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Chopper Express Inc. v. Department of Insurance

September 13, 1996


On appeal from Department of Insurance.

Approved for Publication September 20, 1996.

Before Judges Petrella, Skillman and Eichen. The opinion of the court was delivered by Skillman, J.A.D.

The opinion of the court was delivered by: Skillman

The opinion of the court was delivered by


The issue presented by this appeal is whether the Appeals Subcommittee of the governing committee established under the plan of operation of the New Jersey Automobile Insurance Plan, Commercial Automobile Insurance Plan (CAIP), is authorized to adjudicate a dispute regarding the amount of premiums owed by a party insured under the plan.

Appellant Chopper Express, Inc. (Chopper) is a trucking company which transports automobile parts between its customers' warehouse/distribution centers and their dealerships on the Atlantic Coast. After relocating its primary business operations to New Jersey in 1988, Chopper obtained commercial motor vehicle coverage from respondent Progressive Casualty Insurance Company (Progressive) through an assignment under the CAIP plan of operation.

After an audit of Chopper's operations in April 1991, Progressive changed the classification of many of Chopper's vehicles from long to short and intermediate haul and also changed Chopper's listed garage location from Little Falls to North Bergen. These changes resulted in a substantial increase in Chopper's premiums. Chopper disputed the reclassification of its vehicles, and the parties then engaged in negotiations to resolve their differences. However, these negotiations were unsuccessful, and Chopper's policy was canceled effective October 12, 1991. The notice of cancellation sent by Progressive stated that Chopper could "file a written complaint concerning this cancellation ... with the New Jersey Department of Insurance." Subsequently, Progressive sent a notice to Chopper that Chopper owed an additional $138,962.50 in premiums for coverage provided prior to cancellation. Chopper refused to pay this amount, taking the position that it was entitled to a refund of $16,124.60 in unearned premiums.

Chopper filed a complaint with the respondent Department of Insurance (the Department) alleging, among other things, that the increase in its premium and consequent cancellation of its policy were contrary to the CAIP rules. Chopper asked the Department "to rule on the legality of these premium increases and the rating methods employed by Progressive" and to order Progressive to "cease and desist" from "pressing" for the payment of additional premiums. Progressive filed a response which asserted that its actions had been "reviewed and approved by the New Jersey Automobile Insurance Plan."

Chopper's complaint was ultimately referred to an agency called the Appeals Subcommittee of the CAIP governing committee (the Appeals Subcommittee). The Appeals Subcommittee conducted a hearing at which Chopper challenged Progressive's determination that North Bergen was its principal place of garaging and disputed Progressive's authority to modify the 1990 premium after completion of the policy term. After the hearing was concluded, the Appeals Subcommittee accepted a "loss control report" submitted by Progressive which purported to show that Chopper did not have sufficient space in Little Falls to principally garage its equipment. Chopper objected to the Appeals Subcommittee's consideration of this report, claiming that it described Chopper's operations in June 1993 and thus was not probative of whether it had principally garaged its trucks in Little Falls during the 1990 and 1991 policy periods.

On August 24, 1993, the Appeals Subcommittee rendered a decision in favor of Progressive, specifically finding that plaintiff's trucks were principally garaged in North Bergen and that Progressive was permitted to audit and adjust plaintiff's premium up to three years after the Conclusion of the policy period. Therefore, the Appeals Subcommittee concluded that "Progressive has earned all premiums paid which [were] based on North Bergen as Chopper's principal place of garaging," and that "Progressive is entitled to collect any additional premiums due or outstanding, ... based on this Subcommittee's Decision."

Chopper appealed the Appeals Subcommittee's decision to the Commissioner of Insurance (the Commissioner). Since the proceedings before the Appeals Subcommittee had not been transcribed, the Commissioner reviewed only the documents presented at the hearing and the Subcommittee's decision. Based on this limited record, the Commissioner affirmed the Appeals Subcommittee's decision.

Chopper then filed a notice of appeal with this court. In its initial brief, Chopper argued that the agency proceeding violated principles of administrative due process because the Appeals Subcommittee is composed of persons with a financial interest in assessing higher premiums upon parties insured under CAIP. After receiving this brief, the Department moved for a remand to the Commissioner for reconsideration. We granted this motion, and the Department then prepared a transcript of the proceedings before the Appeals Subcommittee for the Commissioner's review.

After reviewing this transcript, Chopper's counsel submitted an affidavit which indicated that the hearing transcript contained "gaps," including portions of the testimony of Chopper's President. Consequently, Chopper requested a de novo hearing. The Commissioner denied this request, however, and reaffirmed his prior decision, concluding that the Appeals Subcommittee's decision "is not arbitrary or ...

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