On appeal from the New Jersey Department of Banking and Insurance, Order No. A07-107.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 16, 2008
Before Judges Lisa and Lihotz.
National Union Fire Insurance Company of Pittsburgh, PA (National Union) appeals from a final order of the Commissioner of Banking and Insurance (Commissioner) denying its claim for benefits under the New Jersey Workers' Compensation Security Fund (Fund), N.J.S.A. 34:15-104 to -120. National Union's claim against the Fund arose because of the insolvency of Reliance National Indemnity Corporation (Reliance). National Union and Reliance had each issued policies to the New Jersey Turnpike Authority (Turnpike Authority), which was self-insured for workers' compensation, to indemnify the Turnpike Authority for the amount of workers' compensation claims exceeding certain limits. National Union argues that the Commissioner erred in concluding (1) that the Reliance policy was not a workers' compensation insurance policy for purposes of the Fund, and (2) that the claim covered by the Fund was that of the injured employee of the Turnpike Authority, not that asserted by National Union against Reliance. We reject these arguments and affirm.
An employee of the Turnpike Authority, Lori Layton, successfully prosecuted a claim against the Turnpike Authority for sexual harassment and violations of the Law Against Discrimination N.J.S.A. 10:5-1 to -49. The total recovery, including the jury award for damages, together with interest and attorney's fees, exceeded $1 million.
The Turnpike Authority was self-insured for workers' compensation. To protect itself against large workers' compensation claims, it obtained from National Union a "Public Officials and Employees Liability Insurance" policy, which provided for payment of the amount of claims in excess of the $500,000 self-insurance retention (SIR).
When the underlying claim was first made by Layton, the Turnpike Authority provided National Union with notice. National Union assigned counsel to defend the claim. National Union and the Turnpike Authority paid the claim in full after the award was rendered.
The Turnpike Authority had also obtained from Reliance National Indemnity Corporation (Reliance) a "Specific Excess Workers' Compensation and Employment Liability Policy," which contained a $250,000 SIR. However, neither the Turnpike Authority nor National Union provided Reliance with notice of Layton's claim until after the jury award was rendered. Reliance refused to contribute towards payment of the award, contending it was prejudiced by the late notice and had the right under its policy provisions to deny coverage because of late notice. Reliance then became insolvent and was the subject of liquidation proceedings in Pennsylvania.
As a result, National Union, individually and as subrogee of the Turnpike Authority, submitted a demand to the Commissioner seeking payment from the Fund of the portion of the award that might have been payable by Reliance under its policy.*fn1
On March 21, 2007, the Commissioner issued a final decision denying National Union's claim. This appeal followed.
As a threshold matter, the Commissioner stated that he lacked jurisdiction to determine the legal issue of whether Reliance could disclaim coverage because of late notice. Thus, for purposes of his analysis, he assumed that the Turnpike Authority's claim against Reliance was not barred because of late notice. He further assumed, for purposes of analysis, that National Union was properly assigned the Turnpike Authority's rights with respect to that claim. Thus, based upon those assumptions, the sole issue before the Commissioner was whether National Union's claim against Reliance was payable by the Fund.
In their appellate briefs, the parties have presented arguments regarding the late notice issue. For purposes of our analysis, we take the same approach as that taken by the Commissioner and assume that the claim against Reliance would not be barred because of late notice. Indeed, we do not conceive of how we could adjudicate the issue when Reliance is not a party before us.
The Commissioner explained why the Reliance policy was not a workers' compensation policy for purposes of the Fund and why the claim potentially payable by the Fund was that of ...