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Matter of Commissioner of Insurance's Issuance of Orders A-92-189 and A-92-212 and Adoption of Amendment to N.J.A.C. 11:3-20.5 and Adoption of N.J.A.C. 11:3-20-Appendix

Decided: June 14, 1994.

IMO THE COMMISSIONER OF INSURANCE'S ISSUANCE OF ORDERS A-92-189 AND A-92-212, AND ADOPTION OF AMENDMENT TO N.J.A.C. 11:3-20.5 AND ADOPTION OF N.J.A.C. 11:3-20 - APPENDIX


On certification to the Superior Court, Appellate Division, whose opinion is reported at N.J. Super. (1993).

Clifford, Handler, Pollock, Stein, Garibaldi, O'Hern

Per Curiam

Per Curiam

The judgment is affirmed, substantially for the reasons expressed in the opinion of the Appellate Division, reported at N.J. Super. (1993).

Justices Clifford, Handler, Pollock, and Stein join in this opinion. Justice Garibaldi has filed a separate Dissenting opinion, in which Justice O'Hern joins. Chief Justice Wilentz did not participate.

Disposition

The judgment is affirmed, substantially for the reasons expressed in the opinion of the Appellate Division, reported at N.J. Super. (1993).

GARIBALDI, J., Dissenting.

In 1988 the Legislature enacted the present Excess Profits Law (EPL). L. 1988, c. 118. The statute's purpose, according to then-Governor Kean, was to "assure that a complete and accurate assessment of profits and losses is presented by insurers." Governor's Conditional Veto Message to Senate Bill No. 3090, at 2 (Nov. 9, 1987) (emphasis added) (hereinafter Conditional Veto Message). The Court today violates the EPL by upholding N.J.A.C. 11:3-20.5(e), which excludes an insurer's actual expenses from the excess-profits calculation.

The EPL requires insurers to report the sum of profits from underwriting operations and investment income derived from policyholder-supplied funds. N.J.S.A. 17:29A-5.8. If actual operating profit is more than 2.5% above the insurer's 5.3% pre-tax profit allowed under New Jersey rate regulations, an insurer must refund excess profits to policyholders.

N.J.S.A. 17:29A-5.6(m) provides that in the calculation of the excess profits attributable to underwriting operations, underwriting income*fn1 is the difference between earned premiums and losses, loss adjustment expenses, and "other expenses exclusive of UCJF assessments." "Taxes, licenses, and fees" and "general expenses" are specifically identified as "other expenses". N.J.S.A. 17:29A-5.7(c)(3), (3)(b), (3)(e). The FAIR surtax and assessment are "taxes," "fees," or "general expenses" and hence should be deducted in the excess-profits calculation.

Nonetheless, the Court today upholds N.J.A.C. 11:3-20.5(e), (Reg. 20.5(e)), a regulation that requires insurers in calculating their excess profits to exclude from "other expenses" the assessments and surtaxes paid by insurers pursuant to the Fair Automobile Insurance Reform Act of 1990, L. 1990, c. 8 (FAIR). Because the regulation's exclusion of FAIR's surtax and assessment contravenes both the plain ...


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