17:30E-14. Procedures for voluntary coverage

26. a. Within 45 days of the effective date of P.L.1988, c.119 (C.17:28-1.4 et al.), the commissioner shall, in the plan of operation, establish procedures to govern the voluntary writing of applicants and association insureds without the utilization of the association. These procedures shall include criteria identifying drivers who should be eligible for coverage in the voluntary market. Applicants and association insureds meeting these criteria shall be subject to assignment by the association to member companies, pursuant to an equitable apportionment procedure established in the plan of operation. The procedure shall give due consideration to the increase or decrease in the volume of private passenger automobile non-fleet exposures voluntarily written by member companies in this State since January 1, 1984.

b. (1) Pursuant to the procedures established in the plan of operation under subsection a. of this section, the commissioner shall establish a voluntary market quota, which shall not be less than 60% of the aggregate number of private passenger automobile non-fleet exposures written in the total private passenger automobile insurance market in this State on the effective date of P.L.1988, c.119 (C.17:28-1.4 et al.). The quota shall prescribe the number of voluntary market exposures which shall be written by member companies during the 12-month period beginning 60 days after the effective date of P.L.1988, c.119 (C.17:28-1.4 et al.).

(2) Within 30 days of the effective date of P.L.1990, c.8 (C.17:33B-1 et al.), the commissioner shall prescribe a second quota, which shall take effect immediately upon adoption by the commissioner and which shall not be less than 68% of the aggregate number of private passenger automobile non-fleet exposures written in the total private passenger automobile insurance market in this State on or before October 1, 1990. The quota shall prescribe the number of voluntary market exposures which shall be written by member companies during the period described in this paragraph.

(3) (Deleted by amendment, P.L.1990, c.8.)

(4) (Deleted by amendment, P.L.1990, c.8.)

c. In the event that any of the quotas established by the commissioner pursuant to subsection b. of this section have not been met by the end of any applicable period, the commissioner shall direct the association to assign the balance of the exposures needed to meet the applicable quota to member companies in a manner consistent with the apportionment procedure established pursuant to subsection a. of this section. A member company which exceeded its apportionment share for the 12-month period prescribed pursuant to paragraph (1) of subsection b. of this section shall receive credit for the excess against the quota imposed pursuant to paragraph (2) of subsection b. of this section.

d. (Deleted by amendment, P.L.1990, c.8.)

e. For the purposes of this section, any exposure written in the voluntary market by an affiliate of the insurer to which an apportioned share has been assigned shall be credited against that share.

f. The total number of exposures written in the voluntary market, net of exposures cancelled or nonrenewed, by a member company at the end of the applicable period shall be utilized in determining whether the member company has written its apportionment share in the voluntary market for purposes of complying with any quotas established by the commissioner pursuant to this section.

g. The commissioner may excuse a member company from meeting any of its obligations under this section that he determines would result in the member company being in an unsafe or unsound condition.

h. Any member company that does not write its apportionment share of any quota established by the commissioner pursuant to subsection b. or c. of this section within the applicable time period shall be precluded from nonrenewing automobile insurance policies pursuant to section 26 of P.L.1988, c.119 (C.17:29C-7.1) during the immediately following 12-month period.

i. In addition to the requirements of subsection a. of this section, the procedures governing the increase in voluntary market volume shall:

(1) establish guidelines and criteria for determining whether a person is a qualified applicant as defined in section 15 of P.L.1983, c.65 (C.17:30E-3), and procedures for the issuance of automobile insurance through the voluntary market to persons found not to be qualified applicants for association coverage, and for the referral of persons determined not to be eligible for association coverage to alternative residual market mechanisms;

(2) include provisions ensuring that servicing carriers do not obtain any unfair advantage over other member companies in the selection of qualified applicants and association insureds to be written as voluntary business;

(3) neither prohibit nor require member companies to write association business through association producers of record, except as provided for in this paragraph.

(a) When an exposure assigned to a member company in accordance with subsection c. of this section, as a result of the failure of the member company to meet an applicable quota, is written by the member company assigned the exposure, the association producer of record shall have the right to service that business, which shall include all renewals thereof, and shall be entitled to a commission for that service in accordance with subparagraph (c) of this paragraph.

(b) The association producer of record shall retain complete control, possession and ownership of all records and renewals regarding exposures assigned pursuant to subsection c. of this section, provided, however, that the member company may maintain such records as are provided to it under the procedure established by subsection a. of this section. A member company that acquires access to records pursuant to this subparagraph shall not share any such records with any other producer or use any such records to solicit direct renewal of the business, a change in producer of record, other insurance products or any other products.

(c) The association producer of record shall be paid a commission by the member company on the business serviced by the association producer of record pursuant to this paragraph. That commission shall be paid at a percentage rate no less than that being paid by the Market Transition Facility on July 1, 1991.

(d) A copy of every notice, other than bills, and including renewal declarations, change endorsements, cancellations and reinstatements, and the corresponding payment schedules included therein, correspondence, claims checks and acknowledgements, sent to an insured by a member company with respect to business covered by this paragraph, shall be sent to the association producer of record.

(e) This paragraph shall be applicable only to exposures assigned to member companies in accordance with subsection c. of this section as a result of the failure by the member company to meet an applicable quota. This paragraph shall not constitute the grant of an agency contract by the member company to the association producer of record authorizing the association producer of record to write new business through the member company; provided, however, that the association producer of record shall have the authority to provide the usual and customary servicing of the business subject to this paragraph, including adding new and replacement vehicles and adding or changing coverages on the business.

(f) Nothing in this paragraph shall deprive an insured of the right to designate a producer of record other than the association producer of record. Upon that designation, the rights of the association producer of record under this paragraph shall terminate. Notwithstanding any provision in this paragraph, the rights of the association producer of record under this paragraph shall terminate in the event of the producer's insolvency, gross and willful misconduct, fraud or license revocation; and

(4) provide for financial disincentives to applicants who, without good cause, reapply for coverage in the association after being placed in the voluntary market.

L.1983,c.65,s.26; amended 1986,c.211,s.7; 1988,c.119,s.25; 1990,c.8,s.20; 1991,c.462,s.1.