On appeal from the Superior Court, Chancery Division, General Equity, Mercer County.
Long, R.s. Cohen and Stern. The opinion of the court was delivered by R.s. Cohen, J.A.D.
Allstate Insurance Company and Aetna Casualty and Surety Company ("the insurers")*fn1 filed separate Chancery Division suits against Samuel E. Fortunato, Commissioner of Insurance. They sought declaratory and injunctive relief relating to their pending filings for approval of proposed increases in automobile insurance premium rates. The insurers both sought judgment declaring that the Commissioner's failure to act on the filings resulted in approvals by operation of law. Failing that, they sought orders requiring that their filings be deemed complete, and that they be transmitted to the Office of Administrative Law for contested-case hearings.
The Chancery Division entered judgment in each case refusing to declare the filings automatically approved but ordering transmittal of the filings to the OAL. The Commissioner appealed the orders for transmittal to the OAL. The insurers cross-appealed the portion of the judgments declaring that the filings were not automatically approved.*fn2 We consolidated the appeals and accelerated them. We now affirm on both appeals and cross-appeals.
On March 12, 1990, Chapter 8 of the Laws of 1990 was approved by the Governor and immediately took effect. Called the Fair Automobile Insurance Reform Act of 1990 ("FAIR Act"), it undertook a significant overhaul of the perennially troubled New Jersey auto insurance market. Among other
things, the FAIR Act creates a three-year surtax of an annual 5% on all taxable premiums on voluntary automobile insurance policies, N.J.S.A. 17:33B-49, and a proportional annual assessment, through 1997, against auto insurers sufficient to enable the New Jersey Property-Liability Insurance Guaranty Association to make annual loans of $160,000,000 to the New Jersey Automobile Guaranty Fund, an entity created by the FAIR Act to help defray the losses of the New Jersey Automobile Full Insurance Underwriting Association (JUA). N.J.S.A. 17:30A-8; 17:33B-5. The legislation specifically forbids an insurer to impose a premium surcharge to recoup the JUA assessment, N.J.S.A. 17:30A-16, or to pass the surtax along to policyholders. N.J.S.A. 17:33B-51. The Commissioner concedes, however, that insurers are constitutionally entitled to an adequate rate of return, and that insurers may therefore pass along the cost of the assessments and surtax to the extent "constitutionally essential to ensure the insurer's adequate rate of return." Legislative findings introducing the FAIR Act include the statement that "insurers are entitled to earn an adequate rate of return through the ratemaking process." N.J.S.A. 17:33B-2g.
It was not until November 26, 1990, 8 1/2 months after the March 12, 1990, effective date that the Commissioner adopted emergency regulations under the FAIR Act, governing the content of filings seeking approval of premium increases. 22 N.J.R. 3790. By that time, Allstate and Aetna's filings already had been submitted.
Allstate submitted its filing on August 24, 1990. It apparently contained all of the information required by N.J.A.C. 11:3-16.1 et seq., as those regulations then existed. Allstate asked for immediate approval or, failing that, for a hearing pursuant to N.J.S.A. 17:29A-14c.
Not having heard from the Commissioner in response to its filing or the hearing request that accompanied it, Allstate wrote to the Commissioner on September 28, again requesting a hearing. No reply having been received by October 12, Allstate
filed a formal application with the Commissioner for emergent relief. On October 29, the Commissioner finally replied, advising Allstate that he was in the process of developing amendments to the regulations which would require separate filings for surtax or assessment relief and govern the content of the filings. Thus, the Commissioner concluded, the August filing could not be considered without additional information, and he returned it to Allstate. Allstate then filed its Chancery Division complaint.
Aetna's situation was not much different. It submitted its filing on June 29, 1990, covering both surtax and assessment relief and premium increases for other reasons. On July 16, the Insurance Department wrote to Aetna, identifying areas of incompleteness in the filing under existing regulations. Aetna responded on August 1, answering some of the Department's inquiries and offering to try to get the answers to others. On September 4, Aetna wrote again, attaching exhibits in response to Department requests. That letter, Aetna contends, completed its filing. The Commissioner did not answer the September 4 letter. On November 5, Aetna wrote again, this time asking for a hearing.
The Commissioner immediately responded, referring for the first time to the developing new regulations that would require, and govern the content of, separate filings seeking surtax and assessment relief. The letter also pointed out a number of shortcomings the Commissioner found in Aetna's filing. The letter ended with the requirement that the non-surtax-and-assessment filing had to be supplemented with further information concerning cost savings resulting from the FAIR Act. On December 17, counsel for Aetna demanded transmittal of the filings to the OAL. On January 14, 1991, Aetna filed its Chancery Division complaint seeking the same relief Allstate sought, namely, a declaration that its filing was approved by operation of law or, if not, that its filing was complete, and
should be transmitted to OAL as a ...