On appeal from final actions of the Department of Banking and Insurance.
The opinion of the court was delivered by: Lisa, J.A.D
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
[At the direction of the court, the full caption, which is on file with the clerk of the court, has been omitted from the published version of this opinion.]
Argued September 26, 2006
Before Judges Lisa, Holston, Jr., and Grall.
These consolidated appeals question whether title insurance companies are subject to assessments authorized by the Insurance Fraud Protection Act (IFPA), N.J.S.A. 17:33A-1 to -30, or are exempt by provisions of the Title Insurance Act of 1974 (TIA), N.J.S.A. 17:46B-1 to -62. We hold that title insurers are subject to the assessments, and we therefore affirm the action of the Commissioner of Banking and Insurance (Commissioner) imposing them.
The IFPA was enacted in 1983. L. 1983, c. 320. Its purpose is "to confront aggressively the problem of insurance fraud in New Jersey by facilitating the detection of insurance fraud, eliminating the occurrence of such fraud through the development of fraud prevention programs, requiring the restitution of fraudulently obtained insurance benefits, and reducing the amount of premium dollars used to pay fraudulent claims." N.J.S.A. 17:33A-2.
The IFPA established within the Department of Insurance*fn1 the Division of Insurance Fraud Prevention, N.J.S.A. 17:33A-8a, and provided that its expenses would be funded by an annual assessment imposed by the Commissioner, apportioned "among all of the companies writing the class or classes of insurance described in Subtitle 3 of Title 17 of the Revised Statutes ([N.J.S.A.] 17:17-1 et seq.), and Subtitle 3 of Title 17B of the New Jersey Statutes ([N.J.S.A.] 17B:17-1 et seq.), within this State . . . ." N.J.S.A. 17:33A-8g. Amendments in 1998 created within the Division of Criminal Justice in the Department of Law and Public Safety the Office of Insurance Fraud Prosecutor, N.J.S.A. 17:33A-16, the expenses of which are also assessed against the same insurance companies. N.J.S.A. 17:33A-30. Each insurance company's proportionate share is based on the net premiums it received the previous year compared to the sum total of all net premiums received by all included insurance companies that year.*fn2 N.J.S.A. 17:33A-8g.
Subtitle 3 of Title 17 encompasses many kinds of insurance, specifically including title insurance. N.J.S.A. 17:17-1h. Indeed, the TIA, which predated the IFPA by nine years, is part of this subtitle. Subtitle 3 of Title 17B pertains to life and health insurance companies. Thus, the IFPA, standing alone, by its plain terms authorizes assessments against title insurance companies. Since enactment of the IFPA in 1983, the annual assessments issued by the Commissioner have been imposed on title insurance companies, which paid them uneventfully for the next twenty years.
Then, on November 24, 2003, the Executive Director of appellant, New Jersey Land Title Association (Association), a non-profit corporation made up of and representing the interests of title insurance companies in New Jersey, wrote to the Commissioner, the Attorney General and the Office of Insurance Fraud Prosecutor, expressing the view that provisions of the TIA exempted title insurance companies from the assessment provision contained in N.J.S.A. 17:33A-8g. The Commissioner declined to alter the policy of including title insurers in the assessment allocation. The fiscal year 2003 assessments issued on January 9, 2004, payable by February 5, 2004, included title insurance companies. They paid them.
On August 10, 2004, a complaint was filed in the Law Division on behalf of the Association and fifteen title insurance companies transacting business in New Jersey against the Commissioner, seeking a declaration that title insurers are not subject to the assessments, an injunction prohibiting future assessments, and refunds of all assessments previously paid. On December 3, 2004, the Law Division judge transferred the case to this court pursuant to Rule 1:13-4(a). For fiscal years 2004 and 2005, the title insurers paid the assessments "under protest" and in each year promptly filed new appeals. All of the appeals have been consolidated and are disposed of in this opinion.*fn3
Appellants argue that notwithstanding the apparent applicability to title insurers of the IFPA assessments by virtue of N.J.S.A. 17:33A-8g, the Legislature did not intend such applicability. Appellants rely primarily on the TIA's legislative history and several of its provisions to support their argument.
Prior to enactment of the TIA, title insurance companies were unregulated in New Jersey. In 1972, the Legislature created the Real Estate Title Insurance Study Commission (Commission) to study the need for regulation of title insurance and to make recommendations for such regulation. See Assembly Concurrent Resolution No. 77 (Apr. 10, 1972). The Commission noted significant differences between title insurers and other insurers. Most notably, title insurers eliminate risk before issuing a policy, as opposed to casualty insurers, which assume risk for events that may occur after the policy is issued. Title insurers protect their insureds primarily from errors or omissions of the insurer itself. Further, title insurance is purchased by one premium and does not insure against loss for only a limited term. And, title insurance is tied to the system of real estate conveyancing, with each policy pertaining to a specific parcel, based upon an examination of real estate records and applicable laws. See N.J. Real Estate Title Insurance Study Commission, A Report to the Legislature, at 9-12 (Mar. 1974). Because of these fundamental differences, title insurers expend a much greater portion of their operating expenses on overhead than casualty insurers. The converse is true regarding claims payouts, which are much lower than casualty insurers.
The Commission noted that in other states "[t]he usual legislative scheme exempts title insurance from the strictures of the general insurance code and covers the business in a less comprehensive chapter." Id. at 13. The Commission recommended a separate act to regulate title insurers. Id. at 16-17. The Legislature accepted the Commission's recommendations and enacted the TIA as a separate subtitle of New Jersey's insurance code, Title 17, Subtitle 46B. And, the ...