(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued December 1, 1998 -- Decided March 17, 1999
O'HERN, J., writing for a unanimous Court.
In this appeal, the Court considers whether the New Jersey Property-Liability Insurance Guaranty
Association (NJPLIGA) should indemnify a policyholder of an insolvent insurance carrier for environmental
cleanup costs incurred at a facility of the policyholder in Bryan, Texas.
American Employers' Insurance Company and Commercial Union Insurance Company (referred to
collectively as Commercial Union) filed an insurance declaratory judgment action against Elf Atochem North
America, Inc. (Elf), seeking to disclaim coverage for environmental damage claims relating to pollution at
approximately eighty Elf sites throughout the United States. One of those sites was in Bryan, Texas. In
response, Elf filed cross-claims and a third-party complaint, one of which was against NJPLIGA. After some
ancillary proceedings in respect of the Texas site, NJPLIGA sought a partial summary judgment to dismiss
the claims arising out of that site, asserting that they were not covered clams because Elf is not a resident of
New Jersey nor is the site located in New Jersey. The trial court denied NJPLIGA's motion for summary
judgment, concluding that Elf was a resident of several states and in this case was clearly a resident of the
State of New Jersey for purposes of NJPLIGA.
The Appellate Division denied NJPLIGA's motion for leave to appeal. Because the matter involves
issues of important public policy and the costs to NJPLIGA of defending the Bryan, Texas suit are
substantial, the Supreme Court granted leave to appeal.
HELD: Because Elf's principal place of business is not within the State of New Jersey, it is not a resident of
New Jersey for the purposes of the NJPLIGA Act and its claim, therefore, is not a “covered claim” under
that Act.
1. Although NJPLIGA assumes the contractual obligations of insolvent insurance companies that were
licensed to transact business within this State at the time the policy was issued or when the insured event
took place, N.J.S.A. 17: 30A-5d limits covered claims to those in which the claimant or insured is a resident
of this State at the time of the insured event or to those where the property from which the claim arises is
permanently located in this State. (pp. 8-9)
2. While the Post-Assessment Property and Liability Insurance Guaranty Model Act (Model Act) adopted
an amendment that defines the “residence” of a corporate policyholder as the state in which its principal
place of business is located at the time of the insured event, New Jersey has not adopted that amendment.
Thus corporations may still be regarded as a resident of several states. (pp. 9-10)
3. Because the NJPLIGA Act is patterned after but not identical to the Model Act, an examination of the
Model Act does not resolve whether a corporation is a “resident” for NJPLIGA purposes. (pp. 10-11)
4. Whether a corporation that does no more than transact business in New Jersey should be considered a
resident for purposes of protection under NJPLIGA for a claim arising elsewhere than in New Jersey
concerning a site not located in New Jersey is a question of legislative intent. (pp. 13-14)
5. Considering the “core purposes” of the Act, a business entity should be considered a resident of New
Jersey for the purposes of NJPLIGA when its principal place of business is within the State. (p. 14)
6. In the context of determining residence for the purposes of coverage by an insurance guaranty association,
when the site of the risk is not located within a state, then the claimant's relationships with the state from
which guaranty is sought should be considered. (p. 15)
7. Adoption of the principal place of business rule to determine residence for NJPLIGA purposes, which is
consistent with the Guiding Principles for Settling Disputes Between and Among Property and Casualty
Insurance Guaranty Associations as to Responsibility for Claims (“Guiding Principles”), will simplify the
process of decision and will expedite the processing of claims fairly and efficiently. (pp. 15-18)
8. Although the proper analysis of residency involves an assessment of various factors, Elf's business
presence alone is insufficient to establish residency for the purpose of qualifying for coverage under
NJPLIGA. (p. 18)
9. It is unlikely that it was the intent of the Legislature to require New Jersey insurance premium payers to
pay for the clean up of sites in Texas for a corporation whose principal place of business is in Pennsylvania.
(pp. 19-21)
10. Should individual insurance guaranty associations continue to argue that each is the creature of its own
state legislature and therefore cannot participate in a uniform nationwide system, then the need for a federal
insurance guaranty association would seem apparent. (pp. 25-26)
Judgment of the trial court denying NJPLIGA's motion for summary judgment as to the Bryan,
Texas claims is REVERSED, and the trial court is directed to enter judgment in favor of NJPLIGA as to
those claims.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN, and
COLEMAN join in JUSTICE O'HERN's opinion.
