ASSEMBLY, No. 1042
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblyman DORIA
An Act concerning automobile insurance and amending P.L.1990, c.8.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 21 of P.L.1990, c.8 (C.17:33B-3) is amended to read as follows:
21. a. The Legislature finds that the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to section 16 of P.L.1983, c.65 (C.17:30E-4), is currently operating in a substantially impaired financial state with an operating deficit which the association has estimated to be in excess of $3 billion and that, based upon the results of a recent claim and underwriting review and financial audit, the Commissioner of Insurance stated that mismanagement by the insurance companies acting as servicing carriers cost the association $908 million between its inception in 1984 and 1988. The Legislature further finds that the association is not earning new premium income or collecting subsidies in an amount sufficient to pay its claims and expenses. The Legislature further finds that under the above enumerated circumstances the association, if it were a licensed insurer, would likely be declared financially impaired or insolvent pursuant to the provisions of P.L.1975, c.113 (C.17:30C-1).
b. Therefore,
(1) Within 90 days of the effective date of this 1990 amendatory and supplementary act, the commissioner shall appoint a trustee, who shall be a person experienced in insolvency or bankruptcy, who shall not, during his tenure as trustee be affiliated with or employed by an insurer. The trustee shall serve at the pleasure of the commissioner and shall be paid from funds available to the New Jersey Automobile Insurance Guaranty Fund created pursuant to section 23 of this act, in an amount and manner as determined by the commissioner. The trustee shall carry out his obligations as provided in this act and the plan of operation promulgated pursuant to paragraph (2) of this subsection.
(2) The trustee shall, as soon as possible upon appointment, promulgate a plan of operation to be approved by the commissioner. Pursuant to the plan of operation, the trustee shall have the authority to disburse funds made available from the New Jersey Automobile Insurance Guaranty Fund pursuant to section 23 of this act and such other monies as may be appropriated to or otherwise made available to the fund or the association, including those monies collected by the association pursuant to section 20 of P.L.1983, c.65 (C.17:30E-8), on behalf of the association for the payment of claims and other financial obligations of the association, including the contracts with the servicing carriers. The plan shall provide for the payment of covered losses on behalf of the association. Among other things necessary to the orderly evaluation, prioritization and disbursement of monies payable on behalf of the association, the plan shall contain a schedule for the prioritization of claims payments by the type of claim for which payment is due. [The schedule may provide for the deferral of the payment of residual bodily injury losses over a period not to exceed four years.] The schedule may [also] provide for the deferral of [other] payments only upon certification by the commissioner that the fund cannot by any other available means secure the monies necessary to pay those losses. However, the plan shall not provide for the deferral of payment of damages which are due and payable for present economic loss or residual bodily injury loss under any circumstance.
(3) The trustee shall report to the commissioner biannually, or more frequently if ordered by the commissioner, on the financial condition of the association and the disbursement of funds pursuant to the plan of operation. The commissioner shall make an annual report on the activities of the trustee to the Legislature and the Governor. The report shall contain an accounting of the immediately preceding annual period, including a report of the financial obligations attributable to the association; the income available to and the disbursements made by the trustee during that period; and a projection of the financial obligations, anticipated income and expected disbursements for the immediately succeeding annual period.
(4) In fulfilling his duties pursuant to this subsection, the trustee shall avail himself of the services of association staff and shall utilize association procedures, equipment and supplies to the extent such use facilitates fulfillment of the trustee's duties. The trustee shall have the authority to continue any audit being conducted with regard to the operations of the association and to conduct such audits.
(cf: P.L.1990, c.8., s.21)
2. Section 88 of P.L.1990, c.8 (C.17:33B-11) is amended to read as follows:
88. a. There is created a Market Transition Facility to be operated by the Commissioner of Insurance pursuant to the provisions of this section. Every insurer authorized to transact automobile insurance in this State shall be a member of the facility and shall share in its profits and losses as provided by the commissioner pursuant to the provisions of subsection d. of this section.
b. The commissioner shall, within 30 days of the effective date of P.L.1990, c.8 (C.17:33B-1 et al.), appoint a Market Transition Facility Advisory Board which shall be comprised of six members, one of whom shall represent member companies organized on a mutual basis, one of whom shall represent member companies organized on a stock basis, one of whom shall represent servicing carriers, one of whom shall represent insurance producers, one of whom shall be a qualified actuary and one of whom shall represent the public. Advisory board members shall serve for the duration of the facility or until such time as their successor is appointed. Advisory board members shall not be compensated for their services but shall be reimbursed by the facility for any necessary and reasonable expenses incurred in performance of their duties as members of the advisory board.
