# Opposition Brief — Allstate Insurance Co. v. Fortunato

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1992
- **Citation:** 502 U.S. 1121

## Text

Court, US. |
© | FILED
No. 91-983 | GAN 16 (382
In The

Supreme Court of the United States
October Term, 1991
as —

ALLSTATE INSURANCE COMPANY,
an Illinois Corporation,

Petitioner,
v.

SAMUEL F. FORTUNATO,
Commissioner of Insurance of The State of New Jersey,

Respondent.

¢

Petition For A Writ Of Certiorari To The
Appellate Division Of The Superior Court
Of The State Of New Jersey
+

RESPONDENT’S BRIEF AND APPENDIX
IN OPPOSITION TO PETITION FOR
A WRIT OF CERTIORARI
+

Ebwarkv J. DAuBER

Acting Attorney General of New Jersey
Attorney for Respondent

R.J. Hughes Justice Complex

CN 093

Trenton, New Jersey 08625

(609) 292-4965

JoserH L. YANNOTTI
Assistant Attorney General
Of Counsel

Susan L. REISNER
Deputy Attorney General
(Counsel of Record)

On the Brief

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (402) 342-2831

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COUNTERSTATEMENT OF THE
QUESTION PRESENTED

May a State, consistent with the Due Process Clause
of the Fourteenth Amendment, order an insurance com-
pany to take on new business at rates higher than its
current voluntary market rates, where a State appellate
court has found, on appeal of that order, that the com-
pany has not demonstrated that the higher State manda-
ted rates are confiscatory such that the company would
be entitled to an interim rate increase in advance of
implementation of the order?

ii

TABLE OF CONTENTS

Page

COUNTERSTATEMENT OF THE QUESTION PRE-
SENTED . «0 o054cbs see Eee e se es i
COUNTERSTATEMENT OF THE CASE............ 1
SUMMARY OF ARGUING econ ks acess ees: 7

ARGUMENT:

THE PETITION SHOULD BE DENIED BECAUSE
ALLSTATE FAILED IN THE STATE PROCEED-
INGS BELOW TO PRESENT A SUFFICIENT
FACTUAL BASIS FOR INTERIM RATE RELIEF
AND BECAUSE ALLSTATE HAS PRESENTED
NO MERITORIOUS CONSTITUTIONAL ARGU-
MENTS WHICH WOULD JUSTIFY REVIEW BY

THIS COURT. «0.05 <caey eee ees wen 8
CONCLUSION ... .....:5 sae eee eee 16
APPENDIX
Appendix 1... :..3<240de ese ee aes A-1l

Affidavit of Karen E. Mitchell
dated May 1, 1990
Appendix 2... . 2... ss.0deaenh ees A-8
Direct Pre-Filed Testimony of
Allan I. Schwartz (pp.1-4 only)
dated January 25, 1991
Appendix 3... ..<:s.20<sen ee ee ers A-16

Affidavit of Martin Rosenberg
dated February 22, 1991

iil

TABLE OF AUTHORITIES

Cases CITED

Banton v. Belt Line Ry. Corp., 268 U.S. 413 (1925) ...

Calfarm Ins. Co. v. Deukmejian, 771 P.2d 1247 (Cal.
Nv Cras TE Nes <u ys snlae ee acc eae a

California Auto Association v. Maloney, 341 U.S. 105
eee eae oe Panda nk oe ere yeh edee ys

Duquesne Light Co. v. Barasch, 488 U.S. 299 (1989) ..
F.P.C. v. Hope Natural Gas Co., 320 U.S. 591 (1944) ....

First English Evangelical Lutheran Church v. Los
Angeles County, 482 U.S. 304 (1987) ............

Hutton Park Gardens v. Town Council, 68 N J. 543,
MC RUST ic ev eee ecco ceeucceue

In re Matter of Assignment of Exposures to Aetna
Casualty & Surety Co., Allstate insurance Co. and
Colonial Penn Insurance Co., 248 N.J. Super. 367,
oat Aca 631 (App. Div. 1991).................

Jersey Central Power & Light Co. v. F.E.R.C., 810 F.2d
Se BU ie cv ne rece eee e seen eae nee

Lac D’Amiante du Quebec v. American Home Assur.,
mon eae pone Gon Cir 1986) ..... oo ckest

MacDonald, Sommer & Frates v. County of Yolo, 477
NE ate yy yee oe eee ck

Pennell v. City of San Jose, 485 U.S. 1 (1988)......

Prendergast v. New York Telephone Co., 260 U.S. 43
at Ge ge neoy o Oh axe Sa oes

Prudential Insurance Co. v. Benjamin, 328 U.S. 408
ee i ae yi eee ee ek 6 aa is ak

Page

ead

iv

TABLE OF AUTHORITIES - Continued

Page
Public Util. Comm'n of Texas v. Pedernales Elec.

Coop, 678 S.W.2d 214 (Tex. Ct. App. 1984)......... 13
Smith v. Illinois Bell Co., 270 U.S. 587 (1926)......... 12
State Farm v. State of New Jersey, 124 N.J. 32, 590

pe RB.) Serer ree er rt rere rer 8
Williamson Planning Commission v. Hamilton Bank,

og Ee me Be) en Pony eer irre nee 13

Statutes CITED
Rw Wa rr Tot ere Pee ree 13
Stk. CP RR oso nhs s ag aed er eb ae ee eres 1]
Pe eas SPREAD 5 oe i nna cna tsewey anu eee aneun 11
oe ® Ser 2 3) a ae eer errr rr ay ae 2
fee Se eg ee ere er rer er rae 2
PR EARIE NOI ey se ve a cee eeu ny Nace ener en ees 2
NEGA, TED occ ce ocvccceccceccvveccucctvneues 2
WIGA, TOUB-TG, ©. ooo cece cv ver c ccc cceves 1, 3,4
ee Cae hs oa a cee ee ene v crete ere ye enaas 8
Pde SPU Naas docs ech cebveaneddssecdsesanee ht 1, 4
OE is 2 Sr re eee ne re ry |; a2
eh RS Ae errr 2
PAS Be 2 or rr rere rrr 13

