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It is now clear that the commissioner of the Department of Banking and Insurance (DOBI) can bring an administrative action for violating state laws and insurance practices against "non-admitted foreign insurance companies," carriers that are not licensed in New Jersey, and licensed affiliates in New Jersey. According to the Appellate Division's April 27 opinion in Applied Underwriters Captive Risk Assuance Co. v. Department of Banking and Insurance, a Superior Court action by the attorney general is not the only enforcement mechanism.
Under section 20 of the Non-Admitted Insurers Act, N.J.S.A. 17:32-16 to -23, "the Attorney General, upon the request of the Commissioner [of DOBI] shall institute a civil action in the Superior Court for injunctive" or other appropriate relief when it appears that an insurer, or its agent or representative "has violated, is violating or is about to violate" the act. The Appellate Division held that "[b]ased on text, legislative history, and public policies of the statute as a whole, as well as principles of primary jurisdiction, the Commissioner has the authority to pursue an administrative complaint against these companies instead of a lawsuit brought by the Attorney General." It is now clear—in the absence of Supreme Court review—that the commissioner has discretion in the choice of forum and has the authority to proceed administratively against a carrier or, through the Department of Law and Public Safety, in a Superior Court action.
In Allied Underwriters, appellants sold workers compensation programs to New Jersey employers. After meetings with the carrier, "DOBI had determined the programs Applied was selling were not in accordance with the [DOBI's Rating Bureau's] rating system," which "had the potential to lead to higher and unpredictable assessments against an insured employer." The commissioner commenced administrative proceedings and advised the insurers of the right to request a contested case hearing before the Office of Administrative Law.
The Non-Admitted Insurers Act "was enacted to address gap [in regulatory oversight of foreign insurers] by expressly authorizing the Commissioner to regulate the activities of non-admitted foreign insurance companies" which, at the time of adoption, were selling life insurance policies of "questionable value." Based on a model act, the act was adopted in 1968 and gives the commissioner "substantially comparable authority over non-admitted foreign insurers" as admitted ones. Thus a foreign insurer (formed pursuant to authority of another state or foreign government), must either be admitted to transact business in New Jersey or be permitted to do so by some other law, and is subject to the "'strict regulatory control" of DOBI.
The practical consequences of the opinion remain to be seen. But we do know of cases in other states challenging geometric premium increases of policies written and approved in other states and sold in New Jersey and elsewhere without the need for review of such increases by DOBI. We know of the advertising of life insurance policies sold out of state through websites and 800 telephone numbers. It may be that with appellate precedent making clear that the commissioner can proceed administratively and without need for Superior Court actions, she may take more administrative action in certain circumstances that she has not previously taken. It will be interesting to watch the impact of this opinion, which could have significant consequences for New Jersey insureds.