SUPREME COURT OF NEW JERSEY
A-
190 September Term 1997
AMERICAN EMPLOYERS' INSURANCE
COMPANY and COMMERCIAL UNION
INSURANCE COMPANY (as successor to
certain obligations of EMPLOYERS'
SURPLUS LINE INSURANCE COMPANY and
EMPLOYERS' LIABILITY ASSURANCE
CORPORATION, LTD),
Plaintiffs-Respondents,
v.
ELF ATOCHEM NORTH AMERICA, INC.,
Defendant-Respondent,
and
PENNWALT CORPORATION and its
successors and assigns, A.C.E.
INSURANCE COMPANY (BERMUDA) LTD.,
THE AETNA CASUALTY AND SURETY
COMPANY, ALLIANZ UNDERWRITERS
INSURANCE COMPANY, ALLSTATE
INSURANCE COMPANY, as successor to
NORTHBROOK EXCESS AND SURPLUS
INSURANCE COMPANY, formerly
NORTHBROOK INSURANCE COMPANY,
AMERICAN HOME ASSURANCE COMPANY,
AMERICAN RE-INSURANCE COMPANY,
ATLANTA INTERNATIONAL INSURANCE
COMPANY, BIRMINGHAM FIRE INSURANCE
COMPANY OF PENNSYLVANIA, CALIFORNIA
UNION INSURANCE COMPANY, CENTENNIAL
INSURANCE COMPANY, THE CENTRAL
NATIONAL INSURANCE COMPANY OF
OMAHA, CHICAGO INSURANCE COMPANY,
CITIZENS CASUALTY COMPANY OF NEW
YORK, CONTINENTAL CASUALTY COMPANY,
THE CONTINENTAL INSURANCE COMPANY,
EMPLOYERS INSURANCE OF WAUSAU, A
Mutual Company, FEDERAL INSURANCE
COMPANY, FIREMAN'S FUND INSURANCE
COMPANY, FIRST STATE INSURANCE
COMPANY, GIBRALTAR CASUALTY
COMPANY, GRANITE STATE INSURANCE
COMPANY, GREAT AMERICAN INSURANCE
COMPANY, THE HANOVER INSURANCE
COMPANY, THE HOME INSURANCE
COMPANY, ILLINOIS INSURANCE
EXCHANGE, INSURANCE COMPANY OF
NORTH AMERICA, INSURANCE COMPANY OF
THE STATE OF PENNSYLVANIA,
INTERNATIONAL INSURANCE COMPANY,
INTERNATIONAL SURPLUS LINES
INSURANCE COMPANY, CERTAIN
UNDERWRITERS AT LLOYD'S OF LONDON,
LONDON MARKET INSURANCE COMPANIES,
LEXINGTON INSURANCE COMPANY, MUTUAL
MARINE INSURANCE COMPANY, NATIONAL
CASUALTY COMPANY, NATIONAL UNION
FIRE INSURANCE COMPANY OF
PITTSBURGH, PA, NEW ENGLAND
INSURANCE COMPANY, NORTH RIVER
INSURANCE COMPANY, NORTH STAR
REINSURANCE CORPORATION, OIL
CASUALTY INSURANCE, LTD., OLD
REPUBLIC INSURANCE COMPANY, PACIFIC
EMPLOYERS INSURANCE COMPANY,
PENNSYLVANIA PROPERTY AND CASUALTY
INSURANCE GUARANTY ASSOCIATION,
PURITAN EXCESS AND SURPLUS LINES
INSURANCE COMPANY, ROYAL INDEMNITY
COMPANY, SAFETY NATIONAL CASUALTY
CORPORATION, ST. PAUL FIRE AND
MARINE INSURANCE CO., ST. PAUL
SURPLUS LINES INSURANCE CO.,
TALEGEN HOLDINGS INC. (Formerly
Crum and Forster, Inc.), THE
TRAVELERS INDEMNITY COMPANY, UNAT
(a member of American International
Group), WINTERTHUR SWISS GROUP,
X.L. INSURANCE COMPANY, LTD. (NBA
EXCESS AND SURPLUS LINES BERMUDA,
LTD.) THE YASUDA FIRE & MARINE
INSURANCE COMPANY OF AMERICA,
ZURICH INSURANCE COMPANY, and JOHN
DOES ONE THROUGH TWO HUNDRED,
Defendants,
THE NEW JERSEY PROPERTY-LIABILITY
INSURANCE GUARANTY ASSOCIATION,
Defendant-Appellant,
and
ELF ATOCHEM NORTH AMERICA, INC. and
PENNWALT CORPORATION,
Third-Party Plaintiffs,
v.
