*1 report It is ORDERED that the and recommendation of the Disciplinary adopted Review Board are and MELVIN D. LU hereby publicly reprimanded; SANE is and it is further respondent practice ORDERED that shall supervi- under the proctor sion of accordance with Administrative Guideline Attorney No. 28 of the Office of period Ethics for a of two years; and it is further
ORDERED that the entire record of this matter be made a permanent part respondent’s file as attorney an at law of State; this and it is further respondent
ORDERED that shall reimburse the Ethics Finan- cial for appropriate Committee administrative costs incurred in prosecution of this matter.
Douglas Eakeley, Acting S. Attorney General Jersey, of New argued appellants the cause for cross-respondents and State of Jersey, Fortunato, New Tufo, Samuel Douglas Robert J. Del Berman, Benjamin and J. Redmond (Douglas Eakeley, S. attor- ney; Sabatino, Jack M. Attorney General, counsel; Assistant Joseph Yannotti, L. Chewkanes, Lori L. Hallanan, Sharon M. Stephen Tctsy, Darrow, P. Sarah T. Flynn, Bernard M. Todd Widger, A. and John M. Armstrong, Deputy Attorneys Gener- al, briefs). on the argued
Thomas P. respondent Weidner the cause for and cross-appellant State Farm Mutual Automobile Insurance Com- pany {Jamieson, Moore, Spicer, Peskin attorneys; & Thomas Weidner, P. Wertheimer, Deborah T. Poritz and Richard J. a bar, counsel; member of the District of Columbia Thomas P. Weidner, Poritz, Wertheimer, Deborah T. Richard J. Gamick, Murray R. bar, a member of the District of Columbia briefs). on the
Floyd Abrams, bar, argued member of the New York cause for intervenor-respondent cross-appellant Allstate {Smith, Stratton, Insurance Company Wise, Heher Bren- & nan, attorneys; Abrams, Brennan, III, Floyd William J. *6 counsel;
Wendy Floyd and Mager, L. Abrams William J. Brennan, briefs). III, on the argued respondent Proper-
J. Michael the cause for Riordan {Bressler, ty Liability Guaranty Amery Association Insurance Ross, attorneys). & argued
Elmer M. Matthews the cause amicus curiae (Clapp American Association & Eisenberg, Insurance attor- Matthews, Kessler, neys; Elmer M. Frederic and C. Harvey S. brief). Kaish, on the
Stephen Cuyler D. submitted a letter memorandum on be- intervenor-respondent cross-appellant Liberty half of and Mutu- Matthews, Company (Cuyler, al attorneys). Insurance Burk & opinion by Court was delivered HANDLER, J. appeal
This arises from three filed actions automobile Court, Division, in companies Superior Chancery insurance constitutionality all challenging the facial of the Fair Automo- (the bile Insurance Reform Act of c. 8 L. Reform Act). Act or the Farm State Mutual Automobile Insurance (State Farm) Company Liberty Company and Mutual Insurance (Liberty Mutual) contend that certain surtaxes assessments imposed by any Act deny possibility Reform insurers of a taking just reasonable rate of return and are a without compen- process. sation and a of due violation Allstate Insurance Com- pany (Allstate), Mutual, Liberty well as as State Farm impairment claims that is an the Act of contracts it because compels pay debt insurers accumulated attributable prior high-risk the State’s system insuring drivers. Other constitutional are is punitive claims that the Act intentional legislation against companies; insurance that the surtaxes and assessments an exact extraterritorial tax because a mutual Jersey operate insurer’s New business will at a loss and reve- operations nues from Jersey other subsidize states will New rates; “producer assignment program” that the Act’s violates process compels due it accept because insurers either to liabili- incur, they right ties did not or to forfeit their to do business in Jersey; requirements New and that the Act’s that rates in New Jersey on be based an insurer’s nationwide profitability violate the Commerce Clause the United States Constitution. May complaint State Farm filed its
On the Chan- Division, cery County. Liberty Mercer Allstate and Mutual began challenges court; their in federal rather than state how- ever, jurisdictional both federal actions were dismissed on grounds. Liberty Allstate and Mutual then filed actions in the Chancery July Division respectively. November
In appeal, *7 what has become the main action on State Farm State, Mutual Company Automobile Insurance v. State Farm preliminary injunction, requesting moved for a relief from payments to be made to the State under the In deciding Act. motion, the court impairment focused on the issues of taking contracts just compensation. without The court questions interrelated, determined that the two were in that prove precluded State Farm would have to earning it was from a fair rate of return to expectations show that its contractual substantially impaired. had been The court concluded that the provisions collecting payments Act’s from insurers to cover obligations arising prior system under the of automobile insur- scheme, regulation regulatory ance is a long valid as as it does not in taking result losses that would be an unconstitutional or process. Examining a violation of due in detail the Reform provisions Act’s for additional surtaxes and assessments on insurers, Act, the court also determined that while the on its face, prohibited any offsetting form rate relief for the surtaxes, necessarily prohibit it did not rate relief for the assessments. The court ruled that Farm entitled to State was a hearing to determine whether it could obtain a fair rate of through return applications notwithstanding rate-increase exclusion of expense filing. the surtax from the base in a rate granted preliminary The court injunction, authorizing also a statutory payments Farm to make its into State court rather to the State. than immediately Appellate
The State moved before the Division appeal stay Chancery for leave to Division’s preliminary injunction. stay granted was and on the following day applied Farm State to this Court to vacate the Appellate stay. denied, Division’s application leaving That was stay July, in effect. In Appellate granted Division appeal. Allstate, State’s motion for leave to Thereafter then proceeding Chancery in the Division after its federal court dismissed, action had been successfully Ap- moved before the pellate Division to appeal. intervene the State Farm certification,
State Farm then filed a motion for direct which granted this Court November 1990. While that motion was Mutual, which, pending, Liberty Allstate, like had had its feder- complaint al prejudice, court dismissed without simultaneously complaint Chancery filed a in the successfully Division and moved this appeal. before Court intervene in the State Farm Thus, the pursued by plaintiff claims of the insurers are here Mutual; State Farm and intervenors Liberty Allstate and addition, the participated American Insurance Association has as throughout litigation. an amicus the State Farm
I. years, For Jersey’s system New of automobile insurance *8 regulation, many states, like those of other has faced an intract problem providing coverage high-risk able of for Prior drivers. to coverage drivers who could not directly obtain from voluntary insurers the through market were insured an Assigned (N.J.S.A. 17:29D-1), Risk Plan under which the Com apportioned high-risk missioner of Insurance among drivers all doing auto insurers Jersey. business New In the Act, Availability Automobile Full Insurance N.J.S.A. 17:30E-1 -24, through replaced assigned-risk system the with the New Jersey Association, Automobile Full Underwriting Insurance commonly Underwriting known as the Joint Association or JUA.
