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Carpenter Technology Corp. v. Admiral Insurance Co.6/17/2002
ble guaranty associations must resolve itself in favor of the rule of primary liability expressed in Section 12a. To hold otherwise would force NJPLIGA to assume liability beyond that intended by the Legislature.
Although we recognize that in UMC and the other cases cited above, supra at __ (slip op. at 15-18), the excess insurer's policy with the insured contained exhaustion language, those cases are nevertheless helpful by way of analogy. Just as an excess insurer is obligated to pay only an amount above the primary insurer's limit, a secondarily- liable insurance guaranty association should be required to pay only an amount above the maximum recoverable from the primarily-liable guaranty association.
The dissent concludes that because Section 12a does not employ the term "exhaust," in contrast to Section 12b, which does use "exhaust," NJPLIGA is entitled to credit only the amount Carpenter actually received from PPCIGA for each covered claim. Post at __ (slip op. at 7). "Exhaustion" is properly used in Section 12b because of the potential for solvent insurers. See Jendrezewski v. Allstste Ins. Co., 341 N.J. Super. 460, 462 (App. Div.), certif. denied, 170 N.J. 209 (2001) (quoting Jendrezewski v. Allstate Ins. Co., No. L-9374- 99, slip op. at 2 (Jan. 21, 2000) (holding that PIP coverage under defendant's policy must be exhausted before plaintiff could recover statutory benefits from PLIGA and that PLIGA assumes obligations of insolvent insurer)). In other words, Section 12b presumes the existence of solvent insurance and imposes no obligation on the guaranty association before that solvent insurance is depleted. A parallel procedure in circumstances where Section 12a governs simply will not work because of the mutuality of obligation of each guaranty association to the claimant. Thus, in the absence of such insurance, the Legislature has prescribed that a system of primary liability should control under Section 12a.
In its discussion of exhaustion the dissent also asserts that the national network of state insurance guaranty associations establishes only the "order" in which claimants must pursue recovery. We disagree. If the dissent's view is taken to its logical extreme, it inexorably follows that a claimant, for reasons good or ill, can make its initial claim against the foreign association, settle for a small sum, and then demand payment from NJPLIGA for the bulk of its claim. The claimant thus reverses the order of priority and effectively makes NJPLIGA primarily liable.
We recognize that the Pennsylvania maximum ($299,900) approximates the New Jersey cap ($300,000). One may therefore contend that our result frees NJPLIGA from virtually any liability - only $6,500, as determined by the trial court.
But that result is fortuitous, attributable only to the fact that the statutory maximum in each state is nearly identical. NJPLIGA's obligation would be substantially greater, if, for example, the primarily-liable guaranty association was from Colorado, whose statutory cap is $99,900, Colo. Rev. Stat. § 10-4-508 or Oklahoma, whose cap is $150,000, Okla. Stat. tit. 36, § 2007. In the case of Colorado, NJPLIGA's liability would be $200,100 per claim. In the Oklahoma example, NJPLIGA's liability would be $150,000 per claim.
The Appellate Division and the dissent consider the out- of- state guaranty association cases unpersuasive. See 335 N.J. Super at 514-15; post at __ (slip op. at 11-13). However, those decisions reinforce the conclusion that the existence of a nationwide network of insurance guaranty associations is premised on a scheme of primary liability that is designed to spread equitably the risk of insurer insolvencies. The significa
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