AIU INSURANCE COMPANY; AMERICAN RE-INSURANCE COMPANY; BIRMINGHAM FIRE
INSURANCE COMPANY OF PA; CALIFORNIA
UNION INSURANCE COMPANY (Succeeded
by CIGNA Specialty Insurance Co.);
CENTENNIAL INSURANCE COMPANY;
CENTRAL NATIONAL INSURANCE COMPANY
OF OMAHA; CHICAGO INSURANCE
COMPANY; THE CONTINENTAL
CORPORATION (as Successor-in-Interest to HARBOR INSURANCE
COMPANY); CONTINENTAL CASUALTY CO.;
FEDERAL INSURANCE COMPANY;
GIBRALTAR CASUALTY COMPANY; GREAT
AMERICAN INSURANCE COMPANY; THE
HANOVER INSURANCE COMPANY; THE HOME
INSURANCE COMPANY; INSURANCE
COMPANY OF NORTH AMERICA;
INTERNATIONAL INSURANCE COMPANY;
LIBERTY MUTUAL INSURANCE COMPANY;
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA; NEW
ENGLAND INSURANCE COMPANY; NORTH
BROOK INSURANCE COMPANY (Succeeded
by Allstate Insurance Company); OLD
REPUBLIC INSURANCE COMPANY; PACIFIC
EMPLOYERS INSURANCE COMPANY;
PURITAN EXCESS AND SURPLUS LINES
INSURANCE COMPANY (as Successor-in-Interest to PURITAN INSURANCE
COMPANY, formerly THE MANHATTAN
FIRE AND MARINE INSURANCE COMPANY);
ROYAL INDEMNITY COMPANY; SAFETY
NATIONAL CASUALTY CORPORATION
(formerly known as SAFETY MUTUAL
CASUALTY CORPORATION OF AMERICA);
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY; ST. PAUL SURPLUS LINES
INSURANCE COMPANY; TALEGEN
HOLDINGS, INC.; and TEXAS PROPERTY
AND CASUALTY INSURANCE GUARANTY
ASSOCIATION,
Third-Party Defendants.
Argued December 1, 1998 -- Decided March 17, 1999
On appeal from the Superior Court, Law
Division, Union County.
Hugh P. Francis argued the cause for
appellant (Francis & O'Farrell, attorneys;
Mr. Francis and Peter A. Olsen, on the
brief).
James W. Christie, III, argued the cause for
respondents American Employers' Insurance
Company and Commercial Union Insurance
Company (Christie, Pabarue, Mortensen and
Young, attorneys; Marybeth Smith Werb, on the
brief).
Paul E. Breene argued the cause for
respondent Elf Atochem North America, Inc.
(Anderson Kill & Olick, attorneys; Mr. Breene
and Ian R. Scheinmann, on the briefs).
Michael E. Goldman, Deputy Attorney General,
argued the cause for amicus curiae New Jersey
Department of Banking and Insurance (Peter
Verniero, Attorney General of New Jersey,
attorney; Joseph L. Yannotti, Assistant
Attorney General, of counsel; Mitchell A.
Newmark, Deputy Attorney General, on the
brief).
Richard R. Spencer, Jr., submitted a brief on
behalf of amicus curiae National Conference
of Insurance Guaranty Funds (Bressler, Amery
& Ross, attorneys; Mr. Spencer and Jennifer
E. Birmingham, on the brief).
The opinion of the Court was delivered by
O'HERN, J.
"In the arena of environmental insurance law, it sometimes
appears that just as soon as one issue of importance is resolved,
like Hydra, the many-headed serpent in Greek mythology, at least
two new issues arise to replace it." General Accident Ins. Co.
of America v. Department of Envtl. Protection,
143 N.J. 462, 463-64 (1996) (quoting Jeffrey L. Fillerup and Dominic S. Nesbitt,
The Duty to Defend: Post-Montrose Issues, 718 PLI/Comm. 49 (PLI
Commercial Law and Practice Course Handbook Series No. 4477, May-June 1995)). One such new issue that has arisen concerns the
responsibility of a liability insurance guaranty association to
stand in the shoes of an insolvent insurance company to provide
indemnity for environmental cleanup costs incurred by the
policyholder. The specific question is whether the New Jersey
Property-Liability Insurance Guaranty Association (NJPLIGA)
should indemnify a policyholder of an insolvent insurance carrier
for environmental cleanup costs incurred at a facility of the
policyholder in Bryan, Texas. The enabling legislation requires
NJPLIGA to stand in the shoes of its insolvent member insurance
companies only in proceedings involving "covered claims."
