New Jersey Ins. Underwriting Ass'n v. Clifford

• Decision Date: 10 November 1970
• Citation: New Jersey Ins. Underwriting Ass'n v. Clifford, 270 A.2d 723, 112 N.J.Super. 195 (N.J. Super. App. Div. 1970)
• Parties: NEW JERSEY INSURANCE UNDERWRITING ASSOCIATION, Appellant, v. Robert L. CLIFFORD, Commissioner of Insurance of the State of New Jersey, Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 195

112 N.J.Super. 195

270 A.2d 723

NEW JERSEY INSURANCE UNDERWRITING ASSOCIATION, Appellant, v.Robert L. CLIFFORD, Commissioner of Insurance of the State of New Jersey, Respondent.

Superior Court of New Jersey Appellate Division.

Argued Sept. 28, 1970.

Supplemental Briefs Filed Oct. 2 and Oct. 9, 1970.

Decided Nov. 10, 1970.

Charles H. Hoens, Jr., Newark, for appellant(Lum, Biunno & Tompkins, Newark, attorneys).

Virginia Long Annich, Deputy Atty. Gen., for respondent(George F. Kugler, Jr., Atty. Gen., attorney).

Before Judges SULLIVAN, COLLESTER and LABRECQUE.

The opinion of the court was delivered by

LABRECQUE, J.A.D.

AppellantNew Jersey Insurance Underwriting Association(Association) appeals from a directive by the Commissioner of Insurance (Commissioner) dated June 24, 1970 amending the Association's plan of operation to require that vandalism and malicious mischief insurance endorsements be made available on fire policies issued by its members after July 15, 1970, and requesting that prior to August 1, 1970 it present a proposal to the Commissioner for the writing of burglary and theft coverage.Notice of appeal was filed promptly and, though a stay of the directive was denied, the matter has been accelerated.

By L.1968, c. 129, now N.J.S.A. 17:37A--1 et seq., the Legislature enacted a mandatory program of property insurance coverage to be carried out under the supervision and control of the then Commissioner of Banking and Insurance, now the Commissioner of Insurance.That statute, which became effective July 2, 1968, created the New Jersey Insurance Underwriting Association(plaintiff herein) to carry out a program of property insurance on behalf of applicants unable to procure such insurance by themselves by reason of environmental factors beyond their control.¹Under the statute the Association was made up of all insurers authorized to write and engaged in writing property insurance on a direct basis within the State.N.J.S.A. 17:37A--3.The Association was required, within 90 days after the statute went into effect, to formulate plans for carrying into effect the statutory mandate, and to submit them to the Commissioner for review, approval, disapproval or amendment by him.N.J.S.A. 17:37A--7.

The program was to cover 'essential property insurance,' as defined in the statute.N.J.S.A. 17:37A--8.The statute also authorized the Commissioner to do all things necessary to enable the State, and any insurer participating in any plan approved or issued by him, to fully participate in any federal program of reinsurance 'which may be hereafter adopted for purposes similar to the purposes of this act.'N.J.S.A. 17:37A--25.One such program, designed to support state F.A.I.R. (Fair Access to Insurance Requirements) plans, was that later provided by 12 U.S.C.A. § 1749bbb et seq.(1968)(the National Insurance Development Program) with which we are here concerned.

Pursuant to the mandate of N.J.S.A. 17:37A--7 the Association submitted a plan of operation to the Commissioner.It was approved by him on November 25, 1968 with a proviso that there be 'constructive compliance with the provisions of section 2(a) of chapter 129 of the Laws of 1968.'To this end he deemed it necessary that coverage against the perils of vandalism and malicious mischief be made available at once and that burglary and theft coverage be made available not later than June 1, 1969.

When, after long delay, the Association failed to comply, and after correspondence and consultation with the Association's directors, the Commissioner, on June 24, 1970, certified an amendment to the Association's plan of operation which directed that vandalism and malicious mischief endorsements be made available on fire policies issued after July 15, 1970.He also Requested the Association to submit a proposal for the writing of burglary and theft coverage by August 1, 1970.

Since the subject of the appeal is a final decision of a state administrative agency, the matter is properly before us.R. 2:2--3(a)(2).Cf.Alberti v. Civil Service Comm'n, 41 N.J. 147, 150--152, 195 A.2d 297(1963).

Appellant raises two points, which may be summarized as follows: (1) the Commissioner was without authority to order it to include vandalism, malicious mischief, burglary and theft in the plan of operation, and (2) assuming he was vested with such authority, his action was procedurally invalid.