15 U.S.C.A. §§1011-15 (1982)... 0.0 15

TABLE OF AUTHORITIES - Continued

REGULATION CITED

MIAL. TEE OR cca s scsi cteeeee

Laws CITED

L. 198 c 10. =... See
tL. 908. ¢. Oni howe

SULA. VIG 5 cxxeeverperse cee enere

Sa CLR: TOTES i csavcncceeee ae

Page

Lesceveevaes 3

COUNTERSTATEMENT OF THE CASE

Pursuant to a legislative directive to depopulate, or
downsize, the New Jersey Automobile Full Insurance
Underwriting Association (“JUA”) and the Market Transi-
tion Facility (“MTF”) in preparation for a new automobile
insurance assigned risk plan, the New Jersey Commis-
sioner of Insurance issued orders on January 24, 1991
assigning exposures (automobiles) to insurers, including
petitioner Allstate Insurance Company (“Allstate”), that
had not complied with their statutory obligations to
insure a certain number of risks in the voluntary market
(Pet. App. 1).* See N.J.S.A. 17:30E-14; 17:33B-11. Under
the statutory scheme, insurers are permitted to charge
these assigned insureds the higher rates applicable to
persons presently insured by tne MTF. The legislatively-
mandated depopulation assignments are an essential part
of the transition from the JUA, which had insured up to
50% of New Jersey’s drivers, to the new assigned risk
plan, which should provide insurance to only 10% of
New Jersey’s drivers. See N.J.S.A. 17:33B-11; 17:33B-12.

Petitioner Allstate, which did not write its statutorily
required share of former JUA insureds and so was
assigned exposures, challenged the depopulation pro-
gram as unconstitutional because, Allstate averred, under
no conceivable set of circumstances could it realize a just
and reasonable return. Allstate’s assertions are based on
predictions of higher risks and inadequate rates; how-
ever, the evidence presented below did not substantiate

* ,

Pet. App.” refers to Allstate’s appendix filed with the peti-
tion for a writ of certiorari.

these assumptions. The New Jersey Superior Court,
Appellate Division rejected these contentions and
affirmed the Commissioner’s orders (Pet. App. 2). The
Supreme Court of New Jersey denied Allstate’s petition
for certification (Pet. App. 3).

All New Jersey drivers are required to obtain auto-
mobile insurance as a condition of owning and operating
an automobile. N.J.S.A. 39:6A-1 et seq. Between 1970 and
1983, drivers who could not obtain insurance in the vol-
untary market were apportioned among all insurers
doing business in New Jersey, who were obligated to
extend coverage pursuant to an assigned risk plan. See
N.J.S.A. 17:29D-1. This system was changed in 1983, when
the Legislature created the New Jersey Automobile Full
Insurance Underwriting Association (“JUA”) to provide
such drivers with insurance coverage at statutorily-set
rates. See N.J.S.A. 17:30E-1 et seq.

The JUA operated through servicing carriers which
undertook the administrative responsibility of providing
coverage and adjusting claims. N.J.S.A. 17:30E-7e. How-
ever, all claims and liabilities arising from IUA policies
were paid by the JUA and not by the servicing carriers.
Ibid. The JUA derived income from a number of sources
other than premium payments, including Department of
Motor Vehicle surcharges for certain violations, and
charges imposed, on a per vehicle basis, on all auto-
mobile insurance policies. N.J.S.A. 17:30E-8. Essentially,
because driving an automobile is a necessary part of life
in New Jersey, automobile insurance policies for drivers
who could not otherwise obtain insurance (and might
then drive uninsured) were subsidized by all drivers.

However, while the JUA was in existence more and
more persons were being refused coverage in the volun-
tary market, sometimes regardless of their driving
records, and by 1988 the JUA was providing insurance to
over 50% of New Jersey’s drivers.* The Legislature, rec-
ognizing that the burgeoning JUA was no longer serving
its purpose of providing coverage to only a limited
number of drivers, passed amendments to the automobile
insurance statutes to downsize, or depopulate, the JUA
over a period of time. L. 1988, c. 199, §25 (amending
N.].S.A. 17:30E-14). The Legislature thus established a
program to require insurers to write an increasing per-
centage of JUA insureds in the voluntary market pur-
suant to yearly quotas for the industry and apportioned
shares of that quota for each insurer authorized to con-
duct automobile insurance business in New Jersey. /bid.
The amendments provided that in the event the aggregate
industry depopulation quota for exposures (automobiles)
to be insured in the voluntary market is not met, the
Commissioner of Insurance would assign exposures from
the JUA to insurers that did not meet their apportionment
shares. Ibid.

New Jersey’s automobile insurance system was again
comprehensively revised on March 12, 1990 by the Fair
Automobile Insurance Reform Act, L. 1990, c. 8 (“FAIR
Act”). The FAIR Act eliminated the JUA, directing it not

* Under the IZA system, insurers had an incentive to write
only the cleanest risks voluntarily; any applicant without a
proven long-term clean record could be shifted to the JUA
since then the insurer would not be liable for any claims
arising under the policy.

to issue any policies after October 1, 1990, and created the
Market Transition Facility (“MTF”) to provide automobile
insurance to JUA insureds and persons unable to obtain
insurance in the voluntary market between October 1,
1990 and October 1, 1992.* After October 1, 1992, auto-
mobile insurance policies for persons unable to obtain
insurance in the voluntary market wil! be written by
insurers pursuant to an-assigned risk plan. FAIR Act, §24
(N.J.S.A. 17:33B-12). The FAIR Act also accelerated the
schedule for the depopulation of the JUA and MIF in
preparation for the assigned risk plan. FAIR Act, §§20, 88
(N.J.S.A. 17:30E-14; 17:33B-11). Pursuant to the acceler-
ated depopulation schedule, only 32% of exposures
would be covered by the JUA or MTF by October 1, 1990;
29% by April 1, 1991; 20% by October 1, 1991 and 10% by
April 1, 1992. Ibid. If the industry quota is not met, the
statutes direct the Commissioner to assign exposures to
-asurers that had not met their apportionment shares.
Ibid.

The October 1, 1990 industry quota was not met. In
accordance with N.J.S.A. 17:30E-14 the Commissioner
issued orders on January 24, 1991 assigning exposures to
the 44 insurers that did not meet their apportionment
shares, including petitioner Allstate (Pet. App. 1).
Twenty-four insurers, including several large companies,
had met their shares and were not assigned exposures

* The MTF, an unincorporated association of insurers autho-
rized to conduct automobile business in New Jersey, is oper-
ated by the Commissioner of Insurance in consultation with an
Advisory Board, comprised of various industry representa-
tives. FAIR Act, §88 (N.J.S.A. 17:33B-11).

