In re Liquidation of Integrity Ins. Co.
| Decision Date | 19 January 2018 |
| Docket Number | DOCKET NO. A-3285-15T3 |
| Parties | IN THE MATTER OF THE LIQUIDATION OF INTEGRITY INSURANCE COMPANY. |
| Court | New Jersey Superior Court — Appellate Division |
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Before Judges Simonelli, Haas and Rothstadt.
On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-007022-86.
Nancy L. Kahn (Foster Swift Collins & Smith PC) of the Michigan bar, admitted pro hac vice, argued the cause for appellant Road Commission for Oakland County, Michigan (Fox Rothschild, LLP and Nancy L. Kahn, attorneys; Nancy L. Kahn and Brian J. Renaud (Foster Swift Collins & Smith PC) of the Michigan bar, admitted pro had vice, of counsel and on the briefs; Benjamin R. Kurtis, on the briefs).
William B. Puskas, Jr., Deputy Attorney General, argued the cause for respondent Integrity Insurance Company (Christopher S. Porrino, Attorney General, attorney; Melissa Dutton Schaffer, Assistant Attorney General, of counsel; William B. Puskas, Jr., on the brief).
This appeal involves an attempt by appellant Road Commission for Oakland County, Michigan (RCOC) to reopen the liquidation of Integrity Insurance Company (Integrity or Estate) in order to pursue decades-old proofs of claim. RCOC appeals from the March 18, 2016 Chancery Division order, which denied its motion to intervene and for reconsideration of the January 6, 2016 order approving the final accounting of Integrity's assets and liabilities and closing of the Estate.1 We affirm.
On March 24, 1987, the court entered an order placing Integrity into liquidation (the liquidation order). Paragraph 18 required the Liquidator to "give or cause to be given notice of the entry of this [o]rder as soon as possible" to policyholders.2 Paragraph 19 provided, in relevant part, that the notice "shall require that any person seeking to receive distributions in liquidation as a claimant file with the Liquidator a claim . . .together with proof of loss" no later than March 25, 1988. Paragraph 20 provided that if the Liquidator gave notice in accordance with paragraphs 18 and 19, "the distribution of the assets of Integrity shall be conclusive with respect to all policyholders and claimants, whether or not they receive actual notice[.]" The liquidation order authorized the Liquidator to enter into agreements with guaranty associations of other states and alter the notification and filing requirements with those associations.
RCOC does not dispute it received notice of the entry of the liquidation order. On March 18, 1988, it filed two proofs of claim with Integrity's Liquidator (the POCs) concerning two separate motor vehicle accidents that were being litigated against RCOC in Michigan (the POCs). The POCs were contingent at the time of filing because coverage, liability, and amount had not yet been determined.
On September 16, 1988, the Deputy Liquidator issued two notices of determination to RCOC, allowing the POCs in an unstated amount. However, the allowance was subject to the terms and conditions of the Integrity policy and the future determinationby the Michigan Property & Casualty Guaranty Association (MPCGA) as to coverage, payee, and amount.3
The notices advised RCOC it had to file a written objection with the Deputy Liquidator within sixty days of the date of notice of allowance or disallowance of the POCs. The notices further advised that if the Deputy Liquidator did not receive an objection within sixty days of the date of the notice, "the allowance or disallowance . . . shall constitute the final determination and judgment of the Superior Court of New Jersey with regard to the . . . [POCs] and you shall be barred thereafter from objecting to the allowance or disallowance of such [POCs]."
The Liquidator referred the POCs to the MPCGA. On November 22, 1988, the Liquidator notified RCOC that the POCs had been transferred to the MPCGA and RCOC should thereafter communicate with the MPCGA regarding the POCs. On January 6, 1989, the MPCGA confirmed the transfer and directed RCOC to submit documents necessary to determine if the POCs qualified for payment as "covered claims."
In 1989, RCOC settled the Michigan litigation involving the two motor vehicle accidents. After applying its self-retention liability and primary policy limits, RCOC's remainder liability was $562,003. At that point, the POCs became absolute and eligible for payment from the Estate; however, RCOC did not file a final proof of claim with the Liquidator.
In 1992, the MPCGA disallowed the POCs, finding they were excluded as "covered claims" under the Property and Casualty Guaranty Association Act (the Michigan PCGA Act), Mich. Comp. Law § 500.7901 to 500.7949, because RCOC's net worth exceeded the statutory limit (the net-worth exclusion).4 RCOC did not file a written objection with the Deputy Liquidator of the MPCGA's disallowance of the POCs.
