New Jersey Auto. Ins. Plan v. Sciarra
| Decision Date | 30 December 1998 |
| Docket Number | Civil Action No. 96-5497.,Civil Action No. 97-1900.,Civil Action No. 92-1369. |
| Citation | 103 F.Supp.2d 388 |
| Parties | NEW JERSEY AUTOMOBILE, INSURANCE PLAN, et al., Plaintiffs, v. Justin M. SCIARRA, et al., Defendants. New Hampshire Insurance Company, Inc., et al., Plaintiffs, v. Alert Motor Freight, Inc., et al., Defendants. The Travelers Indemnity Company, Plaintiff, v. E.F. Corporation, et al., Defendants. |
| Court | New Jersey Supreme Court |
Alan M. Lieberman, James M. Holston, John K. Gisleson, Schnader Harrison Segal & Lewis, Philadelphia, PA, for Plaintiffs/Third-Party Defendants New Jersey Auto. Ins. Plan, Pennsylvania Assigned Risk Plan, CIGNA, and Third-party Defendant Michael Scott.
Paul W. Verner, Irwin F. Simon, Debra L. Rudoltz, Verner Simon & Rocha, LLP, New York City, for Defendants/Third-Party Defendants Justin M. Sciarra, Sciarra Ins. Agency, Inc., Paul W. Hopkins, Hopkins & Associates, Inc., Philadelphia Ins. Exchange, Inc., Reisch Enterprises, R.G. Truck Leasing, and Ardan, Inc.
William M. Hannay, Heidi Dalenberg, David H. Anderson, Steven C. Benz, Schiff Hardin & Waite, Chicago, IL, Marc L. Dembling, Berlin, Kaplan, Dembling & Burke, Morristown, NJ, for Third-Party Defendants AIPSO, Raymond A. Ursin, Travelers Indem. Co., Fireman's Fund Ins. Companies, Liberty Mutual Ins. Co., Progressive Cas. Ins. Co., Aetna Cas. & Sur. Co., and New Hampshire Ins. Co.
Richard D. Catenacci, Tricia Bevelock O'Reilly, Connell Foley & Geiser, Roseland, NJ, for Third-Party Defendants Paul Arnold Associates and Paul Goldman.
Edward Farman, Schindel, Cooper & Farman, New York City, for Third-Party Defendant Central Analysis Bureau.
Ira Lipsius, New York City, pro se.
William M. Hannay, Heidi Dalenberg, David H. Anderson, Steven C. Benz, Schiff Hardin & Waite, and Marc L. Dembling, Berlin, Kaplan, Dembling & Burke, Morristown, NJ, for Plaintiff New Hampshire Ins. Co. and Third-Party/Fourth-Party Defendants AIPSO, New Jersey Auto. Ins. Plan, New Hampshire Ins. Co., and James Bean.
Paul W. Verner, Debra L. Rudoltz, Verner Simon & Rocha, LLP, New York City, for Defendants/Third-Party Plaintiffs Alert Motor Freight, Inc. and John Stuffo.
Justin Sciarra, pro se.
Edward Farman, Schindel Cooper & Farman, New york City, for Central Analysis Bureau.
Richard M. Darnell, Louis J. Rizzo, Reger & Rizzo, Cherry Hill, NJ, for Plaintiff/Third-Party Defendant on the Counterclaim The Travelers Indem. Co.
James J. Riley, Albert J. Evans, Ernest Gellhorn, Riley and Fanelli, P.C., Pottsville, PA, for Defendant and Third-Party Plaintiff, E.F. Corp.
Joseph E. Mayk, Lewis R. Olshin, Duane, Morris & Heckscher LLP, Wayne, PA, for Third-Party Defendants AIPSO, Pennsylvania Assigned Risk Plan, and Raymond A. Ursin.
This matter is before the court on a host of summary judgment motions. Oral argument on the motions was held on Wednesday, November 4, 1998.
The facts of this dispute are well-known to the Court. The original Complaint in the primary action, New Jersey Automobile Insurance Plan v. Sciarra, Civ. Action No. 92-1369,1 was filed on March 31, 1992 and essentially alleges that Defendants — most of whom have settled with Plaintiffs and are no longer parties to this action — defrauded commercial automobile insurers by assisting trucker-insured in making false representations in their insurance applications within the involuntary insurance market. This involuntary insurance market was created under both Pennsylvania and New Jersey law to provide insurance Plans for those commercial trucking companies who were unable to obtain reasonably priced liability coverage through ordinary methods. The Commercial Auto Insurance Plans ("CAIPs") assign insurance carriers to supply coverage. The Automobile Insurance Plans Services Office ("AIPSO"), a private company, administers both the New Jersey and Pennsylvania CAIPs, as well as drafts the manuals containing the rules implementing the CAIPs.
The Plan rules permitted three methods of computing the premiums for truckers, all of which were intended to produce comparable premium amounts. Defendant/Third-Party Plaintiff Paul W. Hopkins apparently utilized a "loophole" in the rules for one of the methods that, when combined with other manipulations of the rules, resulted in substantial reductions in insurance premium costs to the truckers under both the New Jersey and Pennsylvania Plans. Marketing himself as an insurance consultant and operating through Defendant Justin Sciarra and his insurance agency, Hopkins charged clients based on the savings he could produce rather than the more common charge of a percentage of the premium.