(CPa77).* Attached to the orders was the Mandatory
Depopulation Assignment Plan, which set forth the man-
ner in which assignments were made. The Plan provided
that JUA/MTF insureds who reside in the areas in the
State that are most underrepresented in the voluntary
market would be assigned first, until the percentage of
JUA/MTF insureds in those areas is brought up to the
level of the industry quota (i.e., 32% for October 1, 1990
quota) (CPa8). The Plan further provided that the
insurers offer assignees one-year policies (CPa28).

Finally, and most significantly, section 89 of the FAIR
Act (N.J.S.A. 17:33B-12) permits these insurers that did
not meet their apportionment shares to charge assigned
insureds MTF rates, which are generally higher than the
insurer’s Own voluntary market non-standard or stan-
dard rate.

Allstate, which did not meet its apportionment share,
appealed the Commissioner’s January 24, 1991 orders
assigning it exposures (CPa72). The appeal was acceler-
ated by the Appellate Division, and the depopulation
program was stayed. Ibid. Prior to oral argument before

* Ra refers to respondent’s Appellate Division appendix; Rra
refers to respondent’s Appellate Division reply appendix; ALb
refers to the brief filed by petitioner Allstate in the Supreme
Court of New Jersey. Additional citations are to briefs and
appendices filed by co-petitioners in the Supreme Court’ of
New Jersey. These materials are part of the record below¢
although the co-petitioners did not file petitions with this
Court. AEb refers to petitioner Aetna’s brief; AEa refers to
petitioner Aetna’s appendix; CPb refers to petitioner Colonial
Penn’s brief and CPa refers to petitioner Colonial Penn's
appendix.

the Appellate Division, the Commissioner amended the
Depopulation Plan so that persons with nine or more
points (i.e, moving vehicle violations and other infrac-
tions) would remain in the MTF; only those persons with
fewer than eight points would be assigned to and covered
by insurers. The amendments, transmitted to insurers
after oral argument, provided that insurers screen
assigned insureds and return to the MTF all assignees
that are “ineligible” as defined in N.J.A.C. 11:3-34.1 et seq.
See CPa32.

Before the Appellate Division rendered its decision,
the Commissioner approved an 18.6% overall average
rate increase for MTF insureds (Ra19). Thereafter, follow-
ing a separate appeal by Allstate concerning the ade-
quacy of this rate increase, the Commissioner’s staff filed
for an additional 15% rate increase, which the Commis-
sioner implemented. (Pet. at 17).

On May 20, 1991 the Appellate Division affirmed the
Commissioner’s January 24, 1991 depopulation orders
(Pet. App. 2). The Appellate Division rejected Allstate’s
takings arguments, holding that Allstate had not proven
that MTF rates would be facially inadequate to cover the
costs of insuring assigned drivers. In fact, the record
before the Court contained submissions from both the
Insurance Department Staff and the Public Advocate
Division of Rate Counsel which indicated that Allstate's
existing rates were too high and should be reduced. (R.
App. 1, 2, and 3). The Appellate Division further held
that the Commissioner’s decisions to assign insureds
from underrepresented territories first, and to require
one-year policies be issued, were reasonable. Finally, the
Appellate Division invalidated the part of the program

that required insurers to do business with the assigned
insureds’ producers.” Allstate filed a petition for certifica-
tion to the Supreme Court of New Jersey, which was
denied on September 18, 1991 (Pet. App. 3). Allstate’s
petition to this Court for a writ of certiorari followed.

S

SUMMARY OF ARGUMENT

Allstate’s petition requests this Court to intervene in
an essentially fact-based dispute over its entitlement to
interim rate relief. The petition should be denied because
the proceedings below are being properly handled by the
Insurance Commissioner and the State’s courts, in accor-
dance with well established constitutional principles
enunciated by this Court. Allstate failed, on the evidence
submitted, to establish to the satisfaction of the Commis-
sioner or the Appellate Division that the MTF rates,
which are higher than Allstate’s own rates, will be confis-
catory. Moreover, Allstate’s claim of an absolute right to
protection against any possible financial loss due to rate
lag is without merit. For these reasons, Allstate’s facial
challenge to the depopulation order at issue here was
properly rejected by the State court below. Since Allstate
raises no valid or significant constitutional objections to
the ruling below, the petition for a writ of certiorari
should be denied.

* On December 31, 1991, the Commissioner issued a revised
order to Allstate which changed this aspect of the program.

ARGUMENT

THE PETITION SHOULD BE DENIED BECAUSE
ALLSTATE FAILED IN THE STATE PROCEEDINGS
BELOW TO PRESENT A SUFFICIENT FACTUAL
BASIS FOR INTERIM RATE RELIEF AND BECAUSE
ALLSTATE HAS PRESENTED NO MERITORIOUS
CONSTITUTIONAL ARGUMENTS WHICH WOULD
JUSTIFY REVIEW BY THIS COURT.

Upon review of its petition for a writ of certiorari, it
is clear that Allstate has presented no questions which
require review by this Court. It is clearly established by
this Court, and well recognized in New Jersey law and
New Jersey court decisions, that a rate regulated entity
such as a public utility or insurance company has a
constitutional right to earn a reasonable rate of return on
its investments. Duquesne Light Co. v. Barasch, 488 U.S. 299
(1989); N.J.S.A. 17:33B-2g; State Farm v. State of New Jersey,
124 N.J. 32, 590 A.2d 191 (1991). This principle was recog-
nized by the Appellate Division below. In re Matter of
Assignment of Exposures to Aetna Casualty & Surety Co.,
Allstate Insurance Co. and Colonial Penn Insurance Co., 248
N.J. Super. 367, 591 A.2d 631 (App. Div. 1991) (Pet. App.
2). This is not a case in which a state’s appellate courts
have adopted an erroneous rule of law which requires
correction by this Court. Sup.Ct.R. 10.1(c). Compare First
English Evangelical Lutheran Church v. Los Angeles County,
482 U.S. 304 (1987). Rather, this case represents a cogent,
well-reasoned application by the New Jersey Superior
Court, Appellate Division, of settled principles of law ina
case in which there are hotly contested factual issues and
in which the insurer here simply failed to establish as a
matter of fact that it was entitled to interim rate relief.