RCOC appealed the MPCGA's decision. In 1996, the Michigan Court of Appeals affirmed. See Oakland Cty. Bd. of Rd. Comm'rs v. Mich. Prop. & Cas. Guar. Ass'n, 550 N.W.2d 856 (Mich. Ct. App. 1996). In 1998, the Michigan Supreme Court affirmed. See Oakland Cty. Bd. of Rd. Cty. Comm'rs v. Mich. Prop. & Cas. Guar. Ass'n,575 N.W.2d 751 (Mich. 1998). The court found the net-worth exclusion applied to RCOC, and "covered claims" do not include obligations of an insolvent insurer to a person whose net worth exceeded the statutory limit. Id. at 599-600.
RCOC took no further action regarding the POCs until nearly twenty years later. In the meantime, on June 20, 2008, Judge Robert C. Wilson entered an order approving the Liquidator's Amended Liquidation Closing Plan (Amended LCP), which provided that claimants could only share in the distribution of the Estate if they submitted a final proof of claim by September 30, 2009, demonstrating the claim was absolute as of June 30, 2009.
On March 28, 2014, Judge Wilson entered an order approving the final distribution of Integrity's assets and closing of the Estate (the March 2014 order). The order directed the Liquidator to distribute Integrity's funds in accordance with the order and provide a final accounting. The order authorized the Liquidator to transfer any unclaimed funds to the New Jersey Unclaimed Property Trust Fund (NJUPTF), and authorized the trustees of the NJUPTF to escheat all abandoned funds and assets to the State pursuant to the New Jersey Uniform Unclaimed Property Act, N.J.S.A. 46:30B-1 to - 109.
The March 2014 order authorized the Liquidator to destroy all of the Estate's policy and claim files, and its human resources,accounting, and data processing records. The order empowered the Liquidator to take any and all additional action as he deemed advisable for the Estate's administration and closure without need for further applications to the court. The order discharged and released the Liquidator and his staff from any and all further liability arising out of the liquidation, and terminated the liquidation proceeding without need for any further court order. As authorized by the March 2014 order, the Liquidator destroyed all of Integrity's records by the summer of 2015, nearly thirty years after the court placed Integrity into liquidation.
The Liquidator subsequently submitted a final accounting to the court. Judge Wilson entered an order on January 6, 2016, approving the final accounting and closing of the Estate and discharging the Liquidator and his agents from any liability and further obligation to the Estate (the January 2016 order). The order authorized the Liquidator to escheat Integrity's remaining assets to the NJUPTF, required Integrity to conclude its business and close, and again empowered the Liquidator to take any and all additional action he deemed advisable for the Estate's administration and termination without need for further applications to the court.
On January 21, 2016, RCOC complained to the New Jersey Department of Banking and Insurance (Department) that theLiquidator failed to make a distribution on the POCs. RCOC also complained that, after transfer of its claims files to the MPCGA, the Liquidator had no procedures for continued notice to RCOC or for the return of the files to the Liquidator in the event the MPCGA denied the POCs, and failed to provide notice of the Amended LCP. RCOC posited there may be reinsurance available to satisfy the POCs and requested an investigation and distribution.
On January 25, 2016, RCOC filed a motion to intervene and for reconsideration of the January 2016 order, raising arguments that mirrored its complaints to the Department. RCOC sought to reopen the liquidation and requested a limited period of discovery to determine if there were potential sources of funds to satisfy the POCs, such as reinsurance, claw back agreements,5 or escheated funds. RCOC acknowledged that the Michigan courts had affirmed the MPCGA's disallowance of the POCs, but argued the POCs were still viable because the courts based their decisions on RCOC's eligibility for payment under the Michigan PCGA Act, not the Integrity policy.
In opposition, the Liquidator argued the Estate was closed, there were no funds left to distribute, and the Estate could not claw back money because the records of those paid were destroyed, as authorized by the March 2014 order. The Liquidator emphasized that RCOC knew for nearly twenty years it would not receive a distribution from the Estate and had numerous opportunities during that time to contact the Liquidator. The Liquidator also argued that RCOC received adequate notice in 1988 of the liquidation order, and took no action after the MPCGA disallowed the POCs. Lastly, the Liquidator argued the doctrine of laches barred RCOC's claim for relief.
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