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Ada Financial Service Corp. v. State

Decided: August 8, 1979.


Matthews, Kole and Milmed. The opinion of the court was delivered by Matthews, P.J.A.D.


This is an appeal from a judgment of the Law Division declaring the provisions of N.J.S.A. 17:22-6.6a and 17B:22-8(c) unconstitutional as violative of the Equal Protection and Due Process Clauses of the Federal and State Constitutions. The provisions were enacted by L. 1975, c. 364, and became effective on March 3, 1976. N.J.S.A. 17:22-6.6a reads:

No insurance agent's, broker's or solicitor's license shall be issued or renewed to any banking institution or savings and loan association which regularly accepts deposit from New Jersey residents not regularly employed by said lending institutions or its affiliates or bank holding company, finance company, except any finance company affiliated with an insurance company, mortgage loan company, credit union or any other institution whose principal business is the lending of money, nor any parent company, subsidiary, affiliate, service corporation or member bank thereof, except that this section shall not apply with respect to credit life insurance, credit accident and health insurance, group mortgage cancellation life insurance or group mortgage accident and health insurance.

The Commissioner of Insurance is authorized to promulgate regulations to effectuate the purpose of this section, which will assist in maintaining the separation between lending institutions and the insurance business and to minimize the possibilities of unfair competitive practices by lending institutions or their related companies.

Similar language was adopted as part of the Life and Health Insurance Code at N.J.S.A. 17B:22-8(c).

Because the statute prohibited the Commissioner from renewing the insurance license of any agent or broker who was affiliated with a financial institution and because of the difficulty in discerning such an affiliation, questionnaires were prepared and sent with the applications for renewal*fn1 of property-casualty brokers in New Jersey. Some 18,000 renewal applications and questionnaires were returned to the Department in September and October 1977. After reviewing the information submitted on the questionnaires, the Department notified plaintiffs in the various actions below that their licenses would not be renewed by reason of N.J.S.A. 17:22-6.6a because they are in some way affiliated with a financial institution:

ADA Financial Service Corporation owns three subsidiary corporations, United General Agency of America, Inc., a property-casualty insurance agency, United General Life Agency of America, Inc., a life and health insurance agency, and Millburn Service Plan, Inc., a finance company licensed to do a second mortgage loan business, a sales finance business and an insurance premium finance business;

plaintiff Fred Allen is the president and principal stockholder of the plaintiff Fred Allen Agency, Inc., an insurance broker and agent, and Essex and Union Mortgage Company, a mortgage loan company;

plaintiff Approved Insurance Agency, Inc., an insurance broker, also does business as a premium finance company under the name of AIA Premium Finance; the individual plaintiff Jerry M. Field who is the owner of Approved, also owns a substantial amount of stock of Heritage Finance Service Co., a small loan company, and Brunswick Mortgage Co. and Majestic Finance Discount Co., second mortgage companies;

plaintiff Berg Associates is an insurance broker and is a subsidiary of the plaintiff Berg Enterprises, Inc., which is generally engaged in the business of real estate services; other subsidiaries of the parent corporation include Berg Agency, Inc., engaged in a real estate sales business, and Margaretten & Co. and Blau Mortgage Co., both engaged in a mortgage loan business;

plaintiff City Insurance Services, Inc., is a wholly owned subsidiary of City Federal Savings & Loan Association, a federally chartered savings and loan association;

plaintiff John Costa is an insurance broker and also trades at the same address as Franklin Financing Co., a premium finance company which he operates for the benefit of his insurance business;

plaintiff Anthony C. Damore is an insurance broker and owner of 80% of the stock of the plaintiff A.C. D'Amore Agency, Inc., also a licensed broker; he is also the owner of a substantial portion of the stock of Policy Advancing Corporation, a premium finance company operating for the benefit of the customers of the insurance business;

plaintiffs Ronald and Richard Frigerio, insurance brokers, own all the stock of the Richard Lewis Agency, an insurance brokerage company, and the majority of the stock of Marfico, Inc., a premium finance business;

plaintiff F.T.P., Inc., is an insurance broker and its principal officers are the plaintiffs Frank Powell, Thomas Powell and Patrick Powell, all of whom are insurance brokers; Financial Leisure Finance Co., a premium finance company, is the parent ...

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