Having failed to convince the State court below, on
the factual record, of its right to interim relief, petitioner
Allstate now nevertheless claims that it was denied an
appropriate judicial process for judging its request for
rate relief (Petition at 28) or, in the alternative, that the
State may not impose the depopulation plan at issue here
without first holding a plenary hearing on the rate impact
of the plan on the subject insurance companies. Taken to
its logical extension, Allstate’s position is that it has an
absolute constitutional right to protection against regula-
tory lag, and that a state therefore may not impose any
regulatory requirements on insurance companies (or by
implication, utilities either) without first holding a pro-
ceeding to determine the rate impact on the reguiated
entities and adjusting their rates prospectively to ensure
their absolute protection against any financial loss
resulting from the proposed new regulatory requirement.
Allstate’s contentions are totally lacking in merit.

In fact, as the Appellate Division’s decision below
clearly indicates, Allstate has already had an opportunity
for judicial review of its claim for interim rate relief.
Neither the Insurance Commissioner nor the Court, how-
ever, have found Allstate's factual claims persuasive
enough to justify such relief.* Therefore, even by the

* It must be remembered that granting interim rate increases to
insurance companies in a state such as New Jersey where all
drivers are required to have insurance, places an immediate
and substantial financial burden on that company’s customers
without giving them the benefit of a full adjudication of the
merits of the company’s claim for rate relief. Consequently, any
claim for interim rate relief based on a company’s asserted

(Continued on following page)

10

standards Allstate suggests in its own petition, 1.e., those _
applicable to motions for preliminary injunctive relief,
(Petition at 28 n.25), it would not be constitutionally
entitled to relief here.

Indeed, as the Appellate Division noted below,

The record before us is full of significant and
irreconcilable factual differences. The insurers
offer complex financial analyses and the assur-
ance of their actuaries and executives that they
are losing millions of dollars on their current
New Jersey business. They say the near future
promises even greater losses with or without
their assigned JUA/MTF business, that the
Commissioner is dragging his feet in consider-
ing their rate filings, and that forcing more busi-
ness on them at insufficient rates is confiscatory.
The Commissioner offers equally complex anal-
yses and the assurance of his actuaries that the
- insurers are really doing just fine, and that their
complaints are baseless. [Pet. App. 2 at 62].

The record supports this view. Ranged against Allstate’s
dire predictions of financial loss are expert testimony
from both the Commissioner’s staff and the State Public

(Continued from previous page)

right to an absolute guarantee against any possible financial
loss due to regulatory lag, must be weighed against the finan-
cial burden that its request will place upon thousands of ordi-
nary citizens who may already be struggling to pay existing
rates. The fact that rates may be interim, and hence subject to
eventual refund, does not necessarily mitigate the temporary
financial hardship which a rate increase, which later proves to
be unjustified, immediately places upon the company’s
insureds.

-

11

Advocate Division of Rate Counsel (R. App. 1, 2 and 3)
showing that Allstate in fact is overearning and that its
rates should be decreased rather than increased.*

Moreover, Allstate has chosen in its brief to this
Court to bury in footnotes certain significant information
which undercuts its position. Not only will Allstate be
allowed to charge the new exposures the MTF rate, which
is higher than Allstate’s regular voluntary market rate,
but that MTF rate has already been raised twice, once
through an 18.6% increase in rates of poorer drivers and a
second 15% increase on rates paid by better drivers.
Moreover, New Jersey law allows all insurance com-
panies the benefit of annual “flex rate” increases which
may be instituted without a rate hearing. N.J.S.A.
17:29A-44(a), -44(f). These increases are based on a per-
centage of specified components of the Consumer Price
Index plus 3%, thus cushioning the companies against
losses due to regulatory lag. Allstate sheepishly admits
(Petition at 29 n.26) that it has taken three of these
increases since March 1989. Hence, unlike Prendergast v.
New York Telephone Co., 260 U.S. 43 (1923), in which there
was Clear proof of confiscatory rates, resulting from an
order to reduce rates, here there is simply an order by the
Insurance Commissioner to cover certain customers, as

* The Appellate Division specifically found that “the insurers
do not make a case of sufficient strength to justify our entering
an order freezing in place a currently disastrous insurance
industry situation until the insurers’ hyperbole can be tested
against the Commissioner’s incredulity. The resulting turmoil
in the State’s auto insurance industry would be intolerable.”
[Pet. App. 2 at 63]. :

ad

12

clearly authorized by California Auto Association v. Mal-
oney, 341 U.S. 105 (1951), and there is no proof of confis-
catory rates. Moreover, the company here is permitted to
charge the new customers a rate higher than its voluntary
rate. Compare Jersey Central Power & Light Co. v. F.E.R.C.,
810 F.2d 1168 (D.C. Cir. 1987) (company ordered to reduce
rates without hearing); Smith v. Illinois Bell Co., 270 U.S.
587 (1926) (delay of three years in ruling on rate petition
where no dispute that existing rates were confiscatory);
Banton v. Belt Line Ry. Corp., 268 U.S. 413 (1925) (company
denied rate increase for 8 years; no dispute that rates
were confiscatory). Clearly there was no due process or
other constitutional violation in the Commissioner’s
denial of interim relief in this case.

Finally, it should be noted that in separate pending
proceedings to increase Allstate’s voluntary market rates,
the Commissioner has denied Allstate’s requests for
interim relief, in part on the ground that the factual
submissions showed a hotly contested issue as to whether
Allstate actually needed a rate increase. (Pet. App. 16).
That ruling, which encompasses the issue of the Commis-
sioner’s power to issue interim relief under state law, is
currently pending before the Superior Court, Appellate
Division. To the extent that Allstate claims in fact that it
has been deprived of a just rate of return, this claim is not
ripe, because Allstate has not yet even extended coverage
to the insureds at issue here and because its current rate
increase petitions are still pending. See MacDonald, Som-
mer & Frates v. County of Yolo, 477 U.S. 340 (1986);

13

Williamson Planning Commission v. Hamilton Bank, 473 U.S.
172 (1985).*

Allstate’s second point concerning an absolute right
- to protection against regulatory lag is equally lacking in
merit. This Court has never held that there is a right to
protection against all monetary losses due to delay in the
regulatory process. Indeed in the First English Evangelical
Lutheran Church case, on which Allstate relies (Petition at
20), wherein this Court ruled that state regulation which
denies the use of property for a “considerable period of
years” could constitute a taking, this Court carefully dis-
tinguished “the quite different questions that would arise
in the case of normal delays in obtaining building per-
mits, changes in zoning ordinances, variances and the
like.” 482 U.S. at 321. Plainly, a certain degree of delay in
the rate-adjustment process is simply a “necessary inci-
dent of rate regulation” which is an element of the risk
associated with investment in a rate-regulated business.
See Public Util. Comm'n of Texas v. Pedernales Elec. Coop,
678 S.W.2d 214, 222 (Tex. Ct. App. 1984).

