On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Pressler, O'Brien and Stern. The opinion of the court was delivered by O'Brien, J.A.D.
Plaintiff John Savarese (Savarese) appeals from the dismissal of his complaint. We affirm.
The parties to this appeal are Savarese, defendant New Jersey Automobile Full Insurance Underwriting Association (JUA), and the intervenor, Department of Insurance of the
State of New Jersey.*fn1 On December 6, 1983, Savarese entered into a producer contract with JUA to represent JUA through the Hanover Insurance Company, one of JUA's servicing carriers, to produce automobile liability and physical damage insurance. Section V of the contract concerns compensation and reads as follows:
A. Commissions shall be paid at the rate prescribed in the association plan documents.
B. Commissions shall be earned by the producer as premium is earned. If coverage is terminated or reduced on any policy, the producer shall refund all unearned commissions to the servicing carrier.
C. The association shall not be responsible for any expenses of the producer.
Notwithstanding this language in his contract, Saverese contends that he and similarly situated producers were entitled to receive commissions on unearned premiums where policies were cancelled for nonpayment of premiums based upon the language of N.J.S.A. 17:22-6.14a, the pertinent part of which read in 1983 as follows:
In the event that a policy is cancelled by the insurer, either at its own behest or at the behest of the agent or broker of record, the unearned premium, including the unearned commission shall be returned to the policy holder. In the event that a policy of automobile insurance issued by the automobile insurance plan established pursuant to P.L.1970, c. 215 (C. 17:29D-1) or any successor thereto, is cancelled by reason of nonpayment of premium to the insurer issuing the policy or nonpayment of an installment payment due pursuant to an insurance premium financing agreement, the broker of record for that policy may retain
the full annual commission due thereon and, if a premium finance agreement is not involved, the effective date of cancellation of the policy shall be no earlier than 10 days prior to the last full day for which the premium paid by the insured, net of the broker's full annual commission, would pay for coverage on a pro rata basis in accordance with rules established by the commissioner. [Emphasis supplied.]
It is Savarese's position that JUA is a "successor" to the Automobile Insurance Plan (AIP), and thus he and similarly situated producers have a statutory right to full annual commissions upon cancellation of a policy for nonpayment of premium notwithstanding the language in their producer contracts.
JUA is a nonprofit, unincorporated association created by the Legislature to provide automobile insurance through normal market outlets at standard market rates to qualified persons who cannot otherwise obtain such insurance. See N.J.S.A. 17:30E-2. This purpose is accomplished through agreements with certain insurers, designated as servicing carriers, who issue policies on JUA's behalf and through agreements made with licensed insurance agents and brokers who bind coverage, collect premiums and issue identification cards on behalf of JUA. JUA has approximately 12 servicing carriers administering its policies and 11,000 agents with producer contracts, of whom Savarese is one operating through the Hanover Insurance Company, a servicing carrier of JUA.
JUA was created by L. 1983, c. 65, §§ 13 to 34, to be effective January 1, 1983, but remained inoperative until January 1, 1984. The Committee Statement to Assembly No. 1696 -- L. 1983, c. 65*fn2 explains that:
This bill replaces the Assigned Risk Plan with the New Jersey Full Insurance Underwriting Association which will provide automobile coverage for those individuals who are unable to be written in the voluntary market.
The Statement notes that underwriting losses are to be made up from (1) 80% of the surcharges levied by the Division of Motor Vehicles on a certain class of drivers; (2) 80% of the surcharges levied by JUA on motor vehicle conviction points
accumulated within the three years immediately prior to the operative date of the act by drivers insured under AIP; (3) accident surcharges which may be levied by JUA; (4) income from investment of monies collected by JUA, and
5. The residual market equalization charge which is to be levied on all insured automobiles in the voluntary and residual markets, exclusive of principal ...