All insurers to write licensed automobile insurance in New to Jersey required were be of the The objective members JUA. of the new scheme was to a more system create extensive carriers, allocating high-risk through JUA, drivers to and provide coverage such with at equivalent drivers rates to those charged voluntary in the Originally, market. the JUA was directors, governed by a a majority board of whom were representatives producers of insurers and insurance brokers). agents adopt The board was to a Plan of Operation carry objectives. though out the JUA’s Even JUA, primary responsibility management board had of the plenary powers the Commissioner retained veto actions of or might the board to countermand decisions board that not be regulatory with consonant the State’s scheme. JUA, good prior more than complex Assigned deal Plan, (and as
Risk worked follows. Insurers subsequently qualified entities) apply certain non-insurer could to become “servicing carriers,” which responsi- would bear administrative like, bility collecting premiums, arranging coverage, and the would fees from which receive for such services the JUA. However, statute, Operation, agree- Plan of and the servicing provided ments between the JUA and carriers all claims and indepen- liabilities JUA would be borne it dently; servicing were from such carriers to be insulated claims See, 17:30E-7(e); e.g., liabilities. JUA Plan N.J.S.A. 3; Operation, January V, Paragraph dated Article Servicing Farm, Carrier Contract between JUA and State dated Y, October Article 5.2. Section high-risk required Because JUA insured drivers also but (see voluntary-market that their rates the same as rates 17:30E-13), it anticipated premium N.J.S.A. was revenues against would not cover policies. costs claims JUA There- fore, income, premium in addition to normal JUA was also *9 surcharges
given Department income from of Motor Vehicle convictions, driving moving policy and drunken “flat violations charges,” equalization charges,” “residual market or and RMECs, policy voluntary-market rates for in- to be added Thus, system the sureds. 17:30E-8. JUA was N.J.S.A. high-risk the insurance costs of drivers were subsidized which by imposition segments general population of the the fees on supposed operated The to be on a of motorists. JUA was basis, no-profit, no-loss with RMECs increased or decreased as accomplish needed to that result. JUA, may objectives system one view the of the the
However goals. did not achieve its More and more drivers became procure voluntary-market coverage, by unable to until through Jersey over of New drivers had to be insured 50% against greatly JUA. Claims JUA insureds were sizeable and Despite imposition income. exceeded JUA’s available through substantial RMECs from 1988 the JUA none- unpaid theless accumulated a deficit of over billion $3.3 and other losses. claims reform, including insurance reduction of the
Automobile insurance, particularly plan eliminating some cost JUA, debt, unwieldy repaying replacing its it with a market, more distribution of the insurance workable automobile priority Legislature became a for the and the executive branch By year had 1990. March of that the Reform Act been adopted. principal goals of the Act were to reduce insurance costs drivers, Jersey depopulate
for most switch- New the JUA market, ing voluntary funding insureds to the create a ends, pay Act mechanism to off the JUA debt. To these provided writing renewing policies JUA would cease or “depopulation” as of October 1990. The of the JUA would accomplished by classifying insured into three cate- drivers (1) (revived) gories: high-risk Assigned drivers in the Risk Plan (10% market); (2) drivers, who “non-standard” risk would
43 by private be insured directly, insurers but who could be charged up (15% rates to those 135% standard risks of the market); (3) standard-risk, and voluntary-market insureds cov- (the prevailing ered at remaining market). rates of the 75% Presumably, higher charged high-risk rates to be now “non-standard” risk bring premium drivers should income coverage costs, such on line with coverage actual and this longer would no be subsidized. remains, however, problem
There pay of how to off the prior too, JUA’s billion; this, accumulated debt of over $3.3 is addressed the Reform Act. The Act Jersey creates the New Guaranty (Auto Automobile Insurance Fund), Fund a separate fund Treasury, within the State to collect and disburse the payments designed various off pay the JUA debt. Reform Act, 23; Section 17:33B-5. assigns N.J.S.A. The Act to the Auto Fund certain sources of income prior that under the JUA, e.g., surcharges scheme went to the driving for violations driving and drunken convictions. It also creates new sources Fund, for lawyers, doctors, revenue the Auto e.g., fees on businesses, body repair auto higher registration automobile fees, and, significant most litigation, the context of this imposition of additional assessments and on surtaxes insurers. Act, through 68, See Reform Sections N.J.S.A. 17:33B-58 through (additional fees); 17:30A-8a(9) -63 Section N.J.S.A. -8a(10) (assessments); (sur- Section 17:33B-49 N.J.S.A. taxes). imposed
The assessments on insurance carriers are collected through Property Liability Guaranty Insurance Association (PLIGA). Act, 17:30A-8a(9). Reform Section N.J.S.A. PLI impose was created in Jersey GA 1974 to on New assessments property-casualty against to pay insurers claims carriers (L. 1974, 17; had become insolvent. c. N.J.S.A. 17:30A-1 17:30A-20.) through Roofing Bldg. Supply See Railroad & Co., 384, 389-90, Co. v. Financial Fire Casualty & 85 N.J. (1981). A. 2d 66 requires Reform Act to make PLIGA applied exclusively additional assessments to be to the JUA “loans,” assessments, by the Act as denominated These debt. 17:30A-8a(10). They are paid the Auto Fund. N.J.S.A. are into eight per year million designed to net $160 to be set at rates 1997); repre- (1990 through the assessments years premiums property-casualty insurers. of net sented 2.7% 17:30A-16, Act, addresses of the Reform N.J.S.A. Section 75 policyholders of PLIGA assessments both for recoupment from always bailout. Insurers have insolvencies and for the JUA through insolvency permitted pass assessments been *11 insolvency passthrough originally was ac- policyholders. The increases, but in 1979 the method was complished by rate surcharges policy premiums. The sur- changed on to direct charges insolvency assessments continue to be authorized under, However, the Act. 17:30A-16a. the Reform N.J.S.A. surcharges expressly prohibits such to recover the new Act 75b states: for the JUA bailout. Section assessments surcharge on the of No member insurer shall a premiums any policy impose requiring to assessments to to assessments pursuant [the provision recoup paid loaned to the Auto [N.J.S.A. 17:30A-16b.] be Fund]. assessments, Act, In to the the Reform Section addition new 76, go toward the JUA imposes special a surtax on insurers amount, greater This surtax is a 17:33B-49. bailout. N.J.S.A. period (only imposed is for a shorter premiums, of net but 5% 1992), The years, 1991 and than the assessments. three $300,000,000 designed net a total of over additional surtax is Act, period into the Auto Fund. Reform Section three-year the objective the is to secure $300 17:33B-50. Because N.J.S.A. adjusted, can proceeds, in net the surtax rate be million 5% premiums. The upon amount of insurers’ net depending the 5% exceeded, theoretically possible that the cannot and it is rate rate; lowering the such a Director of Taxation could lower but premiums in- only if insurance net could occur automobile given significantly, highly unlikely event both creased Act and current supposed premium-reducing effects of the Act, addresses market conditions. The Reform Section
45 question of whether the charged additional surtaxes can be consumers:
The of Commissioner Insurance take shall such action is as to ensure necessary passenger that automobile insurance private shall not policyholders pay surtax to section 76. [N.J.S.A. 17:33B-51.] imposed pursuant argue The insurers that prohibi- because of the passthrough tions of impossible Sections it is for the Commission- of grant er Insurance to any rate relief to counteract substantial loss of net income that will result from the new assessments and surtaxes. The insurers further claim that the assessments and necessarily surtaxes will oper- cause them to loss, they ate at a deprived will thus be constitutionally of a adequate rate of return. point
The insurers experience to their 1990 example as an of impossibility achieving a fair rate of return under the They Act. profit claim that they maximum would be permitted under ratemaking procedures current would be 3.5% premiums, and that a surtax and an assessment 5% necessarily return, would more permitted 2.7% than offset the operating and mandate an loss for 1990. State, contrary, argues (1) to the Sections absolutely prohibit relief; (2)
do not rate insurers have *12 failed to account for positive certain effects their profitabili- on ty may “cost-saving” result from the provi- Act’s so-called sions statutory and from other and regulatory means available rates; (3) increasing Act, for 2g and the Section of N.J.S.A. 17:33B-2g, authority clarifies the Commissioner’s to allow an adequate rate of return for all insurers.