c. The facility shall arrange for the issuance and renewal of automobile insurance policies for the period commencing October 1, 1990 and ending September 30, 1992 pursuant to a plan of operation promulgated by the commissioner in consultation with the advisory board. The facility shall not issue or renew any policies of automobile insurance on or after October 1, 1992. The plan shall provide:
(1) The applicable levels of coverage available through the facility;
(2) That the premiums payable on policies issued by the facility shall be based on rates applicable to persons insured by the New Jersey Automobile Full Insurance Underwriting Association on September 30, 1990 but shall not incorporate the rates applicable under section 25 of P.L.1983, c.65 (C.17:30E-13) and section 22 of P.L.1988, c.119 (C.17:30E-13.1). However, the applicable rates for those insureds who do not qualify as eligible persons as provided in section 25 of P.L.1990, c.8 (C.17:33B-13) shall be those set by the plan for the provision of automobile insurance established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1);
(3) Procedures for the filing and approval of changes in rates applicable to policies issued or renewed by the facility;
(4) For the issuance and renewal of automobile insurance through servicing carriers under contract with the New Jersey Automobile Full Insurance Underwriting Association pursuant to the provisions of section 24 of P.L.1983, c.65 (C.17:30E-12), utilizing, at the discretion of the commissioner, the staff of the association;
(5) Procedures for the depopulation of the facility which shall provide that: on or after April 1, 1991 no more than 29% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility and the New Jersey Automobile Full Insurance Underwriting Association created by P.L.1983, c.65 (C.17:30E-1 et seq.); on or after October 1, 1991 no more than 20% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility; on or after April 1, 1992 no more than 10% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility; and on or after October 1, 1992, 0% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility. In establishing the quotas set forth above, the plan shall prescribe the number of voluntary market exposures which shall be written during each six-month period set forth in this paragraph in a manner consistent with the apportionment procedure established pursuant to subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14). In the event that any of the quotas established pursuant to this paragraph have not been met by the end of the applicable period, the commissioner shall direct the facility to assign the balance of the exposures needed to meet the applicable quota to member companies pursuant to the apportionment procedure. A member company which exceeds its apportionment share for any six-month period set forth in this paragraph shall receive credit for the excess against the following period's obligation. The commissioner may excuse a member company from meeting its obligations under the depopulation procedures if he determines that the company would be placed in an unsafe or unsound condition. When an exposure is assigned to a member company under this paragraph as a result of the failure of the member company to meet an applicable quota, but only in such circumstances, the following shall apply:
(a) When an assigned exposure is written by the member company assigned the exposure, the facility producer of record shall have the right to service that business, which shall include all renewals thereof, and shall be entitled to a commission for that service in accordance with subparagraph (c) of this paragraph;
(b) The facility producer of record shall retain complete control, possession and ownership of all records and renewals regarding exposures assigned pursuant to this paragraph, provided, however, that the member company may maintain such records as are provided to it under the procedure established by subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14). A member company that acquires access to records pursuant to that subsection shall not share any such records with any other producer or use any such records to solicit direct renewal of the business, a change in producer of record, other insurance products or any other products;
(c) The facility producer of record shall be paid a commission by the member company on the business serviced by the facility producer of record pursuant to this paragraph. That commission shall be paid at a percentage rate no less than that being paid by the Market Transition Facility on July 1, 1991;
(d) A copy of every notice, other than bills, and including renewal declarations, change endorsements, cancellations and reinstatements, and the corresponding payment schedules included therein, correspondence, claims checks and acknowledgements, sent to an insured by a member company with respect to business covered by this paragraph, shall be sent to the facility producer of record;
(e) The procedure established in subparagraphs (a), (b), (c), (d), (e) and (f) of this paragraph shall be applicable only to exposures assigned to member companies in accordance with this paragraph as a result of the failure by the member company to meet an applicable quota. This paragraph shall not constitute the grant of an agency contract by the member company to the facility producer of record authorizing the facility producer of record to write new business through the member company; provided, however, that the facility producer of record shall have the authority to provide the usual and customary servicing of the business subject to this paragraph, including adding new and replacement vehicles and adding or changing coverages on the business; and
(f) Nothing in the paragraph shall deprive an insured of the right to designate a producer of record other than the facility producer of record. Upon that designation, the rights of the facility producer of record under this paragraph shall terminate. Notwithstanding any provision in this paragraph, the rights of the facility producer of record under this paragraph shall terminate in the event of the producer's insolvency, gross and willful misconduct, fraud or license revocation;
(6) A schedule for the payment of premiums on an installment basis. Any installment payment schedule for policies issued for a one year period shall provide for installment payments during a period of not less than nine months;
(7) That no policy issued by the facility may be cancelled for nonpayment of premium unless written notice is provided at least 15 days prior to the effective date of cancellation accompanied by the reason for cancellation. Notice shall be provided to the named insured and the producer of record at their last known addresses;
(8) [Provide for] For notification of the named insured and the producer of record at their last known addresses no later than 15 days after the nonrenewal of a facility policy of such nonrenewal; [and]
(9) That servicing carriers shall settle undisputed claims which do not exceed $25,000 within 15 days of the date the claim is filed by the insured with the insurer. In the event such a claim is not settled within 15 days, beginning on the 16th day and continuing until the claim is fully paid, the servicing carrier shall be charged a fee equal to a rate of interest of 30% per annum on the unpaid balance, calculated on an average daily balance method based on a 365 day year. The amount of this fee shall be equally distributed: (a) to the facility as a reduction in administrative fees owed to the servicing carrier by the facility; and (b) to the claimant in addition to the balance already owed; and
(10) Such other provisions as are deemed necessary for the operation of the facility.
d. The commissioner shall apportion any profits or losses of the facility among member companies based on each company's apportionment share as determined for purposes of depopulation pursuant to subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14).
e. The facility shall be subject to the provisions of P.L.1945, c.132 (C.54:18A-1 et seq.).
(cf: P.L.1991, c.462, s.2)
3. This act shall take effect immediately.
STATEMENT
This bill requires pain and suffering claims under the New Jersey Automobile Full Insurance Underwriting Association (JUA) to be paid immediately. Currently, the freeze on these claims has created a hardship for thousands of individuals who have been injured in accidents.
The bill also requires servicing carriers under the Market Transition Facility (MTF) plan of operation to settle undisputed claims which do not exceed $25,000 within 15 days of the date a claim is filed. If such a claim is not settled within the 15 day time frame, the servicing carrier would be charged a fee on the unpaid balance of the claim equal to a rate of interest of 30% per annum. Half of the amount of the fee would be paid to the facility as a reduction in the amount of the administrative fees owed to the servicing carrier by the MTF, and half of the amount of the fee would be paid to the claimant.
Requires prompt payment of certain JUA and MTF claims.