On appeal from a Final Order of the Department of Insurance.
Pressler, Muir, Jr. and Kestin. The opinion of the court was delivered by Pressler, P.J.A.D.
This is yet another chapter in the ongoing saga of the automobile insurance industry's continuing challenge to the Fair Automobile Insurance Reform Act of 1990, N.J.S.A. 17:33B-1 to -63 (FAIRA), and the manner in which the Commissioner of Insurance has chosen to implement and enforce that Act. At issue here are the actions taken by the Commissioner to effectuate the producer assignment program mandated by N.J.S.A. 17:33B-9c.
The automobile insurance industry morass which was the motivating impetus for the enactment of FAIRA, the problems it was intended to resolve, and the general mechanisms of its redress are matters which, in the two years since the Act's passage, have received extensive judicial exposition in a variety of contexts, and need not be repeated here. See, e.g., Matter of Plan For Orderly Withdrawal, 129 N.J. 389, 609 A.2d 1248 (1992); State Farm v. State, 124 N.J. 32, 590 A.2d 191 (1991); Matter of Com'r of Insurance, 256 N.J. Super. 158, 606 A.2d 851 (App.Div.1992); Matter of Private Pass. Auto Rate Rev., 256 N.J. Super. 46, 606 A.2d 401 (App.Div.1992); Matter of Market Transition Facility, 252 N.J. Super. 260, 599 A.2d 906 (App.Div.1991); Matter of Aetna Cas. and Sur. Co., 248 N.J. Super. 367, 591 A.2d 631 (App.Div.1991); Allstate Ins. Co. v. Fortunato, 248 N.J. Super. 153, 590 A.2d 690 (App.Div.1991). And see generally Assembly Appropriations Committee Statement to A-1 (1990) (FAIRA). For purposes of the issues raised by this appeal it suffices to say that the overall purpose of FAIRA is to ensure that all automobile owners in the state, except those who meet statutorily defined objective criteria of poor risk, see N.J.S.A. 17:33B-13, are covered by the so-called
voluntary market. To this end, FAIRA abolished the prior JUA system established by the New Jersey Full Insurance Availability Act, N.J.S.A. 17:30E-1 to -24; created the Market Transition Facility (MTF) as an interim mechanism to achieve a two-year, quota-prescribed, phased depopulation of JUA and the transfer of JUA insureds to the voluntary market, N.J.S.A. 17:33B-11; established the rule of "take all comers," required insurers to accept applications for automobile insurance submitted by all eligible persons, that is, those not falling within a statutorily defined poor-risk category, N.J.S.A. 17:33B-15;*fn1 and revived the pre-JUA system of an assigned risk plan to provide coverage for ineligible persons, N.J.S.A. 17:33B-22.
In order to insure that all eligible persons have access to the voluntary market, FAIRA mandates a producer assignment program, N.J.S.A. 17:33B-9. This program has its genesis in the producer system created by the JUA act, N.J.S.A. 17:30E-10. In sum, 17:30E-10a had required JUA business to be serviced by producers, that is, licensed insurance brokers and agents, selected by the JUA board. The board had been required to include an affirmative action program in its selection procedures, a mandate evidently intended to serve not only the producer population but, primarily, the otherwise underserved consumer population. Paragraph b of 17:30E-10 had empowered the board, in the case of producers who were neither exclusive representatives of a servicing carrier nor had entered into a contractual relationship with a servicing carrier, to assign producers to "all servicing carriers on an equitable basis. . . ." The producers had been compensated by JUA in accordance with a statutorily prescribed commission rate. N.J.S.A. 17:30E-11. The effectuation of the JUA producer plan resulted in the creation of a category of insurance brokers who wrote only JUA business, developed substantial books of JUA
business, and established ongoing fiduciary relationships with their JUA customers to whom the voluntary market was, for a variety of reasons, inaccessible.
It is against this background that we consider FAIRA's producer assignment program. Paragraph a of N.J.S.A. 17:33B-9 merely requires the Commissioner to compile a list of JUA producer-brokers and to make the list available to all automobile insurers licensed to do business in New Jersey. The import of paragraph b is also precatory, simply requiring the Commissioner to "initiate a plan to encourage the broadening of authorities held by those brokers who have been active as association [JUA] producers." The heart of the legislation is paragraph c, which requires the Commissioner to establish a producer assignment program by October 1, 1991, that is, one full year prior to the final depopulation of the MTF and the mandated assumption by the voluntary market of the obligation to insure all eligible persons. Paragraph c requires that the program "shall provide for the assignment of qualified producers on an equitable basis to insurers writing private passenger automobile insurance in the voluntary market." Finally, paragraph c enumerates five criteria for producer eligibility for the program. A producer (1) must have been a JUA producer, (2) must have no present affiliation with a voluntary carrier permitting the placing of automobile insurance, (3) must have had such an affiliation which had been terminated on or after December 31, 1980, (4) must have demonstrated to the Commissioner "competency, efficiency and effectiveness in servicing association and other insurance business," and (5) must be located in and service a geographic area determined by the Commissioner "to lack sufficient representation for the placement of automobile insurance business in the voluntary market."
In light of the history of automobile insurance in this state in the last decade and the legislative purpose and plan sought to be effected by FAIRA, this much at least is clear. The enactment of N.J.S.A. 17:33B-9 constitutes a legislative recognition
that the orderly and comprehensive implementation of the "take all comers" centerpiece of the FAIRA scheme requires that there be an effective conduit between the voluntary market and those insureds to whom the voluntary market was theretofore inaccessible for an obvious panoply of demographic reasons. The enactment of N.J.S.A. 17:33B-9 further recognizes that the unaffiliated JUA producers constitute just such a conduit whose utilization is reasonably calculated to advance the legislative voluntary-market plan.
As we understand the posture of this appeal, the complaining insurers are not challenging the validity of N.J.S.A. 17:33B-9 itself. Rather they object to the actions taken by the Commissioner, both procedurally and substantively, to implement it.
We consider first the procedural challenges whose description also explains the procedural history of this appeal. Pursuant to the statutory directive, the Commissioner issued two orders on July 2, 1991, Order A91-280, which established a voluntary producer placement plan in implementation of paragraph b of N.J.S.A. 17:33B-9, and Order A91-281, which established a mandatory producer assignment program in implementation of paragraph c. On August 5, 1991, both of these orders were proposed as rules, published respectively at 23 N.J.R. 2275 and 23 N.J.R. 2297, proposed to be adopted, ...