II. scrutiny The of the Reform Act that is the Court here perform scope. called considering on to is of limited In constitutionality legislation, weigh efficacy of courts do not its Moreover, legislative presumed or wisdom. “are to enactments and proponent invalidity be valid the burden on the of is a 46 Council, 68 v. Town N.J.
heavy one.” Hutton Park Gardens (1975). challenges to 543, 564-65, 1 In limited 350 2dA. legislation, particular the effects on constitutionality of facial rather, industry dispositive; an are not participants of a statute offends the “mere enactment” question is whether Virginia Mining rights. Hodel and v. constitutional Surface 295, 2352, Inc., 264, Ass’n, 452 101 S.Ct. U.S. Reclamation 1, (1981) Tiburon, 2370, (citing Agins City v. 69 28 L.Ed.2d 106, 65 112 100 S.Ct. L.Ed.2d 447 U.S. dealing validity price-control (1980)). with the In cases Act, statutes, holdings unconstitu- as Reform of facial such See, e.g., exceedingly Guaranty Nat’l Ins. tionality are rare. Cir.1990) (Nevada (9th Gates, statute 916 F.2d v. Co. unconstitutional; freezing provisions al- insurance rates held danger insolvency for lowing only relief insurers rate constitutionally adequate rate of not assure a were sufficient to return); Berkeley, 3d City 17 Cal. see also v. Birkenfeld (1976)(rent-control ordinance Cal.Rptr. 550 P.2d standard, due-process minimal because ordi- did not meet even procedures reviewing appli- landlords’ rent-increase nance’s for long be forced delays such that landlords would cations entailed peri- for operate inadequate an rate of return indefinite at ods). challenges Reform primary of the insurers’ to the bases takings of the fifth amendment to the United
Act are the clause through (as applicable action Constitution to state States amendment), process the due clause of four- fourteenth amendment, analogous provisions Jersey of the New teenth takings process claims Although the due are Constitution. ordinarily brought factually and are in tandem interrelated price-control regulations, challenges governmental or rate challenge. actually is each distinct basis issues, the pertinent constitutional courts have Of two developed standards for substantive more definite clearer takings This has process due claims than claims. Court developed by apply the same standards the United chosen
47
Supreme
States
Court under the federal
Constitution
resolv
ing
process
due
under the
Jersey
claims
New
Constitution.
Gardens, supra,
543,
Hutton Park
68 N.J
350
1.
A .2d Courts
have,
course, long
of
been reluctant to interfere with the states’
regulation
Thus,
of their internal economic affairs.
the United
Supreme
York,
States
Court’s 1934 decision of Nebbia v. New
510,
505,
291
54
940,
(1934),
U.S.
78
S.Ct.
L.Ed.
950
upholding
constitutionality
system
price
of a state
sup
of
ports
milk,
set the
validity
basic standard for
under the due
process
guaranty
process
clause: “the
due
of
only
... demands
unreasonable,
law shall not
arbitrary
capricious,
or
the means selected shall have a real and substantial
object sought
relation
to be attained.”
governing
takings
standards
claims originally developed
examining
constitutionality
cases
the physical occupa-
of
property.
tion of real
fully
Such standards became more
subtly
developed
a number of
Supreme
United States
Court
dealing
government price regulation
cases
with
of utilities and
See,
gas industry.
the natural
e.g., Duquesne Light Co. v.
Barasch,
299,
609,
(1989);
488 U.S.
109 S.Ct.
The standards for the rate or price takings under controls clause set the United were
48 Supreme Hope decision in FPC v. Natural Court’s 1944
States
281,
591,
Co.,
64
L.Ed. 333.
supra, 320
S.Ct.
88
Gas
U.S.
There,
regulated
in
participants
made clear that
a
the Court
something
industry
to
more than mere survival:
are entitled
enough
be
of view it is
that there
From the investor or company point
important
operating
for the
costs
but also
of the
revenue not
expenses
capital
only
stock____
include service on the debt and dividends on the
These
By
business.
to
owner should be commensurate with
the return
the equity
that standard
having corresponding
in
risks. That
on investments
other enterprises
returns
to
be
assure confidence in the financial
should
sufficient
return, moreover,
integrity
so
maintain
credit and to attract
as to
its
capital____
enterprise,
L.Ed.
88
at
320 U.S.
S.Ct.
288,
at
64
at
603,
[Id,.,
345.]
in
Hope
were reiterated
Du
The standards of
Natural Gas
310,
Barasch,
299,
supra, 488
109
quesne Light
v.
U.S.
Co.
646, 659,
609, 617,
interpret-
102 L.Ed.2d
where
Court
S.Ct.
determining
validity
setting
rate
require
Hope
ed
takings
scrutiny
clause
of “what is a
under the
should include
given
a particular
of return
the risks under
rate
fair rate
capital upon
setting system and ...
the amount of
which the
posited
are
We
entitled
earn
return.”
have
investors
confiscatory
takings
results under the
like standard:
to avoid
clause,
generally
“the
should
one which is
commensu
return
enterprises having
rate with returns on investments
other
Gardens,
comparable
supra,
risks.”
