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Carpenter Technology Corp. v. Admiral Insurance Co.6/17/2002
nces." Id. at 64. See also Sifers v. General Marine Catering Co., 897 F.2d 1288 (5th Cir. 1990) (holding that Louisiana Insurance Guaranty Association could offset its maximum obligation of $150,000 by $100,000 paid to plaintiff by Texas Guaranty Association, its statutory limit); Cox. v. Minnesota Ins. Guar. Ass'n, 508 N.W.2d 536 (Minn. Ct. App. 1994) (holding Minnesota Insurance Guaranty Association had no obligation to pay plaintiff because amount plaintiff recovered from primarily-liable Florida Insurance Guaranty Association - the statutory limit of $599,900 - was greater than maximum recovery available in Minnesota - $299,900).
A constant in all of the above out-of-state cases is that the secondarily-liable guaranty association was credited the maximum amount recoverable from the primarily-liable guaranty association. We thus consider those cases to support the system of primary liability intended by the national network of guaranty associations.
III.
We hold that NJPLIGA is entitled to a credit equal to the statutory maximum amount payable by PPCIGA. Our decision comports with the Legislature's intent to enroll New Jersey in a national network of insurance guaranty associations designed to spread equitably the risk of insurer insolvency; our public policy favoring the protection of New Jersey insurance policy holders that fund NJPLIGA; the need to prevent claimants from bypassing the system of primary liability codified in the Act; and the duty to conserve NJPLIGA's resources.
A.
We find persuasive NJPLIGA's argument that " f a foreign corporation guaranty association and claimant can unilaterally decide the payment, if any, to be made by the primarily obligated guaranty association, then the mandate to seek recovery first from the state of residence is subject to quick deals and cheap settlements, and is truly inoperable." (Emphasis added). The "plain meaning," if applied literally, can lead to absurd results. " here a literal interpretation would create a manifestly absurd result, contrary to public policy, the spirit of the law should control." Turner v. First Union Nat. Bank, 162 N.J. 75, 84 (1999). Illustratively, an insured and a primarily-liable guaranty association in another state could settle each of the insured's sixty-five claims for $1000 each, transferring the remaining obligation to NJPLIGA. Given NJPLIGA's cap of $300,000 per claim, under Carpenter's theory NJPLIGA would be obligated for the differential of $299,000 per claim on each of the sixty-five claims. As Judge Learned Hand observed, " here is no surer way to misread any document than to read it literally[.]" Guiseppi v. Walling, 144 F.2d 608, 624 (2d Cir. 1944), aff'd sub nom., Gemsco, Inc. v. Walling, 324 U.S. 244, 65 S. Ct. 605, 89 L. Ed. 921 (1945). If we were to adopt the Carpenter view, the primarily-liable guaranty association could settle for a small percentage of the claim, or even for "pennies on the dollar," evade its obligation as the primarily-liable association, and shift that primary obligation to the secondarily-liable guaranty association. That result stands the statute on its head. Neither the Model Act nor New Jersey law intended that the primarily-liable guaranty association could forsake its obligation and transfer its responsibility to a second guaranty association. Those statutes do not contemplate a "pick and choose" policy.
Although we do not attribute bad faith to PPCIGA or Carpenter, the process and the result give pause. By settling with Carpenter, PPCIGA at some level agreed that it had an obligation to pay Carpenter for its covered claims. Accordingly, on this record, any conflict concerning the priority of obligation between two lia
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