We consider them in that order.

I

In essence, the Association contends that N.J.S.A. 17:37A--1 et seq. was part of a joint federal-state program designed to make 'essential property insurance' available in urban areas and that it was geared to and dependent upon the availability of reinsurance under the National Insurance Development Program (the federal program).It urges that since the federal program was to cover vandalism, malicious mischief, burglary or theft only if the Secretary of Housing and Urban Development should so designate by rule, and the Secretary had not done so up to the time of the directive here under appeal, ² the Commissioner was without authority to require such coverage.The Commissioner contends that the challenged directive was authorized by the statute, and this irrespective of whether reinsurance was available under the federal program.

We hold that the Commissioner acted pursuant to the authority conferred by N.J.S.A. 17:37A--1 et seq. in requiring the Association to include vandalism and malicious mischief coverage in its plan of operation and in requesting it to submit a proposal for the writing of burglary and theft coverage.Insurance coverage for the losses authorized to be covered by the statute was not dependent upon the coexistence of a federal reinsurance plan covering the same losses.

N.J.S.A. 17:37A--8 makes it clear that those unable to secure 'essential property insurance' from authorized insurers in the normal insurance market are to be afforded coverage through the Association under the conditions therein stated.'Essential property insurance' is defined in N.J.S.A. 17:37A--2(a) as 'insurance against direct loss to property as defined and limited in the standard fire policy and extended coverage endorsement thereon, as approved by the commissioner, and insurance for such types, classes and locations of property against the perils of vandalism, malicious mischief, burglary or theft, or such other classes of insurance as the commissioner may designate in order to comply with Federal legislation and obtain Federal reinsurance.'

While the legislative intent is to be discerned from the language of the statute, State v. Wean, 86 N.J.Super. 283, 289, 206 A.2d 765(App.Div.1965), the statutory background, the circumstances of passage and the mischief at which the statute was aimed may weigh heavily in its ascertainment.State v. Wasserman, 75 N.J.Super. 480, 488, 183 A.2d 467(App.Div.1962), aff'd39 N.J. 516, 189 A.2d 218(1963).So considered, we are satisfied that the constricted definition of 'essential property insurance' advanced by the Association is at variance with the legislative intent.Assembly Concurrent ResolutionNo. 23 of 1967, which antedated the 1968 report of the National Advisory Panel on Insurance in Riot Affected Areas, stated that:

The practice of insurance carriers of the State of refusing to write, renew and/or arbitrarily canceling existing policies of property insurance (fire And liability), without cause, in certain sections of the State, particularly in the urban and resort areas, is causing great hardship to property owners.This penalizes the owners of good properties with the bad * * *.(Emphasis added)

The 1968 report of the commission of the New Jersey Legislature'to Study the Matter of Refusal of Certain Insurance Companies to Issue Insurance Policies Covering Properties in Certain Portions of this State' noted that 'Public recognition of the conditions described in the (Assembly's) statement * * * and public demand for their correction resulted from the widespread 'civil disorders' of the summer of 1967, particularly those in Newark in July.'The legislative declaration contained in N.J.S.A. 17:37A--1 is to the effect:

(T)hat an adequate market for fire and extended coverage insurance is necessary to attract private capital to central city areas; that without such insurance it is impossible to supply needed goods and services, and expand job opportunities; that orderly community development depends upon an adequate supply of such insurance to enable homeowners to obtain financing for the purchase and improvement of their property; that while the need for such insurance is growing there is reason to believe that the market for same is constricting, and likely to become more constricted in the future; that voluntary efforts to provide fire and extended coverage insurance in areas likely to be unprofitable deserve praise, but are insufficient to meet the needs of these areas; that the State has an obligation to require every insurance company writing fire and extended coverage insurance in New Jersey to meet its public responsibilities, instead of shifting the entire burden to a few public spirited companies; that it is the purpose of this act to accept this obligation; and that any mandatory program to provide fire and extended coverage insurance for all citizens of New Jersey should be supervised by the Commissioner of Banking and Insurance and periodically reviewed in the light of experience and intervening events by the Legislature.

N.J.S.A. 17:37A--1 et seq. had its genesis in Senate BillNo. 712, which was introduced on April 29, 1968, passed the Senate on May 27, passed the Assembly in amended form on June 20, was approved in its amended form by the Senate on June 24 and signed into law on July 2, 1968.As originally introduced it covered only fire and extended coverage insurance, but extended coverage was there defined as including 'vandalism or malicious...