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In re Terminated Aetna Agents

Decided: December 3, 1990.

IN THE MATTER OF THE TERMINATED AETNA AGENTS


On appeal from Administrative Decision and Order of the State of New Jersey, Department of Insurance.

Dreier, Ashbey and Landau. The opinion of the court was delivered by Landau, J.A.D.

Landau

Aetna Casualty & Surety Company and the Standard Fire Insurance Company (Aetna) appeal from an Order of the State Commissioner of Insurance directing it to pay full commissions from and after July 20, 1989 to forty-seven terminated agents (Agents) who continue to service renewed automobile insurance policies for Aetna.

This matter arose after December 11, 1987, when fifty-seven Aetna agents in New Jersey received notices terminating their authority to write personal lines insurance policies for Aetna and its property and casualty affiliates. The Agents commenced suit in the Superior Court to challenge validity of the terminations. The parties continued, however, to engage in settlement negotiations.

Although Aetna and the Agents were aware of pending legislation which would, if enacted, amend N.J.S.A. 17:22-6.14a with regard to commission rights of terminated agents, they nonetheless entered into a settlement agreement on January 3, 1989. Under this agreement, the Agents were permitted to continue servicing personal lines automobile policies which could not be placed with another insurer but were renewable by statute. (N.J.S.A. 39:6A-3). The agreement also required Aetna to pay the Agents a reduced commission of 9% for a nine-month period commencing March 16, 1989 through December 15, 1989, after which the Agents would continue to service their New Jersey policyholders without compensation.

On July 20, 1989, more than six months after Aetna and the Agents entered into the agreement, an amendment to N.J.S.A. 17:22-6.14a required payment of full commissions to terminated agents who continue to service policies. The language of N.J.S.A. 17:22-6.14a(l), as amended, provides in relevant part:

A company which terminates its contractual relationship with an agent subject to the provisions of subsection d. of this section shall, at the time of the agent's termination, with respect to insurance covering an automobile as defined in subsection a. of section 2 of P.L.1972, c. 70 (C. 39:6-2), notify each named insured whose policy is serviced by the terminated agent in writing of

the following: (1) that the agent's contractual relationship with the company is being terminated and the effective date of that termination; and (2) that the named insured may (a) continue to renew and obtain service through the terminated agent; or (b) renew the policy and obtain service through another agent of the company . . . .

The company shall pay a terminated agent who continues to service policies pursuant to the provisions of this subsection a commission in an amount not less than that provided for under the agency contract in effect at the time the notice of termination was issued.

Further, L. 1989, c. 129, ยง 2 provides that "this Act shall take effect immediately [July 20, 1989], and shall apply to all policies in effect on or after the effective date."

Notwithstanding their agreement with Aetna, the Agents invoked N.J.S.A. 17:22-6.14a(f) and filed a violation complaint with the Commissioner which resulted in the final Order from which Aetna now appeals. We briefly note that although this court is not bound by an agency's interpretation of a statute, Mayflower Securities v. Bureau of Securities, 64 N.J. 85, 93, 312 A.2d 497 (1973), our Supreme Court has placed "great weight on the interpretation of legislation by the Administrative Agency to whom its enforcement is entrusted." Peper v. Princeton University Board of Trustees, 77 N.J. 55, 69-70, 389 A.2d 465 (1978). We affirm substantially for the reasons expressed by the Commissioner in his written opinion of January 11, 1990.*fn1

We add our own recognition that the insurance industry is strongly affected with the public interest, Saffore v. Atlantic Casualty Ins. Co., 21 N.J. 300, 310, 121 A.2d 543 (1956), as expressed through comprehensive legislation regulating the industry. Id.; see also Matter of N.J.A.C. 11:1-20, 208 N.J. Super. 182, 199, 505 A.2d 177 (App.Div.1986). In furtherance of this interest, the Legislature promulgated N.J.S.A. 39:6A-3 ("No-Fault ...


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