Park
68 N.J. at
Hutton
570,
However, requirement that a constitutional busi permitted a sufficient to assure its financial ness be return profit require any particular necessarily health does not level capital. adequate attract retain invested above what is Constitution, consistently limit “Regulation may, with the strin investment, for gently the return recovered on investors’ inter provide only one the constitutional ests variables of reasonableness.” Permian Basin Area Rate calculus 769, 1361, Cases, supra, 88 at 20 at 390 U.S. at L.Ed.2d S.Ct. (citing Lexington Turnpike Rd. v. Sand Covington 337 & Co. 560, 198, 205, 41 ford, 566 164 17 S.Ct. L.Ed. U.S. (1896)). regulation, In of the investors’ price consideration
49 interests must be counterbalanced consideration of the con Hope Gas, sumers’ supra, interests. Natural 320 atU.S. 64 S.Ct. at at 345 (ratemaking L.Ed. properly involves balancing “a interests”). of the investor and the consumer Similarly, Gardens, supra, Hutton Park N.J. recognized A.2d this Court constitutionally that a “fair” rate *15 may of return well a involve sacrifice of an untrammelled opportunity profits for part regulated on of the the business: high
The rate of return need not be as as in permitted the prevailed industry regulation might to placing nor as an prior much as investor obtain his by elsewhere____ “just of capital Determination what level of return is reasonable” involves evaluation not of interests only investor but also general sought of the interests of the consumer and of the to be public regulatory legislation. advanced by (citations omitted).] [Id. at 1 570, 350 A .2d Moreover, price of reasonableness is limitations measured by performance businesses, of skilled and efficient not of inept are or unlucky. those that even Price levels are “not objectionable merely they because fix returns at a lower scale operators, inefficient do not persons paid reward who have purchase excessive or prices inflated property, may for their or hardships otherwise work ... in atypical In situations.” Ibid. government particular, price controls do not have allow to passthroughs particular cost increases in order to assure a constitutionally adequate See, rate of return. e.g., v. FPC Inc., 380, 2315, (1974) Texaco 417 94 U.S. S.Ct. 41 141 L.Ed.2d (approving regulations requiring gas pipelines natural large producers, as producers middlemen between small consumers, higher charges must absorb certain of the small producers being without permitted pass along to those costs to consumers); 223, Helmsley, supra, (a 78 N.J. at .2d 394 A 65 municipality is constitutionally required permit not all of a passed through landlord’s cost increases be in tenants units). sum, rate-controlled government In while regulation great cannot wreak too an interference with “distinct invest expectations,” Transp. ment-backed Penn City Cent. Co. v. York, 104, 124, 2646, 2659, New 438 98 U.S. 57 S.Ct. L.Ed.2d 50 (1978), highly regulated industry in
631, participant a a 648 capped can or even anticipate profit its levels must regulation. There is no changes government reduced profits. Edgewater entitlement to maximum Inv. constitutional 227, 240, 103 510 A. 2d Borough Edgewater, N.J. Assocs. v. (1986). 1178 applied takings analysis to statutes have Two recent cases limiting insurance. strictly increases automobile Guar rate 508; Gates, supra, 916 v. F.2d anty Nat’l Ins. Co. Calfarm 771 P.2d Deukmejian, 48 Cal.3d Ins. Co. v. (1989). Supreme Calfarm, In California Cal.Rptr. 161 initiative, constitutionality of an the facial Court addressed on automo- Proposition requiring that November be reduced below the rates effect insurance rates 20% bile Holding process grounds due essen- year earlier. on but one takings analysis, found tially applying a the court unconstitu- provision prohibiting year rate relief for the first unless tional Id., at danger insolvency. 48 Cal.3d an insurer were Nevertheless, 1255-56, Cal.Rptr. 170. P.2d at at years, relying upheld applied as it to future on court statute *16 prohibited the Insurance Commissioner provision another that [maintaining] [any in which is “approv[ing] from or effect rate] discriminatory.” excessive, inadequate, unfairly The court [or] general legisla- reflected a provision that the latter concluded return that a fair rate of and reasoned tive intent assure necessarily confiscatory ‘inadequate an rate’ a rate is “[s]ince language, requires rates with- statutory under the [the statute] fair and range which can be described as and reasonable that confiscatory approval or maintenance of rates.” Id. prohibits 1256-57, 822-23, at Cal.Rptr. at 171. at 771 P.2d Gates, Company v. su Guaranty In National Insurance for Appeals Court of the Ninth pra, 916 F. 2d fifteen-per a required Circuit examined a Nevada statute any the first permit did not rate relief for cent rate rollback and “substantially threatened with year an insurer unless were guarantee there was no insolvency.” The court concluded that constitutionally adequate a rate of year return the first regulatory prohibition scheme because of the of any rate except relief impending under circumstances of insolvency. In considering constitutionality the facial of the re- statute with spect years, to future the court analysis followed the same used by Supreme the California in Calfarm, Court but reached an opposite general conclusion. The court examined statutory a prohibited “excessive, provision inadequate, or unfairly discriminatory” rates. Id. at 515. provision It found that this prohibiting “inadequate” did rates not save the statute’s consti- tutionality, “inadequate” because the statute guaran- defined return, only tee a break-even not constitutionally a fair and reasonable return. Ibid. challenges
The insurers here couch validity their Reform Act surtaxes and assessments terms similar to those plaintiffs invoked and Guaranty National Calfarm v. They Gates. assert that the substantial additional costs of the new necessarily assessments and will surtaxes restrict negative, break-even, carriers to a or a only minimally or a positive that, return and therefore claim pre- because the Act any possibility recovery costs, cludes of those it is confisca- tory taking.
III. The facial constitutionality depends the Reform Act on insurers, whether the new burdens on the surtaxes assessments, necessarily preclude a fair That rate return. requires determination in turn questions— the resolution of two first, absolutely do Sections and 78 of the statute bar cost passthroughs impact of to offset assessments surtaxes; second, if one or both of those new costs cannot through relief, recovered standard rate does the Reform Act permit nonetheless the Commissioner otherwise to set rates *17 provide that would a fair of rate return. Resolution of those questions requires statutory language, of examination the the legislative history, interpretation the administrative of the 75,
interrelationship among 2g, Sections and 78 of the Reform Act.