* Allstate’s rate hearings are being held before independent
administrative law judges, N.J.S.A. 52:14F-1 et seq. Allstate's
hearing on a petition to raise its voluntary rates has concluded
and the parties are awaiting the ALJ’s initial decision after
post-hearing submissions. The insurance statute, N.J.S.A.
17:29A-14c(1), establishes a strict time frame for the issuance of
the Commissioner’s final order following receipt of the initial
decision. A second hearing, on a petition to raise the rates to
pass through certain surtaxes and assessments, is still pending
before an ALJ. Allstate makes reference to this proceeding as
“mired in discovery” (Pet. at 13); such delay is due to Allstate’s
refusal to cooperate with discovery requests from the Insur-
ance Department's staff and Rate Counsel.

14

Indeed, it is well established that a regulation which
controls rates, and by logical extension, a scheme which
simply requires coverage of insureds at existing or higher
rates, will be invalidated “on its face only if its terms
preclude avoidance of confiscatory results.” Calfarm Ins.
Co. v. Deukmejian, 771 P.2d 1247, 1252 (Cal. 1989), citing
Pennell v. City of San Jose, 485 U.S. 1 (1988); Hutton Park
Gardens v. Town Council, 68 N.J. 543, 350 A.2d 1, 16 (1975).
As this Court clearly held in Maloney, supra, a state may
require an insurance company to cover customers that it
would rather not insure:

The problem is a local one on which views will
vary. We cannot say California went beyond
permissible limits when it made the liability
insurance business accept insurable risks which
circumstances barred from insurance and hence
from the highways. Appellant’s business may of
course be less prosperous as a result of the
regulation. That diminution in value, however,
has never mounted to the dignity of a taking in
the constitutional sense. [California Auto. Assoc.
v. Maloney, supra, 341 U.S. at 110-111].

Here, where Allstate has the option of charging these
customers a higher rate even than its voluntary market
rates, and where it has failed on the factual record to
establish to the satisfaction of state appellate courts its
need for interim rate relief, there is no constitutional
violation and no need for review by this Court.

Finally, there is no significance to Allstate’s claim
(Petition at 20-21), that certiorari should be granted to
resolve differences among state courts in dealing with
various types of rate requests. It is well established that
insurance regulation is uniquely a state concern, In fact,

15

Congress passed the McCarran-Ferguson Act, 15 U.S.C.A.
§§1011-15 (1982), to ensure that states would be able to
tailor their own individualized methods of regulating
insurance companies in their states. See Lac D’Amiante du
Quebec v. American Home Assur., 864 F.2d 1033, 1039 (3d
Cir. 1988), citing Prudential Insurance Co. v. Benjamin, 328
U.S. 408 (1946) (“Obviously Congress’ purpose was
broadly to give support to the existing and future state
systems for regulating and taxing the business of insur-
ance”). Given Congress’ intention that the states act as
“laboratories” in this regard, and this Court’s well estab-
lished rule that there is no one constitutionally required
method of rate regulation, Duquesne Light Co. v. Barasch,
supra; F.P.C. v. Hope Natural Gas Co., 320 U.S. 591 (1944), it
is not surprising that different states have reached differ-
ent conclusions as to their requirements for rate regula-
tion in their own jurisdictions. This result is not one of
constitutional magnitude, was plainly within the contem-
plation of Congress, and does not require intervention or
review by this Court. Sup.Ct.R. 10.1(b), (c).

In summary, it is clear that Allstate’s petition
requests this Court to intervene in an essentially fact-
based rate dispute which is being properly handled by
the Commissioner and the State’s courts, in accordance
with well established constitutional principles enunciated
by this Court in its decisions. The petition should there-
fore be denied.

16

CONCLUSION

The petition in this case presents no issues of consti-
tutional magnitude. Allstate has received judicial review
of its claim to interim rate relief and has been denied
such relief based upon the hotly contested factual record
in this case. Moreover, Allstate’s claim of an absolute
right to protection against any financial loss due to regu-
latory lag is completely lacking in merit. Its facial chal-
lenge to the depopulation order must fail given the lack
of conclusive factual proof that any such loss will occur.
For all of these reasons, the petition for a writ of cer-
tiorari in this case should be denied.

Respectfully submitted,

Ropert |. Det Turo

Attorney General of New Jersey

Attorney for Respondent
Samuel F. Fortunato,
Commissioner of Insurance of
the State of New Jersey

By: Susan L. Reisner
Deputy Attorney General
On the Brief
(Counsel of Record)
JosePpH L. YANNOTTI
Assistant Attorney General
Of Counsel

DATED: January 16, 1992

A-1

APPENDIX 1

DOUGLAS S. EAKELEY

Acting Attorney General of New Jersey

Attorney for State Defendants
R.J. Hughes Justice Complex
CN 112

Trenton, New Jersey 08625

By:

Joseph L. Yannotti
Deputy Attorney General!
(609) 292-1539

JY 4102

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

ALLSTATE INSURANCE
COMPANY,
(an Illinois Corporation),

Plaintiff,
V.

JAMES J. FLORIO, in his
official capacity as Governor
of the State of New Jersey
and in his individual

capacity; JASPER J. JACKSON,

in his official capacity

as Acting Commissioner of
Insurance of the State of
New Jersey; and ROBERT |
DEL TUFO, in his official
capacity as Attorney General
of the State of New Jersey,

Defendants

)
)
)
)
)
)

Honorable
John W.
Bissell

Civil Action
No. 90-1366

AFFIDAVIT
OF

KAREN E
MITCHELL

A-2

KAREN E. MITCHELL, of full age, being duly sworn,
according to law, upon her oath, says:

1. I am the Chief Examiner of the Department of
Insurance of the State of New Jersey, Division of Financial
Examinations. As such, I am responsible for examining
the financial health of insurance companies operating in
New Jersey. Part of that examination involves review of
the Annual Statements filed with the Department by each
company according to law. A review of a company’s
Annual Statement can reveal whether or not that com-
pany experienced an operating profit or loss during the
year reflected in the Annual Statement.

