pool year. However, the process of adjusting and settling losses for claims arising out of an event occurring during a pool year may take time, especially if the claims are litigated. The quarterly settlements are therefore tentative and subject to adjustment later as the claims are closed. Both the process and the time involved are referred to as the "run-off" for the particular pool year.
The equity receiver appointed by the Superior Court undertook the reconstruction of NRMC's books and records, including those for pool year 5. Evidently, they had not properly been kept. The process evidently took more than 5 years. He also issued call notices to pool members in connection with pool year 5 and its run-off. How this came to be done in view of the bankruptcy that followed his designation by only a few months is nowhere explained.
The equity proceeding which culminated in the appointment of the custodial trustee was initiated by Horace Mann Insurance Co. The named defendants were NRMC, Princeton Reinsurance Corp., C & W Financial Corp., and the well-known Pritchard & Baird, Inc., as well as individuals and a family trust. Sussex Mutual was not a named defendant.
Later on, Horace Mann sued Sussex Mutual in Superior Court, Law Division, Mercer County, Docket L-46128-77, and obtained a final judgment on the Amended Complaint in the amount of $ 605,500.70 on Count I, of $ 10,111.01 on Count II, and a declaratory judgment on Count III that Sussex Mutual was bound for a 5% share on losses for pool year 5 and its run-off, for which it was obligated to pay to Horace Mann. This judgment was affirmed in the Appellate Division and certification was denied by the Supreme Court.
As noted at the start, Calvert seeks in this suit to recover from Sussex Mutual what it claims to be the latter's share of losses incurred by Calvert under policies issued by it and ceded to the NRMC pool for pool year 5 and run-off.
One of the issues seems to be whether Calvert may recover directly from Sussex Mutual, basing its claim on the equity proceedings and the judgment in favor of Horace Mann against Sussex Mutual. The problem here is that under the ancillary agreement with Horace Mann, and under the Horace Mann judgment, the ceding company is to look to Horace Mann through NRMC, and once Horace Mann pays NRMC, it may look to Sussex Mutual for indemnity. Exoneration is not mentioned.
The other issue arises out of NRMC's bankruptcy. It would ordinarily be expected that the trustee in bankruptcy would look to the pool members for their shares. These would seem to be Horace Mann for 85% and the other "admitted" pool members making up the other 15%. Payment of their shares would become part of the bankrupt estate for application in payment of those creditors consisting of ceding companies for pool year 5, who may or may not receive 100% of their claims. Horace Mann, in turn, once it had paid, could seek indemnity from the non-admitted companies, such as Sussex Mutual, who composed the 80% segment of Horace Mann's 85% share.
But Horace Mann has already obtained a final judgment against Sussex Mutual for pool year 5, and that judgment may well be res judicata as between them.
Thus, it is evident that there are open questions of fact and law. Does Calvert have a direct claim against Sussex Mutual? If it does, can Sussex Mutual safely pay Calvert in the face of Horace Mann's judgment and the [ILLEGIBLE WORD] claims of NRMC's trustee in bankruptcy? Should there be an [ILLEGIBLE WORD] to assure that if Sussex Mutual is liable, it will only pay once? Can the bankruptcy trustee be brought in on [ILLEGIBLE WORD] without an order of the bankruptcy court to allow it?
Given these and other open questions, as well as the factual complexity of the case, the cross-motion for summary judgment cannot be granted and it will be ordered denied.
So far as Sussex Mutual's motion is concerned, that motion will be granted. The third-party defendant is not here on the motion, but will have ample opportunity to be heard once it is in the case.
Submit order accordingly. *
December 28, 1981
s/ Vincent P. Biunno, U.S.D.J.
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