N.J.S.A. 17:30A-8a(2). Covered claims include those in which
"(1) the claimant or insured is a resident of this State at the
time of the insured event; or (2) the property from which the
claim arises is permanently located in this State." N.J.S.A.
17:30A-5d.
Thus the determination of whether NJPLIGA is obliged to
provide coverage for the policyholder's claims with respect to
the Bryan, Texas facility rests on whether the policyholder was a
resident of New Jersey at the time of the insured event. Based
on our review of New Jersey law and consideration of the purposes
and objectives of NJPLIGA, we conclude that the policyholder is
not a resident of New Jersey for the purposes of the NJPLIGA Act
and that the claim is not a "covered claim" under the statute.
This appeal concerns a very small portion of a very large and complex environmental insurance coverage case. American Employers' Insurance Company and Commercial Union Insurance Company (referred to collectively as Commercial Union) filed an insurance declaratory judgment action against Elf Atochem North America, Inc., seeking to disclaim coverage for environmental damage claims relating to pollution at approximately eighty Elf Atochem sites throughout the United States, one of which is the Bryan, Texas site. Because Pennwalt Corporation is Elf Atochem's predecessor in this suit, defendant will be referred to as "Elf/Pennwalt." Elf/Pennwalt responded with counterclaims, cross-claims and a third-party complaint, one of which was against NJPLIGA. During the pendency of the New Jersey proceedings, Elf/Pennwalt filed a declaratory judgment action in Texas against Commercial Union seeking coverage for certain bodily injury claims arising from operations at the Bryan, Texas facility. The Law Division temporarily restrained Elf/Pennwalt from proceeding in Texas, but subsequently dissolved the restraints. On interlocutory appeal, the Appellate Division remanded the matter to the trial court for entry of an order enjoining Elf/Pennwalt from proceeding with the coverage action in Texas.
In response to a case management order that required the parties to proceed first with the Bryan, Texas coverage issues, NJPLIGA sought a partial summary judgment to dismiss the claims arising out of that site, asserting that these were not covered claims because Elf/Pennwalt is not a resident of New Jersey nor is the site located in New Jersey. The Law Division reasoned that Eastern Seaboard Pile Driving Corp. v. New Jersey Property-Liability Insurance Guaranty Ass'n, 175 N.J. Super. 589 (App. Div. 1980), had not provided "a bright-line rule for determining residency for purposes of NJPLIGA. There has to be a balancing act."
In determining Elf/Pennwalt's residence, the trial court considered that Elf/Pennwalt had been qualified to do business in New Jersey and had conducted business in New Jersey for many years. The court denied NJPLIGA's motion for summary judgment to dismiss the Bryan, Texas claims, concluding that Elf/Pennwalt "is a resident of several states and in this case is clearly a resident of the State of New Jersey for the purposes of [NJPLIGA]."
The Appellate Division denied NJPLIGA's motion for leave to appeal. Because the matter involves issues of important public policy and the costs to NJPLIGA of defending the Bryan, Texas suit are substantial, we granted leave to appeal. 153 N.J. 405 (1998).
A.
The Post-Assessment Property and Liability Insurance Guaranty Model Act (Model Act), which nearly every state has adopted in some form, was originally prepared by the National Association of Insurance Commissioners (NAIC) as a means of allocating the risk of insolvent insurers equitably among the several states. "Resident" was not defined in the original Model Act. The NAIC later adopted an amendment to the Model Act to clarify the meaning of the term "resident." The Model Act now provides coverage when "the claimant or insured is a resident of this state at the time of the insured event, provided that for entities other than an individual, the residence of a claimant, insured or policyholder is the state in which its principal place of business is located at the time of the insured event." NAIC Post-Assessment Property and Liability Insurance Guaranty Association Model Act, NAIC Model Laws, Regulations and Guidelines, Vol. III, p. 540-41 (1996). Thus, for those states that adopted the amendment, a corporation's residence is limited to the single state of its principal place of business.
In contrast, in states like New Jersey, in which the narrowing amendment has not been adopted, corporations may still be regarded as residents of several states. The main debate between the parties is whether the NJPLIGA Act should follow the definition of "resident" found in the amendment to the Model Act.