2. I make and submit this Affidavit in response to
Allstate’s allegations of unprofitability in its Complaint,
to the extent that the Court may deem it necessary to
consider Allstate’s factual contentions in disposing of the
motions pending before it.

3. I have reviewed the 1988 and 1989 Annual State-
ments of Allstate Insurance Company. Contrary to what
Allstate is alleging in this Complaint, it appears the com-
pany showed a profit on New Jersey private passenger
automobile business in both 1988 and 1989. I must cau-
tion this Court that, with the exception of the “State
Business Page” of the Annual Statement (page 14), no
financial data filed in Annual Statements deals speci-
fically and solely with the New Jersey part of a com-
pany’s business unless the company writes business only
in New Jersey. All Annual Statements reveal, on the State
Business Page, the amounts of gross premiums written
and earned, and total losses paid and incurred, in New
Jersey. All other information contained in Annual State-
ments, including expenses and investment income, are
reported as world-wide figures. Therefore, my analysis of

A-3

how well Allstate has performed on its private passenger
automobile business in New Jersey is based in part on the
actual figures on the State Business Page, and in part on
estimated figures provided in the A.M. Best Aggregates
and Averages Property and Casualty Manual. In making
my calculation, I have taken the actual reported direct
premiums earned from the State Business Page from Alls-
tate’s Annual Statements, and subtracted therefrom the
actual losses paid and incurred on New Jersey business. I
have further subtracted estimated loss adjustment and
other expenses derived from applying industry-wide
ratios as reported in A.M. Best to Allstate. Finally, |
added estimated investment income similarly computed
by applying A.M. Best ratios. My analysis is set forth in
Exhibit A. It reveals that Allstate, in 1989, reported
$233,264,423 in earned premiums on New Jersey Private
passenger automobile business, and $185,145,357 in
actual incurred losses.

4. The latter figure is an inflated calculation of
incurred losses. It is inflated because it fails to deduct
from those losses the amount of the incurred reimburse-
ment to Allstate from the Unsatisfied Claim and Judg-
ment Fund. Allstate, unlike most other companies,
reports its actual incurred losses as including all monies
advanced to claimants on behalf of the Unsatisfied Claim
and Judgment Fund. (“UCJF” or “the Fund”).

5. The Fund is organized by statute and its major
function is to bear the cost of any individual’s medical
expenses resulting from any one accident to the extent
those expenses exceed $75,000. In other words, that indi-
vidual’s own insurance carrier is responsible for the first
$75,000 in medical expenses, and then the Fund is respon-
sible. In practice the carriers continue to pay the insured’s

A-4

medical expenses even when they exceed $75,000, and
then the carriers are reimbursed by the Fund for the
amounts paid in excess of $75,000. Thus at any given
time, the books of a carrier in the auto insurance business
will reflect an amount due from the Fund.

6. As a result of that reimbursement procedure,
Allstate has set up its reported paid and incurred losses
as including all medical expenses paid to any individual
insured in excess of $75,000 without excluding the amount
reimbursed by the Fund. The Department is aware of this
practice, since it is made evident by Allstate’s inclusion,
on Schedule F of its Annual Statement, of over $111
million in money due to it from the Fund, as if the Fund
was a reinsurer. Nothing on Schedule F is factored into
reported paid and incurred losses on the State Business
Page. Therefore, we know that the amount of incurred
reimbursement from the Fund is not factored into All-
state’s reported losses. This is inappropriate as a measure
of determining whether a company made a profit. Clearly
the amount of incurred reimbursement must be factored
in order to arrive at a true picture of a company’s profits.

7. After factoring that UCJF reimbursement in, All-
state’s losses are reduced by over $24 million in 1989, and
also by over $24 million in 1988. After subtracting esti-
mated expenses and adding estimated investment
income, Allstate shows an apparent 1989 profit on its
private passenger automobile business of $8,823,392, and
an apparent 1988 profit of $8.795,496. This results from
only examining that one factor, treatment of Fund reim-
bursement. There are a multitude of other factors that,
once verified, can alter the company’s profit figure for
each year. For example, Allstate reports a premium
“ceded” to the Fund of over $26 million on Schedule F.

A-5

No other company reports any such figure, and, I do not
know the origin of that figure. The Fund obtains no
“premiums”, only “assessments,” and the assessments
are in no way as much as $26 million. Until that figure is
explained, my conclusion is a qualified one. The $26
million reported “ceded” premiums may have an impact
on Allstate’s profit or loss in 1989 and in 1988. In addi-
tion, each profit figure may be higher or lower depending
on how close the estimated expense and investment
income figures are to the actual numbers. The Court
should also be aware that these calculations do not
account for the effect of reinsurance, which could also
raise or lower the overall profit figure, depending on how
successful Allstate was in reinsuring its losses. The finan-
cial data needed in order to make that analysis is not
available, as mentioned above.

8. Finally, | note that my findings do not agree with
the figures noted for Allstate in the Department’s
November 1989 “Insurer Profitability Report.” The fig-
ures in that report were taken from insurance company
records without independent verification by the Depart-
ment. We now know that the figures contained therein
relating to individual carriers’ New Jersey performance
may be totally inaccurate, as they are with respect to
Allstate. Accordingly, the Department is working on
amending that report to reflect independent analysis.

/s/ Karen E. Mitchell
Karen E. Mitchell

Sworn to and Subscribed
before me this 16th day
of May, 1990.

