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Carpenter Technology Corp. v. Admiral Insurance Co.6/17/2002
The principle of primary liability as set forth in Section 12a tracks the language of the Post-Assessment Property and Liability Insurance Guaranty Association Model Act (Model Act) drafted by the National Association of Insurance Commissioners (NAIC). A significant majority of states, including New Jersey and Pennsylvania, has passed some version of the Model Act containing the provision at issue in the present case. NAIC's purpose in passing the Model Act was to "minimize financial loss to claimants or policyholders because of the insolvency of an insurer." Post-Assessment Prop. & Liab. Ins. Guar. Assoc. Model Act, reprinted in NAIC Model Laws, Regulations and Guidelines, at 540-1, ยง 2 (1995).
In passing New Jersey's Act, the Legislature sought to bring our State within a nationwide network of individual insurance guaranty association statutes designed to spread equitably the risk of insurer insolvency among the states. See generally American Employers' Insurance Co. v. Elf Atochem North America, Inc., 157 N.J. 580, 598 (1999); T.B. Ridgley, Interstate Conflicts and Cooperation, Law and Practice of Insurance Company Insolvency at 528 (1986). The network "should result in as equitable as possible allocation of the inevitable loss where 'everyone makes some concessions to the common necessity and no one suffers too much.'" See Christopher J. Wilcox, The U.S. Guaranty Association Concept at 25: A Quarter Century Assessment, 14 J. Ins. Reg. 370, 399 (1999) (citing The Committee Comment to Wisconsin Statute Chapter 645, at 377-78 (1967)) (emphasis added).
However, the legislative desire to assist claimants cannot be, and is not intended to be, bureaucratic benevolence. The Legislature did not give NJPLIGA unfettered discretion to accommodate all claimants for any claims. The conservation of resources is a major goal. The Legislature signaled the need for restraint and caution in the payment of claims, and did so in a myriad of ways. Illustratively, NJPLIGA does not pay prejudgment interest on covered claims. N.J.S.A. 17:30A-5d. It is not liable for counsel fees incurred by a successful party in a declaratory judgment coverage action against NJPLIGA. N.J.S.A. 17:30A-5d; New Jersey Guar. Ass'n v. Ciani, 242 N.J. Super. 164, 169 (App. Div. 1990). The Act specifically excludes insurer subrogation claims from the definition of a covered claim. N.J.S.A. 17:30A-5d. Recovery against NJPLIGA is limited to unpaid claims that are either asserted by insureds or claimants who are residents of the State, or concern property permanently located in New Jersey. N.J.S.A. 17:30A-5. NJPLIGA is not responsible for "assessments or charges for failure of insolvent insurer to have expeditiously settled claims." N.J.S.A. 17:30A-5d.
Further, where a claim is covered both by a solvent insurer's policy and an insolvent insurer's policy, a policyholder first must exhaust his or her policy with the solvent insurer before NJPLIGA has any statutory obligation to pay the policyholder. "Therefore, until such exhaustion[,] [NJPLIGA], as the 'deemed' insurer under the insolvent insurer's policy, has no obligation." N.J.S.A. 17:30A-12b; Harrow Stores, Inc. v. Hanover Ins. Co., 315 N.J. Super. 547, 555 (App. Div. 1998). Finally, the Act's limitation of recovery at $300,000 per covered claim applies regardless of whether a claimant's policy limit exceeds that amount. N.J.S.A. 17:30A-8a(1).
This Court has recognized the legislative intent that conservation of NJPLIGA's resources is necessary to achieve the Act's stated goals. In American Employers', supra, at issue was whether the defendant was a New Jersey resident at the time of the insured event. 157 N.J. at 590. In holding that the defendan
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