On appeal from the Superior Court, Chancery Division, Bergen County.
Ashbey and Brochin. The opinion of the court was delivered by Ashbey, J.A.D.
The opinion of the court was delivered by
This matter comes before us on the emergency application of the Commissioner of Insurance of the State of New Jersey for leave to appeal from a Chancery Division August 2, 1991 order which denied his application to rehabilitate the New Jersey Life Insurance Company.
Pursuant to his authority under N.J.S.A. 17B:32-4 and N.J.S.A. 17B:32-6, the Commissioner of Insurance commenced a proceeding in the Superior Court seeking an order directing him to "rehabilitate" respondent life insurer, New Jersey Life Insurance Company, primarily on the ground that respondent had been "found, after examination, to be in such condition that its further transaction of business [would] be hazardous to its policyholders, or to its stockholders, or to its creditors, or to the public." N.J.S.A. 17B:32-6f.
The Commissioner claimed that respondent's financial statements misstated its financial condition, that four adjustments of its reserves for liabilities and of its assets were required to reflect its true condition accurately, and that those adjustments would disclose its insolvency. Respondent insurer defended the Commissioner's application on the ground that, under its reinsurance agreement with Republic Vanguard Life Insurance Company, Republic had assumed $25 million of New Jersey Life Insurance Company's potential liabilities, making the adjustments required by the Commissioner unnecessary. The Commissioner disapproved of the reinsurance treaty and challenged its effectiveness toward guarantying respondent's fiscal soundness. The judge ruled that there were issues of fact presented which required discovery and a hearing, and denied the Commissioner's application for a rehabilitation order.
On July 26, 1991, the Commissioner filed for summary judgment on his prior application on the grounds that, in the course of discovery, he had obtained documents proving that the insurer was "insolvent," an independent ground for the issuance of an order permitting him to "rehabilitate" the company. N.J.S.A. 17B:32-6a. On the return day of the Commissioner's order to show cause, it was stipulated that the Republic reinsurance treaty, originally disapproved of by the Commissioner, but which had supported respondent's claim of solvency, had been repudiated by the reinsurance obligor, and respondent insurer had twice acceded to that repudiation in writing.*fn1 New Jersey Life Insurance Company denied that the reinsurance agreement had been effectively terminated, and averred that arbitration of the issue, in accordance with the reinsurance agreement, would take place several months hence. Although
respondent contended that the asserted repudiation was subject to further arbitration, respondent conceded that, if its written agreement were valid, and pending the successful result of arbitration to establish otherwise, technical insolvency existed.
The Chancery judge set the matter down for a hearing, ruling that there were issues of fact concerning the insolvency and concerning whether the insurer's condition made the further transaction of business hazardous. Respecting interim restraints, however, the judge found as follows:
If I weigh the likelihood of success, it would certainly seem to me that New Jersey Life has an uphill fight, No. 1, to be [sic] establish that this agreement with Republic Vanguard is still in effect and must continue in effect and also to ...