A. embody Legislature’s Sections 75 and 78 the directives on the treatment of the assessments and surtaxes in ratemak ing. dealing assessments, provides: Section with the surcharge No insurer shall member on the [of PLIGA] impose premiums assessments PLIGA for the loans to off the recoup paid [to any policy pay JUA [N.J.S.A. 17:30A-16b.] debt]. respect Section 78 states with to the surtaxes: The of Insurance shall take such Commissioner action as is to ensure necessary passenger automobile insurance shall not for the private policyholders pay [N.J.S.A. surtax to section 76. imposed pursuant 17:33B-51.] argued foregoing provisions The insurers have both absolutely passthroughs, any recoupment, forbid or indeed ratemaking process. They the new costs the maintain that clearer; prohibition Legislature Section 78’s could not be policyholders demands that the Commissioner “ensure that ... pay” pertaining shall not for the surtaxes. While Section assessments, face, is less on its absolute insurers entirely prohibits nonetheless maintain that it likewise rate passthroughs. Although literally only pre- Section 75 would “surcharge[s] premiums policies],” clude on the of ... surcharges only passing insurers note that are the means for along Thus, PLIGA assessments to cover insolvencies. maintain, enacting Legislature insurers Section must prohibition “surcharges” have considered the to foreclose the only adding paid by means of assessments PLIGA to the rates policyholders. completely State asserts that Sections 75 and 78 do not
preclude the consideration of the assessments and surtaxes ratemaking process. As to Section the State maintains prohibition “surcharges” prohibition against that a is not a accounting otherwise for the PLIGA in ratemak- assessments ing. Regarding the treatment of the surtaxes in Section 78
53 particularly, regarding and the both assessments and the sur generally, argues taxes State that the intendment of other provisions of the Reform Act is to for allow some relief from the assessments and setting surtaxes in the Commissioner’s Specifically, rates. the State 2g contends that Section Act, 17:33B-2g, N.J.S.A. prohibitions counterbalances the provides: Sections 75 78. 2g Section To automobile provide healthy insurance in this competitive State, system automobile insurers are to through entitled earn an rate of return adequate ratemaking 17:33B-2g.] [N.J.S.A. process. 78, State, according Sections 75 and to the must be read in conjunction 2g, with Section together, and considered these provisions demonstrate that the Reform Act impose does not an recovery absolute bar to of the surtaxes and assessments through ratemaking.
In determining absolutely prohib- whether Sections 75 78 passthroughs, it is there no real room for doubt that mandatory terms of Legislature’s Section 78 demonstrate the preclude entirely any intent to consideration of the surtaxes ratemaking: standard “The Commissioner ... take shall such action to policyholders ... ensure that ... pay shall not for added.) (Emphasis the surtax”. While Section 75 is less tone, evidently absolute its terms were by influenced surcharges insolvency assessments that insurers historical- ly permitted been directly policyholders’ have to add premi- Co., ums. Roofing Bldg. See Railroad Supply supra, & N.J. at 390 n. 2dA. 66. is We believe it consistent prohibition both with the more obvious of Section and with surcharges only recognized as use method passing along assessments, insolvency to construe Section 75’s prohibition recoup of “surcharge[sj ... as assessments” idiosyncratic context, language absolute. Section Legislature only indicates that the intended to foreclose the existing means which costs of the assessments could be directly shifted to consumers. only
If we were remitted
to the terms of Sections 75 and
provisions
we would be constrained
rule that
those
standing
any recovery
alone do not allow
of the assessments
However,
through
and surtaxes
rate increases.
while Sections
*19
ratemaking,
75 and 78 foreclose relief in
2g
standard
Section
implicitly grants
overriding
the Commissioner
authority to
guarantee
by
insurers a fair rate of return
some means other
Thus,
passthrough.
2g
than direct
Section
does not contradict
prohibition,
78,
the
under
pass
Sections 75 and
of direct
throughs of the costs of the surtaxes and assessments. See
Lines,
Medina,
222, 226-27,
Seatrain
Inc. v.
39 N.J.
188 A. 2d
(1963) (the provisions
of a statute should be construed in
harmony
together effecting
and as
legislative
the overall
tent).
2g expressly acknowledges
Section
that “automobile
insurers are
adequate
entitled to earn an
rate of return
through
ratemaking process.”
(em
the
17:33B-2g
N.J.S.A.
added).
phasis
liberally
The statute should be
construed as
giving
ample
the
authority
Commissioner
to follow that di
legislative objective.
rective and achieve the
See Allendale
Field
Legalized
and Stream Ass’n v.
Games
Chance Con
Comm’n,
(1963)
trol
(“[w]e
N.J.
provide supplementary additional or means for the insurers to rates, inadequate despite pass- obtain relief from the direct through prohibitions particular, of Sections 75 and 78. In if an insurer is at risk because of an “unsafe or unsound financial condition,” (1) may suspend obligation the Commissioner its accept Plan, Assigned allocation of risks under an Risk see Act, 92, —24; Reform Sections 91 and N.J.S.A. 17:33B-23 and (2) obligation policies, its to issue or renew automobile Reform Act, 94, -28; (3) Sections 93 and N.J.S.A. 17:33B-27 and its obligation pay assessments, Act, PLIGA Reform Sections 95 96, -56; (4) obligation N.J.S.A. 17:33B-55 and pay its surtax, premiums Act, Reform Sections 98 and N.J.S.A. 17:33B-52 and -53. The State also points out that carriers can through increase their income increases, available “flex rate” permit which insurers to raise rates amounts related to components increases in certain of the Consumer Price Index prior regulatory approval. without N.J.S.A.. 17:29A-44. Fur- ther, Act “cost-saving” contains various provisions, which State are likely contends to decrease insurers’ costs and thus profitability. increase These provisions cap include benefits, Act, personal-injury Reform Section 39:6A- N.J.S.A. 4; allow an insured to select a health insurer as primary benefits, personal-injury Act, carrier for Reform Section 39:6A-4.3; N.J.S.A. fee provid- establish limits on health-care ers, Act, 39:6A-4.6; Reform Section require inspec- N.J.S.A. *20 prior of providing tion automobiles physical-damage to cover- Act, age, 48, Reform 41 through Sections N.J.S.A. 17:33B-33 -40; through program, Act, establish an anti-fraud Reform 51, 17:33B-42; provide Section towing N.J.S.A. and limits on storage Act, charges, Reform Section N.J.S.A. 17:33B- insurers, 47. The vigor, argue with considerable that the cost “savings” foregoing that the State attributes provisions to problematic Nevertheless, are and unrealistic. while the “cost- saving” statutory provisions may individually and other not or collectively insurers, assure fair a rate of return for as the stresses, they possibility State do increase avoiding confiscatory rates. summary,
