ASSEMBLY, No. 1997

STATE OF NEW JERSEY

INTRODUCED MAY 13, 1996

By Assemblyman GARRETT

An Act concerning certain assessments of certain insurer members of the New Jersey Property-Liability Insurance Guaranty Association and amending P.L.1974, c.17.

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. Section 8 of P.L.1974, c.17 (C.17:30A-8) is amended to read as follows:

    8. a. The association shall:

    (1) Be obligated to the extent of the covered claims against an insolvent insurer incurred, in the case of private passenger automobile insurance, prior to or after the determination of insolvency, but before the policy expiration date or the date upon which the insured replaces the policy or causes its cancellation, or in the case of insurance other than private passenger automobile insurance, covered claims against such insolvent insurer incurred prior to or 90 days after the determination of insolvency, or before the policy expiration date if less than 90 days after said determination, or before the insured replaces the policy or causes its cancellation, if he does so within 90 days of the determination, but such obligation shall include only that amount of each covered claim which is less than $300,000.00 and subject to any applicable deductible contained in the policy, except that the $300,000.00 limitation shall not apply to a covered claim arising out of insurance coverage mandated by section 4 of P.L.1972, c.70 (C.39:6A-4). In the case of benefits payable under subsection a. of section 4 of P.L.1972, c.70 (C.39:6A-4), the association shall be liable for payment of benefits in an amount not to exceed $75,000.00. Benefits paid in excess of such amount shall be recoverable by the association from the Unsatisfied Claim and Judgment Fund pursuant to the provisions of section 2 of P.L.1977, c.310 (C.39:6-73.1). In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the limits of liability stated in the policy of the insolvent insurer from which the claim arises;

    (2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent;

    (3) Assess member insurers in amounts necessary to pay:

    (a) The obligation of the association under paragraph (1) of this subsection;

    (b) The expenses of handling covered claims;

    (c) The cost of examinations under section 13; and

    (d) Other expenses authorized by this act, excluding expenses incurred by the association pursuant to paragraphs (9) and (10) of this subsection.

    The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment.

    Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed pursuant to this paragraph (3) in any year in an amount greater than 2% of that member insurer's net direct written premiums for the calendar year preceding the assessment.

    The association may, subject to the approval of the commissioner, exempt, abate or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. In the event an assessment against a member insurer is exempted, abated, or deferred, in whole or in part, because of the limitations set forth in this section, the amount by which such assessment is exempted, abated, or deferred shall be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum assessment, together with the other assets of the association, does not provide in any one year an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as it is permitted by this act. Each member insurer serving as a servicing facility may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by such member insurer;

    (4) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested;

    (5) Notify such persons as the commissioner directs under paragraph (1) of subsection b. of section 10 of P.L.1974, c.17 (C.17:30A-10);

    (6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such designation may be declined by a member insurer;

    (7) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this act;

    (8) Make loans to the New Jersey Surplus Lines Insurance Guaranty Fund in accordance with the provisions of the "New Jersey Surplus Lines Insurance Guaranty Fund Act," P.L.1984, c.101 (C.17:22-6.70 et al.);

    (9) Assess member insurers in amounts necessary to make loans pursuant to paragraph (10) of this subsection. The estimated assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment with actual assessments adjusted in the succeeding year based on the proportion that the assessed member insurer's net direct written premiums in the year of assessment bears to the net direct written premiums of all member insurers for that year.

    (a) For the purposes of this paragraph, "net direct written premiums" shall not include medical malpractice liability insurance premiums paid to member insurers to which an additional charge has been applied for deposit in the New Jersey Medical Malpractice Reinsurance Recovery Fund as provided in the "Medical Malpractice Liability Insurance Act," P.L.1975, c.301 (C.17:30D-1 et seq.) and the regulations promulgated pursuant thereto.

    (b) In the event that the commissioner certifies that loans in amounts less than $160 million per calendar year as provided in paragraph (10) of this subsection will satisfy the current and anticipated financial obligations of the Market Transition Facility, [without reference to the amount of funds remaining from the sale of the Market Transition Facility Senior Lien Revenue Bonds,] a member insurer, and all of its affiliates as defined in subsection a. of section 1 of P.L.1970, c.22 (C.17:27A-1), shall be subject to a reduced assessment pursuant to this paragraph if the member insurer and all such affiliates: (i) did not issue or renew a policy of private passenger automobile insurance in this State on or after January 1, 1973; (ii) were not assessed as members of the Market Transition Facility as established by section 88 of P.L.1990, c.8 (C.17:33B-11); and (iii) had not relinquished voluntarily any expectation they may have had for the repayment of loans made pursuant to paragraph (10) of this subsection, as provided by paragraph (2) of subsection b. of section 6 of P.L.1983, c.65 (C.17:29A-35), pursuant to any court order or settlement agreement approved by any court of competent jurisdiction, on or before the effective date of this 1995 amendatory act. The reduced assessment of such members shall be equal to their proportionate share of the difference between the amount certified by the commissioner and the total of the assessment of all other insurers subject to such assessment. If the amount of such difference is zero or less, the reduced assessment shall be zero;

    (10) Make loans in the amount of $160 million per calendar year, beginning in calendar year 1990, or upon certification by the commissioner, as provided by paragraph (b) of subsection (9) of this section, that lesser amounts will satisfy the current and anticipated financial obligations of the Market Transition Facility, such lesser amounts as may be collected pursuant to paragraph (9) of this subsection, to the New Jersey Automobile Insurance Guaranty Fund created pursuant to section 23 of P.L.1990, c.8 (C.17:33B-5), except that no loan shall be made pursuant to this paragraph after December 31, 1997. In no event shall member insurers subject to assessments have their financial obligation increased due to reductions granted pursuant to paragraph (9) of this subsection.

    b. The association may:

    (1) Employ or retain such persons as are necessary to handle claims and perform such other duties of the association;

    (2) Borrow funds necessary to effectuate the purpose of this act in accordance with the plan of operation;

    (3) Sue or be sued;

    (4) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this act;

    (5) Perform such other acts as are necessary or proper to effectuate the purpose of this act;

    (6) Refund to the member insurers in proportion of the contribution of each member insurer that amount by which the assets exceed the liabilities if, at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities, as estimated by the board of directors for the coming year.

(cf: P.L.1995, c.396, s.1)

    2. This act shall take effect immediately.

STATEMENT

    This bill modifies the calculation of the reduced assessments of certain insurers for payment of the Market Transition Facility (MTF) debt as provided by P.L.1995, c.396. That act allows a reduced assessment for certain insurers only if the Commissioner of Insurance certifies that loans of less than the statutory amount of $160 million per calendar year from the New Jersey Property-Liability Insurance Guaranty Association (PLIGA) will satisfy the current and anticipated financial obligations of the MTF, and further provides that this determination be made "without reference to the amount of funds remaining from the sale of the Market Transition Facility Senior Lien Revenue Bonds." This bill eliminates this condition so that these bond funds can be included by the commissioner when calculating the amount necessary from the PLIGA loans.

Modifies calculation of reduced assessment of certain insurers for payment of MTF debt.