask that we direct such a remand as to that subject.
As to the broader problem -- an understanding of the Commissioner's finding -- we called for a supplemental statement by him to the end that we might be able to settle some part of the controversy. That statement has not been submitted despite the passage of a considerable period of time. In the circumstances we think we should remand the matter to the Commissioner with directions that he proceed forthwith in accordance with this opinion.
There shall be a hearing with respect to what is a proper factor for profit and contingency. We will express some
views, tentative because of the absence of a record. They may later be challenged in the light of what emerges at the further hearing.
Special counsel (appointed to represent the public) refers to the earnings of these carriers from the investments of their total assets (other than current premiums). Those earnings do not appear to be relevant. This is evident as to the assets in excess of the assets required to do business and seems to be equally clear as to assets required to do business. The carrier is compensated for the risk it takes, and although the carrier must show its ability to pay if it ...