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Professional Insurance Management v. Ohio Casualty Group of Insurance Companies

May 25, 2000

IN RE:
PROFESSIONAL INSURANCE MANAGEMENT,
DEBTOR
PROFESSIONAL INSURANCE MANAGEMENT,
PLAINTIFF-APPELLEE,
V.
OHIO CASUALTY GROUP OF INSURANCE COMPANIES, ET AL., AND HARLEYSVILLE MUTUAL INSURANCE COMPANY, ET AL,
DEFENDANTS-APPELLANTS.



[Case No. 94-13602] [Adversary No. 94-1325] [Adversary No. 96-1410]

The opinion of the court was delivered by: Jerome B. Simandle U.S. District Judge

HONORABLE JEROME B. SIMANDLE

ON APPEAL FROM AN ORDER OF THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY

Sat Below: Honorable Judith H. Wizmur

MEMORANDUM OPINION

SIMANDLE, District Judge

I. PROCEDURAL HISTORY

In the instant matter, the Court is called upon to decide whether it will exercise jurisdiction to revoke a decision it rendered on March 2, 1999 ordering the Bankruptcy Court for the District of New Jersey to defer to the expertise of the New Jersey Commissioner of Banking and Insurance on particular matters. For the reasons stated herein, the Court will grant its own motion to withdraw adversary numbers 94-1325 and 96-1410, which require interpretation of the Fair Automobile Insurance Reform Act of 1990 ("FAIRA"), N.J.S.A. 17:33B-1, et seq., in Bankruptcy Case number 94-13602 from the Bankruptcy Court. The Court will thus exercise jurisdiction to decide a motion by Debtor Professional Insurance Management ("PIM") asking this Court to vacate this Court's Opinion and Order of March 2, 1999. The substance of that motion will be addressed in a separate opinion.

In a March 2, 1999 Opinion and Order, this Court reviewed a May 28, 1998 Oral Opinion and June 22, 1998 Order of the Bankruptcy Court, the Honorable Judith H. Wizmur presiding, concerning whether the Bankruptcy Court had to defer to the New Jersey Commissioner of Banking and Insurance ("the Commissioner") with regard to interpretation of provisions of FAIRA that is necessary to determination of common law claims before the Bankruptcy Court between PIM and defendants Ohio Casualty Group of Insurance Companies ("Ohio Casualty") and Harleysville Mutual Insurance Company ("Harleysville"). The Bankruptcy Court had held that the Commissioner did not have exclusive jurisdiction over contract disputes between insurance companies and their agents, that PIM was not required to exhaust administrative remedies before filing breach of contract and breach of the covenant of good faith and fair dealing claims in the Bankruptcy Court, and that the Commissioner does not have primary jurisdiction over the FAIRA issues. Accordingly, the Bankruptcy Court denied defendants' motion to dismiss.

On appeal, this Court agreed with the Bankruptcy Court that the Commissioner did not have exclusive jurisdiction, that PIM need not exhaust administrative remedies, and that the case should not be dismissed. However, this Court, under the circumstances existing at that time, determined that the Bankruptcy Court should have deferred to the Commissioner's primary jurisdiction over the FAIRA issues. Accordingly, this Court affirmed the Bankruptcy Court's June 22, 1998 Order denying the motion to dismiss and remanded to the Bankruptcy Court for further proceedings consistent with that Opinion and Order.

On remand, in an order dated April 14, 1999, captioned in both Adversary Nos. 94-1325 and 96-1410 (Mandel Certif. Ex. 3), the Bankruptcy Court ordered PIM to file a declaratory judgment action with the Department of Banking and Insurance under the Administrative Procedure Act pursuant to N.J.S.A. 52:14B-8 et seq. Deputy Attorney General Heck, representing the Commissioner, participated in the telephone remand conference at which the Bankruptcy Court determined the appropriate mechanism for deferring to the Commissioner's primary jurisdiction. On June 17, 1999, PIM filed that Declaratory Judgment Complaint with the Commissioner. The Complaint, which was 64 pages long (id. at Ex. 4), names as defendants The Ohio Casualty Group of Insurance Companies, The Harleysville Group of Insurance Companies, and The Hanover Insurance Group of Insurance Companies. The Complaint was divided into three sections, first asking the Commissioner to decline jurisdiction, second asking the Commissioner to interpret FAIRA statutes and regulations, and third requesting the Commissioner to apply the specific alleged violations of the FAIRA statutes and regulations to the issues pending at bar.

The Commissioner acknowledged receipt of the Complaint in two separate letters from Jean M. Bickal, Acting Assistant Commissioner of Legislative and Regulatory Affairs, dated July 2, 1999 (id. at Ex. 5) and July 14, 1999 (id. at Ex. 6), both of which acknowledged receipt of the Complaint and notified that parties that the Department would be in touch with the parties shortly. Some question arose as to whether the insurance carriers should be filing a response to the Complaint for Declaratory Judgment, clarified in a letter dated July 14, 1999 from Rachel Hager, Esquire, attorney for defendant Hanover Insurance Group of Insurance ("Hanover") (id. at Ex. 7) to the Deputy Attorney General that no answer need be filed. Since July 14, 1999, there has been no communication from the Department of Banking and Insurance concerning the pending administrative Complaint for Declaratory Relief, whether to set up an administrative schedule or otherwise. The only action at the administrative level has been the filing of a response and counterclaim to the Complaint by Ohio Casualty arising from the same FAIRA subject matter.

On January 27, 2000, PIM filed a motion to vacate this Court's March 2, 1999 Opinion and Order. Deputy Attorney General Heck was among counsel notified of the pending motion when it was filed and served. The Commissioner has contacted neither PIM nor its counsel, but the Commissioner, through Deputy Attorney General Thalia Cosmos, contacted this Court expressing interest on the motion, apparently intending to seek leave to intervene. However, the Commissioner neither filed a written request for leave to intervene or any other argument with regard to the motion, despite the fact that this Court ...


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