The NJPLIGA Act is patterned after but not identical to the Model Act. See Railroad Roofing, supra, 85 N.J. at 391-92 (noting differences in definitions). Thus an examination of the Model Act (and its later renditions) does not resolve whether a corporation is a "resident" for NJPLIGA purposes. We must look to our own Act.
In Eastern Seaboard, the Appellate Division rejected the trial court's conclusion that the NJPLIGA Act contemplated that only a domestic corporation, that is, one incorporated under the laws of the State of New Jersey, could be a resident. Eastern Seaboard, supra, 175 N.J. Super. at 591. The court held that a corporation that was incorporated under the laws of the State of Delaware could present a covered claim as a resident of New Jersey for the purposes of the NJPLIGA Act. Id. at 594-95. It found that based upon the intended legislative function of the NJPLIGA Act, the statutory language could not have contemplated that only domestic corporations of this State would be covered. Id. at 594. Rather, the Appellate Division found that the Legislature intentionally refrained from the use of any term that would limit benefits under the act to domestic corporations. Ibid. Instead, the Legislature used the broader term "resident," which does not require the exclusion of all but domestic corporations. Ibid.
A review of Eastern Seaboard convinces us that it is not dispositive of this case. In Eastern Seaboard, a Delaware corporation maintaining its principal place of business in New Jersey sought indemnification from NJPLIGA after Eastern Seaboard discovered that its steel dredging barge had been damaged and that one of the carriers insuring the barge was insolvent. Id. at 590-91. The insurance company, Interstate Insurance Company, issued the policy in New York but the court presumed that the company was licensed to do business in New Jersey. Id. at 593. Eastern Seaboard maintained an executive office in New Jersey and had allocated all of its corporate assets to New Jersey for tax purposes. Id. at 594. Eastern Seaboard also "conduct[ed] substantially all of its business in New Jersey and has never maintained a place of business in Delaware," the state of Eastern Seaboard's incorporation. Ibid. In holding that Eastern Seaboard was a New Jersey resident for the purposes of the NJPLIGA Act, the court noted that "[w]hether a corporation has established a residence in a foreign jurisdiction depends upon the aim and context of the statute in which the residency requirement is contained and the extent and character of its business there transacted." Id. at 592 (citing 17 Fletcher, Encyclopedia of Private Corporations, § 8300 at 10 (1977); 36 Am. Jur 2d, Foreign Corporations, § 37 at 52 (1968)).
A.
It is a question of legislative intent whether a corporation that does no more than transact business in New Jersey should be considered a resident for purposes of protection under NJPLIGA for a claim arising elsewhere than in New Jersey concerning a site not located in New Jersey.See footnote 1 In determining that legislative intent, we consider the purposes of the NJPLIGA Act, supra at 8-9. Although the scope of relief under the Act is to be construed liberally to effect its purposes, Railroad Roofing & Bldg. Supply Co., Inc. v. Financial Fire & Cas. Co., 171 N.J. Super. 375, 380 (App. Div. 1979), rev'd on other grounds, 85 N.J. 384 (1981), clearly one concern of the Legislature is "to conserve limited Association resources to better assure their availability to serve core purposes." New Jersey Guar. Ass'n ex rel. v. Ciani, 242 N.J. Super. 164, 169 (App. Div. 1990).
Considering the "core purposes" of the Act, we conclude that a business entity should be considered a resident of New Jersey for the purposes of NJPLIGA when its principal place of business is within the State. We find analogous our recent decision in Pfizer, Inc. v. Employers Ins. of Wausau, 154 N.J. 187 (1998). In that case, in determining the appropriate choice-of-law to be applied to the interpretation of environmental insurance policies, we concluded that the answer depended on which state had the dominant public policy interest in having its law apply to determine the coverage issue. Id. at 208. In this context of determining residence for the purposes of coverage by an insurance guaranty association, the question is which state guaranty association has the dominant public policy interest in providing coverage for the claim. The guaranty acts themselves express certain priorities to ameliorate risk to claimants or policyholders because of the insolvency of insurers.See footnote 2 When the site of the risk is not located within a state, then the claimant's relationships with the state from which guaranty is sought should be considered. The principal place of the claimant's business is obviously the most important other factor to consider.
