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Carpenter Technology Corp. v. Admiral Insurance Co.6/17/2002
nt point to be gleaned from the arithmetical labyrinth in Moiser, supra, 890 P.2d 878, is that the secondarily-liable guaranty association was entitled to offset its obligation by the maximum potential obligation owed by the primarily-liable guaranty association, rather than the amount the primary association paid. Further, in three of the cited cases the primarily-liable insurance guaranty association paid its statutory maximum obligation to the plaintiff. As the New Jersey Banking Commissioner argues, those cases suggest that primarily-liable guaranty associations paid their statutory maximum because they recognized their obligation to do so. A contrary practice would expose the national network to settlements disruptive to its primary objective.
Finally, Carpenter's and the dissent's interpretation of Section 12a may expose NJPLIGA to substantially increased liability that will be borne ultimately by New Jersey's insureds. As amicus notes, " mposing that burden on New Jersey shifts the obligations from one state's guaranty association to another at the whim of the insured, and effectively undermines the . . . national network of guaranty associations." We do not believe the Legislature intended the Act to require New Jersey residents and corporations to finance the cleanup of environmental sites polluted by foreign corporations that can recover from another state's guaranty association. Moreover, adopting Carpenter's interpretation would encourage out-of-state insureds to seek recovery from NJPLIGA when such recovery is more properly the responsibility of another state's insurance guaranty association. In that regard, we accept NJPLIGA's representation that NJPLIGA is involved in numerous declaratory judgment actions involving foreign corporations who have elected to bring their insurance coverage lawsuits in New Jersey since it is perceived to be a policyholder friendly forum. As a result[,] NJPLIGA is repeatedly joined in litigation asserting that it bears liability to pay statutory benefits for foreign corporations, which benefits are properly payable by a primarily liable foreign insurance guaranty association.
The Act was not designed to be a panacea for all problems caused by insurance company insolvencies or to require NJPLIGA to assume all the obligations of an insolvent insurer. We agree with the Supreme Court of Montana's observation that the legislation creating guaranty associations "was not adopted as a form of reinsurance for every insurer who becomes insolvent." Palmer, supra, 779 P.2d at 64. Caution is thus the byword, particularly in this appeal, where three of Carpenter's insurers became insolvent and NJPLIGA is facing numerous claims. NJPLIGA has a fiduciary obligation to member insurers and is "required to act as [a fiduciary]." Evanston Ins. Co. v. Merin, 598 F. Supp. 1290, 1313 (D.N.J. 1984).
B.
Carpenter asserted at oral argument that its interpretation of the statute is consistent with this State's strong public policy favoring the settlement of litigation. Although we support that policy, we cannot allow a settlement to undercut the clear legislative intent behind the Act. Carpenter was aware that NJPLIGA believed that it was entitled to a credit equal to the maximum amount payable by PPCIGA. Carpenter settled with PPCIGA and then turned to NJPLIGA to make up the difference. Carpenter assumed the risk inherent in such a settlement. In sum, nothing in the Act suggests that the Legislature intended NJPLIGA to assume liabilities resulting from environmental or any other damage caused by an out-of-state corporation when those liabilities are the primary obligation of another guaranty association that has received the benefit of assessments paid by
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