In stopped the State contends the Legislature prohibition short of against any an absolute form of rate relief for the surtaxes and assessments. The insurers assert that the Legislature provisions believed it enacted effected an abso- prohibition. arguments go beyond plain lute Those terms support Reform Act and from legislative draw the Act’s history parties’ respective positions. to plain bolster If the
56 of its mean- entirely is not determinative language of a statute may examined to discover statutory history ing, the Vermeulen, 125 A.2d N.J. legislative Lloyd intent. v. (1956). Re- “legislative history” of the put as Most items forward Assembly floor newspaper accounts or Act are either form by plain- to recorded a consultant statements were debate reliability of such items if the relevance and tiff Allstate. Even legisla- certain elements of the questionable, there are may be proposed amend- history concerning the fate various tive the intended effects of Sections pertinent are ments that 2g. of Section being the Reform Act was February while On Committee, Assembly Appropriations Assem- by the considered 78. to Sections 75 and introduced amendments blyman Kamin committee, similar reported out of had been After the bill by Assembly entire Assem- proposed to the amendments were 2,1990. proposed Amendments Haytaian on March See blyman Leg., Assembly, No. 204th 1st Assemblyman Haytaian to Amendments). proposed (1990) (Haytaian Both sets Sess. strengthen prohibitions of were intended amendments proposed by As- to Section 75 passthroughs. The amendment provided: Kamin semblyman surcharge on the any policy
No member insurer shall premiums impose or include any the PLIGA loans to the Auto Fund] assessments [for recoup paid filing. insurance rate assessments ... as an expense any amount of the 204th Kamin to No. 1, Assembly, proposed by Assemblyman [Amendments Amendments), (1990) (Kamin Leg., p. 11.] 1st Sess. provided: to Section 78 proposed amendment rating organization as an insurance shall include expense any No insurer or to section 76. filing amount for the surtax imposed pursuant rate any paid *21 Amendments, pp. 11-12.] [Kamin explained that amendments accompanying those The statement language more restrictive pass through they “make the by surcharges the assessments premium tax regard to the Amend- Guaranty Kamin Association.” Property-Liability the ments, p. 13. Assembly Appropriations Committee the entire As-
sembly,
rejected
respectively,
the Kamin Amendments and the
Haytaian Amendments to Sections
Although
75 and 78.
the
proposed changes
strengthened
would have
passthrough
the
prohibitions, opponents maintained
strengthening
that no
was
necessary because passthroughs
already
were
completely pro-
balance,
hibited. On
insofar as one can surmise from the
unofficial
debates,
and unsanctioned record of the
the defeat of
the
Haytaian
Kamin and
may
Amendments
indicate that a
majority of the members
Assembly
of the
found the amend-
superfluous
ments to be
prohibitions
because
pass-
the
throughs
already
However,
were
absolute.
we
not
need
fur-
analyze
significance
ther
the
proffered
this
history.
Al-
though
proposed
may
amendments
prohibi-
have stated the
specificity,
tions with more
does
not obviate the conclusion
prohibitions
are
finally
absolute
the statute as
adopted.
legislation may express
“Enacted
generally
more
expressed
what was
more specifically
proposed legislation.”
Holmdel,
Holmdel
Township
Builders Ass’n v.
121 N.J.
of
(1990). Moreover,
58 passthrough prohibitions ened the of Sections 75 and 78 were Legislature rejected, 2g, empha- the chose to add Section which adequate sizes that insurers “are entitled to earn an rate of return”, finally adopted. the Act as
Thus, legislative history suggests the of the Reform Act how separate 2g the terms of Sections 75 and 78 and of Section can conclusion, history supports That fairly be reconciled. language pass- evident from the of Sections 75 and throughs of surtaxes and assessments the form of direct premium absolutely prohibit- increases or direct rate relief are However, 2g original ed. the addition of Section to the bill Legislature’s demonstrates the awareness and accommodation requirement that of the constitutional insurers must receive a fair rate of return. It is reasonable to conclude that Legislature conferred on the Commissioner of Insurance the necessary implied authority satisfy the constitutional stan- expressly acknowledged in dard that it the statute. possible Whether it is to secure a fair rate of return under statutory judicial question this scheme—the ultimate to be resolving answered the insurers’ facial attack on the stat- important already ute—is a difficult and issue that has been Department addressed of Insurance.
B. Recently-adopted regulations Department of Insurance governing may when and how rate relief be available to offset legislative the surtaxes and assessments corroborate the mean- i.e., ing suggested by statutory history, text a fair despite rate of return is to be assured under the Reform Act specific prohibitions of Sections 75 and 78. That adminis- understanding persuasive trative is evidence of the intent of the See, Legislature enacting regulatory e.g., scheme. Director, 19, 25-26, Taxation, Smith v. Div. 108 527 N.J. (1987); Fender, 129, 137, A .2d 80 402 Malone v. N.J. A .2d (1979). On November “emergency Commissioner issued *23 regulations” implement Act; to regulations, the Reform those amendments, permanently with certain were adopted on Janu- ary regulations implications 1991. The and their for the validity constitutional the by of Reform Act were addressed the parties appeal. Department’s on The Insurance summary of regulations governing emphasizes the filings rate the Act’s prohibition passthroughs. explains of also regula- It that the special, separate tions establish a filing procedure rate-increase any for insurer who believes that the effect of the surtaxes and assessments, case, particular in its preclude is to a constitution- ally adequate rate of return: N.J.A.C. 11:3-16.10 is to that amended confirm the Insurance Property-Liability Association assessment and surtax Guaranty the sections 74 and by imposed the