We acknowledge that this "bright-line rule" may not be as easy to apply as one might think. A corporation may have manufacturing facilities in several states, headquarters in yet another state, and significant retail and distribution centers scattered throughout all of the states in which it operates. Examples that come to mind are those such as the American Telephone and Telegraph Company, which for many years had its headquarters in New York but conducted much of its business in New Jersey. Surely if such a company obtained insurance in New Jersey to cover operations here and its activities resulted in liability elsewhere (e.g., for transporting hazardous materials to Pennsylvania), it could still be considered eligible for coverage under NJPLIGA, subject to the Act's priority provisions.See footnote 3 Still, we believe that adoption of the principal place of business rule to determine residence for NJPLIGA purposes will simplify the process of decision and we hope that the rule will expedite the processing of claims fairly and efficiently.
Adoption of the principal place of business rule is generally consistent with the Guiding Principles for Settling Disputes Between and Among Property and Casualty Insurance Guaranty Associations as to Responsibility for Claims, 1 N.A.I.C. Proc. 457-59 (1986) ("Guiding Principles"). According to the Guiding Principles, which guaranty association shall have the primary responsibility of proceeding with the defense or settlement of a claim depends upon a weighing of relevant factors that "should be determined in each individual circumstance."See footnote 4 Id. at 458. The first two factors (and presumably the most important) are the location of the entity's headquarters and the location of the operations at issue.
Thus although we agree with the trial court that the proper analysis involves an assessment of various factors, Elf/Pennwalt's business presence alone is insufficient to establish residency for the purpose of qualifying for coverage under NJPLIGA. The preponderance of the remaining factors clearly points to other jurisdictions as having the much more dominant and significant relationship to coverage for the risk. See Douglass v. Levi Strauss & Co., 315 Ark. 380, 385, 868 S.W.2d 70, 73 (Ark. 1993) (finding that corporation incorporated in Delaware with principal place of business in California is not a resident in Arkansas despite substantial presence there).
Elf/Pennwalt's principal place of business is in Pennsylvania. All of the insurance policies upon which Elf/Pennwalt now seeks recovery were issued to its headquarters in Philadelphia, Pennsylvania. Elf/Pennwalt paid the premiums in Pennsylvania and also paid the surcharges on the policies to the Pennsylvania guaranty fund. Although the insurance companies were licensed to do business in New Jersey, the policies at issue were not issued in New Jersey, nor were they intended exclusively to cover risks in New Jersey. The insured risks, of course, involved operations in Bryan, Texas.
Elf/Pennwalt emphasizes the essential unfairness of holding that it is not a resident. It is in litigation in New Jersey against its will. When it attempted to bring a coverage action in Texas, Elf/Pennwalt was enjoined from doing so by our courts. It argues that one held captive, as it were, in a state ought at least receive the benefits of that forum's law. Elf/Pennwalt's argument is appealing, but not dispositive. In retrospect, it may have been preferable if Elf/Pennwalt had been allowed to pursue its coverage claims under Texas law, including coverage under the Texas guaranty act. The New Jersey coverage proceedings will presumably be governed by Texas law insofar as the proceedings concern Texas sites. See Pfizer, supra, 154 N.J. at 223.
The guaranty associations of Pennsylvania and Texas each have priority provisions substantially identical to N.J.S.A. 17:30A-12 that require a policyholder with a covered claim first to seek recovery from the guaranty association in its state of residence. As we have noted, Elf/Pennwalt is incorporated in Pennsylvania and also has its principal place of business in Pennsylvania. NJPLIGA argues that, under Pennsylvania law, a corporation may have only one state of residence for purposes of its guaranty association. T & N, plc, v. Pennsylvania Ins. Guar. Ass'n, 44 F.3d 174, 181 (3d Cir. 1994). If Elf/Pennwalt is found to be a resident of New Jersey, there may be no coverage in Pennsylvania.
Similarly, under Texas law, the Texas guaranty association is entitled to a credit for the amount of any recovery from the guaranty association of Elf/Pennwalt's state of residence. Tex. Ins. Code Ann. Art. 21.28-C § 12(b) (West 1998). If Elf/Pennwalt is determined to be a New Jersey resident for purposes of NJPLIGA coverage, and because the Texas association statutory cap of liability is equal to or less than that of NJPLIGA, the argument is that NJPLIGA will have to satisfy the Bryan, Texas claims up to its statutory limit while the Texas association will pay little or nothing.