/s/ Stephen P. Tasy

Attorney-At-Law
State of New Jersey

A-6

EXHIBIT A
1989
No Fault & Physical
Liability Damage Total

Premiums

Earned $147,660,175 $85,604,248 $233,264,423
*Losses

Incurred 113,289,653 47,213,633 160,503,286
LAE Incurred 19,491,143 6,762,736 ~ 26,253,879
Other

Underwriting

Expenses 35,528,925 18,532,481 54,061,406
Total

Expenses $168,309,721 72,508,849 240,818,570
Underwriting

Gain (Loss) (20,649,546) 13,095,399 (7,554,147)
Investment

Income 14,323,037 2,054,502 16,377,539
Net Gain

(Loss) (6,326,509) 15,149,901 8,823,392

* Reported losses incurred 137,931,724

UC] reimbursement 13,746,161
Ending Balance UC] 111,926,921
Beginning Balance 101,031,011
Total 113,289,653

(Incurred basis)

Premiums
Earned

*Losses
Incurred

LAE Incurred

Other
Underwriting
Expenses

Total
Expenses
Underwriting

Gain (Loss)
Investment
Income
Net Gain
(Loss)

A-7

No Fault & Physical
Liability Damage Total

$137,278,946 $97,942,581 $235,221,527
112,964,490 49,951,416 162,915,906
18,120,821 7,737,464 25,858,285
30,743,940 — 22,574,579 53,318,520
161,829,251 80,263,459 242,092,710
(24,550,305) 17,679,122 (6,871,183)
13,316,058 2,350,622 15,666,680
(11,234,247) 20,029,744 8,795,496

* Reported losses incurred $137,389,274

11,527,832

UC] reimbursement
Pending Balance UC]

Beginning Balance

88,134,059
$112,964,490

101,031,011

A-8

APPENDIX 2
STATE OF NEW JERSEY

DEPARTMENT OF INSURANCE

In The Matter of the Rate Application by Allstate
Insurance Company Dated October 15, 1990 Requesting
a +27.7% Increase in Private Passenger Automobile
Insurance Rates

OAL Docket No: INS 9536-90
NJDOI File No: 90-1320
Exhibit PT-1

Direct Pre-Filed Testimony and Exhibits of
Allan I. Schwartz

On Behalf of the
New Jersey Department of the Public Advocate
Division of Rate Counsel

January 25, 1991

In The Matter of the Rate Application by Allstate
Insurance Company Dated October 15, 1990 Requesting
a +27.7% Increase in Private Passenger Automobile
Insurance Rates

OAL Docket No: INS 9536-90: NJDOI File No: 90-1320

Direct Pre-Filed Testimony and Exhibits of Allan lI.
Schwartz On Behalf of the New Jersey Department of
the Public Advocate

Table of Contents

Item Description Pages
] Qualifications 1 2
II Summary 2- 4
Il] Overall Ratemaking Methodology 4- 9
IV Loss Development 9-12
V Trend Period/Effective Date 12 - 15

A-9

VI Annual Trend Factors 3 - 9
VII Impact of the FAIR Act 20 - 21
VIII Depopulation of JUA : 21 - 23
IX Underwriting Profit and Contingencies 23 - 27
X Additional Contingency Loading 27 - 29
XI Market Transition Facility 29 - 30
XII Private Passenger Automobile Profits 30 - 31
XIII CAS Ratemaking Principles 31 - 33
XIV Conclusion 33 - 34

Background of Allan I Schwartz Appendix A

Glossary of Insurance Terms Appendix B

In The Matter of the Rate Application by Allstate
Insurance Company Dated October 15, 1990 Requesting
a +27.7% Increase in Private Passenger Automobile
Insurance Rates

OAL Docket No: INS 9536-90: NJDOI File No: 90-1320

Direct Pre-Filed Testimony and Exhibits of Allan I.
Schwartz On Behalf of the New Jersey Department of
the Public Advocate

List of Exhibits

Exhibit

Number Description

1 Summary of Rate Level Changes

2 Derivation of Rate Level Changes

3 Comparison of Overall Rate Level Indica-
tions

4 Loss Development

5 Total Loss and Premium Trend Factors

6 Annual Loss Trend Factors

7 Fast Track Trend Data

A-10

8 FAIR Act Savings

9 Permissible Loss & Loss Expense Ratio

10 Underwriting Profit and Contingencies

11 Countrywide Residual Market Share

12 Data Bank Information on JUA Insureds

13 Allstate’s N.J. Private Passenger Auto Profits

STATE OF NEW JERSEY
DEPARTMENT OF INSURANCE

In the Matter of the Rate ) OAL Docket No:
Application by Allstate Insurance ) INS 9536-90
Company Dated October 15, 1990 ) .
Requesting a +27.7% Increase in) ac iinet ee
Private Passenger Automobile )

Insurance Rates )

Direct Pre-Filed Testimony of Allan I. Schwartz On
Behalf of the New Jersey Public Advocate
I - QUALIFICATIONS

1. Q. Please state your name and address?

A. My name is Allan I. Schwartz. My address is
4400 Route 9 South, Freehold, New Jersey.

2. Q. By whom are you employed and in what capac-
ity?

A. Iam President of AIS Risk Consultants, an actu-
arial consulting firm which I started in Novem-
ber 1984. In that capacity I have performed

A-11

consulting work for a variety of clients covering
a wide spectrum of actuarial projects.

What was your previous employment history?

From May 1988 to January 1990 I was Assistant
Comnnissioner with the New Jersey Department
of Insurance (NJDOI). In that position, I was
responsible for all property/liability filings,
excluding workers’ compensation, submitted to
the NJDOI in addition to other responsibilities.
From June 1986 until April 1988 I was Chief
Actuary for the North Carolina Department of
Insurance (NCDOI). I was responsible for all the
actuarial work at the NCDOI, both property /
liability and life / accident / health. From
August 1977 to November 1984 I worked for the
actuarial consulting firm of Woodward and Fon-
diller. My last position at that firm was Senior
Actuary. Prior to that, from March 1976 to
August 1977, | was employed by the National
Council on Compensation Insurance (NCCI).
While there, I worked on rate level analyses,
benefit factor evaluations, and special projects.
Before that, I attended college where | received
a B.S. degree in physics from Cooper Union.

Are you a member of any actuarial societies?

I am a Fellow of the Casualty Actuarial Society,
an Associate in the Society of Actuaries, a Mem-
ber of the American Academy of Actuaries, and
a Fellow of the Conference of Actuaries in Pub-
lic Practice. | have belonged to various regional
actuarial organizations and professional actu-
arial committees. In addition, I served on the
Property / Casualty and Life / Accident /
Health Actuarial Task Forces of the National
Association of Insurance Commissioners

A-12

(NAIC). I was also Chairperson of a sub-com-
mittee for the NAIC statistical task force. This
sub-committee developed the current NAIC
standard private passenger automobile statisti-
cal data reporting requirements.

Would you please describe some of your addi-
tional professional activities?