of not Act, into the respectively, may incorporated base for expense be determining rates. This sections 75 implements of the Act which pass-through direct of the assessment or surtax to prohibit The policyholders. Act and the Constitution of the United States, however, that insurers provide ratemaking through are entitled earn an to rate of return the adequate process. An insurer thus rate relief if it is unable to earn an rate may request adequate Accordingly, return to of of due the assessment or surtax. the imposition proposing is a new Department rule, 11:3-16.11, N.J.A.C. which sets forth the filing desiring insurer an to its rates reflect requirements to the modify assessment or surtax. The data filed will enable the to Commissioner evaluate all the insurer’s on lines of business New the insurer’s experience Jersey; the insurer’s of method allocation of and the operational efficiency; expenses; synergistic passenger effect of mandated automobile insurance on the private other of of lines business. profitability Filing [Rate Requirements, supra, 6-7.] pp. requirements filings The for standard rate-increase have prohibited heretofore expenses, e.g., the inclusion certain fines, costs, lobbying punitive damages, and the like. The new regulation, ll:3-16.10(b)8, Department’s N.J.A.C. reflects understanding prohibits passthroughs the Reform Act altogether, surtaxes, expense- and of both assessments as regulation filings. side items rate-increase The standard new prior to prohibited expenses: adds itemization of following shall items not into the base expense expense incorporated determining rates: [********] and surtaxes 74 and 76 [Sections vii. Assessments imposed pursuant
the Reform Act], respectively. assessments, Further, respect the new with PLIGA repaid, provide that if these “loans” are ever insur- regulations accordingly: reduce their rates ers shall receiving funds attributable to the assessments ... Prior to repayment any file for a reduction of rates an insurer shall with Commissioner plan ll:3-16.13(c).] with such [N.J.A.C. commensurate repayment. hand, explanation regulations, in its of the new On the other specifically acknowledged Department of Insurance has prohibit only and 78 dollar-for-dol- terms of Sections 75 the. negate overriding passthroughs, and do not entitlement lar of insurers to a fair rate of return: “pass-through” not assessments and/or surtaxes Insurers may directly imposed Act on a dollar for dollar basis to N.J.S.A. pursuant ... policyholders and 17:33B-51 assessments and/or Thus, 17:30A-16 [Section 75] [Section 78], *24 determining using in rates surtaxes are excluded from the base expense methodologies. an in an insurer increase rates However, may request standard the that it is assessments and/or surtaxes. Because on basis required pay generally the insurer must demonstrate excluded, however, these are expenses rate of return unless these that it is unable to earn a constitutionally adequate are considered. expenses Filing Passenger Market Private Automo- [“Rate Requirements: Voluntary Agen- of Insurance of Comments and Insurance,” bile Department Summary dated January p. 28.] cy Responses, end, procedure regulations provide To that the a new separate filings by insurers can demonstrate rate-increase who has denied them payment that of the surtaxes and assessments provisions, of return. the Commission- a fair rate Under these given necessary: discretion to allow rate relief when er is an insurer's rates as a result of are, The Commissioner determine whether may In of the surtaxes and assessments, constitutionally payment adequate. determines that rate relief is deemed to be the event that Commissioner the rates should be the Commissioner shall determine whether necessary, adjusted or over as 11:3-16.- time, [N.J.S.A. immediately may appropriate. 11(f).] Thus, Department interprets of Insurance the Reform authorizing effect of the Act as consideration of the economic addressing and assessments in an insurer’s claim that surtaxes being deprived constitutionally adequate return. Fur- it is of a ther, Department apparently intends that in such circum- stances, it will take the surtaxes and assessments into account ratemaking despite the Act’s that directive cannot insurers passthrough obtain a or expense- direct include those costs as side filings. items standard rate-increase
C. sum, 2g In Section Legisla Act demonstrates the ture’s intent any lessening overall to make certain that profits insurers’ due to the surtaxes and assessments would not preclude adequate Moreover, constitutionally a rate of return. doubtful, even this were construction accept we would it in order to avoid an interpretation of the statute that would render it unconstitutional. See In re Kimber Petroleum Corp., (1988) (when 110 N.J. 539 A. 2d necessary, rely meanings implied by courts can on provisions a statute’s preserve constitutionality). its Legislature deliberately left to the Commissioner of Insurance the determination precise return, constitutionally required being rate of as within expertise the area Department entrusted to the of Insurance long its exercise of ratemaking function. In N.J.A.C. 11:3-16.11, the a Commissioner has created mechanism special individual insurers to seek rate relief to assure fair possibilities rate of return. In view offered regulation, yet untried, which say are as cannot we now Sections and 78 of the Reform Act make impossible would it for any insurer to a fair achieve rate of return.
Considering the interrelationship Reform Act’s terms and provisions, of legislative history, its several and the Insur- Department’s ance regulations, we conclude that the Reform absolutely prohibits Act rate relief in to insurers the form of passthroughs direct of surtaxes and assessments in standard ratemaking. Nonetheless, Legislature’s of an assurance adequate of 2g rate return under Section and the of creation a special process rate-relief under 11:3-16.11 N.J.A.C. demon- 78 do not prohibitions of Sections 75 and
strate that earning fair rate of necessarily preclude all insurers from a regulations appear pro- literally, the Act and return. Read treating as the surtaxes and assessments insurers from hibit rate-making purposes, nevertheless standard but expenses for allow, the surtaxes require, if the Commissioner to consider not compa- affording rate relief to an insurance assessments Thus, to earn a fair rate of return. ny otherwise unable as a confis- facially 78 are not unconstitutional 75 and Sections catory taking. that the surtax and assess- the insurers established
Nor have
necessarily confiscatory or
ment rates in effect for 1990 are
has conceded that a
preclude a fair rate of return. The State
premiums may
adjusted if
targeted profit of
well be
3.5%
Further,
required.
a
has not
constitutionally
such
claim
been
merely
percentages of income
on the basis of the
established
upon
profits or
Any arguments
here.
based
actual
asserted
appropri-
for 1990 would be more
particular
losses of
insurers
ratemaking proceedings or as
ately
in administrative
asserted
as-applied challenge
the Act.
part of an
uncertainty
may
the Act
acknowledge
about how
We
rate-increase determi-
applied by the Commissioner
individual
11:3-16.11
example,
language
For
of N.J.A.C.
nations.