We have not attempted to resolve these questions of Texas and Pennsylvania law. It suffices to observe that the net result of a decision that Elf/Pennwalt is a New Jersey resident under the NJPLIGA Act might be that New Jersey insurance premium payers will be paying to clean up sites in Texas for a corporation whose principal place of business is in Pennsylvania. We doubt that this result would reflect the Legislature's intent.See footnote 6
New Jersey has a public policy interest in protecting New Jersey policyholders, the victims of pollution in New Jersey, and New Jersey's environment. Pfizer, supra, 154 N.J. at 207. New Jersey's public policy interests are minimally implicated when the issue involves indemnifying a policyholder of a state other than New Jersey for liabilities incurred in states other than New Jersey. Ibid.
To date, at least six jurisdictions have considered whether one state has jurisdiction over another state's guaranty association. "Texas Has No Jurisdiction Over Claims Against Nonresident Associations," 9 No. 3 Mealey's Litig. Rep.: Ins. Insolvency 3 (July 2, 1997). In June 1997, "[t]he Texas court held that while the Pennsylvania guaranty fund act places the association in the insolvent insurer's shoes, the association assumes only certain substantive obligations of the insurer." Ibid. (discussing Texas Property and Cas. Ins. Guar. Ass'n v. Boy Scouts of Am., 947 S.W.2d 682 (Tex. Ct. App.), reh'g overruled (1997)). The Texas court ultimately found that it lacked personal jurisdiction because the Pennsylvania guaranty association did not have sufficient minimum contacts with Texas. Ibid.
"Florida and California courts [have] held that a nonresident guaranty association is not subject to the forum state's personal jurisdiction." Ibid. However, two other courts have determined that nonresident guaranty associations may be subject to personal jurisdiction, provided that there are minimum contacts, such as transacting business or refusing to settle a claim. Ibid.; see Washington Ins. Guar. Ass'n v. Ramsey, 922 P.2d 237 (Alaska 1996) (minimum contacts exist where nonresident guaranty association's refusal to settle negligence claim resulted in actionable claim against the association); Olivier v. Merritt Dredging Co. Inc., 979 F.2d 827 (11th Cir. 1992), cert. denied, 507 U.S. 983, 113 S. Ct. 1577, 123 L. Ed.2d 145, and cert. denied, 508 U.S. 910, 113 S. Ct. 2342, 124 L. Ed.2d 252 (1993) (injured seaman's claims against associations come within Alabama long-arm statute). A Louisiana court has found a nonresident guaranty association to be subject to personal jurisdiction solely because the guaranty association had stepped into the shoes of an insolvent insurer. Mealey's Litig. Rep., supra; Guidry v. Cajun Rentals & Servs., Inc., 563 So.2d 1335 (La. Ct. App. 1990).See footnote 7
The question whether New Jersey courts have jurisdiction over nonresident guaranty associations will undoubtedly require our eventual consideration. See "Asbestos Litigation: Guaranty Associations Seek Dismissal of New Jersey Suit," 1 No. 17 Mealey's Litig. Rep.: Ins. Supplement 14 (Nov. 7, 1995) (discussing New Jersey action in which nonresident guaranty associations asserted lack of personal jurisdiction in motion to dismiss). The amici National Conference of Insurance Guaranty Funds argue that the insurance guaranty associations of the several states are intended to form a national safety net. They contend that the residency requirement "is part of a carefully crafted national approach which, when construed and administered as intended, apportions the cost of funding claims arising under an insurer insolvency in a rational, cohesive, and equitable manner throughout the United States." This safety net realistically cannot be achieved unless a single state can assert jurisdiction over the insurance guaranty associations of other states.
However, even were we to decide that the Texas and Pennsylvania guaranty associations are subject to our jurisdiction in this case, consideration of the purposes of NJPLIGA persuades us that Elf/Pennwalt, a corporation with its principal place of business in Pennsylvania, should not be considered a "resident" of the State of New Jersey for purposes of coverage under NJPLIGA for claims that arose in Texas.
The managers of IGAs have the same responsibility as business managers to resolve these issues among themselves as efficiently as possible. Yet, "under normal circumstances, few IGAs will voluntarily assume a leadership role. Each wants to pass the buck and, to a greater or lesser degree, each assumes an air of indignation when requested to step up and pay." Id. at 22. As the "balkanization process intensifies, . . . the safety net that protects not only the insured but often other solvent insurers may be jeopardized." Id. at 23.