I have written several papers dealing with var-
ious aspects of actuarial work. These have
included topics on ratemaking, reserving, and
reinsurance. I have also presented lectures and
taught classes on these subjects. In addition, |
was editor of Fresh Air Magazine, a newsletter
published by Actuaries in Regulation. This is a
special interest group of the Casualty Actuarial
Society composed of actuaries who work for
State Insurance Departments.

Have you previously testified in regulatory pro-
ceedings regarding insurance rates

Yes. I have testified in property / liability insur-
ance ratemaking proceedings in Arkansas,
Maine, Massachusetts, North Carolina, Okla-
homa, Rhode Island, South Carolina, Texas and
Virginia. In addition, I have reviewed rate fil-
ings for the Insurance Departments in Delaware
and New Jersey, which were resolved without a
hearing.

Do you have a resume setting forth your profes-
sional background?

Yes. It is included as an Appendix A to this
testimony.

A-13

II - SUMMARY

Have you reviewed the rate filing by Allstate
Insurance Company (Allstate) dated October 15,
1990 requesting a +27.7% increase in private
passenger automobile insurance rates, the addi-
tional information supplied in response to data
requests, and other materials?

Yes. I have.
What issues did you analyze in your study?

There were seven main items that impacted the
overall premium level indication. These were
the (1) loss development factors, (2) length of
trend period / proposed effective date and
annual trend factors, (3) impact of the FAIR Act,
(4) consideration of the depopulation of the
New Jersey Automobile Full Insurance Under-
writing Association (NJAFIUA or JUA), (5)
underwriting profit and contingency factors, (6)
additional contingency loadings and (7) Market
Transition Facility (MTF) operating results. The
seven items and the impact they have on the
private passenger automobile rate level are set
forth in Exhibit AIS-3, Sheet 1. The differences
in the treatment of these items between myself
and Allstate is given descriptively in Exhibit
AIS-3, Sheets 2 & 3.

In addition, Allstate included consideration of
the premium surtax and Automobile Insurance
Guaranty Fund Loan Assessment in its filing. It
is my understanding that these issues are the
subject of a separate proceeding. I have there-
fore not included the impact of these items on
either the income or costs for Allstate.

10.

11.

A-14

Furthermore, I have included a discussion of
Allstate’s prior profitability for New Jersey pri-

. vate passenger automobile insurance and the

Casualty Actuarial Society’s Statement of Rate-
making Principles. While these items do not
impact the rate level directly, they do address
some of the issues included by Allstate in its
filing.

What was the result of your analysis?

That the proposed rate increase by Allstate of
+27.7% for private passenger automobile insur-
ance will lead to excessive rates.

My indications are for an overall rate decrease
of -11.4% for private passenger automobile
insurance. This would be split as -11.4% for
bodily injury (BI) liability, -22.2% for property
damage (PD) liability, +8.5% for personal injury
protection (PIP), +18.9% for uninsured motorists
(UM), -19.9% for collision and -24.9% for com-
prehensive. These values are displayed in
Exhibit AIS-1. The derivation of the rate level
changes are set forth in Exhibit AIS-2, Sheets 1
to 6.

The seven items where | differ from Allstate are
set forth in Exhibit AIS-3. The numeric values of
these variables, as well as the impact on the rate
level are set forth in Sheet 1. The differences are
given in a descriptive manner in Sheets 2 & 3.

Based upon your analysis, what is your recom-
mendation regarding the needed private pas-
senger automobile insurance rate level change
for Allstate?

I would recommend that the overall rate level
be decreased by -11.4% compared to the rates
currently in place. Within this overall value,

A-15

some coverages (i.e., PIP and UM) would have
the rates increase, while for other coverages
(i.e., BI and PD liability along with physical
damage - collision and comprehensive) rates
would decrease.

* * *

A-16

APPENDIX 3

DOUGLAS S. EAKELEY

Acting Attorney General of New Jersey
Attorney for Respondent

R.J. Hughes Justice Complex

CN 112

Trenton, New Jersey 08625

By: Donald M. Parisi
Deputy Attorney General
(609) 984-0183

SUPERIOR COURT OF
NEW JERSEY APPELLATE
DIVISION DOCKET NO. A-

IN THE MATTER OF
THE ASSIGNMENT OF

) Civil Action

)
EXPOSURES TO THE )

)

)

AFFIDAVIT OF
MARTIN ROSENBERG

AETNA CASUALTY AND
SURETY COMPANY

MARTIN ROSENBERG, of full age, being duly sworn
according to law, upon his oath deposes and says:

1. I am currently employed as an Assistant Com-
missioner, Property/Casualty Division, of the New Jersey
Department of Insurance. I was appointed to my present
position in 1990.

2. Since 1988 I have been responsible for supervis-
ing the units that analyze and approve/disapprove prop-
erty and casualty rate filings. This includes private
passenger automobile insurance.

3. Further details on my educational and employ-
ment history are listed on pages 1 and 2 of Exhibit A.

A-17

4. I have personally undertaken the review of Alls-
tate’s rate filing dated October 15, 1990. I am the sole
actuary within the Department responsible for this
review.

5. Attached as Exhibit A is my prefiled testimony in
the ongoing Allstate rate hearing which began on Febru-
ary 6, 1991 in the Office of Administrative Law.

6. Allstate requests an overall increase in private
passenger automobile insurance rates of 27.74% in its
October 15, 1990 filing.

7. I concluded from my review of Allstate’s filing
that the data provided by Allstate did not support the
request for an overall rate increase of 27.74%. Rather, |
concluded that the rate indication developed from the
data should be an overall decrease of 8.3% (see Exhibit
A).

8. As part of my analysis of the Allstate filing |
reviewed the effect of the “depopulation requirement” on
the indicated rate need of Allstate.

9. I have concluded that Allstate needs no rate
increase to compensate for the depopulation requirement.
I explain my analysis fully on pages 17-20 of Exhibit A.

10. Subsequent to the filing of my direct testimony,
Exhibit A, Liberty Mutual Insurance Company filed the
type of standard/non-standard rating plan described on
pages 17-19 of my testimony. This filing was made on
February 1, 1991 and approved by the Commissioner on
February 11, 1991.

A-18

11. Allstate has yet to file a standard/non-standard
rating plan.

/s/ M. Rosenberg
Martin Rosenberg

Sworn to and subscribed
before me this 22 day
of February, 1991.

/s/ Donald I. Bryan, Jr.

Donald I. Bryan, Jr.
An Attorney at Law of New Jersey.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_2196%3A4. Public record. Not legal advice.