On appeal from The New Jersey Department of Insurance.
King, Gruccio and Brochin. The opinion of the court was delivered by Brochin, J.A.D.
The opinion by the court was delivered by
By this opinion, we decide two consolidated appeals which challenge the validity of an amendment to the plan of operation of the New Jersey Automobile Full Insurance Underwriting Association which provides for the initiation and funding of legal proceedings asserting monetary claims for the benefit of the Association against its servicing carriers.*fn1 The appellants
are eight automobile liability insurers*fn2 which have acted as servicing carriers for the Association. We hold that appellants have failed to establish the invalidity of the disputed provisions.
The New Jersey Automobile Full Insurance Underwriting Association was created by the New Jersey Automobile Full Insurance Availability Act. L. 1983, c. 65, N.J.S.A. 17:30E-1 et seq.. The Association was intended to "provide automobile insurance for qualified [New Jersey] applicants who cannot otherwise obtain such insurance . . . ." N.J.S.A. 17:30E-2. It was established as an unincorporated, nonprofit association of all insurers licensed to transact automobile insurance in New Jersey. N.J.S.A. 17:30E-4. Its board of directors was directed to adopt a plan of operation, subject to approval of the commissioner of insurance, which would prescribe the "methods and means," consistent with the Act, for accomplishing its statutory objective by engaging "servicing carriers" which were to issue insurance policies on its behalf and to receive "reasonable and adequate compensation" for their services. See N.J.S.A. 17:30E-6a, -7e. This plan of operation could be amended either by the commissioner of insurance or by the board of directors of the Association at the commissioner's suggestion or with his approval. N.J.S.A. 17:30E-6b, c, d.
The New Jersey Automobile Full Insurance Availability Act failed to accomplish its purpose.*fn3 Effective on March 12, 1990,
the Legislature enacted its successor, the Fair Automobile Insurance Reform Act of 1990, N.J.S.A. 17:33B-1 et seq. In that statute, the Legislature declared that, "[n]ot only has the cost of the insurance product itself escalated, but the subsidies that most drivers contribute to support the financially troubled New Jersey Automobile Full Insurance Underwriting Association have made the system a burden rather than a benefit to the citizens of the State." N.J.S.A. 17:33B-2d. The Reform Act describes the condition of the Association as follows:
[T]he New Jersey Automobile Full Insurance Underwriting Association . . . is currently operating in a substantially impaired financial state with an operating deficit which the association has estimated to be in excess of $3 billion and . . . based upon the results of a recent claim and underwriting review and financial audit, the Commissioner of Insurance stated that mismanagement by the insurance companies acting as servicing carriers cost the association $908 million between its inception in 1984 and 1988 . . . . if it were a licensed insurer, [the Association] would likely be declared financially impaired or insolvent . . . .
The Legislature declared that because of these conditions, the public interest required, among other things,
eliminat[ing], over time, . . . the New Jersey Automobile Full Insurance Underwriting Association, and certain of the market subsidies currently funding its losses . . . [and] provid[ing], through the appointment of an insolvency trustee, for the orderly evaluation, prioritization and ...