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Ivy Hill Park Apartments and Outstate Realty Corp. v. New Jersey Property Liability Insurance Guaranty Association

Decided: November 17, 1987.

IVY HILL PARK APARTMENTS AND OUTSTATE REALTY CORP., A NEW YORK CORPORATION, PLAINTIFFS-APPELLANTS,
v.
NEW JERSEY PROPERTY LIABILITY INSURANCE GUARANTY ASSOCIATION, NEW JERSEY SURPLUS LINES INSURANCE GUARANTY FUND, HAZEL FRANK GLUCK, THE COMMISSIONER OF INSURANCE OF THE STATE OF NEW JERSEY, RUTH LIEBERFARB AND CARL LIEBERFARB AND AGNES F. ELLIOT AND GEORGE ELLIOT, DEFENDANTS-RESPONDENTS



On appeal from the Superior Court of New Jersey, Law Division, Essex County.

Shebell, Gaynor and Stein. The opinion of the court was delivered by Shebell, J.A.D.

Shebell

Plaintiffs Ivy Hill Park Apartments (Ivy Hill) and Outstate Realty Corp. brought an action in the Law Division to compel the Commissioner of Insurance (Commissioner), the New Jersey Property Liability Insurance Guaranty Association (Association) and the New Jersey Surplus Lines Insurance Guaranty Fund (Fund) to pay the balance due on the settlements of two personal injury claims and to restrain the claimants from executing on plaintiffs' property to satisfy the judgments entered on the settlements.

Plaintiffs were insured for liability by the Ambassador Insurance Company (Ambassador) at the time the injuries were sustained; Ambassador, however, became insolvent. The Fund, under authority of the New Jersey Surplus Lines Insurance

Guaranty Fund Act, N.J.S.A. 17:22-6.70 et seq. (Act), paid 40% of the settlements agreed upon, but has declined to make further payments at the present time. The court denied relief and dismissed the action against the Commissioner on the ground that jurisdiction lay with the Appellate Division.

Plaintiffs appeal, contending that the Act obligates the Fund to pay all claims that Ambassador would have covered and provides it with an unlimited source of income to pay these claims. Plaintiffs further argue that the court erred in dismissing their claim against the Commissioner since the Fund's obligation to pay the claims was a ministerial duty and an action in the Law Division to compel performance of such a duty was proper.

Outstate Realty Corp. is the owner of Ivy Hill Park Apartments, a 2,100-unit complex located in Newark. On September 5, 1984, the Vermont Superior Court declared Ambassador insolvent and ordered its liquidation. At that time there were claims against Ivy Hill by Carl and Ruth Lieberfarb and Agnes and George Elliot, on which lawsuits were subsequently filed. The Elliots' suit was settled for $75,000 by consent order which prevented Ivy Hill from selling its property before full payment of the settlement. The order also provided that if the settlement was not paid within a year, the Elliots could move for an order of judgment, and interest on the $75,000 would begin to run. The Lieberfarbs' suit was settled for $16,800. The settlement required that if Ambassador or the Fund failed to pay the settlement in 11 months, then Ivy Hill would become obligated to pay any amount remaining unpaid within seven days, or a judgment with interest would be entered against Ivy Hill. Plaintiffs represented that both settlements were investigated and approved by the Fund.

The Legislature passed the Act specifically in response to the insolvency of Ambassador. It created a fund to pay covered claims under policies issued by eligible, insolvent surplus lines

insurers,*fn1 such as Ambassador. See Introductory Statement, Assembly, No. 2273- L. 1984, c. 101. The Act took effect on July 27, 1984. L. 1984, c. 101, ยง 16.

On May 29, 1985, the Commissioner issued an order directing the Fund to "begin payment of Ambassador-related covered claims . . . in the amount of 40% of the principal amount of each such covered claim. . . ." The order recited that the "Fund, subject to the issuance of an order by the Commissioner to the contrary, shall be obligated, over time, to pay the full amount of all Ambassador-related covered claims in accordance with the provisions of the Act," but that no payments in excess of 40% were to be made until further order of the Commissioner. The Commissioner's decision was based on the purported fact "that the monies currently available in the Fund are insufficient to permit full, immediate payment of all Ambassador-related covered claims as they mature. . . ." Because of the Fund's finances the Commissioner found it "necessary to adjust the Fund's obligations for the payment of covered claims in accordance with the Act. . . ."

In his February 18, 1987 affidavit filed by leave of this court, John A. Conover, Sr., the individual designated by the Commissioner to oversee the administration of the Fund, offered the following regarding the Fund's financial status and the reasons for the Commissioner's order:

6. As of December 31, 1986 the total amount of money the Fund had collected was approximately $14,626,000. Three million dollars of that total was comprised of two loans from the New Jersey Property Liability Guaranty Association (hereafter "the Association") as authorized by N.J.S.A. 17:22-6.75(a)(2). The balance of $11,626,000 represents the amounts collected by imposition of a one-time statutorily authorized $25,000 assessment against each of the 34 surplus lines insurers eligible to do business in New Jersey, and through imposition upon those carriers of policy surcharges in the statutorily mandated maximum amount of 4% of the premiums written in this State by those carriers.

7. As of December 31, 1986 the Fund had paid out a total of $9,207,000 on 1,414 Ambassador claims, including the claims of the plaintiffs. This $9,207,000 amount represented a payment of 40% of the amount due on each of those 1,414 claims pursuant to the ...


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