Understandably desirous of finding a comprehensive, national solution to the overlapping liabilities of the IGAs, the trial court sought to fashion an equitable allocation. It remains to be determined whether individual state courts have the constitutional authority to bring the IGAs together in one forum. Ideally, the IGAs that have adopted the Guiding Principles will agree, as the Guiding Principles themselves provide, to arbitrate disputes among themselves.See footnote 8 "However, should individual IGAs continue to argue that each is the creature of its own state legislature and therefore cannot participate in a uniform nationwide system, then the need for a federal insurance guaranty association would seem apparent." Id. at 22.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN, and COLEMAN join in JUSTICE O'HERN's opinion.
NO. A-190 SEPTEMBER TERM 1997
ON APPEAL FROM Law Division, Superior Court, Union County
ON CERTIFICATION TO
AMERICAN EMPLOYERS' INSURANCE
COMPANY, et al.,
Plaintiffs-Respondents,
v.
ELF ATOCHEM NORTH AMERICA, INC.,
Defendant-Respondent,
and
PENNWALT CORPORATION, et al.,
Defendants,
and
THE NEW JERSEY PROPERTY-LIABILITY
INSURANCE GUARANTY ASSOCIATION,
Defendant-Appellant,
and
ELF ATOCHEM NORTH AMERICA, INC., et al.,
Third-Party Plaintiffs,
v.
AIU INSURANCE COMPANY, et al.,
Third-Party Defendants.
DECIDED March 17, 1999
Chief Justice Poritz PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
CONCURRING/DISSENTING OPINION BY
Footnote: 1On occasion, the Legislature has stated that a corporation
may only be a resident of the state in which its principal place
of business is located, e.g., N.J.S.A. 17B:32A-1 (defining
"resident" for purposes of New Jersey Life and Health Guaranty
Association Act), but we do not find that conclusive.
Footnote: 2 Under the NJPLIGA priority provision, a claimant
shall seek recovery first from the
association of the place of residence of the
insured at the time of the insured event
except that if it is a first party claim for
damage to property with a permanent location,
he shall seek recovery first from the
association of the location of the property.
. . . [I]f recovery is denied or deferred by
the association, a person may proceed to
recover from any other insurance guaranty
association or its equivalent from which
recovery may be legally sought.
[N.J.S.A. 17:30A-12.]
Footnote: 3"Although there is no set standard or single test by which
a court can determine where a corporation's principal place of
business is located, the courts have developed three distinct
tests for determining a corporation['s] principal place of
business: (1) the nerve center test, which is used where a
corporation is engaged in far-flung and varied activities which
are carried on in different states; (2) the place-of-operations
test, which is used where a corporation has its executive or
administrative offices in one state and its physical operations
wholly or predominantly in another state; and (3) the total
activity test, a hybrid test which is used where neither the
nerve center nor place of operations test is appropriate.
Deciding which approach to apply and which indices to emphasize,
therefore, depends to a great extent on the character of the
corporation and the scope of its activities." 32A Am. Jur.2d
Federal Courts § 802 (1995) (footnotes omitted).
Footnote: 4 According to the draft of the Guiding Principles:
The residence of an insured entity which is not a
natural person shall be determined by considering
which state has the most significant contacts with
the insured. In making this determination, the
following criteria should be considered:
(I) state where executive offices or corporate
headquarters are located;
(ii) location of the operation where the insured
event occurred;
(iii) state of incorporation;
(iv) state where the applicable insurance policy
was issued or delivered; and
(v) state that is considered the insured entity's
primary domicile for state income tax purposes.
Other factors may be considered if it is agreed
those factors are relevant to the inquiry.
[
1 N.A.I.C. Proc. 458 (1986).]
Footnote: 5 The NJPLIGA Act provides that the association's
obligation "shall include only that amount of each covered claim
which is less than $300,000.00 and subject to any applicable
deductible contained in the policy . . . ." N.J.S.A. 17:30A-8a(1).
Footnote: 6Our research of guaranty associations elsewhere indicates
that thirty-six jurisdictions have adopted the "principal place
of business" rule to establish residence of business entities and
twenty-four jurisdictions have a "one state of residency" rule.
Footnote: 7 We note that N.J.S.A. 17:30A-8a(2) provides that NJPLIGA
is "deemed the insurer to the extent of its obligation on the
covered claims and to such extent shall have all rights, duties,
and obligations of the insolvent insurer as if the insurer had
not become insolvent[.]" (emphasis added).
Footnote: 8We are informed that ten IGAs are currently signatories to
the Guiding Principles. A number of other states' IGAs have
withdrawn from the agreement.