Specifically, the method used by Defendants (collectively referred to as "Sciarra/Hopkins") is called the "cost of hire" method. This method, used for vehicles leased on a short-term basis (i.e., less than six months), basically employs a two-step formula: First, the "average specified car rate" must be calculated. This is determined by adding together all of the rates for the vehicles scheduled on the policy and dividing by the number of scheduled vehicles. This figure is then multiplied by .0033. Second, the average specified car rate (per 100) is multiplied by the "cost of hire" figure. This "cost of hire" is determined by adding a number of operating costs together. The Sciarra/Hopkins methodology produces a significantly lower premium primarily by manipulating the number of scheduled vehicles a trucking company reports and by narrowly construing what is included in the "cost of hire."
To take advantage of the "cost of hire" method, Sciarra/Hopkins would instruct the trucking company to create another company to serve as the owner of the fleet of trucks. The trucking company would then lease the trucks back from its newly created company under short-term leases, decreasing the number of vehicles it would have to report. Another unique feature of the Sciarra/Hopkins methodology is that it limits "total cost of hire" to include only driver wages and truck rent, rather than including such things as fuel, tolls, maintenance and other costs involved in leasing a truck on a short-term basis.
Contesting the validity of the Sciarra/Hopkins method of computing premium rates, Plaintiffs and Third-Party Defendants claim that Sciarra/Hopkins advised, counseled, encouraged and directed motor carriers to inaccurately report the number of vehicles owned by the motor carriers, manipulated the cost of hire and radius of operations, and obscured previous adverse lost histories. Plaintiffs base their claims on violations of the RICO Act and the New Jersey Racketeering Statute, as well as common law fraud, breach of contract, and unjust enrichment.
In defense to Plaintiff's claims and in support of their counterclaims and third-party claims against Third-Party Defendants, Sciarra/Hopkins maintain that the methodology they used to compute the application figures was entirely proper under the Plan rules. They further claim that Plaintiffs engaged in a conspiracy among themselves and others to monopolize the involuntary insurance market by manipulating the insurance rating procedures. Specifically, Sciarra/Hopkins' Third-Party Complaint alleges that Plaintiffs/Third-Party Defendants conspired, in restraint of trade and in violation of federal antitrust laws, to create a monopoly of the involuntary insurance market by retroactively altering the Plan rules to make Sciarra/Hopkins' methodology appear fraudulent and attempting to force them out of business. In furtherance of this goal, Sciarra/Hopkins argue that Third-Party Defendants also published numerous disparaging remarks about Sciarra/Hopkins and their services to Plan representatives and others in the insurance industry.
Sometime in 1992, New Hampshire Insurance Company ("New Hampshire"), one of the servicing carriers that was engaged to insure Sciarra/Hopkins' clients under the New Jersey Plan, filed suit in the Superior Court of New Jersey, Burlington County against Alert Motor Freight, Inc. ("Alert"). New Hampshire alleged that Alert, one of Sciarra/Hopkins' trucker clients, owed it $139,512.20 for liability insurance. This matter was ultimately removed to the District of New Jersey before Judge Stephen M. Orlofsky and was reassigned to this Court on December 19, 1996. New Hampshire Insurance Company, Inc. v. Alert Motor Freight, Inc., No. 96-5497.
On or about August 3, 1995, The Travellers Indemnity Company ("Travelers"), another one of the servicing carriers that insured Sciarra/Hopkins' clients under both the Pennsylvania and New Jersey Plans,2 filed suit against E.F. Corporation ("E.F."), in the Common Pleas Court of Pennsylvania, Berks County. Similarly, Travelers sought to recoup money lost on the premiums it claims Sciarra/Hopkins inappropriately calculated for E.F., another one of Sciarra/Hopkins' trucker clients. After E.F. filed a timely notice of removal, this case was finally removed to the District Court for the Eastern District of Pennsylvania and was eventually transferred to the District of New Jersey before Judge Joseph E. Irenas. The Travelers Indemnity Company v. E.F. Corporation, Civ. A. No. 97-1900. This case was consolidated with New Jersey Automobile Insurance Plan v. Sciarra, Civ. A. No. 92-1369 and New Hampshire Insurance Company, Inc. v. Alert Motor Freight, Inc., No. 96-5497, by Magistrate Judge Robert B. Kugler in an order dated September 12, 1997.
After years of discovery and an ever increasing hostility among the parties, Judge Kugler ordered discovery closed on September 2, 1997. Also in this June 16, 1997 Amended Scheduling Order, the parties were given time lines for filing dispositive motions. Approximately fifteen of these motions for summary judgment are presently before the Court.3
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...S.E.2d 369 (N.C. 1998), 70 North Tex. Specialty Physicians v. FTC, 528 F.3d 346 (5th Cir. 2008), 79 N.J. Auto Ins. Plan v. Sciarra, 103 F. Supp. 2d 388 (D.N.J. 1998), 43, 117 Nat’l Bancard Corp. v. VISA U.S.A., Inc., 779 F.2d 592 (11th Cir. 1986), 13 Nat’l Gerimedical Hosp. & Gerontology Ce......
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