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In re Liquidation of Integrity Insurance Co.

Superior Court of New Jersey, Appellate Division

June 17, 2013

IN THE MATTER OF THE LIQUIDATION OF INTEGRITY INSURANCE COMPANY.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 28, 2012

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. C-7022-86.

Robert M. Horkovich, of the New York bar, admitted pro hac vice, argued the cause for appellant The Congoleum Plan Trust (Anderson Kill & Olick, P.C., attorneys; Mr. Horkovich, Kenneth E. Sharperson, and Robert Y. Chung, of the New York bar, admitted pro hac vice, on the briefs).

David M. Freeman argued the cause for respondent Thomas B. Considine, Commissioner of Banking and Insurance of the State of New Jersey in his capacity as Liquidator of Integrity Insurance Company (Mazie Slater Katz & Freeman, LLC, attorneys; Mr. Freeman, of counsel and on the brief; John D. Gagnon, on the brief).

Before Judges Simonelli, Koblitz and Accurso.

PER CURIAM

In this appeal, we are once again called upon to determine whether the special master and liquidation court correctly disallowed asbestos-related bodily injury claims made against excess insurance policies issued by Integrity Insurance Company (Integrity). In this case, Integrity issued policies to Congoleum Corporation (Congoleum). Congoleum submitted timely proofs of claim (POCs) for which it sought coverage under the policies. Relying on In the Matter of the Liquidation of Integrity Insurance Co., 193 N.J. 86 (2007), the liquidator issued seven notices of determination (NODs) disallowing the incurred but not reported claims for the following reasons:

Insufficient supporting documentation.
Failure to document the exhaustion of limits of coverage of the underlying policy to the Integrity policy.
Allowance of contingent claims is prohibited by New Jersey statute.
The insured failed to provide support for the complete exhaustion of the underlying coverage. In view of the ongoing coverage litigation, it is assumed that exhaustion of all underlying coverage has not yet occurred. However, if full exhaustion of coverage underlying the Integrity policy period has occurred, a letter from the carriers confirming when their limits exhausted will suffice. Support for paid loss was not included. The insured's attachments to their LPOC refers to a universe of pending claims, not paid claims. As per Integrity's Liquidation Closing Plan, only absolute claims may be considered for an allowance. The definition of an absolute claim does not include pending claims for which a value has not yet been fixed by actual payment or by judgment of a court of law.

As a result of the approval of Congoleum's bankruptcy plan of reorganization, effective July 1, 2010, appellant The Congoleum Plan Trust (Trust) is the successor-in-interest to the policies Integrity issued to Congoleum. The Trust timely filed an objection to the NODs. The liquidator declined to amend his decision and submitted the Trust's objection to the special master for consideration. In a February 25, 2011 written determination, the special master upheld the liquidator's decision. The special master determined that Congoleum's claims could not be allowed because they were not "absolute claims" as defined by the Amended Liquidation Closing Plan (the Amended LCP) and determined in In the Matter of the Liquidation of Integrity Insurance Co., 193 N.J. 86, 97 (2007).[1] The special master concluded as follows:

It is undisputed that Congoleum's claims do not have fixed liability, have not been either settled or adjudicated, and thus the amount which Congoleum will have to pay is not definite or determinable, but estimated. Congoleum's claims do not fundamentally stand on their own. Liability and value has not been fixed by actual payment by the Claimant or by judgment of a court of law, nor did the federal bankruptcy court approve claim resolution procedures by the bar date, and, in fact, did not approve the claims resolution procedures and create the trust until July, 2010. Therefore, based on ...

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