N.J. Insurance Dept. OK With Fund Grab
By E.E. Mazier
NU Online News Service, July 11, 4:06 p.m. EST?New Jersey's insurance department finds nothing wrong with state officials balancing the state budget with monies taken from a fund earmarked for claims against insolvent surplus lines insurers, a spokesperson for the agency said today.
The action was decried yesterday by the National Association of Independent Insurers, based in Des Plaines, Ill., which suggested it could be illegal and raised the possibility of a lawsuit.
Mary Caffrey, spokesperson for the N.J. Department of Banking and Insurance, explained that the department does not control the Surplus Lines Insurance Guaranty Fund, which has its own board and governance system.
Senate bill 1717, signed into law by Democratic Gov. James E. McGreevey on July 1, authorizes the transfer of more than $40 million from the Fund to the state's general fund.
"New Jersey faced an extraordinary budget crisis, and this was hardly the only fund that was tapped under these circumstances," Ms. Caffrey added.
She said that "under normal circumstances," the transfer might be considered illegal.
But because "a specific piece of legislation" was passed authorizing the transfer, there is no illegality, she said.
Ms. Caffrey added that S1717 also changed the scope of what the surplus lines fund will cover. Specifically, starting June 25, the fund covers only medical malpractice liability and owner-occupied dwellings of less than four units.
The fund had previously applied to all surplus lines. The monies in the Fund came from one-time membership fees for new members as well as a direct policyholder surcharge, which ended about four years ago.
The reduced scope of coverage means that the fund no longer requires the same level of funding, Ms. Caffrey argued–as did the legislature when enacting S1717.
"We do communicate with the fund about individual companies and situations as needed," Ms. Caffrey said, but the relationship between the department and the fund is essentially "arm's length."
It is merely a "coincidence" that the department's commissioner, Holly Bakke, "knows a lot" about the fund, she said. Ms. Bakke was the fund director before her appointment as department commissioner.
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