require,
arguably may only permit, rather than
the Commission-
grant
relief to insurers who cannot achieve a fair rate
er to
rate
59-60,
supra at
Because we find that facially the Act is it will be appropriate for the Commissioner to render determinations on applications individual insurers’ rate-increase in the first in stance, challenges before to the constitutionality applica regulations tion of the statute brought. are Depart The particular ment of Insurance expertise has the necessary to develop the detailed record perform of an insurer’s financial ance any that must form the as-applied challenge. basis for Burke, 269, 296-300, (1985) See Abbott v. 100 N.J. 495 A .2d376 (as-applied challenge constitutional funding to school statute transferred to Commissioner of development Education for record). factual here, plaintiffs insurers, any or other affected are free to as-applied
institute challenges to the Reform Act the event that the relief afforded to them under N.J.A.C. 11:3-16.11 is substantively either or procedurally inadequate to assure a constitutionally fair rate of imply return. We no view on regulations whether the statute and pass will constitutional as-applied challenge. muster the event of an
IV. not, face, Since we hold that the Reform Act does on its impose confiscatory taking, a we find that it meets fortiori requirements constitutionality the minimal under a substan is, process analysis. tive due That the Reform Act’s scheme prohibiting passthroughs direct of the surtaxes and assess ments, permitting while the Commissioner of Insurance to grant special necessary, insurers rate relief when is not “unrea sonable, arbitrary capricious”; statutory regula or and this approach tory problem availability to the of automobile object insurance has “a real and substantial relation to the sought York, to be supra, attained”. Nebbia v. New 291 U.S. at 54 S.Ct. at at 950. L.Ed. *27 claims,
In takings process addition to the and due certain of insurers’ other facial constitutional claims have ad- been fully by parties dressed before the lower courts and on this appeal, and can be present. determined at
Allstate, Mutual, Liberty and State Farm have all compelling pay part claimed that the insurers to of the JUA Const, clause, I, 10, debt violates the contract U.S. art. § promised because the insurers had pro been under the JUA gram they individually would not be liable JUA claims However, legal or debts. standards for a violation of the contract clause are strict: the United Supreme States Court though has often noted that even the contract clause sounds face, applied very flexibly. See, definite on its it must be e.g., 234, 240, Spannaus, Allied Structural Steel Co. v. 438 U.S. 2716, 2720, 727, (1978)(“The S.Ct. 57 L.Ed.2d 733-34 [Contract] provision Clause is not ... the Draconian might that its words imply. recognized, seem to As the Court has ‘literalism in the construction of the contract clause ... would make it destruc public by depriving tive of the interest preroga the State of its ”, self-protection’ quoting Thomas, tive of W.B. Worthen Co. v. 426, 433, 1344, 1347 (1934)). U.S. 54 S.Ct. 78 L.Ed. contracts, To be an impairment unconstitutional legislation (1) substantially must impair (2) a relationship; contractual significant must lack a legitimate public purpose; (3) upon must be based unreasonable conditions and be unrelated appropriate governmental objectives. Energy Reserves Group, Co., Inc. v. The Kansas Power Light & 459 U.S. 411-12, 697, 704-05, (1983). 103 S.Ct. 74 L.Ed.2d 580-81
In the case of the Reform
imposition
Act’s
on
costs
JUA,
that,
insurers to cover the
debt
we do not
believe
instance,
any
first
there
relationship
was
contractual
for the
impair.
Act to
simply
regulatory
The JUA was
a
scheme for
high-risk drivers;
schemes,
insurance of
regulatory
like all
transient,
potentially
it was
subject
change
any
at
time
Legislature
that had
In
highly regulated
created it.
insurance, participants
business such as
credibly
cannot
assert
they
any
right
had
expectation
vested
or contractual
in the
Moreover,
indefinite continuance of the JUA scheme.
if
even
impairment
there were an
relationship,
a contractual
it would
justified
nonetheless
this instance because the Reform Act
significant
legitimate
addresses a
public purpose, imposing
appropriate govern-
reasonable conditions that are related to
objectives.
mental
Energy
Group,
Reserves
supra, 459 U.S.
103 S.Ct.
Allstate and Mutual assert an additional consti claim, i.e., attainder, tutional that the Reform Act is a bill of intentionally punitive legislation that it is specifically directed *28 against Supreme insurers. The United States Court has dis recurring tilled three characteristics of of bills attainder from its line of decisions on such claims: (1) challenged meaning legisla- whether statute falls within the historical of (2)
tive
whether
in terms
statute,
“viewed
and
punishment;
type
of burdens
can be said to further
severity
imposed,
reasonably
nonpunitive
legislative
(3)
legislative
[legisla-
whether
record “evinces a
purposes”;
intent
tive]
punish.”
Sys.
Group,
Serv.
v. Minnesota Pub. Interest Research
[Selective
U.S.
468
(1984) (quoting
104 S.Ct.
Nixon v.
841,
82 L.Ed.2d
643
852,
3348, 3355,
632,
Serv., 433
Administrator
Gen.
U.S.
97 S.Ct.
425,
475-76,
478,
2777,
(1977)).]
2805, 2806-07, 2808,
53 L.Ed.2d
Historically, legislative punishments have taken the forms of
sentences,
banishment,
imprisonment,
death
confiscation of
property,
barring
parties
specified
the attainted
from
em-
ployment
Nixon,
or
supra,
vocations.
at
97 S.Ct.
U.S.
punishments, only
at
Other claims in the complaints, insurers’ e.g., that the “producer assignment Act's program” process, violates due that the Act subjects mutual tax, insurers to an extraterritorial and that the Act violates the Commerce Clause of the United Constitution, States eclipsed have been by the more central during issues procedural the unusual history of these cases. Thus, those claims fully have not been parties addressed appeal, on this they subject were not the specific rulings by the Therefore, courts below. we decline to decide those claims, acknowledging they may, if appropriate, be re- newed in subsequent proceedings.
Y. *29 In accordance with opinion, this we determine that the Re- form facially Act is constitutional. The Chancery Division’s judgment is part reversed in and modified in part.
GARIBALDI, J., concurring. I concur in opinion. However, Court’s I separately write emphasize that this susceptible statute is still to an as-ap- plied challenge. I grave have ability doubts about the of the Insurance, Commissioner of present under regulations, guar- antee insurance companies a constitutionally-adequate rate of
67
lengthy
present rate-making structure is
return. The
special separate-hearing procedure
of the
complex; the addition
Although
only
existing delay.
add to
for rate relief will
not, alone,
granted may
rate relief is
length of time before
defective,
constitutionally
Helmsley v. Bor
make the scheme
(1978),
Lee,
200, 223,
appeal
Current economic conditions concerns. In the past, banks, companies, insurance like always were considered longer Crenshaw, financial That is no bulwarks. true. See Finding Insurance; “Personal Finance: Buyers Best Life Solvency Cost,” Must Consider Firm’s Well Policy As As Wash- Post, 16,1990, (“in ington December H9 at the current econom- uncertainty, ic the possibility company an insurance becom- [of ing longer overlooked”); can Floyd, no be “Market insolvent] Failing Rises,” Place: Times, Insurers’ Bailout Cost York New 15, 1988, D8, (estimates November at col. 3 saving costs of failing companies insurance have $82,000,000 soared from in $917,000,000 1987). Although the size of the accumu- unpaid lated debt of the Underwriting Joint Association is deplorable, the failure or companies withdrawal insurance providing coverage prove in this damag- state would even more Therefore, ing. imperative it is companies that insurance actu- ally adequate receive a “fair and rate of return” within a period reasonable supra, of time. Helmsley, 78 N.J. at Cf (holding 394 2d 65 regulatory scheme, A. that a more moderate i.e., attempt keep one that does not investors’ returns at the minimum, adopted constitutional governing must where the body prepared not support sophisticated is administrative system providing relief prompt, fair pro and efficacious cesses). Neither company the insurance nor this state’s insur ance adequately protected by market will be pyrrhic dis covery after it doing (and has ceased perhaps business here elsewhere) that it years ago. deserved a rate increase five part, For part reversal Justice affirmance —Chief CLIFFORD, WILENTZ and HANDLER, POLLOCK, Justices O’HERN, GARIBALDI and STEIN—7.